Samma Keetsin
Board Member and Independent Director, Sena Development Public Company Limited

The Property Tax Act B.E. 2562 was enacted on March 9, 2019, with the rationale that the previous collection of local maintenance tax and property tax had long-standing issues, such as overlapping tax bases with income tax, high tax rates, and significant discretion in assessment. There were numerous exemptions and reductions, and no updates had been made for a long time. This led to a reform of the tax structure to modernize it, address the issues of the old tax structure, and enhance the efficiency of tax collection for local administrative organizations, strengthening and ensuring transparency in their management, and helping localities have sufficient budgets for long-term development.

Regarding the tax rates, Section 37 specifies that:

  • Land or buildings used for agricultural purposes have a ceiling rate of no more than 0.15%.
  • Land or buildings used for residential purposes have a ceiling rate of no more than 0.3%.
  • Land or buildings used for other purposes have a ceiling rate of no more than 1.2%.
  • Vacant land or buildings not utilized appropriately have a ceiling rate of no more than 1.2%.

However, in the transitional provisions, Section 94 sets the tax rate for the first two years of property tax collection (i.e., for the years 2020 and 2021) lower than the standard rates specified in Section 37, differentiated by the value of the tax base as follows:

Land or buildings used for agricultural purposes (tax rate according to Section 37, ceiling of no more than 0.15%):

  • Value not exceeding 75 million baht, rate of 0.01%
  • Value exceeding 75 million but not exceeding 100 million baht, rate of 0.03%
  • Value exceeding 100 million but not exceeding 500 million baht, rate of 0.05%
  • Value exceeding 500 million but not exceeding 1,000 million baht, rate of 0.07%
  • Value exceeding 1,000 million baht, rate of 0.1%

Section 96 also specifies that in the first three years, tax collection is exempted for individual landowners and buildings used for agricultural purposes. Additionally, a Ministry of Finance and Ministry of Interior announcement on December 6, 2019, states that individuals are exempt from the tax base value in each local administrative organization not exceeding 50 million baht for land used for agricultural purposes.

Land and buildings used for residential purposes (tax rate according to Section 37, ceiling of no more than 0.3%):

  • Value not exceeding 25 million baht, rate of 0.03%
  • Value exceeding 25 million but not exceeding 50 million baht, rate of 0.05%
  • Value exceeding 50 million baht, rate of 0.1%

An announcement from the Ministry of Finance on June 21, 2019, states that in cases where the land and buildings are owned by individuals, used as residences, and registered in the household registration (i.e., the primary residence), they are exempt from the tax base value not exceeding 50 million baht.

  • Value not exceeding 40 million baht, rate of 0.02%
  • Value exceeding 40 million but not exceeding 65 million baht, rate of 0.03%
  • Value exceeding 65 million but not exceeding 90 million baht, rate of 0.05%
  • Value exceeding 90 million baht, rate of 0.1%

The Ministry of Finance announcement on June 21, 2019, also states that in cases where the buildings are owned by individuals, used as residences, and registered in the household registration (i.e., the primary residence), they are exempt from the tax base value not exceeding 10 million baht.

Land or buildings used for residential purposes in other cases (tax rate according to Section 37, ceiling of no more than 0.3%):

  • Value not exceeding 50 million baht, rate of 0.02%
  • Value exceeding 50 million but not exceeding 75 million baht, rate of 0.03%
  • Value exceeding 75 million but not exceeding 100 million baht, rate of 0.05%
  • Value exceeding 100 million baht, rate of 0.1%

Land or buildings used for other purposes (tax rate according to Section 37, ceiling of no more than 1.2%):

  • Value not exceeding 50 million baht, rate of 0.3%
  • Value exceeding 50 million but not exceeding 200 million baht, rate of 0.4%
  • Value exceeding 200 million but not exceeding 1,000 million baht, rate of 0.5%
  • Value exceeding 1,000 million but not exceeding 5,000 million baht, rate of 0.6%
  • Value exceeding 5,000 million baht, rate of 0.7%

