Is crown property taxable?

Originally, the Crown Property Act, B.E. 2479 (1936) separated royal property into 3 categories: the ‘King’s private property’; ‘public property’; and ‘crown property.’ It also stated that the public property and crown property, which is property of the King in his position as the country’s monarch, were exempted from tax while the King’s private property was not.

King Vajiralongkorn (Source: The Television Pool of Thailand)

However, the 2017 and 2018 Crown Property Acts combined the ‘King’s private property’, ‘crown property’ and ‘public property’ into ‘crown property’ which can be administered at the King’s pleasure. (The 2 acts have the same name in English but a literal translation of the 2017 Act is ‘Act on the Organization of Property on behalf of the Monarch’, and of the 2018 Act is “Act on the Organization of the Property of the Monarch’.) It was also stipulated that crown property must be taxed or exempted according to the law.

After the law was enforced, the Crown Property Bureau (CPB) published information on the change of ownership of property from the Bureau to King Rama X. The reason provided was “so that the property is under the purview of the tax laws and will be subject to taxes like that of any other person, according to His Majesty’s wishes.”

So we tried taking a look at related laws in an attempt to answer the question, is the crown property taxable like any other person’s property, and how?

Is crown property taxable?

Property

(Probably) Taxable

Exempt

Uncertain (?)

Crown Property Bureau income

 

 

X

Financial support from the national budget

 

 

X

Income through royal charity funds

 

X

 

Interest, dividends, rent

X

 

 

Land and buildings

 

X

 

Inheritance

 

X

 

Income tax is unclear on many points

The status of the Crown Property Bureau

The Crown Property Bureau (สำนักงานทรัพย์สินพระมหากษัตริย์, literally ‘Office of the property of the monarch’) is an agency founded according to the 2018 Crown Property Act. It was originally the Crown Property Bureau (สำนักงานทรัพย์สินส่วนพระมหากษัตริย์, literally ‘Office of the property on behalf of the monarch’), responsible for the preservation and management of the crown property and was exempt from tax according to the 1936 Act and its amendments.

The 2017 Crown Property Act combined public property with crown property, and also transferred authority for the administration, preservation, management, and operations of all property to be at the King’s discretion. This means the Crown Property Bureau, originally responsible for the preservation and management of property, was reduced to an organisation that simply acts according to the King’s commands.

The 2017 Crown Property Act was in effect for only a year when the 2018 Crown Property Act came into force, replacing the 2017 version. The significant amendment is combining all of the crown property under one administration. This means the administration, preservation, management, and operations of all the property is to be at the King’s discretion. It has also been noted that King Rama X’s name started to appear as the owner of land, real estate, and shares instead of the Crown Property Bureau, as it had been during King Rama IX’s reign.

The tax law that may be related to this category of property is Section 3 (3) of the Revenue Code which states that a Royal Decree may be issued ‘to exempt taxation of the government, a government organisation, a Thetsaban [municipality], a Sukhaphiban [sanitary district], a religious body or a public charitable organisation’.

Deciding whether the property or income of the Crown Property Bureau is taxable or not depends on the interpretation of whether the Crown Property Bureau is a state organisation or not.

Section 2 of the Revenue Code defines a “government organisation” as “a government organisation under the law on the establishment of government organisations, an undertaking of the State under the law establishing such undertaking, or a business enterprise owned by the government which is not a juristic person.” [Translator’s note: the official translation of the Revenue Code has ‘enterprise’ instead of ‘undertaking.]

And what does an undertaking of the State mean? In the 2013 Private Investment in State Undertakings Act, a ‘state undertaking’ is defined in Section 4 as being either of the following:

(1) an undertaking which a government agency, state enterprise, other state agency or local administrative organisation, either singly or collectively, have a legal obligation to perform

(2) an undertaking which requires the utilisation of natural resources or properties of one or several government agencies, state enterprises, other state agencies or local administrative organisations, either singly or collectively

Even though the latest law stipulates that the administration of the Crown Property Bureau is to be at the King’s discretion, the Bureau is still not part of the Royal Offices, according to the 2017 Royal Decree Organising Governmental Affairs and Personnel Administration for Royal Service and in the summary of public opinions on the … Crown Property Act on 18 Oct 2018, it was clearly stated that the Crown Property Bureau is not part of the government nor a state agency.

There is still uncertainty whether the Crown Property Bureau utilises the natural resources or assets of one or several government agencies, state enterprises, other state agencies or local administrative organisations, either singly or collectively. Will this allow the Crown Property Bureau to be defined as a state undertaking according to the law or not? This means that the interpretation that the Crown Property Bureau is exempt from tax is also uncertain.

In addition, the Crown Property Bureau still has not disclosed its annual report on its website, as was previously done during King Rama IX’s reign, so we do not have any information on the income of the Crown Property Bureau, especially on the transfer of real estate which used to be crown property and public property to become the property of King Rama X to be administrated, preserved, managed, and operated all at the King’s discretion.

