You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

April 3, 2015

Effects of a Land and Buildings Tax on Condo Owners

Bangkok Post, Corporate Counsellor Column

As has been widely reported, the Finance Ministry has proposed a new property tax on land and building owners. However, Prime Minister Prayut Chan-o-cha has decided to delay the new tax, citing concerns about weak economic growth and the bill’s impact on the poor.

Despite the prime minister’s latest decision, property owners should be aware of the proposed tax bill’s provisions so they can prepare for the eventuality that the bill is passed. This article will discuss the proposed bill’s impact on a particular segment of property holders: owners of condominium units.

The proposed law represents a stark departure from the current law’s stance on property taxes. At present, property tax is governed by the Local Maintenance Tax Act of 1965, under which the government collects a local maintenance tax from real estate owners. If an owner uses his or her property as a personal residence, then the local maintenance tax can be partially reduced or even eliminated, depending on the location and size of the property.

For example, if a person owns land in an area that is densely populated such as central Bangkok, he or she will only be obligated to pay local maintenance tax on that land if the area was more than 100 square wah. This tax is not enforced for condominium units that are used by their owners as personal residences.

Under the proposed new law, however, the government is seeking to increase the tax base to generate additional streams of revenue. Therefore, the proposed law provides for additional factors and considerations such as the value or area of a condominium unit to determine tax eligibility.

The value would be based on an assessment price set by the Treasury Department. According to information currently available but still under review by the Finance Ministry, if the area of a condominium unit exceeded 50 square metres or its value was higher than 1 million baht, the owner would be required to pay the new tax. With such criteria, a large percentage of condominium units in Bangkok would be subject to tax.

In addition, according to currently available information, if an owner of a condominium unit used his or her unit as a place of residence, the applicable tax rate would not exceed 0.1% of the unit’s assessed value.

If the same unit owner had a second condominium unit in Thailand with an area of more than 50 square metres or a value that exceeded 1 million baht, the applicable tax rate on such an additional unit would not be higher than 0.5% of its assessed value.

If the law takes effect, the proposed land and building taxes would apply to all condominium owners. Taxpayers would be required to pay the new tax by the end of April each year.

However, one potential consequence of such a law would be a reduction in the number of condominium unit resales.

The Lands Department, upon notification by the relevant government entities, might attach “encumbrances” to a condominium unit if an owner did not pay the tax.

As the official transfer of a condominium unit must be registered at a local Lands Department office, the outstanding tax liability attached to the unit would hold up the transfer until the tax was paid.

Condominium owners would, however, be able to challenge the tax assessments levied against them. Owners could do this by petitioning a local administrative executive to review the assessment. If the owner disagreed with the local administrative executive’s decision, an additional appeal could be made to an appeal committee.

Importantly, owners would still be responsible for paying the applicable taxes during the petition and appeal process. The only exception would be if the local administrative executive allowed the taxpayer not to pay the tax pending the appeal. If the taxpayer did not agree with the appeal committee’s decision, he or she could file a claim against the relevant government entity.

Whether the tax bill will be passed is uncertain. What is certain, however, is that current and prospective condominium owners should take note of how they may be affected if the law eventually comes into force.

RELATED INSIGHTS​ 

February 9, 2021
On January 26, 2021, the Thai government passed a resolution to reduce the government fees that are generally collected for the registration of a sale and mortgage of immovable property. The details of this were subsequently set out in two notifications issued by the Ministry of Interior and published in the Government Gazette on February 2, 2021, taking effect the following day. The notifications will remain in effect through December 31, 2021. These two notifications, which are part of the government’s relief efforts to soften the economic fallout of the COVID-19 pandemic, specify that government fees for the registration of a sale and mortgage of immovable property are reduced to 0.01% of the official assessed sale price (reduced from 2%) and 0.01% of the mortgage amount (reduced from 1%). In order to qualify for the reduced rates, the sale and mortgage must be registered at the same time, and the sale price and mortgage amount must not exceed THB 3 million (approximately USD 100,000). The reduced rates only apply to the sale and mortgage of detached houses, semi-detached houses, row houses, commercial buildings, and condominium units, and they must be sold by a licensed developer or authorized government authority. For more information on these notifications, or on any aspect of the Thai government’s COVID-19 relief measures, please contact Tilleke & Gibbins at [email protected] or +66 2056 5555.
February 2, 2021
The Royal Decree on Land and Building Tax Reduction (No. 2) B.E. 2564, which we previously noted was under consideration, has been officially promulgated. The royal decree, which was announced and published in Thailand’s Government Gazette on January 31, 2021, and came into effect the following day, will effectively reduce land and building tax payments by 90% in 2021 for the following types of land and buildings: Land or buildings used for agricultural purposes; Land or buildings used for residential purposes; Land or buildings used for other purposes; and Vacant or unused land or buildings. Owners of the above types of land or buildings are therefore only required to pay 10% of the land and building tax normally owed for 2021. The royal decree follows the Ministry of Interior’s recent announcement of an extension for the payment of land and building tax in 2021, which will now be due by June 30, 2021 (extended from April 30, 2021). For more details on these measures, or on any aspect relating to Thailand’s land and building tax, please contact Chaiwat Keratisuthisathorn at [email protected] or +66 2056 5507.
January 27, 2021
In 2019, Thailand introduced an online system for payment of stamp duty (e-Stamp Duty) and a requirement for e-Stamp Duty to be paid on the following five instruments when executed electronically (e-Instruments): hire of work service instrument; loan instrument or bank overdraft instrument; powers of attorney (POA); proxy letters for voting at company meetings; and guarantee instrument. However, given the strict financial penalties on those who fail to pay stamp duty, the government implemented a grace period until December 31, 2020, to allow people to become familiar with the e-Stamp Duty system before the requirement is strictly enforced. During the grace period, taxpayers could pay stamp duty for the five e-Instruments at an area revenue office, rather than via the e-Stamp Duty system, and could also pay stamp duty for traditional paper versions of those five instruments through the e-Stamp Duty system. On January 19, 2021, the Revenue Department issued Notifications of the Director-General of Revenue Re: Stamp Duty (Nos. 61 and 62) B.E. 2564 (2021) further extending that grace period until December 31, 2021. The following table summarizes the revised methods of stamp duty payments available for the five instrument categories mentioned above under the new notifications. The e-Stamp Duty system allows taxpayers to pay stamp duty online by filing the prescribed form (Form Or.Sor.9) through (i) the website of the Revenue Department (www.rd.go.th), or (ii) the Application Programming Interface (API) of the Revenue Department before or within 15 days from the date of instrument execution. Taxpayers can currently file a request to pay for e-Stamp Duty no earlier than 30 days before the date of instrument execution. Taxpayers should note that the e-Stamp Duty system does not currently support late payment. Therefore, late filing and stamp duty payments will have to be made at an area revenue