Property tax in Bangkok: the Ministry of Finance and the governor of the capital clashed

Bangkok property tax dispute: old law vs new - who wins?

In Bangkok, a dispute over tax laws flares up, sparking a heated debate between the finance ministry and the city's governor, Chadchart Sittipunt. The question is whether the old property tax law should be reinstated or the new one, which is considered more fair and up-to-date, should be left in place.

Gov. Chadchart Sittipunt is pushing for the return of the old tax law, arguing that it will provide higher revenues to local governments. He cites the mall-rich Phaya Thai district as an example, where revenues fell from 10.7 million baht to 1.08 million baht a year as a result of the new tax.

The governor points out that the old tax collected 12.5% on sales and rentals of real estate, while revenues were reduced by the new tax, which is based only on the value of the land. However, a spokesman for the Ministry of Finance counters, stating that Phaya Thai's low income levels in 2021 and 2022 are due to the 90% tax credit given to businesses to mitigate the effects of the COVID-19 pandemic. The full levy of the new tax would return Bangkok's land tax revenue to the level of 15 billion baht earned in 2019 from the old tax, the ministry said.

Property tax in Bangkok: history and implementation

The history of the introduction of a new tax on land and real estate in Bangkok has more than 10 years. The aim of the new tax law was to help local governments generate more revenue so that they would not be dependent on the central government budget. Prior to the introduction of the new tax in 2020, about 7,800 local governments across the country received about 30 billion baht annually from the old tax, according to the Ministry of Finance.

However, due to the COVID-19 pandemic, a 90% discount on all payments was provided for the first two years of the new tax law. In 2020, the Bangkok government collected 1.256 billion baht in land tax, and in 2021 the amount increased to 1.802 billion baht. The full amount of the tax was restored in 2022 when the Bangkok government collected 12.347 billion baht in tax as of September 2022.

This year, the Ministry of Finance has reduced the land tax by 15% after estimating revenues of 30 billion baht at the new average land prices.

Advantages of the new tax law and the rejection of the governor's proposals

According to Ministry of Finance spokesman and fiscal policy adviser Wuttipong Jittungsakul, the new land and property tax is fairer than its predecessor. He claims that the new tax sets 34 different rates for land and property owners based on their assets. This allows you to more accurately assess the value of the property and set the appropriate tax rate.

The Treasury Department is also rejecting Governor Chadchart's proposal to raise the tax rate for land in commercial areas used for agricultural purposes. The governor proposed to levy the full tax rate of 0.15%, instead of the 0.01-0.1% tax paid if crops were grown on the land. A ministry spokesman said such a proposal could not be implemented because it discriminated against certain landowners.

So, the dispute over tax laws in Bangkok continues. The Ministry of Finance insists on maintaining the new tax law, considering it to be more fair and in line with modern requirements. In contrast, Chadchart City Governor Sittipunt is pushing for the return of the old law to ensure higher revenues for local governments. The issue will be decided by the new government, and only time will tell what changes will be made to Bangkok's tax laws.

Changes in the property tax system in Thailand: the introduction of a new property tax

In Thailand, there was a tax on land and buildings, which was levied annually by local governments under the Property Tax Law. It is important to note that Thailand did not have a general annual property tax, but if individual owners rented out their property or used it commercially, a housing and rental tax of 12.5% was levied annually.

The owner had to notify the local authorities if his property was rented out or used commercially, and he is expected to pay this rental tax by February of each year.

In 2020, the Thai government decided to change the existing tax on buildings and land, and decided to replace them with a new "property tax".

This new tax is now levied on real estate and every owner of land, including any permanent structure on that land, will have to pay the tax. The new tax has a maximum of three rates, which are calculated based on the appraised value of the property.

Below are the three tax rates:

The above rates are the maximum tax rates that local governments can charge. Thus, there may be variation in building and land tax rates in different areas under the new system.

Thailand Land Property Restrictions for Foreigners: Alternative Paths and Property Tax

In Thailand, foreigners are not allowed to own land, and if a foreigner wants to own land, it is not so easy. It is important to note that restrictions on land ownership by foreigners in Thailand apply only to land and do not affect buildings on land or apartments.

If a foreigner is interested in buying a plot of land, there are two main routes that are recommended. The first way is not to own real estate at all, but to rent it for a long period of 30 years. In most of these cases, the foreigner marries a Thai citizen, with the Thai woman acquiring land and demanding a lease agreement with the foreigner. The second way is the creation of a Thai company (Thai Limited Company), where a foreigner will own 49% of the shares. According to Thai real estate law, a foreigner cannot own half or more than half of the shares of a company. Having gone through this path, the Thai owner can transfer the company to a foreigner, while the immigration office will carefully monitor the foreigner's business activities.

Despite the restrictions associated with land ownership, foreigners interested in investing in property in Thailand have alternative ways to achieve their goals. One of these ways is to acquire a share in a Thai company, which allows you to legally control the property.

In addition, it is important to have an understanding of property tax in Thailand. After the acquisition of real estate by a foreigner or a Thai company, the owners are required to pay property tax. The tax rate may vary depending on the value of the property and ranges from 0.5% to 2% of the appraised value of the property. This tax is levied annually and is payable to the local tax office.