We should start by defining the word "property"; which can refer to land, land with a building, or a condominium, sometimes referred to as an apartment. Foreigners who wish to purchase property in Thailand should consult with our real estate experts who can certainly shed light on the complexities of property law.
RULE #1 - a Foreigner is not permitted to own land in Thailand. A Foreigner cannot put land in their name. It is the law! Are there work arounds? Yes there are, BUT remember Rule #1!
Purchasing A Condominium
The purchasing of a condominium is governed by the Condominium Act B.E. 2522. There are no nationality restrictions. Foreign nationals have the same rights as Thai nationals. BUT, Foreigners can only purchase a unit located in the Freehold Section of the building. The freehold section of the building means that only 49% of the buildings total space can be sold to foreigners. All funds used to purchase the condo must be transferred in foreign currency and must come from abroad. Unless you are a foreigner who has been working in Thailand and paid taxes on the monies earned. You are then permitted to use the money you earned in Thailand to purchase a condo. The "Title Deed" of the condo will show the foreigner's name and prove ownership of the unit.
Blue Book & Yellow Book
The "Blue Book" also called "Tabien Baan" refers to the house registration for Thai Nationals. This book records all the residents in that address. When a Foreigner purchases a condominium they too will get a Blue Book but it will not include the foreigner's name. Instead Foreigners should apply for and receive a "Yellow Book". This is the foreigner's house registration. The Yellow Book shows your name and your address and basically tells the government where you live.
Buying Land & Building A House
Scenario 1: If you have a good relationship with a Thai partner or are married to a Thai National then buying land is relatively simple. The land and the title deed will go under the Thai National's name. Now if you plan to build a house on that land here is where the foreigner can protect their investment. The Foreigner can actually own the house that will be built on the land. The way to get it done is a little complex but the real estate experts at PCS can get done properly for you. The end result will be; the Thai partner will own the land and the Foreigner will own the building that sits on that land. Your Thai partner will have a Title Deed to the land and a Blue Book. The foreigner will have a Title Deed for the house and be able to get a Yellow Book.
Scenario 2: You can set up a Thai Limited Company. The company can then own the land, or the land and the house, or own the land and the Foreigner can own the house. All three options have their pros and cons so its best to discuss these options with the experts at Professional Corporate Services. Which ever way you choose to go, you do so knowing that Scenario 2 is better than Scenario 1. Why you ask? In scenario 2 the foreigner can own up to 49% of the company and if the company owns the land and the foreigner owns the house, you can now understand that the ownership rights weigh heavy on the side of the foreigner. There are significant expenses related to this scheme;
- The cost of setting up a Thai Limited Company
- The cost of all the documents needed to lock up this scheme
Ongoing Annual Costs
- The cost of the annual filings
- The cost of all the secraterial work required
The additional costs may or may not be worth the protection this scheme offers a Foreigner. It is our opinion that the costs are well worth the benefits and protection the scheme offers a Foreigner.
Buying A House/Villa
If you remember Rule #1 then you know that a house must sit on land and a foreigner cannot own land. So how can a foreigner buy a house that sits on land? There are several ways to get this done and the easiest one is to buy the property in the name of your Thai Partner or Thai Spouse. If that is not an option then you can do as we suggest above and open a Thai Limited Company. If you think the costs involved with that option may be excessive then we can try to seperate the house from the land and just like above the foreigner can own the house and the wife can own the land.
But there is another way and that is 100% Foreign Leasehold. What this means is that we sign a lease with the owner of the House which equals the sales price of the House. The Foreigner signs and pays for the house and gets to live on the property for 30 years. The foreigner will get their name in a Yellow Book but not on the Title Deed. Instead a note will be inserted into the Title Deed that will prevent the owner from selling your property. I already know what you will ask next, you want to know what happens after 30 years? The answer is also rather simple. Anything you want can happen. As long as the Title Deed is frozen to change you can remain in the property and with the right paperwork you could be Free to sell your Leasehold anytime you want. This option is a very popular option with luxury villas in the resort areas. But before you get into one of those deals please make 100% sure all the paperwork is reviewed by one of our property experts.
Taxes Related To Property In Thailand?
The purchase of a property is not without tax. Once the property has been registered with the Land Department, it is also necessary to pay the fees related to the property's purchase.
What are the property transfer taxes and fees?
Except for the transfer fee, which is generally shared between the buyer and seller at a rate of 1% each, the payment of all taxes and fees related to the sale of real estate in Thailand is the seller's responsibility.
The transfer fee is calculated based on the valuation of the property as held by the Land Department. This valuation is always lower than the market valuation.
If a property is owned by a corporation or for less than 5 years by an individual, a specific business tax is levied at a rate of 3.3% of the declared sale price. If an individual has held the property for more than 5 years, a stamp duty of 0.5% is applied. And a withholding tax at the rate of 1% of the property's assessed value by the Land Department is also applied.
What taxes do you then have to pay annually?
The old property tax law imposed a tax on the annual rental income of a property, at the rate of 12.5%. So most property owners were happy to keep the property empty.
In contrast, the new law effective January 2020, all land owners, villas and condominiums must pay the new Land and Building Tax. This requires the taxation of the property's value and not its rental income. The tax rate will differ depending on the property's use and the official value of the property. The law distinguishes four possible services: agricultural, residential, commercial, or vacant.
International Real Estate Attorney
So you found your dream property in Thailand and now you are ready to buy. What do you need to complete this transaction successfully? Our International Real Estate Attorney suggests:
- Offer To Purchase Property
- Property Due Diligence
- Sale & Purchase Agreement
- Representation At The Land Department
SUMMARY - As you can see Property Law is very complex so we strongly suggest that you take advantage of our FREE consultation services. Give us a call or make an appointment for a consultation with one of our Real Estate experts. Please remember the 1st consultation is totally FREE so don't hesitate to contact us! Simply fill in the form below and we will be happy to answer your questions and concerns.
Contact PCS
Our Address
253 Sukhumvit 21 Road (Asoke), 25th Floor
Email Us
contact@pcsthai-1.com
Call Us
+66 2 109 5160