Tag: Property Tax

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The Tax Court’s Expanding Authority: Overstepping into Criminal Jurisdiction

The Cabinet has recently approved the draft Act for the Establishment of the Tax Court and the Procedures for Tax Cases (Amendment No. ..) B.E. …. (Criminal Tax Case Adjudication). The key aspect of the draft is to grant the Tax Court the authority to adjudicate criminal tax cases. The Criminal Procedure Code or the Act on the Establishment of and Procedure for District Courts will be applied mutatis mutandis to these cases. The draft also amends the notification of court schedules in tax cases, excluding criminal tax cases, and revises the criteria for appeals and petitions in tax cases. This change aims to allow parties to handle their cases in one court, reducing the burden of time and costs for litigants, the court, and judicial personnel. It also enhances the efficiency of tax law enforcement, ensuring the state’s revenue collection and providing more accurate and fair criminal tax case adjudication.

Currently, tax cases are handled by the Central Tax Court, which specializes in tax law, tax accounting, and double taxation agreements. While tax law covers both civil and criminal cases, the specialized court only has jurisdiction over civil cases according to Article 7 of the Act on the Establishment of and Procedure for Tax Court B.E. 2528 (1985). Criminal tax cases are handled by criminal courts, which are not ideally suited for these cases due to the differences in intent and nature of tax-related offenses compared to standard criminal cases. Many pieces of evidence relevant to civil cases are also applicable to criminal cases, making it inconvenient for litigants to present such evidence in separate proceedings. Additionally, penalties may vary across different criminal courts due to their differing authorities.

This proposal has been agreed upon by a cabinet resolution. The next steps will involve consideration by the House of Representatives and the Senate and then require publishing in the Gazette.

The effect of this proposed bill is expected to benefit both juristic persons and individuals, as it would allow tax cases to be addressed in a single proceeding for both civil and criminal aspects. This consolidation is anticipated to make it easier for the accused to handle their cases and for the examination of witnesses to be more convenient, given that the evidence is often similar for both civil and criminal cases. This amendment is expected to be advantageous for investors.

Key Takeaways:

  1. The Thai Cabinet has approved the proposed bill to expand the Tax Court’s authority to include criminal tax cases. The bill will now proceed to the House of Representatives and the Senate for consideration.
  2. The consolidation of civil and criminal tax cases in one court is expected to benefit both individuals and businesses, making the legal process more efficient and investor-friendly.
  3. The new law aims to streamline the legal process, reduce costs, and ensure fairer outcomes in tax-related criminal cases.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand Implements FATCA Agreement: A Milestone in International Tax Compliance

The Kingdom of Thailand has taken a significant step forward in international tax compliance by fully implementing the Foreign Account Tax Compliance Act (FATCA) agreement with the United States. This development marks a crucial milestone in the ongoing efforts to improve global financial transparency and combat tax evasion.

The Director-General of the Thai Revenue Department, acting as the competent authority for Thailand, has recently signed a Competent Authority Arrangement (CAA) with their United States counterpart. This arrangement establishes the necessary procedures for the practical implementation of FATCA in Thailand, as agreed upon in the intergovernmental agreement signed in 2016.

The CAA’s signing is a pivotal moment, as it enables Thailand to commence the exchange of financial account information in accordance with the FATCA agreement. Consequently, Thai financial institutions and other reporting entities can now fulfill their reporting obligations through the International Data Exchange Service (IDES), a secure online platform designed for the automatic exchange of tax information between participating countries.

This implementation is rooted in Thailand’s commitment to enhancing tax transparency and bolstering the efficiency of tax administration. By joining the global movement towards automatic exchange of financial information, Thailand aims to prevent international tax evasion and create a more transparent financial ecosystem.

To facilitate a smooth transition and ensure compliance, the Thai Revenue Department has announced an extension for the initial reporting deadline. Reporting entities now have until 30 September 2024, to submit the required information via the IDES system without incurring penalties. This extension provides ample time for affected institutions to adapt to the new reporting requirements and resolve any technical issues that may arise during the implementation phase.

The successful implementation of FATCA in Thailand represents a significant advancement in the country’s international tax practices. It demonstrates Thailand’s dedication to aligning with global standards for financial transparency and reinforces its position as a responsible member of the international financial community.

As financial institutions and other reporting entities in Thailand begin to navigate this new reporting landscape, it is crucial for them to familiarize themselves with the specific requirements and procedures outlined in the FATCA agreement and subsequent regulations. This proactive approach will ensure smooth compliance and contribute to the overall success of this important international tax initiative.

