Land windfall tax receives cabinet approval

28 August 2018

The Thai cabinet has approved in principle a draft law to tax benefits derived from price increases of properties within a 5 kilometer radius from all public transport infrastructure projects.

According to the newsletter of the Ministry of Finance, all individuals and juristic persons who own land for commercial purposes valued at more than Baht 50 million and/or condominium developers will be liable for the tax upon transfer of ownership of properties within a 5 kilometer radius from all public transport infrastructure projects.

Public transport infrastructure projects include:

  • High-speed, double-track or electric trains
  • Expressways
  • Airports or ports
  • Other projects prescribed by the Ministerial Regulations

The areas subject to tax will be considered and determined by a committee which would include the Permanent Secretary of the Ministry of Finance and representatives of the Fiscal Policy Office.

Proposed tax rates

Capped 5% tax rate on price increases for the following periods:

  1. During the period from commencement of construction of public transport infrastructure projects until its completion, all owners of land and condominium units within the radius of the public project will be liable for the tax every time upon ownership transfer.
  1. After the completion of public transport infrastructure projects, the first time transfer of the following properties:
  1. Land or condominium units for commercial purposes with the value more than Baht 50 million.
  2. Condominium units of the developer.

Land for residential and agricultural purposes are exempted. The actual tax rate to be applied will be prescribed by a Royal Decree.

Tax base

The tax base for  calculating the windfall tax would be the difference between the value of the land/condominium units at the date of commencement of the public project and the date that the construction of the public project is completed.

For projects under construction, the effective date of the Act will be the commencement date to calculate the tax base.

The official appraised price of the land and condominium units provided by the Treasury Department will be used to calculate the inflated prices of the land adjacent to public projects. The Treasury Department is responsible for determining the official appraised prices of land for tax collection purposes, with the prices revised every four years.

In the case where the tax base cannot be calculated as there is no official appraised price for the new condominium units, the tax base would be 20% of the value of such condominium unit.

The tax will be collected by the Land Department or the Local Administrative Organization where the property is situated.

The next step is for the Council of State to review the draft law before it is tabled for approval by parliament. The final version of the windfall tax that is passed as law may be different to that approved in principle by the Thai cabinet.