Legal Considerations When Buying a Property in Thailand
We posted some information on laws that foreigners must know about property ownership in Thailand. Below is some more information. Just remember that this is not meant to replace a lawyer’s advice. A foreigner cannot have a land’s title deed under his or her name. Instead, the law allows them to do one of two things:
- Lease the land for 30 years with an option to have the lease extended for another 2 30-year terms, giving the foreigner a total of 90 years. While the lessor can seize the land after the lease is over, he/she/it cannot get the property built on the land because it is considered separate from the land.
- Buy the land through a company that the foreigner owns. The company, of course, should be operating and recognized in Thailand. The difference here is that while the foreigner may technically own the land, it is in the company’s name and not in his. Because the foreigner is in control of the company, he then has complete control and ownership of the land as well.
Another thing that one should know about when buying property is the different types of land titles. There are 6 but here are the most common:
- Nor. Sor. 3: this is a document is issued by the government and certifies the use of the land by the proprietor but it is not a possessor title. This title can give the holder a legal right to possess the land and to use the title as a legal document. This has no aerial photograph so it has no parcel points and only a floating map is used. This is given for a specific plot of land and is not connected to any other land plots. The lack of accurate surveys can cause problems in confirming the land area and size. Any legal acts, such as changing the ownership of the land, needs to be publicized for 30 days.
- Nor. Sor. 3 Gor: this title has the same legal basis as the Nor Sor 3. One difference is that Nor Sor 3 Gor has parcel points on the map so it has exact boundaries. An aerial survey is used to set the points and area by using a scale of 1:5000. Neighboring areas can also be verified. Another difference is that you don’t need to publicize any legal acts. Lastly, you can subdivide the land into smaller plots.
- Chanote-Land title deed (Nor Sor 4 Jor): this document grants the possessor full rights to the land. This is a certificate of ownership of land that allows the person whose name is on the deeds to use it as evidence to verify their right to government authorities. Unlike the other two land titles, GPS is used to survey and accurately plot the boundaries of the land. There is no waiting time on any legal acts. Dividing the land into more than 9 subplots must follow the Land Allotment Law, Section 286. Chanote is the most secure type of land title.
If buying a house is what you want to achieve, you should not feel hindered because you can’t own land in your name. You can own the building and lease the land with an option to purchase (on the land) in the event that you become a Thai citizen or a legal entity that is allowed to own land. You can also have effective ownership of the land by purchasing it through a Limited Company that you formed.
In Thailand, a development built on a land can be owned by a foreigner. The development owners often set up a legal mechanism and mechanism that allows the property to be bought with the purpose of owning it. Here is an example of this:
Corporate ownership of the property
Corporate structures in Thailand are similar to that of the British. PLC, LLC, Ltd partnerships and other corporate entity types are allowed by Thai law. Once formed, they are considered a “Juristic Person” or a legal entity. A Juristic Person in Thailand that has a Thai majority and owns land within a legal structure is viewed, in terms of property ownership, as a Thai person and therefore may own property. Keep in mind that equitable ownership does not mean actual control of the Juristic person. The Limited Liability Company (LLC) is the most popular form of corporate land ownership. Control of the LLC The law of Thailand allows the issuing of two-tiered or classified stocks. This means that LLC shares can be an “Ordinary Share” where the owner of the share is allowed one vote or a “Preferred Share” where one must have multiple shares in order to get one vote. The Thai majority of the company may be given Preferred shares while the foreigners have Ordinary shares. This way, foreigners will hold a fewer number of shares but have control of the company because of their voting rights.
The simplest and easiest transaction for foreigners is buying a condominium. Thai law lets foreigners buy 49% of the units in a condominium freehold. This means that the name of the person on the title is the foreigner’s. One significant requirement to do this is to make sure that the funds (in foreign currency) that you’ll be using to buy the condo were transferred from abroad and correctly recorded by a local Thai bank. This is the preferred method for a foreigner buying a condominium in Thailand.
Payment method for your property
If you want to pay for a property in Thailand using Thai Baht, you need to make sure that your money is in a foreign currency when it is transferred into the country. This is important because the bank will then give you a Foreign Exchange Transaction form which you will need if in case you want to get back your money (by selling the condo) out of the country and do not want to pay any tax penalties. Repatriation of your funds or repayment of a foreign currency loan can be paid freely once supporting evidence is submitted, one of which would be the FET. Without this, payment of funds could be considered as income and therefore taxable. You should also take note that an FET will only be issued if the transfer of foreign currency into the bank exceeds US$20,000.
Other costs involved
For properties that are used a private residences, property tax is not applicable. The additional costs only happen when there is a transfer of ownership. These are transfer fees (2%), stamp duty (0.5%), business tax (3.3%), and withholding tax (the same as capital gains tax and has a variable rate). Mostly, these fees are calculated based on the tax assessment value of the property according to the government. The good thing about it is that this value is well below market value. As a rough guide, the total fees and taxes should be around 2-3% of the market value of the property. These fees are often split between the seller and the buyer.