QUESTIONS & ANSWERS

FAQ's about foriegn ownership of real estate in Thailand

1. What kind of real estate can I own in Thailand?

1.1 Condominiums: Foreigners can purchase perpetual freehold ownership of up to 49% of all private area in any one condominium project.

Example: In a condominium project with 20,000 square metres of total private ownership area divided into 100 equal size units of 200 square metres each, foreigners can purchase perpetual freehold ownership of 49 condo units.

1.2 Buildings: Foreigners can acquire freehold ownership of all kinds of buildings, such as stand-alone homes and villas, townhouse units and commercial units.

2. What about land ownership?

Foreigners are generally not allowed to own land in Thailand, even though the Land Code, since it was first promulgated in 1954, has provided that foreigners may own up to one Rai (1,600 square metres) of land for private residence, but only upon being granted approval by the Minister of the Ministry of Interior. This approval has practically never been given

Exceptions to this are:

2.1 When foreign investment is granted special privileges by the Board of Investment (BOI) which has the authority to allow land ownership for foreign company directors for private residence. BOI promotion privileges which include allowing foreign ownership of land is generally reserved for large industrial production or high technology projects. Further information may be obtained at www.boi.go.th.

2.2 When approved by the Industrial Estate Authority of Thailand (IEAT), foreigners may own up to 100% of land. Applicants must be export-related business operators. Further information may be obtained at www.ieat.go.th.

2.3 By revision of the Land Code in 1999, foreigners who bring foreign currency into Thailand equivalent to not less than 40,000,000 Baht (or approximately EUR 800,000; GBP 580,000; USD 1,000,000) for investment and maintain that investment for not less than 3 consecutive years. Such investment includes placing these funds into fixed deposit accounts, investment in the stock market and other investment deemed beneficial to the economy and social well being of Thailand.

The drawback in this category, is that there are no precise fixed rules and the investment must be made first before seeking approval from the Minister of the Ministry of Interior. All applications are considered on a case by case basis.

More detailed information concerning land ownership by foreigners is available at the Land Department’s website at www.dol.go.th.

3. How do I go about purchasing a residential property?

3.1 One option commonly offered to foreigners is purchase of long term leasehold possession of land. This is typically marketed by sales of three consecutive lease terms of 30 years each. Some real estate projects offer the facility for the foreigner either build their own villa on the leased land by applying for a building construction permit in their own name to while others offer the facility to purchase the villa from a developer after construction is completed.

Pros of Leasehold Possession:

• Registration procedures are simple and straight forward;
• Registration costs consist of a one time payment of a lease registration fee which is 1.1% of the total rent declared paid over the entire lease term;
• Possession of the land can be assured 100% throughout each registered term of 30 years each;
• Cons of Leasehold Possession:
• Extension of each registered 30 year lease term is 100% legally enforceable only between the original parties of the lessor and lessee and not by the heirs of either party;
• If a lessor is declared bankrupt or fails to pay applicable taxes, a creditor or the Revenue Department can obtain a court ordered lien against the land in order to sell the land by public auction.

3.2 A second option commonly offered to foreigners is to set up their own limited company to purchase freehold ownership of the land and lease the land from their own company while establishing separate ownership of buildings on the land in their own name.

Pros of Owning Land with a Limited Company:

• Perpetual land lease extensions can be assured by establishing control of the company by the foreign shareholders and directors;
• Cons of Owning Land with a Limited Company:
• Initial set up costs may be relatively expensive in addition to the 1.1% land lease registration fee;
• Annual administration costs may also be relatively expensive depending on the sale purchase price of the land;

4. How do I decide between purchase of a long term leasehold or establishing a limited company?

There are many variables to consider, the most important of which are the expected long term financial standing and social reputation of the developer or seller. In either case, a potential buyer should consult a reputable law firm or legal consultant to obtain further details. In the case of establishing a limited company, there are a number of different proposed shareholding structures, some of which may provide very high long term investment and re-sale security, while others may not.

5. If I sell my property, what kinds of taxes and fees will I have to pay?

The most significant of these are:

5.1 Specific Business Tax of 3.3% of the sale price is always applicable against property sales by a limited company and only applicable against sale of land and/or buildings by individuals owned for less than 5 years. If an individual owns land or buildings for more than 5 years, a stamp duty of only 0.5% is applicable against the sale price.

5.2 Transfer fees of 2% are applied against minimum assessed values (MAV) established by the Land Department for land and buildings. For land, the MAV is typically 50% or more below real market value. For buildings, the MAV is based on approximate real construction cost of the square metre area of the concrete shell floor space. MAV is subject to re-evaluation every four years.

5.3 While capital gains tax does not exist as such, when a company sells property the difference between the acquired price and sold price less specific business tax and administrative costs incurred in the year of the sale is taxed at 15% (less than 1 million Baht net taxable income) 25% (over 1 million Baht but less than 3 million Baht net taxable income) and 30% (over 3 million Baht net taxable income). This does not apply to sale of land or buildings by private individuals.

5.4 Land and buildings sold by private individuals are subject to personal income tax ranging from 8%, if owned for less than one year, to 50%, if owned by 7 years or more, and is based on the MAV of the property divided by the number of years of ownership. In all cases, this is a rather insignificant amount.