If the Crown Property Bureau is not a state organisation and transferred its ownership or proprietary rights over the real estate without compensation, the Crown Property Bureau would be an entity with an income and would have to pay taxes, according to Section 41 bis of the Revenue Code.

Grants-in-aid from the national budget – no information

An important player is the Bureau of the Royal Household (BRH), because originally, the BRH received a budget as grants-in-aid for the expenses of royal residences, His Majesty’s expenses, annuities for royal family members, pensions for palace officials and funds for charities at the King’s pleasure, etc.

(Translation)

  1. Grants-in-aid 1,216,481,000 baht

    2.1General grants-in aid 1,216,481,000 baht

    1. Grants-in-aid for coordination expenses in Princess Sirindhorn’s projects 18,000,000 baht
    2. Grants-in-aid for charities at the King’s pleasure 17,000,000 baht
    3. Grants-in-aid for provincial royal residence expenses 140,000,000 baht
    4. Grants-in-aid for royal family members’ annuities 87,856,000 baht
    5. Grants-in-aid for the King’s expenses 80,625,000 baht
    6. Grants-in-aid for the Crown Prince’s royal residence expenses 320,000,000 baht
    7. Grants-in-aid for royal residence expenses 440,000,000 baht
    8. Grant-in-aid for coordination expenses in the plant genetic conservation/rare plants project under the patronage of Princess Sirindhorn 40,000,000 baht
    9. Grant-in-aid for the Lukphradabos Project 18,000,000 baht
    10. Grants-in-aid for integrated projects on raising the quality of life 5,000,000 baht
    11. Grants-in-aid for expenses in the Chitralada Royal Villa’s renovation, repairs and decoration 30,000,000 baht
    12. Grants-in-aid for expenses in royal palace renovation, repairs and decoration 20,000,000 baht

Information from Budget Documents, Fiscal Year 2017

However, when the 2017 Royal Service Administration Act came into effect, the BRH was transferred to the Royal Offices, its administration to be at the King’s discretion. Information related to each type of grant-in-aid then no longer appears in the Bureau of the Budget’s budget documents.
An example of the 2021 Budget documentation indicates grants-in-aid for the Royal Offices of almost 9 billion baht (8,980,889,600 baht) with no details stating what it is to be used for and for how much.

(Translation)

Budget details categorised by expenses

Output: Operations of the Principal Private Secretary and facilitating the King, the immediate royal family and other royal family members    8,980,889,600 baht

    1. Grant-in-aid 8,980,889,600 baht
      • General grant-in-aid 8,980,889,600 baht
        • Grant-in-aid for expenses of the Royal Offices 8,980,889,600 baht

Information from the Budget documents, Fiscal Year 2021

Even though the 2017 Royal Service Administration Act requires the Cabinet to allocate part of the budget as grants-in-aid to the Royal Offices, the income of the Royal Offices does not need to be sent to the Treasury as national income and the Offices hold the authority to all operations related to the Royal Offices’ property at the King’s discretion, with the BRH proposing a budget.

The crown property in this category is thus still ambiguous, from the amount of income the King receives from the allocated national budget and the interpretation of related tax laws.

Even though many have made comments on this issue, when the 1936 Crown Property Act was still in effect, the King and royal family members had to pay taxes, especially on their private property. But if we interpret that the King’s private expenses from the annual expense budget constitute property obtained in his status as King, then this income would be categorised as crown property, which is exempt from tax according to the old law.

What will be quite clear already is that regarding the annuities for royal family members, which is income according to Section 40 (3) of the Revenue Code, the responsible government agency collects withholding tax according to the rate and method determined in the Revenue Code as national income.

However, nobody has yet to interpret clearly if the King’s expenses from the annual expenditure budget, most recently detailed in the 2017 Budget documents at over 80 million baht (80,625,000 baht) will be counted as a taxable annuity according to Section 40 (3) of the Revenue Code or not.

If His Majesty’s private expenses that are paid as a grant-in-aid from the national budget are interpreted to be an annuity according to Section 40 (3), then it cannot be a deduction for personal expenses and it would be taxable at a rate of 35%. At least 28 million baht would likely be returned as national income according to the most recent personal income tax rate.

Income from royal charity funds is exempt

The Revenue Code, Section 42 (29), stipulates that money received as a gratuitous act where the giver expresses the intention or indicates that the money is to be used by the recipient for the benefit of religion, education, or the public good, according to the criteria and conditions stipulated in the Ministerial Regulations, is exempt from income tax.

