Land and Building Tax: Thailand Introduces Legal Instruments for Tax Reduction and Exemption to Support Waterworks, Green Spaces, and Electric Railway Transportation

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Land and Building Tax: Thailand Introduces Legal Instruments for Tax Reduction and Exemption to Support Waterworks, Green Spaces, and Electric Railway Transportation

Introduction

The Land and Building Tax Act B.E. 2562 (2019) (the “Act”) has been enforced since January 1, 2020, serving as the legal instrument for collecting land and building tax, replacing the Land and Building Tax Act B.E. 2475 (1932) and the Local Maintenance Tax Act B.E. 2508 (1965). The Act provides for land tax exemptions and reductions in certain cases and circumstances. On December 17, 2024, the Cabinet approved three draft legal instruments aimed at expanding the scope of land tax exemptions and reductions as follows:

  1. The Draft Royal Decree on the Reduction of Land and Building Tax (No. ..) B.E. …. (Water Treatment Plant), proposed by the Ministry of Finance.

Previously, the Royal Decree on Land and Building Tax Reduction B.E. 2563 (2020) was enacted to reduce the land and building tax for 13 types of land and buildings. The new draft Royal Decree expands the tax reduction to include land and buildings used for developing water treatment plants or producing consumable water by offering a 50% reduction for these specific types of land and buildings. The amendment aims to alleviate the tax burden on water production and waterworks businesses. This support is particularly significant as water is essential and indispensable for the Thai population.

  1. The Draft Ministerial Regulation on Assets Exempted from Land and Building Tax Collection (No. ..) B.E. …. (Green Space), proposed by the Ministry of Finance.

Previously, the Ministerial Regulation on Assets Exempted from Land and Building Tax Collection B.E. 2562 (2019) and B.E. 2566 (2023) issued by virtue of the Act (the “Ministerial Regulation 2023”) established tax exemptions for certain categories of assets. The new draft Ministerial Regulation seeks to enhance the importance of reducing the greenhouse gas emissions, increasing green areas and mitigating coastal erosion by granting land and building tax exemption to lands covered with greenery that provide environmental benefits or enhance the quality of life for humans. These lands must meet one of the following characteristics:

white smoke coming out from a building
  1. Land registered with the Thailand Voluntary Emission Reduction Program (“T-VER”) under the projects categorized for reduction, absorption and storage of greenhouse gases from the forestry and agriculture sectors standardized by Thailand Greenhouse Gas Management Organization (“TGO”), specifically those projects that align with voluntary greenhouse gas reduction methodologies for reforestation and forest restoration; or
  2. Land defined as mangroves by the rules and regulations announced by the Director-General of the Department of Marine and Coastal Resources.
  3. The Draft Ministerial Regulation on Assets Exempted from Land and Building Tax Collection (No. ..) B.E. …. (Electrical Railway), proposed by the Ministry of Finance.

Additionally, another new draft Ministerial Regulation will amend the provision regarding railways specified in the Ministerial Regulation issued in 2023 by expanding the definition of “Electrical Railway.” This change aims to standardize tax exemptions for railway and electrical railway operators. The revised definition will include “Communication Equipment Room,” “signaling Equipment Room,” and “Platform Area for Passengers Waiting to Board the Train” in order to relieve the tax burden on the three main railway operators in Thailand: Bangkok Metropolitan, the State Railway of Thailand and the Mass Rapid Transit Authority of Thailand. This amendment also aligns with the tax burden relief for other types of rail transport businesses.

In conclusion, the recent draft Royal Decree and Ministerial Regulations reflect the Thai government’s efforts to promote sustainable development and reduce the tax burden on key sectors. The proposed changes focus on expanding tax reductions for land used in water treatment plants as well as providing tax exemptions for green spaces and electrical railway infrastructure. By offering these tax benefits, the government aims to support water production and environmental conservation efforts, while also fostering the growth of the transportation sector. All of these draft legal instruments are set to take effect on January 1, 2025.

Author: Panisa Suwanmatajarn, Managing Partner.

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