Published on 23 February 2006 at 05:51 pm
Filed under: Asia:- Thailand Property Guides » Thailand Property Buying Guide for Foreigners
There are many restrictions placed on foreign investors who wish to own land and property in Thailand, but because the investment opportunities in Thailand are so great, many foreigners commit to the market anyway and use the various ways and means that exist that allow them to get around or work with the restrictions.
The property buying process for foreigners in Thailand can therefore differ from person to person and from property transaction to property transaction – but here’s an overview of the general process involved for an overseas investor.
In Thailand foreigners are not permitted to own the land on which any piece of property sits, furthermore they are not allowed to purchase a condominium in a building where there is already a foreign percentage ownership of 49%...this naturally restricts the options an investor has.
There are two real ways around both of these issues and they are either establishing a local Thai limited company and buying property assets through the company, or leasing real estate for 30 year renewable periods.
The first option is the one most commonly taken by non-Thai residents. The requirements are that a foreign shareholder cannot hold more than 49% of a Thai limited company and that there must be a minimum of seven shareholders in the company.
Usually the overseas property investor will be the single foreign shareholder and six Thai shareholders will be appointed; the foreign investor will be named as the only executive director in the Articles of Association for the company and upon the company’s incorporation each of the Thai shareholders sign undated share transfer contracts which effectively transfers control of the company to the foreign director and gets around the issue of them having a smaller share of the company.
The other option is the limited land lease option which gives the property buyer the right to lease land for 30 years and automatically be offered an extension of 30 years to continue for a period of 990 years maximum. The family of the person offering the land for lease has to abide by the contract after his death and the overseas investor leasing the land can will their rights to their future heirs.
Whichever option an investor takes their first step in the property buying process in Thailand will be securing both a lawyer and an estate agent’s services. Local knowledge of the property market is essential in Thailand where very few properties are ever advertised as being for sale; a local estate agent and lawyer will make the hunt for property that much easier.. Unsurprisingly realtors in Thailand are unregulated though and everyone from the receptionist at the hotel to the taxi driver from the airport will know of real estate that the overseas investor may be interested in which is why it’s essential that an investor spends sufficient time in Thailand to understand its property market and to understand where market demand could come from to help the property buyer realize an income or gains from his property.
Once properties have been viewed that meet an investor’s objectives and an offer to purchase has been made and accepted, the property investor’s lawyers will need to check the history and validity of any title deeds that exist on the property. In Thailand many parcels of land and pieces of property have title deeds but there are some areas of the country that have yet to be surveyed and in these areas a lawyer will need to check documents known as Nor Sor documents which show transfer transactions but not ownership rights. Basically a certain amount of due diligence should be conducted by the investor and his lawyer into the rights of the vendor to offer the real estate for sale and the rights of the foreign buyer to purchase the property that is now under offer.
If all is found to be in order with the sale of the property the sale can complete and funds can be transferred to the vendor. For the real estate to be transferred into the name of the buyer or the corporation making the purchase the following taxes and fees will have to be paid: -
Stamp Duty – 0.5%
Transfer Fee – 0.01%
Business tax – where applicable 0.11%
Lawyer and estate agent fees
Ongoing, an investor may have to pay income tax on an income he derives from his investment property in Thailand but may be pleased to know that there is currently no capital gains tax in Thailand. There is also a Land Tax and Structures Usage tax that an overseas investor may have to pay on their property assets but both are minimal figures.
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