Vacant land or buildings not utilized appropriately (tax rate according to Section 37, ceiling of no more than 1.2%):

  • Value not exceeding 50 million baht, rate of 0.3%
  • Value exceeding 50 million but not exceeding 200 million baht, rate of 0.4%
  • Value exceeding 200 million but not exceeding 1,000 million baht, rate of 0.5%
  • Value exceeding 1,000 million but not exceeding 5,000 million baht, rate of 0.6%
  • Value exceeding 5,000 million baht, rate of 0.7% 
    (an increase of 0.3% every 3 years, but not exceeding a ceiling of 3%)

Section 55 of this Act also stipulates that tax reductions for certain types of land or buildings can be made to suit economic, social, situational, business, or local conditions by royal decree, but not exceeding 90% of the tax owed.

In the past, there has not been full tax collection at the required rates, as Section 94 set flexible rates for 2020 and 2021, and Section 55 allows for a reduction of up to 90%, meaning there has been a reduction of two levels.

A royal decree was issued to reduce taxes for certain types of land and buildings in 2020, on June 9, 2020, based on the severe outbreak of COVID-19, which caused a rapid contraction of the economy in Thailand and worldwide, affecting people across all professions. Therefore, to suit the economic necessity and alleviate the overall impact on the public, the tax rate for land and buildings for 2020 was reduced to only 10% of the tax owed.

Subsequently, a second royal decree was issued on January 30, 2021, to further reduce the tax rate for land and buildings for 2021 to only 10% of the tax owed, effectively extending the reduction from 2020.

On December 7, 2021, the Cabinet approved to maintain the property tax rate according to Section 94 for another two years, in 2022 and 2023. Most recently, on December 13, 2021, the Royal Gazette announced the property tax rates for 2022 and beyond, indicating that the rates would remain the same as previously set in Section 94. However, since Section 94 only specified rates for 2020 and 2021, a new royal decree was issued.

Since this resolution refers to Section 94 but does not mention Section 55, it implies that the resolution only reduces the tax rate at one level, from the ceiling rate according to Section 37, without further reducing it by 90% as per Section 55. Therefore, to maintain the same tax rates as in 2020 and 2021, a new royal decree for tax reduction for certain types of land and buildings must be enacted for 2022 and 2023, which the government needs to proceed with due to ongoing public health and economic issues from 2020 and 2021.

Additionally, a royal decree issued on January 18, 2020, stipulated a 90% tax reduction for land or buildings that are real estate awaiting sale, held by financial institutions or asset management companies for no more than five years.

For land or buildings of operators under development as residential or industrial projects according to land allocation laws, for no more than three years from the date of allocation approval, and for land or buildings of operators under development as condominiums for no more than three years from the construction approval date. This aspect may also need to be reviewed for an extension due to the impacts from public health and economic issues.

Note*

This article was written and published in TerraBKK on December 16, 2021, analyzing the Cabinet resolution on December 7, 2021, which approved the extension of the property tax rate for another two years. It highlights that this resolution does not maintain the same tax rates as in 2020 and 2021, as interpreted by some scholars, entrepreneurs, and media, but rather reflects a tax rate that has not been further reduced according to Section 55, which states, "Tax reductions for certain types of land or buildings to suit economic, social, situational, business, or local conditions can be made by royal decree, but not exceeding 90% of the tax owed."

Later, on January 16, 2022, the Minister of Finance revealed that the Ministry of Finance would not extend the 90% tax reduction period further, as local revenues would significantly decrease.

The author of this article further opines that the 90% tax reduction in 2020 and 2021 under Section 55 was a response to the COVID-19 pandemic and its overall impact on the economy. Given that the reasons for the tax reduction still exist, as the pandemic has not improved and is even worsening globally, and the overall economic situation remains unchanged, it is appropriate to maintain the same tax reduction rates as in 2020 and 2021, possibly reducing them to lower than 90%, such as 80% or 75%.