Chiang Mai Real Estate Agency

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How can I own the property I want to buy in Thailand?

Although technically you are able to own a house or structure in your own name, Thai law currently prohibits you from owning the land the building is erected on. There are ways in which you can structure the purchase so that you are the de-facto owner of the land. The following ways can be used in order to fully comply with Thai law:

– Condominium

 Thai Limited Company

 Leasehold

 Superficies

 Usufruct


Additional property related legal information:

 Thai Property Taxes

 Thai Land Titles

 Thai Will


Buying and selling property in Thailand can be a complex matter, and you should ask a lawyer to complete advice.


Can I own a Condominium in Thailand?

Buying a condominium in Thailand is perhaps the simplest and easiest option available to foreigners. The only restrictions on purchasing a condominium in Thailand, 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 “Foreign Exchange Transaction Form”.

A Foreign Exchange Transaction Form:

This 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 Foreign Exchange Transaction Form from your bank when you are remitting funds to Thailand for the purpose of purchasing a condominium in Thailand , and the Foreign Exchange Transaction Form must specify that the remittance is solely for the purpose of purchasing a property in Thailand – Code 5.22.

Purchases of Condominiums in Thailand by foreign individuals come under the jurisdiction of the Condominium Act B.E. 2535 (1992).

The owner of each Condominium in Thailand is issued with a certificate of unit ownership. The certificate also has a statement saying exactly what percentage of rights over the common areas of the building each owner has.

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Thai Limited Liability Company

If a foreigner is going to operate a business in Thailand then he may purchase the freehold of the land through his Thai Limited Company. The land will be owned by the Thai Company, not by the individual. 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.

This results in the foreign ownership of the company being limited at 39% (only if buying land), but with the recommended changes of the Articles of Association, the foreigner can be the only director of the company, and the only person of the company who can commit or bind the company in any contractual dealings (buy or sell land and house), effectively giving the minority shareholders control over the company.

Note: The Thai authorities have been clamping down on the use of local companies and nominee shareholders to buy and own land. More stringent measures have also been put in place by the Land Office to ensure the Thai shareholders in a company are indeed genuine.

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30-Year Lease

The preferred method of acquiring land for building a home is by leasehold. The foreigner safely acquires the right to use the land and registers the right with a 30-year lease at the Land Department. A lease contract is carefully drafted to guarantee the initial 30-year lease with two renewal periods of 30 years each. In Thailand , the maximum time period for a lease registration of residential property is 30 years, hence, the need for two renewal periods in a contract to provide for a 90-year lease.

The lease contract is drafted in the Thai language (some contracts contain English language with the Thai) and is registered at the Land Department. The lease contract is attached to the title deed and maintained at the Land Department. The foreigner can construct a house on the land. The construction permit is applied for in the name of the foreigner. The foreigner will own the structure in his/her own name. The advantage of leasehold is a lower registration fee (1.1 percent on the amount of the land lease). It is recommended to include family members such as young adults as co-lessees in the contract. In the uneventful demise of the parents, the children can carry on the full term of the lease period.

 

Buildings can be owned

The buildings on the leased land can be owned freehold by the foreign buyer. The foreigner can apply for the construction permit in his/her name or show proof of a sales agreement. Transfer of a building requires a posting for 30 days by public notice to see if anyone contests this ownership. The lease contract can be written stating the house is separate from the building and it cannot be seized at the expiration of the lease contract.

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Superficies

Superficies may be granted to a person under Section 1410 of the CCC. It is essentially a right which can be granted to an individual, irrespective of nationality, to own on the land the buildings, structures or plantations. This right may be granted for a period of time (a maximum of 30 years) or for life of either the owner of the land or the person granted the right. The process of registering Superficies is similar to any other proprietary transfers in
Thailand . All involved parties will need to attend the Land Office to register the right along with the relevant documents including, among others, the land title deed, house registration book, ID cards and passports. There is also a transfer tax of 1.5% involved.

A positive characteristic of a Superficies is that it is binding on your heirs. It is fully transferable to your loved ones unless drafted otherwise in the agreement. Like all proprietary rights, it can also be transferred to other parties but will need the consent of the land owner and requires a re-registration of the right at the Land Office with the new party. One of the most salient features of a Superficies is that it is a fully registered right giving you an inalienable right on the property for the duration of the Superficies. The key benefit of a Superficies is that there are no limitations on foreign nationals holding such rights.

