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Thailand's property and real estate laws can seem fairly restrictive as applied to foreigners, but they are really no different from other countries where special treaties are not in place. Although foreigners may own buildings, condominium units or houses, in their own names, Thai law stipulates that foreigners cannot own Thai land in their own names. There are, however, several ways in which foreigners can secure property rights in the Kingdom of Thailand ...
Option # 1 - The romantic solution Meet and marry a Thai person you love and trust, buy house and land in his or her name, and live happily together ever after! This beautifully simple solution is, for reasons we will not discuss here, the least popular option. It is, however, not uncommon, and thank goodness for that! Option # 2 - Renewable/resellable 30-year lease Leasing is legally the simplest, most straightforward way to own land rights in Thailand, a solution used by foreigners and Thais alike. Land lease contracts can cover periods of 30 years, or consecutive periods of 30 years, and can confer rights equivalent to freehold ownership to the buyer. Leasing is currently seen as a reliable solution, if also as one which bridges the time until a more agreeable option is introduced. Option # 3 - Limited Company This option has long been the most popular way of enabling foreigners to acquire land in Thailand. It involves the incorporation of a limited company, legally, a "Thai Juristic Person" which has the undeniable right to own land, using the identities of voluntary Thai persons as nominee shareholders and the installment of the sole foreign investor as Sole Executive Officer of the company. The company owns the land and the foreigner owns the company. Perhaps due to the enormous value of foreign investment in Thai property, successive governments have consistently left this aspect of the nominee issue alone. There has been some tightening of the rules in recent years in response to alleged commercial abuse of the system such that establishing such companies is a little more difficult and costly to do than before, but this solution is still highly viable and effective. The "nominee" solution has been in use since 1932 and is seen and accepted as the proper way for foreign individuals to own business or property interests in Thailand. Business ownership is one thing, but it is the issue of land ownership, so fundamentally important to Thailand and its people, which is the reason for much of the concern over the nominee solution. Thailand understands, however, that foreign investors require acceptable security, and perhaps consequently, the nominee system is still in full use while the world waits for the outcome of presumably important political discussions which have been pending since 1932. On the date of writing, March 26 2008, land offices still inspect and accept correctly prepared companies with foreign executives and conduct the registration of land and property ownership in the names of these companies. Option # 4 - Condominiums Under condominium law, up to 49% of the units in a condominium complex can be owned by foreign nationals. To ensure that the registration of ownership goes smoothly, there are clear procedures which ought to be followed correctly: Foreigners buying condos must transfer funds in foreign currency from a bank account outside Thailand to an account at a Thai bank. The name of the transferree must be the same as the name that will appear on the final purchase contract, ie. the buyer. Use Bangkok Bank or Kasikorn Bank (f.k.a. Thai Farmer's Bank), the only two with full international services and English speaking staff, and be sure that the funds transfer documentation stipulates that the funds will be used to purchase a condominium. It is also common to transfer funds to the escrow accounts of estate agents or lawyers administrating the condo purchase, who can ensure that the correct documentation is collected from the receiving bank. Transfers must be made in amounts USD 20.000 or more in order to qualify for Foreign Exchange Transaction Forms issued by the receiving bank to verify that the originating funding came from outside Thailand in a currency other than Thai Baht. This bank certificate confirms the origin and purpose of the funds and furthermore facilitates the repatriation of the funds if/when the condo is later sold. The Department of Lands (Land Office) may refuse to execute ownership transfers if these bank certificates cannot be produced. There is a great deal of paperwork, which can be very awkward to correct if first done wrongly, required for the purchase of condos, so please do use a qualified agent or lawyer to handle this. Option # 5 - Vacation Investment Program On 25 November 2006, the Royal Thai Government presented its first fully-comprehensive solution for foreign ownership of Thai property at a public meeting in Hua Hin attended by TH-property Estate Agents Co. Ltd. and other estate agencies and property developers. Perhaps the most secure solution by virtue of it's governmental endorsement and management, this solution is, however, by far the most expensive, although it does come with several advantages. The result of joining this program is that you will have paid about 1 million baht simply to join up, you will then pay about 100,000 baht annually for administration, and you still only have a 30 year lease, which it will cost another million baht to renew. Taxes When property is transfered from seller to buyer, there are some taxes to pay at the Land Office. The Land Office has its own, forever changing, evaluations of land in different locations, and this is how the "appraised" value of the land is set. The appraised value of buildings is 5,750.00 baht per square meter, no matter their quality and features. These two values together constitute the basis for calculation of the Registration Fee (2%) and the Stamp Duty (0.5%). Then there is the "registered" value of the property, which is the basis of the Withholding Tax (1%, falls away if the seller has owned the land for more than 5 years) and the Business Tax (3.3%). It would be entirely correct to register the property at the price one is actually paying, but this never done (to lessen the tax impact), except with condos where the purchase contract must be presented at the Land Office. Normal practice decrees that buyer and seller agree what value they will state at the Land Office, and this value is normally set just a little over the appraised value. It would also be entirely correct for the buyer to pay the Registration Fee and Stamp Duty, and for the seller to pay the Business Tax and Withholding Tax, but arrangement is seldom made. Normally, the entire tax bill is bourne equally by both parties. |
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