Buying property in
Thailand
Laws governing a foreigner's ability to acquire freehold
property in Thailand are currently under review by the
Government. Clarification of existing laws, particularly
in relation to the 'Foreign Business Act', is expected
this year as part of a referendum process on a new constitution.
However, it is widely anticipated that new laws will be
implemented in 2008 following a return to democracy with
national elections, planned for December 2007. Whilst
the legal future on foreign ownership of freehold property
(land & stand-alone houses) remains uncertain there are
still several ways in which foreigners can acquire property
in Thailand. Here is an overview:
Ownership of an apartment by foreigners
Buying a condominium or apartment
in Thailand is probably the simplest and easiest way
to acquire property; there are many excellent choices
contained in this website. Search
The law covering condominium ownership is the 'Condominium
Act (No. 3) B.E. 2542 (1999), which allows foreigners
to participate in the ownership of apartment units,
as long as foreigners do not own more than 49% of the
total number of units in the block. The only other stipulation
is that the funds used to acquire the interest are remitted
from abroad and are correctly recorded as such by a
Thai bank on a money transfer certificate (tor tor sam).
Once completed each owner is issued a certificate of
ownership, which records the exact percentage of common
area rights the owner has. There are discussions that
the 49% foreign share limit may be increased up to 70%;
watch this page for further developments.
Ownership of a villa or land
by foreigners
Ownership of land in Thailand
is governed by regulations set by the Ministry of the
Interior' including the 'Land Code BE 2497 (1954)',
the 'Land Reform for Agriculture Act BE 2518 (1975)'
and the 'Civil and Commercial Code'. Any individual
under Thai law, foreign or otherwise, can own a structure
developed on land, in their own name, which must be
registered with the local land office. In this way the
registered property is treated as separate from the
land which it sits on. The Ownership of the land itself
however can only owned by a Thai entity; corporate or
individual. Outright ownership by foreigners is restricted
but possible under the following circumstances:
a) Leasehold ownership
The maximum period of lease, under
one single agreement, is 30 years; foreigners have the
same rights to acquire such a lease as a Thai national.
These leases can be extended by two further periods,
of up to 30 years; giving a maximum contract period
of 90 years. All leases of 3 years or more must be registered
with the local authority and are liable to a registration
fee and stamp duty (based on a percentage of the total
lease value). Foreign leaseholders may also have drafted
into the contract the right to acquire the freehold
of the property in the event of a suitable change in
the law in respect of foreign ownership rights. The
one drawback of a lease is that while the parties can
contractually agree to renewals, the renewal cannot
be registered until commencement of the new term and
in the event of the lessor selling/transferring the
freehold, the new owner is not bound by the original
contracts.
b) Limited Liability Company (LLC)
Traditionally this has been the most popular method used by foreigners to acquire property in Thailand. In brief, foreign interest in a LLC is limited to 49%, the remaining 51% shareholding must be owned by Thai nationals. A minimum of seven shareholders are required to set up a LLC. However, if a LLC wishes to acquire the freehold of a property, the foreign shareholding must be pruned back to a maximum of 39%; giving 61% to Thai shareholders. Despite the foreigner holding a minority of the shares, it has been possible for them to gain control of a LLC by changing the Articles of Association, keeping the all important controlling 'preference shares' in foreign hands and by appointing the foreigner as the sole director. In 2006 the Government became aware of the extent to which foreigners were using LLCs as a front to acquire land, so they issued an instruction to regional land offices that they should more strictly enforce the interpretation of the law to stop foreign controlled LLCs from using the law to acquire property. They also require that all shareholders in a LLC are scrutinized to ensure that they have sufficient cash assets to prove that they have an active interest in the LCC and are not just a 'name' to make up the required number of shareholders. This instruction has caused some uncertainty in the regional land offices, which are now more reluctant now to approve land transfers involving foreign controlled LLCs. The current interim Government has had other priorities and has not comprehensively addressed this confusion. Observers are predicting that it will take the election of a new government at the end of 2007 before the laws relating to foreign ownership of freehold property are re-drafted.