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Usufruct

In Thai language it is called Sidhi-kep-kin and it provides temporary ownership rights. This right is for the use and enjoyment of the profits and advantages of something belonging to another as long as the property is not damaged or altered in any way. The person who enters into a contractual agreement with the owner for this right is called the usufructuary. A usufruct may be created either for a period of time (not exceeding 30 years) or for the life of the usufructuary. The usufructuary is responsible for the expenses for the management of the property, paying taxes and duties, and be responsible for interests payable on debts charged to it. If required by the owner, the usufructuary is bound to insure the property against loss for the benefit of the owner. He must pay the insurance premiums for the duration of his usufruct. You are registered on the title deed. The land can never be sold or transferred by the owner of the land until the servitude is terminated. A usufruct interest expires upon the death of the holder of the usufruct and therefore cannot be inherited.

An interesting feature of usufruct is that the usufructuary can enter into a 30-year lease with a third party. So if the usufructuary signed a 30-year lease contract before his death, the lessee (tenant) will maintain the rights of the lease until its expiration. Supreme Court ruling 2297/1998 states that the lessor (landlord) does not have to be the owner of the property. Therefore the usufructuary can rent out the land. Although in the event of death of the usufructuary with the lease term, only the usufruct will be terminated but not also the lease.

Moreover, the usufructuary could transfer the right of using the land to his child. However, it remains to be seen if the Land Department officials would allow a transfer of the rights to the land. There is no annual tax levied on the property compared with 12.5 percent of the assessed or market rate rental value in the case of a registered lease.

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Taxes for Buying and Selling Property in Thailand

Every person residing in Thailand, regardless his/her nationality shall be responsible to pay taxes and fees when buying or selling property. These taxes and fees are as follows:

Transferring Fee

The Transferring fee is 2% of the registered value of the property. Whether, the buyer or the seller is paying for this fee, is depending on the Sale and Purchase Agreement. Normally the buyer partly pays for this fee. This fee will be paid to the officer at the land office, upon the day of the transfer of ownership.

Stamp Duty

Buyer or seller is subject to a 0.5% Duty Stamp from either the appraised value of the property or actual purchasing price, whichever is higher. The parties reliable for this additional 0.5% of Stamp Duty can be agreed in Sale and Purchase Agreement. Stamp Duty is to be imposed unless the Specific Business Tax (SBT) is paid.

Specific Business Tax (SBT)

SBT will only be imposed if you are selling your property, which you have own less than a period of five years. The tax rate is 3.3% of the selling or assessed price of an asset (whichever is higher).

Witholding Tax

Individuals selling their property:

The withholding is determined under to Revenue code of Thailand. The seller shall withhold such tax and pay to the Revenue Department, when he/she earn an income from the sale of immovable property (including condominium unit). Withholding tax rate are calculated based from government assessed price with a deduction of possession year, which are varied depending on the year of your possession (the more years of  ossession, the more the deduction) and calculate that amount based on the income form the progressive tax rate (range from 0  37%).

 

Company selling their property:

The withholding tax of 1% from appraised value of property or actual selling price, whichever is higher, must be paid by the Seller. However, there are no property taxes as such in Thailand that are exactly equivalent to the property taxes in the West.

Commercial properties incur a small tax which is collected infrequent. In term of registering a lease agreement, a registration of a lease for duration of more than 3 year required to pay a registration fee rate of 1% plus a 0.1% rate of stamp duty. Rates are calculated from the total amount of the rental fee or the key money or both.

Business Tax

3.3% of the appraised value of the property if selling within 5 years. This applies to both individuals and companies.

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Land 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. At Satihoga-Tropical Homes 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.

History of land owning law in Thailand

In the beginning, i.e. the Sukhothai era, most of the land in Thailand was in the possession of the people, who reserved the right to individually use said land and to transfer it to their heirs. Later, in Ayuthaya and Ratanakosin era, the land was owned by the Kings. The people had to request a royal grant in order to obtain land. At present, the possession of land has to be in accordance with the principle land administration laws. There is the supervising Land Department and some land is still controlled by other governmental authorities, such as the Forestry Department, which is responsible for the management of land in forest zones, Sor. Por. Gor. is responsible for land in reformed land zones, District Offices and Municipalities (Or. Bor. Tor) look after public land zones.

All land under the control of these government departments have no effect as to the rights of people who owned land before the government appointed the land as a forest, public or reformed zone. The law has o retrospective effect on the individual’s rights to land under the law before it became a forest zone. That individual person still maintains its right to the land.

