Proposed Thai land tax clarity needed

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Proposed Thai land tax clarity needed 
Bangkok Post: 17 Aug 2010
PROPERTY
Land tax law continues to raise concerns
More clarity needed on several issues


The Land and Building Tax Act remains one of the hot legal issues people are discussing and endeavouring to grasp as it will affect everyone, whether he owns land or not.

While the law awaits cabinet approval, many issues need clarity and mutual understanding between those who will enforce it and those who will follow it, says a local lawyer.

Those who will enforce the new law need to have a clear and fair interpretation in order to avoid problems, says Wittaya Luengsukcharoen, a partner in the financial services division, real estate group at the international law firm Baker & McKenzie Ltd.

For example, the term "own residence" needs to be clear in terms of whether it means being a house owner or householder.

Under the new act, a residential unit owner must pay tax except for a unit for his or her own residence which he or she must live in for longer than six months to get the tax waiver.

That means that if a person has many housing units, he or she needs to choose one of them as a residence to avoid being taxed.

For example,
Mr A has a single house on the outskirts of Bangkok and a condo unit in the central business district. He needs to weigh the tax rate he has to pay for the single house and that for the condo and choose one as his residence.

What if the cunning Mr A wanted to get tax waiver for both units? Does he need to find a nominee to be a householder or unit owner for one of them?

In the case of a transfer, the property owner must present a receipt of tax payment to Lands Department staff. If a transfer is done and unpaid tax is found, the new owner must be responsible for that unpaid tax.

Under the new act, all revenue from tax collection will be given to local administrations as the government aims to increase their income and help them become self-sustaining, reducing the central government's burden.

"The question is, do we need to increase revenue to local administrations?" asks Mr Wittaya.

"And there may be more leaks," he said, suggesting it would be better "if we don't need to increase revenue but plug the leaks instead".

In fact, he said, increasing local administrations' revenues may lead to an increase in property owners' expenses, which will raise costs. As a result, there may be a rise in product prices, causing inflation eventually.

Another issue of concern is the establishment of a land bank for which funding will be raised from the tax. The fund would buy land plots and distribute them to people having no land.

But the question is whether land bank fund can solve that problem, as the Agricultural Land Reform Office, set to distribute land, has given out a total of 29.5 million rai to date but many people still have no land.

Mr Wittaya said, however, that the new act would help prevent people claiming land with no title.

"Some lands with no title deeds are claimed by some people paying tax for those plots each year to get possession. Under the new act, they cannot do that any more," he said at a recent meeting of Rotary Club of Bangkok Port.

http://www.bangkokpost.com/business/economics/191419/land-tax-law-continues-to-raise-concerns