Thailand Law on buying property

Legal Information and Ownership Structure

Bobs Developments Co  Ltd, we offer both freehold and renewable leasehold ownership structures to our clients. Our experienced legal consultant can explain and guide our clients throughout the process in order to make their investments secure and legal.

Frequently Asked Questions

Detailed below are the most commonly asked questions we have received to date. If you cannot find an answer to your particular question, please feel free to ask our consultant:

• Condominium ownership in Thailand
• House and Land ownership in Thailand?
• Tor Tor Sam title
• Property Titles
• Property Taxes in Thailand
• Taxes and Costs applicable to purchase property in Thailand

Condominium ownership in Thailand

Buying a condominium is perhaps the simplest and easiest option available to foreigners. The only restrictions on purchasing a condominium, are that the percentage of units sold to foreigners cannot exceed forty nine percent (49%) of the total number of units in the condominium block; and that the funds used to buy the condominium have been remitted from abroad and correctly recorded as such by a Thai Bank on a Tor Tor Sam.(See below) Purchases of condominiums by foreign individuals come under the jurisdiction of the Condominium Act B.E. 2535 (1992). The owner of each condominium is issued with a certificate of unit ownership (See below). The certificate also has a statement saying exactly what percentage of rights over the common areas of the building each owner has.

House and Land ownership in Thailand

Ownership of land is governed by the Land Code BE 2497 (1954), the Civil and Commercial Code, Land Reform for Agriculture Act BE 2518 (1975) and the regulations set forth by the Ministry of the Interior. Although Thai law prohibits foreigners from owning land in Thailand, there are various ways in which you can structure your affairs so that you can own land, and still comply with existing Thai laws:

• Nominee with Lease and Option to Buy

  You can use a Thai Nominee to purchase the house/land and have a 30 year lease with a 30 by 30 year option from the nominee. In order to be enforceable, any lease for a period of longer than three years must be registered, which involves payment of a registration fee and stamp duty based on a percentage of the rental fee for the whole lease term. The original registered lease remains in force and effect even if the property is sold. The drawbacks to a lease include the fact that the parties can contractually agree to renewals, but this right cannot be registered and is not effective against a purchaser of the property, and that the lessee cannot (without the lessor's consent) sublease, sell or transfer his or her interest.

  Bobs Developments Co Ltd offers you a land lease contract for the period of 30+30+30 years. This lease will be registered at the land office; so your investment will be 100% protected by the government. For your higher confidence, we also offer the payment structure in which the payment of the lease value will be simultaneously with the payment schedule as stated in the Construction Contract, with the only remark that the last 20% of the land price will become payable when the Chanote title has been separated and confirmed by the Land office. In case the land you like to purchase is a part of a bigger Chanote plot, it can take up to 24 months before the title of the land can be separated. Our consultant can inform you about the title separation timing. The lease contract will also includes a specified statement which basically says that as soon as the Thai law permits, the lease-contract will be replaced by the ownership-contract.

• Limited Liability Company

  This form of purchasing property is the most popular with foreign investors as the Articles of Association can be varied to allow greater protection for foreign minority shareholders where majority Thai ownership is required under the Alien Business Law. Thai law requires that 51% of the shares be held by Thai juristic persons, however, any company with more than 40% foreign interest that purchases land will be investigated by the Central Land Office in Bangkok (under Section 74 of the Land Code) to ensure that the company has not been organized in an attempt to circumvent the prohibition against foreign ownership of land. Nowadays you can see that the Koh Samui land office still allows the transfer of a piece of land smaller than 1 Rai (1,600 sqm) to a company that have only foreign directors, while they prohibit the same kind of transfer for land bigger than 1 Rai. A foreign owned company purchasing land smaller than a Rai usually indicates that it is being bought for residential purposes, something which the government only supports. That means the government agrees with this kind of small acquisition by foreigners.
  This results in the foreign ownership of the company being limited at 49%, but with the recommended changes to the Articles of Association, the foreigner can be the only director of the company, and the only officer of the company who can commit or bind the company in any contractual dealings - effectively giving the minority shareholder control over the company.