There are two types of rights to private land

The first is the right of possession (Possessoary right), i.e. people who possess and use the benefit of land will have the right to possess such land under the Civil and Commercial Code.

The second is ownership by a person who has a title deed and documents concerning the land.

Sor. Kor 1

is a notification form of possessed land. There is a certificate to show the right to the land. This maintains existing rights. Notification of Sor. Kor 1; on December 1954, the government advised all land proprietors to notify such possession to the government as per form Sor. Kor 1. After it was proven that such a proprietor had possessed the land legally and used the benefit of the land, then the government would issue Nor. Sor. 3 or Nor. Sor. 3 Gor as evidence. Nor. Sor. 3 and Nor. Sor. 3 Gor are legal certificates provided that any name shown on the title is a person who has the right to the land (according to the principle law). This right will be recognized by the law and can be used as evidence in any dispute with an ordinary person or the government.

Por. Bor. Tor 6

is evidence by the issuance of a tax number for the purpose of paying tax for using the benefit of the land. Such land has not yet been assessed as to the person’s right to possess such land. In the event that there is not title for the land, then it may be land in a conserved forest, public land or land which existed under Sor. Kor 1, Nor. Sor 3, Nor. Sor. 3 Gor or a title deed. Any of these titles must have a Por. Bor. Tor 6 as tax must be paid, the same as any land without a title. Purchase of such land is possible by handing over the possession of the land to the buyer along with the tax nuber. The right to the land under Por. Bor. Tor 6 can not be used as evidence in any dispute with authorities.

Sor. Por. Gor 4-01

is an allotment of land from the land reformative committee, and under no circumstances may this land be bought or sold. It may be transferred to heirs only.

Nor. Sor. 3

is an instrument certifying the use of land issued by the government to the proprietor of land not a possessoary title, i.e. it is confirmed by law that a person holding Nor. Sor. 3 has the legal right to possess the land. This land title can be used as a legal document or to use the benefit of the land as an owner. Nor. Sor. 3 is a floating map with no parcel points. It is issued for a specific plot of land and it is not connected to other land plots. This causes problems in verifying the land area. Any legal acts must be publicized for 30 days.

Nor. Sor. 3 Gor

is a legal land title with the same legal basis as Nor. Sor. 3. The difference being that Nor. Sor. 3 Gor has parcel points on the map, and is set by using an aerial survey to set the points and the land area. It is possible to verify a nearby land area. It always uses the same scale of 1:5000. There is no need to publicize any legal acts, and it is possible to partition (divide) the land into smaller plots.

Land Title Deed (Chanot)

is a certificate for ownership of land. A person having their name shown on the deed has the legal right to the land, and can use it as evidence to confirm the right to government authorities. The title deed has been issued
by using GPS to set the area and boundaries of the land, which is a very accurate method. 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.

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Thai Will

 

What Happens Upon Your Demise? This is certainly not something we would like to think about but it is important to have good estate planning to ensure your loved ones are taken care of should you finally pass away. If there is no Thai will, the intestate’s assets must be distributed in accordance with the classes of relations as stipulated in the CCC Article 1629 which are, in order of priority:

(1) descendants;

(2) parents;

(3) brothers and sisters of full blood;

(4) brothers and sisters of half blood;

(5) grandfathers and grandmothers;

(6) uncles and aunts. Before any distribution of the estate to the relatives, half of the estate, known as Sin Somros , will belong to the spouse, if any.

The rest will be equally distributed accordingly. If there are no living relations and no Thai will, the estate will devolve on to the State. As such, we do strongly recommend making a Thai Will to cover all of your properties and assets in Thailand. For those who own land under a company on a freehold basis, upon your demise your property would not simply be passed on to your heirs. Instead, it would be passed on in the form of shares. In the other words, your heir will receive shares of the company as opposed to the actual property itself which can involve complex legal mechanisms. It is therefore imperative that you arrange for the drafting of a Thai will.

For those who acquired a property under a leasehold structure, it is worth mentioning that a lease is a personal right which is not attached to the property per se and essentially terminates when the lessee dies. Therefore,
if you make a renewable long term lease and have already paid the rental in advance, you should also ensure that there is a succession clause in the lease contract so as to allow you to transfer your right of the lease to your
heir. Nevertheless, you should still have a Thai Will which states your clear intention to pass on such rights to your loved ones.

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