Property tax rejig to amplify revenue

by Daryl Lum | Apr 18, 2024 | Bangkok Property Market Updates, Legal, Tax & Due Diligence

The revision of the land and building tax law aims to boost revenue by improving collection efficiency and establishing appropriate tax rates, while also tightening criteria to close tax loopholes, according to Lavaron Sangsnit, the finance permanent secretary.

Lavaron stated that the land and building tax law, which has been operational for five years, necessitates periodic reviews every five years to address implementation issues. Initially, the criteria were not overly strict, particularly for vacant land, which typically incurred higher tax rates compared to residential, agricultural, or commercial/industrial land.

However, Lavaron noted that some owners of vacant urban land avoided higher tax rates by planting fruit trees like limes, claiming agricultural status with the lowest tax rate. This strategy now obligates owners to pay agricultural land tax rates, whereas previously, no tax was levied on such land.

Determining vacant land status falls under the jurisdiction of local administrative organisations responsible for tax collection. Vacant land, legally defined, refers to land not utilized to its fullest potential. Lavaron emphasized the principle that landowners should derive benefits from the land exceeding the tax imposed.

He emphasized the gradual tightening of tax collection criteria in the future, as current levies remain relatively low. Tax rates should increase over time, with adjustments based on appropriate timing and circumstances, according to Lavaron. While the law specifies minimum rates, local administrative organisations can increase them, but not below the legal limit.

The land and building tax replaced the house and land tax and the local development tax, resulting in slightly higher revenue collection after deductions expired, and full rates were enforced. The current system bases property tax on land appraisal values multiplied by respective tax rates, unlike the previous house and land tax, which used annual rental values multiplied by a fixed rate of 12.5%.

Lavaron mentioned that certain properties like department stores may face higher tax levies, while others could have lower rates than before. This system is deemed fairer as it applies the same tax rate universally, without reliance on tax collectors’ discretion.

How Foreign-Sourced Income brought into Thailand will be treated moving forward

by Daryl Lum | Apr 11, 2024 | Bangkok Property Market Updates, Legal, Tax & Due Diligence

The Thai Department of Revenue has enacted Departmental Instruction No. Paw 161/2566, which introduces substantial amendments to the taxation of foreign-sourced income for personal income tax purposes, effective from 1 January 2024. 161/2566 was issued to provide interpretation to Section 41 Paragraph 2 of the Thai Revenue Code. This directive mandates that Thai taxpayers, including both citizens and residents, who earn income from employment, business activities, or property outside of Thailand, are required to pay taxes on such income upon repatriation to Thailand.

Under the prior regulations, foreign-source income was taxable only if repatriated to Thailand within the same calendar year it was earned. The new instruction closes this loophole by requiring the declaration and taxation of overseas income regardless of the repatriation timeline, within the tax year it is earned.

This revised taxation rule applies to all Thai taxpayers. This includes:

• Thai nationals;
• Residents who have previously filed taxes in Thailand;
• Foreign nationals residing in Thailand for 180 days or more within a tax year.

For the 2024 tax year, with tax filings due by March 2025, income tax will be applicable under the following conditions:

• Income earned both within and outside of Thailand, including wages, business income, and passive or property income as specified under sections 40 and 41 of the Revenue Code.

The income tax rates for Thai citizens and permanent foreign residents are structured as follows:

• Income up to 150,000 baht is exempt;
• Income over 150,000 baht up to 300,000 baht is taxed at 5%;
• Income over 300,000 baht up to 500,000 baht is taxed at 10%;
• Income over 500,000 baht up to 750,000 baht is taxed at 15%;
• Income over 750,000 baht up to 1 million baht is taxed at 20%;
• Income over 1 million baht up to 2 million baht is taxed at 25%;
• Income over 2 million baht up to 5 million baht is taxed at 30%;
• Income above 5 million baht is taxed at 35%.

Instruction No. P 161/2566 signifies a pivotal shift in Thailand’s approach to taxing foreign-sourced income, aimed at creating a more equitable tax environment for individuals earning from both domestic and international sources. This is particularly relevant for foreign investors and expatriates residing in Thailand.