Tor Tor Sam(3) title

A Tor Tor Sam (3) is an official bank document issued by the receiving bank upon the receipt of foreign currency into your bank account in Thailand. You must request a Tor Tor Sam from your bank when you are remitting funds to Thailand for the purpose of purchasing a condominium or land, and the Tor Tor Sam must specify that the remittance is solely for the purpose of purchasing a property - Code 5.22.

Property Titles

There are many different types of land titles in Thailand, the majority of which do not allow the legal right to build a house on that land. We only recommend one title:

• CHANOT (Land Title Deed)
  Is a certificate for ownership of land. A person having their name shown on the deed has the right to the land and can use it as evidence to confirm the right to Government authorities. This land has been accurately measured using GPS to set the area and boundaries of the land. The boundaries of the land are indicated by numbered posts. Any legal acts may be done immediately, as per the right of ownership. Land partition of more than 9 plots must be carried out according to the Land Allotment Law, Section 286. The land office holds information on all land or real estate within the province. This is the place to conduct any due diligence prior buying.
  
  Purchase transaction should be recorded in a written from, have documentary evidence showing some form of a deed signifying title, and should be registered and paid. It should be noted that contracts of sale and negotiations between the buyer and seller do not take precedence - as the only transactions conducted at the land office are to record what is being exchanged and what fees are payable. Apartment and condominium leases for more then 3 years should also be registered at the Provincial land office.
  
  Documents, which provide evidence of ownership include

• Condominium - Title Deed: (Nangsue Kammasit Hong-Chut)
  This is the documentary evidence of condominium ownership. It has similar importance to the Land Title Deed (Chanote). Administrative procedures relating to the registration and issuance of a Land Title Deed also apply to the registration and issuance of a Condominium Unit Title Deed.

Property Taxes in Thailand

There are no property taxes as such in Thailand that are exactly equivalent to the property taxes in the west, however, the most comparable taxes on properties in Thailand are the Land Tax and the Structures Usage Tax. The Land Tax levied on land is so miniscule, that in practice the body charged to collect it, rarely bothers to do so, and if they do, they usually wait several years until the amount accumulates. The second tax, the Structures Usage Tax, relates to buildings, is collected by the municipal office or district office, and is only applied to properties used for commercial purpose.

Taxes and Costs applicable to purchase a property

On all purchase/sale of property in Thailand there is a stamp Duty of 0.5%, a transfer fee of 0.01%, a business tax of 0.11% levied against an owner who has been in registered possession of the property less than 5 years, and Income Tax. There is no Capital Gains Tax in Thailand, unlike many countries, and Income Tax (usually between 1.0 - 3.0%) on property is the comparable replacement. There are no set rules on who pays the income tax, and it is just another part of the bargaining process, as with all the other costs of the transfer of ownership.

Service and Maintenance

You as the owner of a land plot in the project have an obligation to pay an annual Maintenance and Service Fee, starting from the delivery of the completed House as specified in a separate Service Contract. The Maintenance and Service Fee of each land plot will be based on its plot size. The Maintenance and Service Fees include, but are not limited to, the costs of operating, maintaining, repairing, renovating and managing the common facilities, utility systems, supplies and equipment, communal areas and all gardens within the project, security guard service, cleaning service, water waste management and garbage disposal.

Villa Rental Management

Should you wish to have your villa rented out, there is a huge demand for quality villa accommodation in Koh Samui. Our Professional on-site management team will manage the whole renting process as well as the full range of hotel-liked services for the guests.

The estate rental will be regularly marketed through our high circulation channels to ensure high occupancy rates. Reasonably estimated, the net rental return should be in excess of 8% per annum. This estimate is based on a rather conservative occupancy rate of 50% as well as realistic rental rates of various estates on the island.

Disclaimer

Although above information is generated directly from the Law and carefully monitored and changed when necessary, verification is mandatory before committing to any contract with Bobs Developments Co Ltd. can therefore not kept responsible for any miss interpretation