c) Becoming a Thai resident / citizen
d) Through inheritance
Section 93 of the 'Land Code' allows a statutory heir to inherit a property which does not exceed 1 rai (1,600 sqms) and which can only be used for residential purposes.
e) Making a substantial capital investment in Thailand
Providing that an investment of forty million Baht (approx US$1 million) or more is made, a foreigner can acquire a property, of not more than 1 rai (1,600 sqms) in size, for residential use only.
f) Usufruct interest (Sidhi-kep-kin)
This is a temporary interest (up to thirty years) in a property, somewhat akin to a lease. A usufruct ownership can be successively renewed, however, unlike a lease, it can also be sold or transferred.
Title deeds in Thailand
There are four types of title deed, the first two (chanote & nor sor sam kor) are recommended as the most secure for foreigners. Exotiq do not list property unless it has either a chanote or nor sor sam kor title.
a) Chanote
The 'title deed' or 'chanote' is the certificate for ownership of land. The person whose name appears on the chanote and the titleholder has the legal right to the land. The chanote is issued after a GPS survey has been completed to ascertain the exact boundaries. The chanote is the purest form of freehold land title and the one which is most commonly sort after by investors.
b) Nor Sor Sam Kor
This is the 'right to use' title and implies that all the necessary requirements for the issuance of the chanote have been met and that the final issuance of the chanote deed is pending. Under the nor sor sam kor, the title holder can sell, lease, mortgage & build on the property; but they cannot leave the land unattended for more than 12 years.
c) Nor Sor Sam
A watered down version of Nor sor sam kor in that the formalities to certify the right to use have yet to be completed. Before a transfer can be made, a notice of intent must be publicly posted for 30 days before any change in status can be registered.
d) Sor Kor Nung
Recognition that the title holder is in possession of the land but the deed doesn't imply that there are any rights associated with the title. This title is often associated with land that is retained by a Thai family, which has never been measured by the Land Office and which is passed down to future family generations.
Taxes applied to property ownership in Thailand
There are two taxes levied on owners of property: the Land Tax and the Structures Usage Tax. The Land Tax is an annual tax but it is rarely collected annually because the amounts payable tend to be so small (a few thousand Baht) that the collecting body tends to wait for a few years or until the title is transferred to a new owner. The Structures Usage Tax, as the name implies is a tax on the building of a structure, but it only applies to commercial buildings
Taxes applied to property acquisition in Thailand
Unlike taxes associated with ownership, taxes linked to buying and selling property are taken more seriously by the Government. There are four taxes to consider:
a) Stamp duty
0.5% of the assessed value or sale value of the land, whichever is higher
b) Land transfer fee
2% of the assessed value of the land
c) Specific business tax
3.3% of the assessed value or sale value of the land. Only applies to transactions involving the sale of a company and to all private sales which occur within five years of the original purchase.
d) Income tax
Varying between 1% & 3% of the acquisition price and is calculated using quite a complicated formula.
It is common that some of these taxes are shared between the buyer and the seller. It is important that you ascertain exactly what tax burden the seller is take during the course of the negotiation.
Legal fees
For obvious conflict of interest reasons, and unlike many real estate brokers in Thailand, Exotiq does not offer legal services. We strongly recommend that you seek independent legal advice before acquiring any property in Thailand. For our part we can point you in the direction of the best legal providers in each of our locations. We suggest you consult at least two firms before deciding on which one to work with. Depending of the complexities of your acquisition, and the value of the property, you can typical expect to pay a lawyer between 50,000 to 100,000 Baht for one of our typical listings.
Our fees
Exotiq commission fees are amongst the lowest in Thailand and are normally paid by the vendors. All property prices we advertise have our fees built in, including those featured in this website.
Land measurement conversion
1 Rai = 1,600 mē
1 Ngan = 400 mē
1 Wah = 4 mē
1 Hectare = 6.25 Rai (approx.)
1 Acre = 2.5 Rai (approx.)
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