Q: Can foreign persons buy land in Thailand?
A: No. Foreign nationals may not purchase land “freehold” in Thailand. Neither foreign citizens nor foreign companies may be the registered owner of land (registered on the land title deed maintained at the relevant Land Office). In addition, neither foreign citizens nor foreign companies may own more than 49% of the shares of a Thai company which is the registered owner of land.
Q: Can foreign persons own a building in Thailand?
A: Yes. Both foreign citizens and foreign corporations may own a building constructed on another person’s land. Moreover, both foreign citizens and foreign corporations may lease land (under a 30 year lease registered on the title deed, plus a 30 year lease renewal term) and either construct a building or purchase a building situated on the leased land.
Q: Can foreign persons purchase condominium units in Thailand?
A: Yes. Both foreign citizens and foreign corporations may purchase condominium units in Thailand and register such ownership on the land title deeds directly in their own names. However, only 49% of the livable area in any condominium building may be foreign owned. Therefore, it is essential that the condominium sale and purchase agreement include a warranty from the seller to confirm that “foreign quota” is available to register ownership of the condominium unit in the name of a foreign person (citizen or corporation).
Q: Why should I lease land?
A: The Thai Civil and Commercial Code permits any individual or corporation (Thai or foreign) to lease land for a maximum period of 30 years (with a maximum lease renewal period of 30 years, under certain conditions). The leasehold interest can (and should) be registered on the land title deed – thereby establishing a property right in addition to the contract right established under the lease agreement. Many long-term leasing contracts also permit the lessee to transfer ownership of the land during the lease term either (1) to any legal designee of the lessee; or (2) to the lessee (upon a future change in Thai law, if any). Note that a lease renewal term of 30 years is more easily enforced against a corporate lessor than an individual lessor. Registered leaseholds are safe, uncomplicated and easy to set up -- at least for the initial 30 years lease term.
Q: How can I secure freehold land ownership in Thailand?
A: In order to secure freehold ownership of land in Thailand, you will need a Thai partner to own a majority of the shares of a Thai company (which becomes the registered land owner). The Land Office will interview the Thai shareholder(s) to ensure that the Thai shareholder(s) has sufficient funds to finance the purchase of his/her shares in the Thai company. Thai citizens are prohibited under the Foreign Business Act from providing “nominee” shareholding services to facilitate foreign ownership of land. The corporate documents of the Thai company may be customized to protect the (foreign) minority shareholders’ rights, and to vest day-to-day control of the Thai company in the hands of the (foreign) minority shareholder. Additional protections for the benefit of the (foreign) minority shareholder may include: (1) registering a long-term lease on the land title deed under the name of the (foreign) minority shareholder (or an offshore company owned by the foreign minority shareholder); and (2) registering a mortgage on the land title deed under the name of the (foreign) minority shareholder (or an offshore company owned by the foreign minority shareholder).
Q: How do I pay for real estate transactions in Thailand?
A: Funds should be transferred from overseas to your bank account in Thailand (or the bank account of your lawyer’s trust account in Thailand). You will then receive a “foreign exchange transaction form” (“FET Form”) from the receiving bank. The FET Form will identify the property to be purchased with the funds. By retaining a copy of the FET Form, you are authorized to send funds outside of Thailand upon your re-sale of the property in the future. Otherwise, if you do not have an FET Form for any reason, it may be difficult to transfer funds outside of Thailand after you sell your property in the future.
Q: What types of land titles can be transferred under Thai law?
A: True land title deeds are called “Nor Sor 4 Jor” or “Chanote” and are issued by relevant Land Office. Land held under a “Chanote” title deed is accurately surveyed by the relevant Land Office and GPS plotted in relation to a national survey grid, and marked by unique “numbered” marker posts set in the ground by Land Office officials.
Land which has not been officially surveyed by the Land Office is commonly held under a “certificate of utilization” known as either “Nor Sor 3 Gor” or “Nor Sor 3.” Such certificates of utilization may be upgraded to “Chanote” following an official land survey conducted by the relevant Land Office. However, both “Nor Sor 3 Gor” and “Nor Sor 3” certificates may be sold, leased and mortgaged in the same manner as a “Chanote.” From a risk management perspective, however, only land held under “Chanote” or Nor Sor 3 Gor should be purchased by foreign investors.
The difference between the two types of certificates of utilization (Nor Sor 3 Gor and Nor Sor 3) relates to accuracy of the land survey. Nor Sor 3 Gor land has been surveyed by use of aerial photographs, while Nor Sor 3 land boundaries are simply recorded in relation to the neighboring land plots.
Q: Which taxes will I be required to pay in Thailand?
A: Your property investment may be subject to the following taxes and fees:
2% of the land office appraised value of the property.
2) Withholding Tax (one time):
1% of the land office appraised or the actual transaction value of the property (whichever is higher) if the Seller is a juristic person. This is a withholding tax and it is credited to (i.e. deducted from) the company’s income tax payable for that year. If the seller is an individual, personal income tax is charged at progressive rates (0% to 37%), based upon the appraised value of the property.
3) Stamp Duty or Specific Business Tax/Local Development Tax (one time):
Stamp Duty: 0.5% of the land office appraised or the actual transaction value of the property (whichever is higher). In general, the Stamp Duty will apply if the land has not been transferred within the last five years (for Thai nationals: two years), otherwise the Specific Business Tax/Local Development Tax will apply.
or
Specific Business Tax/Local Development Tax: 3.3% of the land office appraised or the actual transaction value of the property (whichever is higher).
4) Land and House Tax (annual)
Land and House Tax is imposed on the owners of a house, building, structure and/or land except with respect to the primary residence of an individual. The tax rate is 12.5% of actual or assessed annual rental value of the property. The annual value is the amount of rental income that a property may reasonably generate over one year, if the property is offered for lease.
5) Local Development Tax (annual)
This tax is imposed upon any person who either owns or is in possession of land. The tax rates vary according to the appraised value of the property being determined by the local authorities. There is an allowance granted for land utilized for personal dwellings. This allowance differs according to the location of the land.
6) Personal or Corporate Income Tax (annual)
Income tax (corporate or personal) is incurred by the owner of property when income is derived from the property. Such income may take the form of rental return or profit in case of resale of the property.
7) Lease Registration Fees
1.1% of the total rental income under the long-term lease agreement.
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