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BUYER GUIDE :

Whenever a person considers purchasing property in Thailand, an understanding of the basic legal principles in this regard is advised. Also, a basic knowledge of the individual ownership structure underlying the target property should be acquired. We have lawyer service who can advise you essential knowledge to ensure that your chosen property fit your interests is safe under the law act.

» Foreigners may own

  • A unit in a registered condominium
  • A building ( as distinct from its land )
  • A registered leasehold of up to 30 years for all type of title lands ( and / or building )
  • A company can purchase land and building 49% foreign shareholding but must carry out business as well
  • More than 40 % of a condominium unless done in company form
  • 49% max of land/ building in a company

» Ownership Structure

Freehold ownership is the most comprehensive and complete interest in property that a person can possess. Freehold ownership allows the owner full ownership rights to the property to the extent permitted by law. This is similar to the full ownership rights a foreigner would have if he were to buy and own property in his own HOME country. However, the first thing all foreigners must understand is that foreign buyers, with limited exceptions, cannot acquire freehold interests in land in Thailand.Nevertheless, several ownership structures have been developed and exist in Thailand which fully allows foreign buyers to purchase property in Thailand whether for residence or investment. A summary of these property structures follows:

» Land

As mentioned above, with limited exceptions, foreign buyers cannot acquire freehold interest in land in Thailand. However, the Thai government has brought laws into effect that allows also foreign nationals or entities to acquire freehold title to land under certain conditions and restrictions.

1. Buying Land by purchasing under the name of Thai Company
Land can be purchased under the name of a Thai company having foreign shareholders and/or directors . This " Thai " company must at least 51 % owned by Thai shareholders, while remaining 49 % or less may be held by foreigners.

2. Leasing Land
A foreigner who are wishing to buy Land in Thailand may acquire an interest in land through a lease, maximum period of 30 years with renew options giving a total right of 90 years to the plot.Many foreigners choose this method to secure land or property ownership. In comparison to setting up a company, land leasing is easier and requires less maintenance. The lessor's heirs are bound by law to honour the agreement, and the lessee can bequeath the lease to his/her heirs in a Last Will and Testament. Additionally, a purchase option can be agreed between the landowner and the lessee providing that the lessee shall have a right to demand title transfer upon change of the applicable laws allowing foreign national to hold freehold title to land.

Furthermore, a foreigner has the right to enter into a Pre-Purchase agreement for land in which stipulations are inserted under which the foreign buyer has the right to transfer or sell his contractual rights of this agreement to third parties at any time until the registration date of ownership transfer to the property into the name of the buyer or his appointee. This option allows a foreigner a contractual right to purchase land, but into the name of a third party designee to be identified later.

» Land Title

Property buyers also need to be aware of the different grades of land title in Thailand and ensure that the development at which they intend to buy holds the property on adequate title. The land title in Thailand are as example

A) Chanote
This type of title grants the holder of this document the full rights over the land. Thus, if you are planning to buy land in Thailand, this type of title deed is the best title deed to hold. The title deed has been issued by using GPS to set the area and boundaries of the land, which is a very accurate method. Any legal acts may be done immediately, as per the right of ownership. Land partition of more than 9 plots must be carried out according to the Land Allotment Law, Section 286.

B) Nor Sor 3 Gor
A land awaiting a full title deed is granted the document Nor Sor 3 Kor. The land is measured by the Land Department; therefore, it has its exact boundaries. The owner knows exactly what he owns. This type of land may be sold, transferred, or mortgaged, as a land with freehold title deed (Chanote) as long as it is ready to be a full title deed. In order to change the title to a Chanote, the owner of the land may file a petition to the Land Department to file a request to change it to a full title deed (Chanote), and the Land Department may do so if there is no opposition made against the petition.

C) Nor .Sor. 3
Nor .Sor. 3is an instrument certifying the use of land and is issued by the government to the occupier of land and is more than a mere claim of possessory title, i.e. it is confirmed by law that a person holding Nor. Sor 3 has the legal right to possess the land. This land title can be used as a legal document or to use the benefit of the land as an owner. Nor Sor 3 is a floating map with no distict parcel points. It is issued for a specific plot of land and is not connected to other land plots. This causes problems in verifying the land area. Any legal acts must be publicized for 30 days.

» Villa or House

It's important to know that full ownerships rights to buildings can always be acquired by foreign buyers, although not to the land itself. This separation of ownership of building from the land is contrary to the methods of most of the western jurisdictions. However, in Thailand, the purchase of a long term lease of land (including purchase option) in combination with full ownership of the Villa or building sited upon it has been established as a popular ownership structure for foreign property investors in Thailand.

» Condominium Unit

A Condominium Unit purchase is the most common and straightforward way to acquire property in Thailand and is relatively simple to complete. Currently, under the law, foreign buyers are allowed to purchase freehold up to 49% of the total area of units available in any particular Condominium building (with some specific exceptions), the remaining 51% of the units must be owned by Thai nationals or Thai companies. A purchase of a Condominium unit is generally paid for by remittance of the purchase price in foreign currency into the Thai Baht account of the seller in Thailand, and the submittal of relevant documentation evidencing such international money transfer to the Land Department on the day of registration of title transfer into the buyer's name.