Key Takeaways:

1. Thailand has signed a Competent Authority Arrangement (CAA) with the United States to implement FATCA.

2. Thai financial institutions can now report financial account information through the International Data Exchange Service (IDES).

3. The implementation aims to enhance tax transparency and prevent international tax evasion.

4. Reporting entities have until 30 September 2024 to submit information without penalties.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thai Government Slashes Property Transfer and Mortgage Fees

In a move aimed at supporting Thai citizens and stimulating the real estate market, the Thai government has announced significant reductions in fees for property transfers and mortgage registrations through the end of 2024.

Driven by a Cabinet resolution on April 9, 2024, the Ministry of Interior is set to issue two announcements lowering the government fees and expenses related to real estate transactions under existing laws and regulations.

Reduced Fees for Houses, Land, and Commercial Properties: The first announcement, issued under Article 2(7)(Dor) of Ministerial Regulation No. 47 based on the Land Code B.E. 2497 (1954), reduces fees for registering transfers and mortgages on residential properties, commercial buildings, and land with buildings such as single houses, semi-detached houses, and townhouses.

Specifically, the transfer registration fee has been cut from 2% to just 0.01%, while the mortgage registration fee has been lowered from 1% to 0.01%. However, this reduced fee structure only applies to properties with a purchase price, appraised value and mortgage amount not exceeding 7 million baht. Additionally, the provision is limited to real estate purchases by natural persons of Thai nationality.

high angle shot of suburban neighborhood

Condominiums Also Get Fee Reductions: The second announcement from the Ministry of Interior targets reductions in government fees for condominium unit transactions. Issued under Article 1(77)(Chor) of the Ministerial Regulation related to the Condominiums Act B.E. 2553 (2010), it slashes the fees for condominium units transfer registration from 2% to 0.01% and mortgage registration from 1% to 0.01%.

As with the reductions for houses and lands, the lower fees for condominium units only apply to a purchase price, appraised value, and mortgage amount below 7 million baht threshold. The reducing of condominium unit fees are also exclusively for Thai national buyers.

Temporary Relief Until End of 2024: The Ministry of Interior’s fee reduction announcements for both property types will go into effect once published in the Royal Gazette, with the lower rates remaining valid until December 31, 2024.

This temporary reprieve on transfer and mortgage fees exhibits the Thai government’s commitment to easing financial burdens around property ownership and uplifting the real estate sector during the current economic climate.

Industry analysts expect the fee cuts to provide a substantial boost for prospective homebuyers and real estate investors over the next 8 months. Developers and brokers are gearing up for heightened housing market activity in response to these government incentives.

Author: Panisa Suwanmatajarn, Managing Partner.

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Top-up Tax Bill: Implementing BEPS Pillar 2 in Thailand

The Organization for Economic Cooperation and Development/ the Group of Twenty (OECD/G20) has been leading a global effort to address tax avoidance by multinational entities (MNEs) through the Base Erosion and Profit Shifting (BEPS) project. This collaborative initiative involves over 140 member countries and aims to close the gaps in international tax regulations that allow MNEs to shift profits to low-tax jurisdictions, often referred to as tax havens. By exploiting loopholes and inconsistencies, these companies gain a competitive advantage over domestic entities while undermining the fairness and integrity of the tax system.

The BEPS project is divided into two main pillars:

Pillar 1: This pillar focuses on re-allocating profits and taxing rights on large MNE profits to ensure the impartiality of the tax system.

Pillar 2: This pillar introduces a global minimum tax rate of no less than 15% on MNE profits, preventing tax competition by requiring large MNEs to pay taxes at the Effective Tax Rate (ETR).

To implement Pillar 2 of the BEPS project in Thailand, the Revenue Department has conducted a public hearing regarding the drafting of the Top-Up Tax Bill B.E. …. This bill aims to collect top-up tax in accordance with the Global Anti-Base Erosion Rules (GloBE) measure, allocate profits from such taxation to the National Competitiveness Enhancement for Targeted Industries Fund, and provide information on top-up taxpayers to the Thailand Board of Investment (BOI).

tax documents on the table

Understanding Top-Up Tax

Top-up tax is considered a type of assessment tax separate from income tax. It is collected by low-tax jurisdictions when a Multinational Entity (MNE) has a Net GloBE Income but an Effective Tax Rate lower than 15%. The Net GloBE Income and Effective Tax Rate are calculated according to the provisions of the bill.

Who is Subject to Top-Up Tax?

Constituent entities established in Thailand, which are members of an MNE Group with a collective turnover of the Ultimate Parent Entity (UPE) not less than the equivalent of €750 million in Thai currency, are subject to the top-up tax under the bill. However, certain types of entities may be exempted, including governmental entities, international organizations, non-profit organizations, pension funds, investment funds, real estate investment instruments, and others specified by the Royal Decree to be issued.

