There are three ways in which a foreigner can control title to residential property in Thailand: outright purchase of a condominium unit, voting control in a Thai company which owns the property, or through a lease.
The method of ownership a foreigner chooses when purchasing property in Thailand will depend on the type of property, the title options on offer and the sophistication of the buyer and any relationships he/she may have locally.
Foreign ownership of condominiums
The law governing foreign ownership of condominium units is straight-forward; foreigners may own up to 49% of the total area of all condominium units in a condominium project.
In effect, this means that foreigners can fully-own property in condominium buildings with the same rights to title that Thai owners have.
With some exemptions relating to foreigners with resident status or working in Thailand, the Condominium Act 1992, as amended in 2008, stipulates that a foreign individual wishing to purchase a condominium unit must remit foreign currency into Thailand in an amount not less than the unit’s purchase price.
Proof of the remittance must be shown to the Land Department at the time the transfer of ownership of the condominium unit is registered.
When a condominium unit is sold the initial funds transferred in to Thailand to make the purchase, plus any declared profit, may be freely remitted out of the country.
Foreign ownership of land
Currently, foreigners may own up to one rai (1,600 square meters) of land for residential use, provided the foreigner brings in not less than 40 million Baht (1.3 million US Dollars) from abroad to invest in specified businesses in Thailand and obtains permission from the Ministry of the Interior. Foreign land ownership exemptions are also granted for businesses having Board of Investment promotion privileges.
It is possible for a company with non-Thai shareholders to own land, and landed property, provided that not more than 49% of the shares in the company are owned by foreigners and a numerical majority of the shareholders are Thai persons or companies.
It is illegal for a foreigner to establish a company using Thai nominees with the sole purpose of circumventing Thai law to purchase property. It is not illegal for a Thai company to have a Thai majority shareholding and foreign majority voting rights.
Alternatives to land ownership for foreigners
The Thai Civil & Commercial Code allows forms of possessory rights such as lease and, unlike the Land Code, the CCC does not distinguish between foreigners and Thai nationals. A lease allows land and buildings to be used for a maximum term of 30 years and remains in full force with respect to the property, even if there is a change in ownership of the land. Using a Protected Lease the parties can contractually agree to renewals of 30 + 30 years meaning a total lease period of 90 years. Properly structured, leases are fully transferable and can protect the rights of heirs and allow an option to purchase if a change in the law allows it, or if the buyer’s personal circumstances change – for example if he/she marries a Thai national.
Foreign ownership of property in Thailand: the reality
As far as condominium units are concerned, the reality is that only a small minority of condominium projects in Thailand have reached the maximum allowed 49% foreign ownership. The vast majority of condominium projects in Thailand are freehold but there are leasehold buildings in parts of central Bangkok which can be held under the Thai Civil & Commercial Code described above. If a particular condominium project has reached the maximum ‘foreign quota’ or is not leasehold, the foreign buyer has the option of having the developer provide a Protected Lease which is the preferred purchasing method in many villa developments in Thailand.
Legal assistance with property purchases
The majority of condominium purchasers in Thailand buy without legal assistance as the transaction is managed by the real estate agent and sealed by both parties being physically present at the Land Office when ownership transfer is made. Off-plan purchases involving pre-payments are protected by law governing escrow accounts. Many foreign property buyers are familiar with using legal services in their own countries and are understandably more comfortable contracting legal assistance when purchasing in Thailand. In the case of purchasing landed property legal assistance is highly recommended. Some large international law firms do not offer their services direct to individual buyers, or individuals controlling a company to purchase residential property, except in exceptional circumstances, for example if the buyer is already an important client or is making a highly valuable or bulk purchase of several units. The reason they give is that representing individual residential property buyers is not economically viable for them but they usually provide a list of smaller firms whom they can recommend and would be willing to act.
Property transfer taxes and fees
With the exception of the Transfer Fee which is usually shared between the buyer and the seller (0.001% each with effect from November 2015), payment of all taxes and fees involved in the sale of a property in Thailand are the responsibility of the seller. The Transfer Fee is calculated upon the valuation of the property as held by the Land Office and updated from time to time. The Land Office’s appraisal is nearly always less than the market valuation. If a property is held by a company, or for less than 5 years by an individual, a Specific Business Tax is levied at a rate of 3.3% of the declared selling price. If owned by an individual for more than 5 years a Stamp Duty rate of 0.5% is applied. Witholding Tax at the rate of 1% of the Land Office’s appraised value of the property is also applied.