Some wealthy people in Thailand are utilising a tax loophole to avoid paying the land and buildings tax. This has been done by taking advantage of recently implemented tax incentives designed to ease the process of changing from an owner-operated small and medium-sized enterprise (SMEs) to a juristic person, reports local media.
The Thai Revenue Department is looking to eliminate this practice and is in the process of clarifying who is eligible to use these privileges. The new regulations will ensure only individual operators using a property for business operations are eligible to receive the incentives. Those allowed to partake in the current scheme are family-owned or owner-operated SMEs.
“The incentives for real estate transfers have been in effect for less than 2 weeks, but no one has used the privilege yet,” says Revenue Department Director-General Prasong Poontaneat to the Bangkok Post.
There have been some conflicting reports as to if some wealthy individuals are registering as juristic persons to take advantage of the tax incentive. The government says this hasn’t happened, but sources have told the newspaper otherwise. It has been reported that a few wealthy people with large land plots have used the tax incentives programme to avoid the land and buildings tax.
Even though wealthy land owners are able to transfer land to juristic persons and avoid making tax payments, actually doing so might not be worthwhile since establishing companies with the aim of holding land will incur costs from creating these accounts In addition to this, land used commercial purposes is not eligible to receive tax exemptions under the land and buildings tax, according to Director General of the Fiscal Policy Office Krisada Chinavicharana.
While there will be some high-income people trying to exploit the loopholes in the tax incentive scheme, the impact of this will be minimal and the government is set to benefit in the long-term, says Kitipong Urapeepatanapong, Chairman of Baker McKenzie Bangkok.
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