Landowners panic over tax changes

December 26, 2019

Operators of homestay and home-sharing premises will soon face much higher commercial property tax than buy-to-let homeowners who pay residential rates, the Finance Ministry says.

However, the new rules have sent many confused land and property owners into a panic, particularly in Bangkok. They received a letter from local administrative organisations and district offices informing them of their property type ahead of the enforcement of the new tax legislation.

To quell homeowners’ unease, the Finance Ministry and related agencies have agreed to group buy-to-let homes and condominiums under residential use, which is charged below the rate for commercial use under the new land and building tax to be implemented in August next year, according to Lavaron Sangsnit, director-general of the Fiscal Policy Office.

This is because the authorities believe these properties are rented for long-term residential purposes. But homestay operators and home-sharing hosts like Airbnb will reap no windfall from the Finance Ministry’s decision to apply the land and building tax rate for residential purposes to buy-to-let homes.

Homestay and home-sharing activities are considered short-term rentals for commercial use, so these operators will be subjected to the commercial rate, Mr Lavaron said.

Daily rentals are deemed for commercial purposes, while long-term rentals are classed as residential use, he said, adding the various durations of rental periods will be spelled out later. According to the new tax structure, land and buildings used for residences with appraisal prices of up to 50 million baht are tax-exempt for principal homes, while those valued at more than 50-75 million baht are taxed at 0.03% of appraisal prices, more than 75-100 million baht are taxed at 0.05%, and more than 100 million baht at 0.1%.

Those who only own houses, not land, qualify for a tax exemption for the first 10 million baht of their houses’ appraisal prices.

If owners have more than one home, the second and subsequent residences are subject to a 0.02% tax for those with an appraisal price of up to 50 million baht or 200 baht for 1 million baht worth of appraisal price, and the same tax rate as principal homes is applied to those with appraisal prices above 50 million baht. In comparison, owners of commercial use property will be subject to a 0.3% tax rate for up to 50 million baht, or 3,000 baht for 1 million baht worth of appraised price.

Mr Lavaron said the land and building tax’s objectives are to simplify tax collection and reduce local administrative organisations’ discretion.

A buy-to-let home whose physical appearance is that of a residence will be regarded as for living use even if rented to others, he said.

Meanwhile, permanent secretary for finance Prasong Poontaneat said the Finance Ministry and the Interior Ministry will publicly announce guidance for the land and building tax in cases of buy-to-let homes to reduce confusion.

Mr Prasong said land owners who lease their land for agricultural purposes should be subject to tax under agriculture activity rates, not commercial rates. For vacant high-value land plots authorities will issue guidance to determine how land owners can grow trees and is to be classified as agricultural land which is subject to low tax rate.

Source: Bangkok Post