Collection of Top-Up Tax

Each constituent entity located in Thailand has the responsibility to submit the following documents to the Revenue Department within 15 months from the last date of the accounting period as imposed by each entity in which the top-up tax is considered.

  1. Notification reporting information of its MNE Group, information of the constituent entity, and the country where it is located;
  2. GloBE Information Return; and
  3. Top-up tax return and payment of the corresponding tax.

The bill empowers assessment officials to assess top-up tax within 10 years from the last date of submitting the GloBE Information Return.

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Penalties for Non-Compliance

Taxpayers who fail to pay the required top-up tax after submitting a GloBE Information Return and assessment by the Revenue Department will be subject to a one-time penalty equivalent to the amount of the top-up tax. Additionally, taxpayers who fail to submit a GloBE Information Return and pay the top-up tax will face a penalty equivalent to two times of the top-up tax amount. In addition to the penalties, the bill imposes criminal liability on taxpayers who fail to comply with its provisions and cause damages to the state’s financial stability, such as deliberately submitting false information or making false statements.

Disclosure of Top-Up Tax Information

Under the bill, the competent authority of Thailand, specifically the Director-General of the Revenue Department, is authorized to disclose top-up tax information. However, this disclosure is limited to cases where it serves the national economic and financial stability objectives or complies with international agreements regarding the exchange of information on taxation as per the GloBE measure.

Effective Date

The principle of the bill was published for a public hearing from March 1, 2024, to March 15, 2024. The next step in the process is for the Revenue Department to analyze the impact of the public hearing results and prepare the bill for the cabinet accordingly.

Author: Panisa Suwanmatajarn, Managing Partner.

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Taxes on Land and Buildings be Reduced for the Fiscal Year of 2023

As of March 19, 2023, the Royal Decree on Reduction of Taxes for a Certain Type of Lands and Buildings (No. 3) B.E. 2566 (2023) (“Royal Decree”) has been implemented to reduce taxes on certain types of lands and buildings for the tax year 2023. The Royal Decree states that the tax amount for lands and buildings falling under certain categories can be reduced by 15%, according to Section 42 of the Land and Building Tax Act B.E. 2562 (2019). The categories include lands and buildings used for agriculture, residential purposes, other purposes apart from agriculture or residential purposes, and lands and buildings that are not being used or utilized appropriately based on their condition.

Furthermore, a further reduction at the rate of 15% of the tax amount calculated after the initial tax reduction for the tax collection of the tax year 2023 for the aforementioned lands and buildings will also be applied.

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On 7 December 2021, the Cabinet has approved to remain the rate of land and building taxation and the draft Royal Decree Stipulating the Rate of Land and Building Tax B.E. …. (“Draft Royal Decree”) as proposed by the Ministry of Finance and reviewed by the Council of State.

The Ministry of Finance considered and has approved to remain the rate of land and building taxas specified in the transitory provision, i.e., Section 94 of Land and Buildings Tax Act B.E. 2562 for the collection of land and building tax from 2022 onwards under the following reasons:

calculators on the table
  • Most taxpayers, under hearings arranged by the Fiscal Policy Office of the Ministry of Finance, agreed with the current land and building taxation e.g., basis tax calculated by assessed value, different rates of tax depending on the types of utilization, and tax burden of the taxpayers are reduced or remains the same as compared with the tax burden by house and land tax or land development tax.
  • Progressive tax rates are fair and appropriate to the current situation. This makes people with higher land or building values have a greater tax burden than those with lower land or building values. It also does not create an unreasonable tax burden.
  • Due to mitigation of  impact of covid-19 epidemic, the Royal Decree on Land and Certain Types of Land Tax Reduction B.E. 2563 and The Royal Decree on Land and Certain Types of Land Tax Reduction (No.2) B.E. 2564 have reduced the amount of tax at a rate of 90% of the amount of tax calculation, in which the taxpayer has not yet been aware of the full real tax burden. Therefore, the same tax rate should be remained for a while.
  • Due to changing of tax administration and procedure, the Department of Local Administration does not have the database of land and building tax of each taxpayer that can be efficiently processed the  taxes Collection.

The rates of land and building tax under the Draft Royal Decree are as follows:

Types of utilizationTax rates in percentage according to the value of land and/or building
(1) Land and building used for agricultural purpose0.01 – 0.1
(2) Land and building used for residential purpose0.02 – 0.1
(3) Land and building used otherwise than in (1) or (2)0.3 – 0.7
(4) Land and building left empty or unused as otherwise reasonable for its condition0.3 – 0.7