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Land Windfall Tax Likely To Deflate Property Bubble

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The land windfall tax is expected to help fend off a property market bubble as developers take care to avoid tax liabilities that will come into effect if the value of unsold residential units exceeds 50 million baht.

The tax should compel property developers to be more cautious in assessing market demand, said a source at the Finance Ministry.

A draft bill on the land windfall tax, now under consideration by the Fiscal Policy Office, capped the ceiling at 5% of the inflated price, but the applicable rate will be decided later.

Those liable for the tax must own land within a radius of five kilometers of a station serving high-speed, double-track or electric trains, or of the on- or off-ramp of an expressway. Those who own plots within 5km of building-restricted zones such as airports or ports will also be required to pay the tax.

Landlords whose land value is inflated will be charged the land windfall tax every time ownership is transferred from the time when the transport infrastructure project’s contract is signed until the project’s completion.

Once transport projects begin operations, those owning land for residential and agricultural purposes will not be liable to pay the tax, while those who have land for commercial use and whose value is higher than 50 million baht will be subject to the tax upon ownership transfer.

Only property developers for which the leftover units of their projects are valued in excess of 50 million baht will be taxed in the event that land ownership is transferred after the launch of an infrastructure project.

For condominiums, the tax base will be the difference between the sale price and valuation on the effective date of the law. For new or under-construction units, the valuation will be 20% of the average valuation of condominiums in the same area.

But a one-time tax will be applied to cases where land ownership is transferred after a transport infrastructure project starts. That means other landlords on plots for which the tax has been paid will no longer be subject to the tax.

Owners of land near infrastructure projects launched before the land windfall tax take effect will be exempt from the levy.

The Finance Ministry source said a property developer working on more than one project in the same area may be taxed less for the second or third project than for the first one to create a fair tax payment system, as such developers would have already paid the land windfall tax.

For instance, the first project could be taxed at 3% and the second one at 1%.

But the second project could be charged at the same rate as the first if the government determines that its unit prices are higher on account of infrastructure project development, the source said.

 

source: https://property.bangkokpost.com/news/1426547/windfall-tax-likely-to-deflate-property-bubble

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