The Revenue Department has amended the Revenue Code to allow the Land Department to levy a land ownership transfer tax based on either an appraisal or a market price, whichever is higher.

The move is aimed at charging property taxes that better reflect actual prices, as the appraisal price is typically lower than the market price, said Prasong Poontaneat, director-general of the Revenue Department.

The amended law is being vetted by the Council of State, he said.

The tax computation is currently based on the Treasury Department's appraisal price. For example, a landlord or buyer can be subject to the tax based on the appraisal price of a mere 10 million baht, even if the land plot is sold for 50 million baht.

In another development, Mr Prasong warned that it would not be worthwhile if wealthy people were to take advantage of setting up juristic persons as land transfer recipients to avoid paying the inheritance tax, as such entities would eventually be subject to the imminent land and buildings tax.

The inheritance tax is a one-off levy and its rates are fairly low with a tax exemption on the first 100 million baht, while the land and buildings tax is required to be paid every year once the new tax comes into force.

It has been widely reported by media that many affluent people are exploiting the recent cabinet nod for a series of tax perks to ease the transformation of owner-operated small and medium-sized enterprises (SMEs) into juristic persons as a means to avoid paying the new asset-based tax.

The cabinet recently approved tax incentives to persuade family-owned or owner-operated SMEs to register as juristic persons and pay the correct income tax.

The tax perks are a 60% corporate tax deduction on expenses from Jan 1, 2017, exemptions for corporate income tax and value-added tax, a reduction of the specific business tax to 0.01% from 2%, and a reduction of the property transfer fee for those who register properties as new juristic persons to 0.01% from 2%.

The incentives will be effective until Dec 31, 2017.

A draft bill on the land and buildings tax is now undergoing its second reading at the National Legislative Assembly. The draft bill calls for the tax to be levied on first-home owners and farmland appraised at more than 50 million baht.

A tax rate of 0.05% will be applied to first homes and agricultural land worth 50-100 million baht, and a 0.1% rate for homes above 100 million.

People owning second homes will be taxed in a range of 0.03-0.1% of the appraisal price, depending on the value of the property.

The tax on vacant land will rise by 0.5 percentage points every three years, up to a cap of 5%, while land for commercial and industrial use will be levied at 0.3-1.5%.

For the inheritance tax, the levy is set at 5% of the amount above 100 million baht for descendants and 10% for others. For gifts, 5% applies to portions above 20 million baht when beneficiaries are descendants. For non-descendant beneficiaries, the same rate applies but is calculated from portions above 10 million baht.

The inheritance tax was put into effect from early last year.

Surachet Kongcheep, associate director of the research department at Colliers International Thailand, said it may be difficult to use transacted prices to calculate income tax, as landlords and buyers are mostly not willing to report the actual selling price.

"It is also hard [for government agencies] to examine the prices that buyers and sellers settle on," he said. "Instead, the government should make updates based on annual land price appraisals."