Tax on Land and Building in Thailand

The Land and Building Tax Act ("LBTA") was established in 2019, replacing the long-standing House and Land Tax and Local Maintenance Tax. This new land and construction tax is collected by local administrative entities for the purpose of community development, as the levy is not sent to the federal government. This year, after several years of tax exemption, decrease, and deferral, the LBTA is completely implemented.

ASSESSABLE PROPERTIES TO LAND AND BUILDING TAX

Generally speaking, the Land and Building Tax Act applies to lands and buildings owned by individuals or corporations. As defined under the Act, buildings also include condominium units and warehouses. Therefore, whoever owns or possesses land or buildings (including condominium units) as of January 1 of any given year must pay tax for that year.

TAX BASE & TAX RATE

The tax calculation is based on the value of the land or the structure. The Department of the Treasury appraises the value of such items, therefore the appraisal value. It is the same formula used to calculate the transaction charge in real estate transactions. Typically, the appraised value is lower than the market price.

The tax rate is determined by the land or structure's use. This is separated into four classes:

1) Agricultural use is one of Thailand's most important industries, the tax rate for this sort of use is often low, ranging from 0.01 to 0.1%. The maximum tax rate is 0.15 percent. The government cannot levy a higher rate;

 2. Residential use – this category can be divided into three subcategories:

(a) Land and building used as a primary residence – the owner must be a natural person, not a juristic person, owning both the land and building and named in the house registration book;

(b) Building used as a primary residence – the owner must also be a natural person, owning only the building and not the land, and named in the house registration book, e.g. an individual owning a condominium unit;

(c) Land or building that is used for other residential purposes than specified in (a) and (b) – this may apply to those individuals who own lands or buildings to accumulate wealth but not as their primary residence.

The highest property tax rate for residential use is 0.3%;

3. Other use - includes commercial and industrial applications. 1.2% is the maximum tax rate.

4. Vacant and abandoned or unused land or building – As the government encourages lands and buildings to be developed or utilized, anyone who leaves their lands or buildings unused for three consecutive years will be subject to an increase in tax rate of 0.3% in the fourth year and every year thereafter, up to a maximum of 3%.

The rate of land and building tax is defined in the Royal Decree issued pursuant to the LBTA. Below is a breakdown of the tax rate in effect beginning in 2022:

TAX EXEMPTIONS

LBTA exemptions include the following:

1. Any land or building used for agricultural purposes is exempt from the tax base value of up to THB 50 million for its individual owner;

2. Any land and building used for residential purposes is exempt from the tax base value of up to THB 50 million for its individual owner named in the house registration book;

3. An individual who owns only the building for residential purposes and is named in the house registration book is exempt from the tax base value of up to THB 50 million.

TAX PAYMENT

Within February of each tax year, the local administrative authority will notify taxpayers of their tax assessment in writing. The tax assessment must include the characteristics of the land or building, the appraised value, the tax rate, and the amount of tax due. The taxpayer may object and request a review of the assessment in the event that either the authority or the taxpayer committed an error or made a mistake.

After receiving the tax assessment, the taxpayer is required to make payment by April of each year. It is possible to pay in installments.

PENALTIES

The penalties for not paying the land and building tax include:

• Taxes that are payable but not paid by the due date are considered unpaid.

• Any taxpayer who fails to pay tax by the due date is subject to a 40% penalty of the unpaid tax.

• Any taxpayer who fails to pay tax by the due date is subject to a 1% monthly surcharge of the unpaid tax.

• Making a false statement for the purpose of tax evasion is punishable by up to two years in prison or a fine of up to THB 40,000, or both.

With the LBTA being fully enforced this year and various related laws to consider, it can be fairly complicated to comply with such regulations. Consultation with an attorney may assist clarify your tax difficulties. Please contact LAFS Legal for tax guidance.