Even though the foreign freehold quote of 49% may have been sold out in a particular Condominium building, a Unit forming part of the 51% Thai quota may be acquired by a foreigner through a long-term leasehold structure similar to an Apartment lease as described below, or through the incorporation of a Thai company by the foreigner which can itself purchase the particular Unit. In regard to use of such Thai company, it must be considered that this requires strict compliance with the applicable laws (same as under other jurisdictions) including but not limited to accounting, tax and legal regulations. Your legal advisor can explain this option more fully.

» Apartment Lease

Another viable option for foreigners for property purchase in Thailand is an Apartment lease. Such leases are generally issued on a long term basis comprised of a 30 year lease period and two additional rights to renew for 30 years each. This provides a total of 90 years right to the Unit. Under the current laws of Thailand a lease may have a maximum of 30 years term and legally be registered with the relevant authorities. Therefore renew options giving additional 30 years plus eventual further extension(s) of term are offered and widely used in Thailand. Sophisticated developers have sweetened the deal and have implemented legal structures which allow Apartment lessees to acquire share interest in the land itself and to the company that owns the Apartment building. Under these structures, the holder of an Apartment lease together with the other lessees in the project, are in effect joint-lessors of themselves who can participate in the management of the Apartment building and assure renewal of the lease terms for additional 30 year periods upon expiration of the first term.

» Legal Documentation

Normally the real estate agent will introduce a buyer to his seller who will ask for the execution of a Reservation Agreement to secure the property. The main purpose of such Reservation Agreement is to reserve the chosen property for a certain period of time, usually 30 days upon signing, and the buyer giving commitment to the sale. Therefore, under such Agreements, payment of a reasonable monetary deposit is usually requested. Subject to the parties negotiations, such deposit can be refundable in the event the rendered due diligence has a negative outcome or the seller cannot provide reasonable main agreements to be entered into by the parties within the reservation period.

The provided legal documentation should be reviewed by the buyer and its legal advisor within the reservation period, and due diligence shall ideally be completed prior to the expiration of the reservation period. However, a seller should not object to reasonable extension of the reservation provided that issues have occurred which justify such extension and the delay has not been caused by the buyer.

» Thailand Real Estate Tax and Fees
Taxes and fees imposed and collected by the Land Department's local or provincial branch office upon transfer of ownership of realty property (condominium, apartment, land, house, land and house)

Transfer fee 2% of the registered value of the property
Stamp Duty 0.5% of registered value. Only payable if exempt from business tax
Withholding Tax 1% of the appraised value of the property
Business tax 3.3% of the appraised value of the property if selling within 5 years. This applies to both individuals and companies.
 
TAX WHICH PARTY NORMALLY PAYS AMOUNT
Transfer fee Buyer 2% of registered value
Stamp Duty Seller 0.5% of registered value
Withholding Tax Seller 1% of appraised value
Business Tax Seller 3.3% of appraised value

» Appraised value A real estate property appraised or assessed value is an actual evaluation price of the property by the government and is used by the land office to determine the amount of tax that must be paid. The appraised value of a house ( separate from the land ) depends for example on criteria like floor area of the house, number of floors, materials used ( e.g. wood or concrete ) and location.

» Registered value is the actual registered sale price between the parties. The appraised value used by land office value is often pretty much lower than the actual sale price, and in practice the Thai seller tends to insist on declaring and registering a sale price close to the appraised value as this decreases his taxes. This is a known practice but not so common practice. The parties are required by law to state the correct true sale price at the Land Department.

Specific Business Tax

SBT is charged at a rate of 3%, plus a municipal tax of 10% on the amount of the specific business tax, bringing the total tax to 3.3%. This is charged if the seller is a company (specific exemptions applied), or if the seller is an individual and sells the property within five years of the purchase registration date. The transfer is not subject to business tax if the seller is an individual and has possessed the property for more than 5 years before the transfer. Other exemptions are for example if the seller transfers the real property to a legal heir or heir by a will or the seller transfers the real property to a legitimate child (there are other specific exemptions). Companies transferring property are subject to Specific Business Tax, irrespective the period of ownership but there are exemptions depending on the business objectives of the company.

» Stamp Duty

Stamp Duty depends if the seller is subject to any Specific Business tax. In case Specific Business Tax is paid the seller is exempt from the payment of the Stamp Duty. However, if the stamp duty has been paid to the Land Department, the seller shall have the right to claim for the refund in full within 6 months after the payment. Specific Business Tax 3 % + local maintenance tax at the rate of 10% charged over the business tax, calculated over the registered value or actual sale price ( whichever is higher ).

» Withholding Personal Income Tax

For individuals withholding tax depends if the immovable property is acquired by inheritance or gift or if the sale and purchase of the property has a trade or profit seeking purpose or not, usually the final Withholding Personal Income Tax income shall be calculated at progressive rate based on the government assessed value with a deduction depending on the number of years of possession.

If the seller is a company, then withholding tax is fixed at 1 % over the registered or sale price or government assessed value of the property, whichever is higher.

( The information is for guidance only, you may consult with us for your questions, and we welcome to provide you with excellent service, outstanding result )

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