New tax unlikely to hit wealthy's homes
The land and buildings tax is likely to have a minimal impact on the high-priced self-built home segment with units valued at 50 million baht or more.
But the tax burden may hinder those buying a land plot and preparing to build a house in the future, says the Home Builder Association.
Honorary director Wisit Monaiyapong said those who wanted to build a house valued at 50 million baht or more would be able to pay tax anyway because of their high purchasing power.
The cabinet last Tuesday approved the long-awaited land and buildings tax, which is designed to expand the national taxpayer base.
The bill, which takes effect next year, sets ceiling rates of 0.2% of appraisal value for land used for agricultural purposes, 0.5% for residences, 2% for commercial use and 5% for vacant or undeveloped land.
The tax will be levied on first homes and land used for agricultural purposes with appraisal prices starting at 50 million baht, with the rate applied to the amount exceeding 50 million baht.
Owners of first homes and farms with an appraisal price below 50 million baht will be free from tax liability.
The tax will also apply to second homes on a progressive basis, with rates of 0.03% to 0.30% for homes with an appraisal value of less than 5 million baht to more than 100 million baht.
For vacant or undeveloped land, the tax rate will be imposed at 1% for land left vacant or unused for 1-3 years, 2% for 4-6 years and 3% for more than seven years.
"Many people who plan to have a self-built home will usually buy a vacant plot long before building a house as they want to take time to collect money for the unit," Mr Wisit said. "These people are mostly civil servants but some are parents who plan to build a house for their children when they grow up."
If the new tax is effective, these people will have to pay tax for a vacant plot they plan to use for building a house.
"The rate [for vacant land] is too high, nearly equal to the inflation rate," he said. "This will discourage those who buy a plot and plan to have a self-built home unit in the future. They may shift to buy a unit in a housing estate project instead as they don't want to pay tax."
Mr Wisit suggested those who own a vacant plot and plan to have a self-built home on it should be refunded when they build a house. "There may be an endorsement on the back of the title deed that this plot will be for residential purposes. The period may be no longer than 10 years," he said.
Mr Wisit said the new tax would have two positive effects on the self-built home market.
Those who have a vacant plot and plan to have a house built will speed up their decisions to avoid tax on the vacant plot, while those who want to have a self-built home but have no plot yet will be able to seek a piece of land more easily as more land will be offered by landowners who may not want to pay tax.
Mr Wisit said the overall self-built home market was sluggish in the first five months. "Homebuilders should be more cautious, control costs and not expand too much as sales may slow," he said.