While Thailand has put off yet another attempt to impose property taxes amid questions about fairness and practicality, a look around the region shows that many countries tax land and buildings using different criteria and rates.
The calculation of tax rates varies widely in line with economic conditions, the level of development and demographic profile of each country.
Most countries in Asia, among them the Philippines and Japan, collect the tax based on the appraised value of assets, similar to the Land and Building Tax that the Thai government was considering. Thai authorities were proposing maximum rates of 0.25% for land for agricultural use, 0.5% for residential property and 2% for commercial property and unused or vacant land.
In the Philippines, the real estate tax is 1-2% of the appraised value of residential, commercial and industrial properties, and an additional 1% for the Special Education Fund. Total tax rates vary by municipality, according to Jones Lang LaSalle (JLL), an international real estate services group.
Japan, like many more developed countries, collects taxes on fixed assets which refers to land, buildings and tangible business assets. The amount of the tax is determined based on the applicable tax rate (usually 1.4%) and the assessed value of the relevant asset, JLL says.
Singapore and Malaysia, meanwhile, use an annual value base that is assessed yearly by the government agency responsible for land valuation.
Even some less developed countries including Cambodia and Myanmar collect taxes based on the estimated annual value of a property, but in a less complicated manner.
In Cambodia, land and building tax applies to all types of properties at a flat rate of 0.1% annually. The tax is applied to all immovable properties valued in excess of 100 million riels (about US$24,000 or 790,000 baht), and is administered by the land valuation department.
Ross Wheble, country manager of the real estate company Knight Frank (Cambodia), says the actual amounts collected can vary and application of the 0.1% rate is not universal because the system is not very transparent.
In Myanmar, immovable properties situated in lower Myanmar and in Thayetmyo district of upper Myanmar are subject to property taxes, covering general tax, lighting, water and conservancy taxes. Due to restrictions on foreign ownership of land, these taxes usually are not a direct issue for foreign investors.
In Vietnam, owners of residential property are required to pay a land-use rights (LUR) ownership transfer tax. It is calculated based on the land area, the price of land established by the state, and the prevailing tax rate, according to information from the Credit Administration Department.
When houses or land are transferred, the new owner will be required to pay registration fees at 0.5% of the appraised value. The LUR transferred by a Vietnamese resident household is taxed at 25% of the capital gain. If there is no capital gain, the tax rate is 2% of the transaction value.
Owners of residential property are also required to pay land tax each year to the government at rates between 0.1% and 0.15% based on land area, the land price established by the state, and the applicable tax rate.
CHINA
Most cities in China offer a tax exemption for real property owned by individuals for non-business purposes. The exceptions are major cities such as Shanghai, Beijing, Guangzhou and Chongqing where every category of property is taxed.
For owner-occupied properties in Shanghai, real estate tax is levied at 1.2% of 80% of the original value of the property. In Beijing and Guangzhou, the rate is 1.2% of 70% of the original value.
In 2011, both Shanghai and Chongqing also introduced a new real estate tax to curb speculation. These taxes are levied on owners who have more than one property. In Shanghai, the applicable rates are from 0.4% to 0.6% of the assessed market value of the property. The rates in Chongqing are from 0.5% to 1.2%.
Solely in Shanghai, land use tax is imposed on land use rights holders at rates ranging from the equivalent of 25 US cents to $4.93 per square metre per year, depending on the location and use.
An additional "comprehensive tax" is applied on property leasing activities in Beijing, Shanghai and Guangzhou. The rates vary depending on the purpose of the land use, location and type of landlords, whether corporate or individual.
Leased properties in Shanghai, Beijing and Guangzhou are taxed at 12% of rent for both foreign and local companies. For leased properties without rental income, real estate tax is levied at 1.2% of the annual value.
SINGAPORE
Singapore imposes property tax with an aim to reduce speculation as property prices have surged in recent years. Therefore, tax rates are high.
Singapore, with the second most expensive property prices in Asia after Hong Kong, has a very detailed tax calculation regime for land and buildings, especially for residential properties, with rates varying according to how the property functions, is used and managed. Different rates apply for non-owner-occupied residential properties and owner-occupied homes.
"Singapore has a land scarcity problem which forces the government to try to limit the ownership of land. As people want to own more, the relevant taxes tend to increase too," explains Somboon Weerawutiwong, a tax and legal consultant at PricewaterhouseCoopers (PwC) in Bangkok.
Inland Revenue authorities in Singapore charge property owners annually at progressive tax rates that move higher according to the estimated annual value and annual estimated market rents. Non-owner-occupied properties, including rental properties and vacant land, are subjected to higher tax rates than owner-occupied properties.
Tax rates for non-owner-occupied properties start from 10% for property values at S$30,000 (US$21,000) to 30% for values above S$90,000. Rates for owner-occupied homes range from zero for property worth below S$8,000 to 16% for property above S$130,000. There are multiple rates for prices in between. The rates are effective from January 2015 to January 2016 and will be reassessed next year.
Such progressive tax rates are applied to all residential properties. Other properties such as residential land, commercial and industrial buildings are taxed at the non-residential tax rate of 10% per year.
The city-state also has different tax rates for residential properties and public flats managed by the Housing and Development Board (HDB). As of 2013, 81.9% of the resident population of Singapore lived in HDB flats.
MALAYSIA
In Malaysia, an "assessment tax" is imposed based on the annual value of the property as evaluated by local authorities. It is generally levied at a flat rate of 6% for residential properties.
Individual state governments also levy a land tax known as "quit rent" which is payable yearly. The rates vary from state to state and will depend on the locality and category of land use.
However, according to the real estate services group CRBE in Johor Bahru state, a more popular property-related tax is the Real Property Gains Tax (RPGT) — based on the RPGT Act 1976 — which is imposed on positive capital gains derived from the disposal of property.
The RPGT last year was 30% of the net gain if the disposal is made within three years after the first purchase. After three years, individuals would be taxed at 20% for the fourth year and 15% for the fifth year. Sales of property held by Malaysian individuals after five years are not subject to the tax, while companies have to pay 5% for a disposal after five years.
The rate has been increased from only 5% since the tax was first implemented in 2010 to 30% today because the government is trying to reduce speculative activity, which pushes up property prices.
Speculators tend to face more impact compared to genuine end-user buyers, who qualify for certain exemptions. For example, there is an exemption from tax on gains from the disposal of one residential property once in a lifetime for an individual, and an exemption for gains arising from the disposal of real property between family members. In addition, the first 10% of profits or 10,000 ringgit (US$2,700) per transaction (whichever is higher) are not taxable, according to Loanstreet, a loan advisory service provider in Malaysia.
However, in the long term, increasing the RPGT rate is expected to slow the growth of secondary markets and also might reduce property investments by local and foreign investors.
The tax is also applicable to the procurement and disposal of shares in companies where 75% of their tangible assets are in the forms of property.