The "Land and Building Tax" is a topic many are currently discussing, stemming from the Land and Building Tax Act B.E. 2562, which came into effect on January 1, 2020, with the final tax payment date set for August 31, 2020. As this is a new tax, there are various points of confusion. Today, TerraBKK will summarize the key points regarding this tax, including who is liable to pay the tax, the applicable rates, and the payment procedures.

                First, it should be noted that the Land and Building Tax may be perceived as a new tax, but in reality, it replaces the house tax and local maintenance tax to help reduce social inequality, encourage land utilization, reduce land speculation, and increase revenue for local administrative organizations (LAOs) for local development.

                The reason for implementing the Land and Building Tax instead of the old tax system is due to the high rate of the house and land tax at 12.5% per year, while the local maintenance tax is based on outdated land values, adjusted every four years. Additionally, the tax rate is regressive, where high-value land has a lower average tax rate than low-value land. These issues and limitations in the old tax collection system resulted in insufficient revenue for local development.

Types of Land and Buildings?

Source: Fiscal Policy Office

  • Residential land: The first house will be assessed based on the name on the registration (if not registered, it is considered a secondary house). For the first house valued at no more than 50 million baht, no tax is due. Other houses must pay tax in all cases, starting at a rate of 0.02%.
  • Agricultural land: This is land used for agriculture for sale or consumption, taxed based on usage proportion, but not exceeding 0.15% per year. Tax exemptions will be granted to individual landowners from 2020 to 2022 for three years. From 2023 onwards, tax will be due unless the value does not exceed 50 million baht; any excess will be taxed at 0.01%. Legal entities will not receive any exemptions.
  • Commercial land: This is land used for commercial purposes or as part of a business operation, such as hotels, restaurants, shops, factories, etc., including those renting out various properties. The tax rate is 0.3%.
  • Vacant land: Land that is not utilized will be taxed at a rate of 0.3%. If the tax remains unpaid for three consecutive years, the tax will increase by another 0.3% in the fourth year and will continue to increase by 0.3% every three years, capped at 3%. This tax collection method encourages the utilization of vacant land and buildings.

                In cases where land and buildings have multiple uses, for example, a two-story building with a shop on the ground floor and a residence on the second floor, the tax will be assessed based on the actual usage proportion.

How is the annual tax burden calculated?

                The tax base is the total value of the land and buildings.

                Tax calculation method

                                - In cases where land has no buildings

                                Tax due = Land value x Tax rate (Land value = Appraised land price/(sq.wa) x Land area)

                                For example, land priced at 300 sq. wa, with an appraised value of 100,000 baht/sq. wa, is vacant land with no utilization (vacant land tax rate of 0.3%).

                                The calculation is as follows: Land value 300 x 100,000 = 30,000,000 baht.

                                Tax due = 30,000,000 x 0.3% = 90,000 baht.

                - In cases of land and buildings

                                Tax due = (Land value + Building value) x Tax rate (Land value = Appraised land value/sq.wa x Land area) (Building value = Appraised building value/sq.m x Building area - Depreciation)

                                For example, a restaurant on 50 sq. wa of land is a two-story commercial building with a total area of 300 sq.m (commercial land tax rate of 0.3%).

                                The calculation is as follows: Land value 50 x 100,000 = 5,000,000 baht; Building value 300 x 7,750 (appraised by LAO) = 2,325,000 baht.

                                Tax due = (5,000,000 + 2,325,000) * 0.3% = 21,975 baht.

                Appraised land and building values will be announced by the local administrative organization, including details of tax collection each year at the LAO office, or the appraised values can be viewed at Treasury Department.

When is the tax due and where should it be paid?

                The LAO will notify the tax assessment by February, and taxpayers must pay the tax by April of each year. Payments can be made at the office or local administrative organization, via mail or bank.

What are the penalties for not paying taxes?

                If taxes are not paid by April, an additional 1% per month of the tax due will be charged, and a notification letter will be sent in May.

                        - If taxes are paid after April but before receiving the notification letter, a 10% penalty will apply.

                        - If payment is made after receiving the notification letter but within the specified date, a 20% penalty will apply.

                        - If payment is not made within 15 days of the notification letter, a 40% penalty will apply.

                        If taxes are not paid within 90 days after receiving the notification letter, the LAO can seize and auction assets to cover the tax owed, and can also sell other assets of the taxpayer, such as bank account funds or bonds, to pay the overdue taxes, returning any excess to the taxpayer.

Measures to Mitigate Impact

                According to the law, to alleviate this tax burden, tax reductions of up to 90% can be granted for certain types of land and buildings, such as:

                - Primary residences inherited before the Land and Building Tax came into effect.

                - Land and buildings for public services, such as schools and museums.

                - Assets under development for residential projects or industrial estates (for three years from the application date).

                - Assets awaiting sale by financial institutions for five years, etc.

                Tax Relief Taxpayers facing increased tax burdens compared to current payments can gradually pay the increased amount over three years at rates of 25%, 50%, and 75% respectively.

                Originally, the deadline for land tax payments was set for August 2020, with penalties ranging from 10-40% for late payments. However, many people had not received tax notification letters, leading to debates on whether payments were necessary. Recently, on August 28, an extension for tax payments until October 31, 2020, was announced without penalties or additional fees.

                For those who did not receive tax assessment documents, they should bring proof of ownership and their ID card to the revenue department at the district office where the land is located to request a tax assessment. Those who received tax assessment letters in July 2020 and believe the assessment is incorrect can file a complaint with the Bangkok governor at the revenue department of the district office where the land and buildings are located.

                Due to the COVID-19 pandemic, the global economy, including Thailand, has contracted severely, leading to a 90% reduction in land and building taxes for all four types of land and buildings for the 2020 tax year, requiring only 10% payment. However, the reason for not canceling or postponing tax payments was to identify who is liable for taxes and the tax base.