In the Kingdom of Thailand foreigners are restricted from freehold ownership, although this is possible under certain conditions. By far the most popular method of property acquisition is using a leasehold structure for land ownership. Foreigners can obtain freehold rights of property under the following situations:
- Condominium acquisitions, providing that the total foreign ownership within a development doesn’t exceed 49% of the units.
- The Board of Investment (BOI) and the Industrial Estates Authority has power to permit promoted companies to own land for the purpose of the promoted business.
- Permission can be granted under the Petroleum Act for use in approved projects.
- Banks and financial institutes that have become foreign owned.
- A foreigner who invests at least 40 million Baht in authorized securities in Thailand may buy up to 1 rai (1600 sq. m.) for residential purposes only of the owner and their family.
Foreigners can lease land and/or structures on short or long term contracts. Leases may be registered at the appropriate land office for up to 30 years and often have a renewal clause for additional periods of 30 years. Leases for industrial or commercial purposes have a term of up to 50 years. This again is renewable for periods of 50 years. The majority of authorities agree that any such renewal clause is enforceable as against the original lessor; not, however, as against a transferee lessor. Any lease of 3 years or more must be registered on the title to the land at the appropriate land office in order for the lease to be enforceable for any term beyond 3 years.
For leases that are registered, there is a registration fee and stamp duty of 1.1% of the total rental amount of the term actually being registered (i.e. not including any renewal terms).
Company Ownership of Freehold Property
A Thai Limited Company can purchase land as a juristic person. The company must be allowed to own land and invest in land in accordance with its objectives and Articles of Association. Foreigners can hold a maximum of 49% of the shares in such a Thai Limited Company, the balance must be owned by Thai actual investors. It is also vitally important that annual accounts are completed and taxes paid on time.
Ownership of Buildings
Foreigners, in their own name, may also own buildings outright. They should have a "superficies" (i.e. the right to own structures on land they do not own) over the land registered in their name on the title deed to the land the structure is on. If they are the first owner of the structure they should also have evidence that they built the structure such as payment records to the builder, a building contract and their name on the building permit. If they are a transferee owner of the structure, the transfer is registered in their name at the relevant land office and requires a 30-day public notice period before the transfer.
Ownership of Condominiums in Thailand
The rules concerning the ownership of condominiums are similar to those concerning land. Condominium units have a form of freehold title deed where ownership is transferred at the Land Department. Foreigners, both natural persons and foreign owned companies can own up to 49% of the area of a condominium project. For those who do not have resident permits there must be proof that foreign money was brought into Thailand to purchase the unit. Foreigners may also lease condominium units in the same way that they may lease land or structures.
In general, the current fee and taxes applicable to and payable upon the registration of ownership of immovable property are as follows:
2% of the land office appraised value.
Income Tax (payable as withholding tax):
1% of the land office appraised or the actual transaction value of the property (whichever is higher) if the Seller is a juristic person. This is a withholding tax and it is credited to (i.e. deducted from) the company’s income tax payable for that year. An incrementally applied personal income tax sliding scale from 0% - 37% based on the land office appraised value of the property and a rather complicated calculation or based on the actual profit margin, if the seller is an individual.
Stamp Duty or Specific Business Tax/Local Development Tax:
Stamp Duty: 0.5% of the land office appraised or the actual transaction value of the property (whichever is higher).
Specific Business Tax/Local Development Tax: 3.3% of the land office appraised or the actual transaction value of the property (whichever is higher).
**In general, the Stamp Duty will apply if the land has not been transferred within the last five years, otherwise the Specific Business Tax/Local Development Tax will apply.
For further Foreign Ownership information please contact DUENSING KIPPEN, Phuket's leading law firm specializing in Thai Property Law.