Real estate agents are extending a cautious welcome to a change in the tax laws that could stimulate the torpid property market. A combination of anxiety over the coming election and backlash against huge price surges over the past few years has had a significant cooling effect on the property market since at least the start of the year.
The tax cuts are expected in particular to revive interest in the low-to-middling K100 million to K1.5 billion range, where sales taxes have been cut by multiple percentage points. For instance, a K500 million property whose sale would have been taxed at 30 percent under the old law will now be taxed at only 5pc.
“Buyers and sellers have been coming in to ask about the market ever since the government announced the new tax rates. The market is alive again, with lots of people wanting to buy,” said Ko Hein Zan, marketing manager of Sai Khun Naung real estate agency.
The Union Tax Law 2015 was printed in state-owned media on April 5 following final approval by Pyidaungsu Hluttaw. It came into effect on April 1.
The lowest tax rate of 3pc applies on deals up to K100 million (about US$100,000). Up to the K500 million level the new tax will be 5pc, rising to 10pc for properties up to K1 billion, 20pc for up to K1.5 billion, and a ceiling of 30pc for properties valued at above K1.5 billion. These taxes are payable by the buyer if they cannot show the source of their income. Sellers pay a flat 10pc rate. In addition, property sales are subject to stamp duty for buyers, set at 5pc of value in Yangon, Mandalay and Nay Pyi Taw, and 3pc in other cities.
Previously, all property transactions incurred a 30pc tax payable by the buyer if they could not show the source of the income.
Last year, however, the government introduced once-in-a-lifetime tax relief for transactions below K300 million, which set the tax at 3pc for purchases up to K50 million, 5pc on transactions worth up to K100 million, 10pc for deals worth up to K150 million and 20pc for up to K300 million.
U Myo Min Zaw, deputy director of the Yangon Region Internal Revenue Department, said the one-time tax relief was removed because of concerns it was being abused.
“Wealthy people who can buy many properties were able to get this tax relief over and over,” he said. “So the rule has been removed from this year’s tax law.”
Broker Daw Mya Mya Sein of Galaxy Real Estate Service said the new rates could well shake up the market. “After Thingyan, the real estate market will come alive. The tax reductions will increase demand for buying and selling houses or land. There is a potential, to some extent, to gain momentum again,” she said.
But tax officials are not convinced that the lower rates will encourage more buyers to pay the tax. The tax is payable only when the purchaser applies to change the ownership name on the land registration documents, and U Myo Min Zaw said those who want to ensure strong ownership over their purchase were likely to pay the tax regardless of the rate. Speculators who only intend to hold property for a short period will see little incentive.
“If people don’t care about [long-term] ownership, they will not pay tax … even if it is very cheap,” he said.
Real estate prices boomed in Yangon after the government of President U Thein Sein took office in 2011 after decades of military rule and economic stagnation, and introduced a raft of political and economic reforms.
Since 2012, real estate values have skyrocketed all over the country, particularly in Yangon and Mandalay. At one point, prime office space in Yangon was priced comparably with Singapore and Manhattan.
Median prices for properties situated along Yangon’s main roads reached unprecedented highs of K700,000 to K1 million (US$680-970) per square foot, with Pyay Road and Kabar Aye Pagoda Road the most lucrative areas in the city.
Source: Myanmar Times