The Finance Ministry is considering amending laws to allow foreigners to buy properties through leasehold, according to minister Apisak Tantivorawong.
Currently, foreigners cannot own land in the kingdom. They can only buy condominium units up to 49% of total sellable space in a project. Foreign businesses with Board of Investment privileges or wealthy investors who agree to commit a certain sum can enter into 30-year leases, with the option for one 30-year renewal.
“If we can amend the leasing law to support leasehold, foreigners can lease Thai real estate for a long term, possibly up to 50 years, and sell the rights,” Mr Apisak said on Friday.
Allowing them to lease properties for a long term and to sell the leasehold rights will give them a sense of ownership. Once the leasehold ends, the property remains in Thai hands, he added.
“We’re studying the possibility and the chances are high that related laws can be amended to that effect. If we can do that, we can expect another property boom [a first after the pre-1997 period].
“Allowing leasehold will unleash demand from around the world. It will also change the structure of the property market in which foreigners will become customers alongside Thais,” he said.
Real estate is a crucial sector in the Thai economy as it is closely linked to other sectors — from construction materials, decorations and electrical appliances to banking.
“When the economy is about to hit a slump, the property sector always shows early-warning signs. When the economy picks up, the sector is always the first to show a sign of life. That’s why this government pays attention to the sector.”
The government has launched projects to stimulate the sector, ranging from housing for low-income earners, and senior complexes to the Eastern Economic Corridor (EEC), which will stimulate housing demand in Chachoengsao, Chon Buri and Rayong.
The former Krungthai Bank president also mentioned a “windfall tax” to be imposed on land and buildings benefiting from state projects such as mass transit lines because their value would increase.
“Fundamentally, the windfall tax will be based on the value increases before and after the state projects and only when the properties change hands,” he said.
Cabinet ministers on Tuesday revised and approved for the second round the new land and buildings tax bill to be forwarded to lawmakers.
The cabinet version sets the ceilings at 0.2% for farmland, 0.5% for houses and residential land and 2% for land and buildings for other purposes.
Vacant land will be taxed at 2%, to be increased by 0.5 percentage points every three years to a maximum of 5%.
Exemptions are for houses and farmland worth not more than 50 million baht. The measurement unit to be used in the calculation is square metres to minimise the use of discretion by officials and reduce corruption.
“These rates are the ceilings so in practice they will be lower. For example, a house worth more than 50 million baht will be taxed at 0.05% only. But in the case of a person having more than one house, the second will be taxed from the first baht [without exemption for the first 50 million baht].”
The tax for a second house starts at 0.03% and if it is worth more than 50 million baht, the 0.05% rate will apply.
For other property types, the rates are 0.3% for value below 20 million, 0.9% for those valued at 100 million to 1 billion baht and 1.5% for more than 3 billion baht.
Certain businesses are also eligible for reduction such as schools (90% discount) or housing estates under construction (90%) for three years.
Once the law takes effect in January 2019, local governments will be able to collect 60 billion baht in taxes, compared to 20 billion baht under the current local land tax law and the building and land tax law.
-The Bangkok Post