New Land TAX

[Dr Mick 111]

I have noticed in the last 6 months ,lots of land is now having houses /estates built here in Khon Kaen

 

Im sure this coming new TAX will cause upset for many Thai people who has been sitting on land for many years.

 

But it may cause house prices to come down as more houses than demand.

 

Time will tell.

 

Was on Thai tv today that this law may be brought in very soon.

 

The New Land Tax Law

By Admin on Jan 21, 2010 in Investment

The government seems intent on proposing a new tax on land and property which if implemented could have a significant impact on the property market.

 

Driving around Bangkok or viewing the city using Google Earth reveals a large number of empty land plots that one would not see in other cities.

 

Traditionally Thais have invested in land as a long term asset even willing to hold the land for several generations without realizing any return apart from the capital gain.

 

Unlike other countries there is almost no holding cost for vacant land. Local property taxes are minimal and there is no inheritance tax.

 

Currently there is a tax on rental income which is set at 12.5%. Leases in Thailand are often split between rent, services and fixtures to reduce the landlord’s liability for household tax.

 

The Democrat administration seems intent on reviewing the current taxes on property. The Finance Minister Korn Chatavanij suggested that a draft would be proposed for consideration by the cabinet in the first quarter.

 

We understand that the new proposed new tax would impose an annual charge on land assets and property nationwide with local administrations given flexibility in setting rates.

 

Rates would very depending on use. Owners of vacant unutilized land would possibly face a sliding scale with taxes increasing each year the land remains unutilized.

 

Imposing a tax which creates a holding tax for land would be a radical move.

 

We think the intended results are to broaden the tax base and to encourage more efficient land use.

 

Taxes should be equitable, economic and efficient they should be fairly spread over the population, achieve economic goals and be easy and cost effective to collect and enforce. Property has always been a popular asset to tax by governments because it is visible and in countries like Thailand with widespread land registration there are good records.

 

The devil will be in the detail and effectiveness of enforcement.

 

A well written and enforced act could increase revenue for local authorities on both income producing buildings, owner occupied buildings and vacant property and land.

 

If there is a high tax burden on unutilized land then this may pressure some landowners to sell as they might be asset rich but cash poor.

 

The unintended consequence may be that there is a rush to develop land or sell to developers this might create oversupply.

 

If the law does come into effect then I am also sure we will see some landowners trying to minimize their tax liability perhaps by claiming the land is being used for agricultural purposes even though it is in downtown Bangkok.

 

The new land tax law has the potential to change the dynamics of the Thai property market but we shall have to wait for the exact details of the contents before we can forecast the possible impact.

 

James Pitchon

Executive Director