This means income from royal charity funds should be exempt from tax according to the above law. Originally, the BRH had proposed a budget as a grant-in-aid for charities at the King’s pleasure at 17 million baht in fiscal year 2017, but details of this disappeared after the 2017 Royal Service Administration Act came into effect and the national budget proposals of the Royal Offices no longer gave any details. At the same time, royal income received from the state and private sector is also not disclosed. Other countries governed by a democratic form of government with the King as Head of State are all very strict with this part of income of their monarchs, for example:

Japan: The constitution sets a ceiling value of gifts given and received. The Emperor and palace servants may give presents worth no more than 18 million yen or around 5 million baht and receive those worth no more than 6 million yen or around 1.7 million baht. Adult members of the royal family are able to give and receive presents worth no more than 1.6 million yen or only about 460 thousand baht.

The United Kingdom: The practice is that royal family members should refuse presents, benefits or services offered by the business sector and people they are not personally acquainted with. They can accept money only through donations to charitable organisations under the patronage of the royal family, in order to prevent any obligation to the donor. Presents received as a royal family member or while on duty or presents that are worth more than 150 pounds (around 6,000 baht) are considered crown property that needs to be reported and disclosed.  

Income that is probably taxable as normal: interest, dividends and rent

Property that does not fall into any yet discussed exemption for the King, such as income from interest (e.g. deposit interest), the difference between the redemption and selling price of bills of exchange or debt instruments, and benefits from the transfer of bonds, debentures or debt instruments will be taxable at a rate of 15%, or can be calculated as part of the total income and taxed according to the tax rate.

Dividends are considered to be income where the investor needs to pay withholding tax at a rate of 10% of the dividend received, or can also be calculated as part of the total income and taxed according to the tax rate.

Income from other businesses is taxed at 5% for amounts exceeding 20 million baht, while other types of income must be calculated as part of the total income and taxed according to the tax rate.

Even so, since the Crown Property Bureau does not publicise its annual report, we do not know much about this part of the crown property. There are some examples which can be used as examples:

  • Siam Commercial Bank PCL paid a dividend on 22 April 2020 of 4 baht per share, resulting in King Rama X having an income of around 3 billion baht (3,175,329,436 baht) from this dividend, paying withholding tax at a rate of 10% which is around 300 million baht.
  • Siam Cement PCL paid a dividend on 28 August 2020 at 5.50 baht per share, resulting in King Rama X having an income of around 2 billion baht (2,220,063,120 baht) from this dividend, paying withholding tax at a rate of 10% which is around 200 million baht.

Land and real estate tax exemptions

The law stipulates that local administrative organisations collect Land and Building Tax according to the 2019 Land and Building Tax Act at a rate of 0.01-3% of the estimate property value, depending on the category of land/building.

However, the 2019 Ministerial Regulation on Property Exempted from Land and Building Tax gives an exemption from Land and Building Tax for crown property, according to the Crown Property Act, and for the property of royal family members who receive annuities with the rank of Phraongchao or higher, according to the Royal Decree on Salaries, Annuities, Pensions and Other Similar Types of Money, only for property used for the following purposes:

(a) for use in governmental affairs, royal affairs or any royal agencies

(b) for use in any other affairs of the King and royal family members or for public benefit

(c) for use as a religious place of any religion to perform religious activities or public activities or as the residence of monks, priests or clergymen of any religion, or as a shrine

If it is property not for the purposes as stated in Paragraph 1, exemption is only applicable to property that is not used to reap any benefits.

Inheritance tax exemption

The 2015 Inheritance Tax Act stipulates that the inheritor who receives an inheritance from the testator, no matter if received at one time or in instalments, if the combined inheritance from all testators totals more than 100 million baht, the inheritor must pay tax only on the amount that exceeds 100 million baht.

The Inheritance Tax laws have exemptions for inheritors in the case that the testator has expressed the intention or shown that it is their wish that the inheritance be used for the benefit of religion, education or the public.

This law may appear to be a ‘progressive’ law that was enacted by the NCPO government, but in the Ministerial Regulation there are very interesting exemptions, because the categories or names of people that are exempted from inheritance tax are listed: persons who receive royal expenses from the annual budget and royal family members who receive annuities with the rank of Phraongchao or higher, according to the 1992 Royal Decree on Salaries, Annuities, Pensions and Other Similar Types of Money. This means that these individuals do not need to pay tax like other people.  

More interestingly, the Ministerial Regulation on inheritance tax was published in the Royal Gazette on 25 Jan 2017 but was backdated to take effect as of 1 Feb 2016, the year that King Rama IX passed away and Thailand had a new King.

Information is insufficient to form an understanding

The information given here cover only the facts and laws that are common knowledge, and the interpretation is based on the author’s understanding. It is difficult to confirm whether tax is collected as interpreted in this article or not. Ever since the changes in the administration of the Royal Offices and crown property there has been no clear explanation on the newly amended laws, and details about the crown property are not disclosed to the public.  These questions therefore remain in society, as long as the people do not have access to sufficient information to answer them.

Source: 
https://prachatai.com/journal/2021/01/91087

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