If you or your company own a condominium unit or villa in Thailand that was used — even for just one day — by someone other than its legal owner, whether or not you received rental income for that use, you or your company have likely incurred liability under the House and Land Tax Act (1932) (“HLT”). The HLT is imposed on the owner of such structures where they receive, or should have received, rental income. Local authorities in Thailand have the right to collect this tax, making it one of the few taxes collected by local municipalities rather than the national revenue authorities.
An important exemption from the HLT applies to houses or other structures inhabited by their owners. But note: if your property generates assessable rental income for even a single day, the HLT becomes payable at a rate of 12.5% of the property’s total rental value for the entire year. This amount is calculated based on the property’s total annual “rental value” for the preceding year — defined as the sum for which the property might reasonably be expected to let from year to year (where a lease exists, the actual rent serves as the basis for this value). So, for example, if you allow an acquaintance to stay a few days in your villa or condominium without you, the authorities have discretion to determine that you did, or should have, charged rent — and may then assess HLT equal to 12.5% of the total amount they believe you did or could have earned by renting the property out for the entire preceding year.
Any property owner subject to the HLT must submit a “Por Ror Dor 2” form within 30 days of receiving notice from the relevant authorities (or within whatever timeframe that notice specifies). This form serves as your official declaration of the property’s annual rental value for the preceding year. The relevant municipality then uses this information to determine the annual rental value and the resulting tax due. However, if the municipal authorities disagree with the submitted figures — or if no figures are submitted at all — they are empowered to assess and assign the rental value themselves.
Failing to submit this form waives your right to appeal the municipal authority’s assessment, and also carries a fine of up to THB 200. Providing false or misleading information, or making a false statement to evade proper calculation of the annual value, can result in imprisonment of up to six months, a fine of up to THB 500, or both.
Unfortunately, the municipal authorities’ discretion in assessing the HLT sometimes opens the door to informal “discussion and negotiation” with the taxpayer over the amount owed. This, along with other inefficiencies in the HLT system, has prompted the government to consider drafting a more modern, comprehensive property tax — one that would shift the basis of taxation from a property’s assessed rental value to its assessed market value.
Under such a reform, municipal authorities would no longer have discretion to determine the tax payable themselves. Instead, property valuation would be carried out by the existing Valuation Committee under the Land Code, using the same valuation method already used to calculate registration fees and personal income tax payable at the Land Department upon transfer of immovable property under Section 49bis of the Revenue Code — a method based on actual market value under Section 103 et seq. of the Land Code, rather than rental value.
A comprehensive, modernized real estate tax to replace the outdated and inefficient HLT would be a welcome improvement to Thailand’s property tax regime. However, it remains to be seen if and when the Thai government will actually implement such a reform. Until then, the HLT remains in force.