Buying and owning property in Thailand.
Let’s consider buying and owning condos in Thailand. A non-resident (foreigner) can purchase a Condominium Unit according to Condominium Act 2008, in two ways. The first is freehold, other is long term rent (leasehold).
Buying and owning condominium in Thailand
1. Foreigners can only buy condominium unit freehold. Total amount of foreign owners in the project must not exceed 49%. Buying condominium freehold means that you will have total right of possession, disposal and use for unlimited term. When purchasing property freehold, the registration of ownership transfer is taking place at the Land Office, with the entry of the name in the Apartment Title Deed. You become the owner of the property forever, you have the right to bequeath it to your heirs, sell to the third party, though the third party receives the same right as the original buyer. This way is good for build-up of equity, as ownership term is not reducing. If the amount of your investment exceeds 10 million THB then owner has the right of the Investment Visa that is renewed by Immigration Service once a year.
2. If you buy an apartment leasehold the terms of owning are restricted by contract. Normally it is a 30-year term. Depending of contract’s conditions the leasehold term can be renewed for another two 30-year terms, according to Section 540 of Thailand Civil and Commercial Code. You can transfer the rent to other person, but term of rent will be residual.
3. The benefits of leasehold are: minimum of registration fees (1.1%) compared to freehold (6.8%), and if the lessee is public officer he can’t specify his property abroad in the declaration, it is leasehold. The negative is that in case of lessee’s physical loss rent rights are canceled, so you can use purchase property by Thai Limited Liability Company. In this case the non-resident’s share is inherited and director is changed. Owner change is taking place by the same way. Transfer of ownership is regulated by lease contract.
Steps of buying condominium Unit freehold:
1. You like the condominium. Before signing the contract and paying deposit which is usually 100-200 thousand THB, you must talk to your lawyer to revise contract conditions, building permit, land Act, developer’s and seller’s registration, also recipient of funds and director’s signing authority, terms of building and registration.
2. After paying the deposit you sign preliminary contract of sale, pay another 25% of price for off plan development or 100% if construction is complete and Apartment Title Deed is ready for ownership transferring.
3. In a Land Office, when transferring a right of ownership, you have to pay the following taxes according to terms of sale contract:
* Transfer fee at the rate of 2% of the value of the unit.
** If you buy condominium Unit direct from the developer, you have to pay 1% of the price specified in the contract. *** When buying condominium unit from homeowner who has owned the unit for less than 5 years, you have to pay business tax at the rate of 3.3% of the purchase price.
**** Stamp Duty is 0.5% of the purchase price. If you own Condominium Unit freehold, you have right to vote on management and building issues that are usually discussed on meeting of Operating organisation Juristic Person. If you rent out your condominium unit, you have to pay 12.5% government tax of the annual rental charge.
Buying land in Thailand
1. Thai law doesn’t allow foreigners to buy land 100% freehold, although there are some legal ways around this restriction. You can set up a Thai Limited Company, so you may purchase the land through your Company. The land will be owned by and sold by the company you own, not by an individual foreign person. Right transfer is taking place by director and founder change.
2. Other popular way is purchasing land leasehold. Extending leasehold period is the same as apartment leasehold – 30 year term with a possibility of extending twice to 90 year period maximum. You can buy a house leasehold or own it according to contract.
3. If you are married to a Thai citizen, or in other relationship, you can purchase the land freehold by her/his name, then sign the lease agreement with your husband/wife. It is reasonable that you should sign a loan agreement in the amount of land and house price.
Building house in Thailand.
Restrictions of foreign property ownership in Thailand are restricted to land ownership only. The land and the building sitting on the land can be owned by different people by law. Meaning a Thai national can own the land and be renting the land to you on a leasehold basis of 30 year periods. You as the foreigner can own the property that sits on the land.
The right of owning the house on the land always follows the term of the land lease and cannot exceed a term of 30 years for each period before renewal. If you want to build a house you must obtain a building permit. he building permit can be issued in the construction companies name or in the land owner’s name. Separate ownership of the house increases the lessee’s right and decreases taxes.
Before building the house you must consider:
* Does the land documentation for rent and building meet its intended purpose, number of store’s and zoning?
** Is there enough capacity and networks for household operation (electricity, water, sewage)?
*** Isn’t the road to the building private?
**** Set the legal capacity of the land owner, check the documents by your lawyer and make the agreement in Thai language. The owner might be in litigation on debt (for example, bankruptcy, etc.).
Secure your investment is a key to good mood and relax in the Land of Smiles!