|
Buying Property in Thailand
Many foreigners wish to buy land or property in Thailand but they don't know how to get started. To buy land or property, there are specific legal issues relating to foreigners purchasing land or property in Thailand. Hua Hin Property Shop can assist you in your purchase. Our experienced and friendly staff will take care of all your legal needs, letting you focus solely on buying land or property in Thailand and achieving your objectives.
According to the strict nature of Thailand land law, foreigners are, in general, prohibited from buying freehold land in Thailand. However, there are various exceptions in the law regarding this issue. There are also other methods available for acquiring ownership interest in buying land or property in Thailand.
There are two types of land tenure in Thailand: leasehold and freehold.
FREEHOLD OR LEASEHOLD
There are many questions asked as to which method is better and there are relevant arguments made for both cases. Since foreigners cannot own land outright, registered leaseholds with appropriate extensions are equivalent to freehold. Registered Leaseholds are safe, uncomplicated and easy to setup.
Leasehold title grants the lessee ownership rights to property, agriculture or other products on, under or from the land, but does not grant ownership of the land. Leasehold titles are granted for a maximum period of 30 years and an option may allow the lease to be renewed for an additional 30 years. The property can be used for only the purpose stated in the lease, and the lessee cannot sublease or alter the property without the lessor’s consent. The lessee cannot sell or transfer their interest without prior consent from the lessor.
In order to be enforceable, any lease for a period longer than three years must be registered at the Land Department, 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. Both parties can contractually agree to renewals, but this right cannot be registered at the Land Department.
This type of lease has become popular among foreigners to own or buy land.
A foreigner is allowed to own a building distinct from the land, which coupled together with a renewable registered 30 year lease is regarded by many as being good as owning the freehold.
For those of you who are not comfortable with Leaseholds, the Freehold method of ownership means that the Thai company that you control owns the property.
A Freehold title is the most popular type of land ownership. A Freehold title gives ownership rights to the land and the property on or under it. The title may be sold, given as a gift or inherited. Freehold land title can be sold at any time and the new ownership comes into effect when the transfer fee and stamp duty are paid to the Land Department
Unlike land leases, the ownership is permanent as long as the company stays in existence and does not sell or transfer the land. Forming a company may make more sense for people seeking to hold land for long-term or investment purposes, to provide for their future heirs, of for those contemplating doing business in Thailand. Also, with ownership, it is possible to mortgage the land and subdivide the land for resale.
SETTING UP A THAI PRIVATE COMPANY LIMITED
This manner 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 to 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.
Buying property with a limited liability company is one of the most popular methods for foreign investors. This is because the Articles of Association can be written to allow greater protection for foreign minority shareholders. Thailand law generally requires that Thai nationals own a majority interest in a company if they wish to purchase land legally.
A number of means can be used to ensure that the foreign minority shareholders have effective management and financial control of the company. These include but are not limited to creating different classes of shares along with different voting and directorial appointment rights.
Forming a Thai Limited Company
In order to set up a limited company in Thailand, the following procedures should be followed:
Corporate Name Reservation
________________________________________
The name to be reserved must not be the same or close to that of other companies. Certain names are not allowed and therefore the name reservation guidelines of the Commercial Registration Department in the Ministry of Commerce should be observed. The approved corporate name is valid for 30 days. No extension is allowed.
File a Memorandum of Association
________________________________________
A Memorandum of Association to be filed with the Commercial Registration Department must include the name of the company that has been successfully reserved, the province where the company will be located, its business objectives, the capital to be registered, and the names of the seven promoters. The capital information must include the number of shares and the par value. At the formation step, the authorized capital, although partly paid, must all be issued.
Although there are no minimum capital requirements, the amount of the capital should be respectable enough and adequate for the intended business operation.
Convene a Statutory Meeting
________________________________________
Once the share structure has been defined, a statutory meeting is called during which the articles of incorporation and bylaws are approved, the Board of Directors is elected and an auditor appointed. A minimum of 25 percent of the par value of each subscribed share must be paid.
Registration
________________________________________
Within three months of the date of the Statutory Meeting, the directors must submit the application to establish the company. You will need to pay in at least 25% of your registered capital, within 90 days of registering your company.
Tax Registration
________________________________________
Businesses liable for income tax must obtain a tax I.D. card and number for the company from the Revenue Department within 60 days of incorporation or the start of operations. Business operators earning more than 600,000 baht per annum must register for VAT within 30 days of the date they reach 600,000 baht in sales.
Bank Transfers
If you are purchasing property in Thailand and you want to pay in Thai Baht, ensure that your funds are transferred into Thailand in foreign currency and converted to Thai Baht here. The reason for this is that the receiving bank will issue the Foreign Exchange Transaction Form (Thor Tor 3 certificate) which 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 solely for the purpose of purchasing a condominium or a property in Thailand. Code 5.22.
The relevance of the Thor Tor 3 Certificate is that it is one of the documents you will need in the future if you wish to repatriate funds without incurring tax penalties.
Also, please be aware that Banks will only issue Thor Tor 3 Certificates for individual inward transfers exceeding 10,000 US$.
Tax Expenses
Tax Expenses Due on the Sale & Transfer of Immovable Property
The transfer of an immovable property, including the purchase of land, land with building or a condominium unit owned by a natural person, including an alien juristic person shall be subject to the following costs and taxes.
Transfer Fee
The transfer fee is usually collected at the rate of 2% of the appraised value of property by the Land Department. However this rate has been reduced to 0.01% until October 2003
Stamp Duty
Stamp duty shall be collected at the rate of 0.5% of the actual purchase price or the appraised value of the Land Department, whichever is the higher.
Withholding Tax
Withholding tax is a tax payable by the seller of an immovable property to the Land Department immediately at the occurrence of purchase. The collection of withholding tax can be divided into 2 cases as follows:
Withholding Personal Income Tax: The computation shall be based on the appraised value of the Land Department.
Withholding Corporate Income Tax: The computation shall be based on the appraised value or the actual purchase price, whichever is the higher. The rate used is currently 1%
Specific Business Tax
Specific business tax shall be collected from the sale of immovable property for trade or profit purposes at the rate of 3.3% of the appraised value or the actual purchase price, whichever is the higher. This rate has been reduced to 0.11% until October 2003.
Sale of immovable property subject to specific business tax:
The sale of land subdivision which is registered under the regulations regarding the land subdivision.
The sale of a condominium unit which is registered under the Condominium Act.
The sale of a building which is constructed for sale or indicated as constructed for sale, including the sale of land where the building e.g. shop houses, commercial building, house or townhouse, is situated whether or not the sales are made separately.
The sale of the immovable property that does not fall within the descriptions of I, II, or III but is a land plot in t he same manner as statutory land subdivision, the sale of a condominium or the sale of divided building, or the sale of the property without being divided, but clearly could be divided after sale.
The sale of immovable property, which is used for conducting business, in order to move to a new location, except for the sale of land used for agriculture but not including the building on such land, e.g. the sale of a field for growing rice, crop or plant.
The sale of the immovable property that does not fall within the descriptions of I—V but is made within 5 years from the date of acquisition of such immovable property.
Local Development Tax
The local development tax shall be collected from the possession of the landowner on land only in accordance with the Local Development Tax Act B.E. 2508 as follows:
The Land owner who possesses the land as at the 1st of January each year shall have the duty to pay the local development tax at the rate computed on the medium value of the land of the year concerned according to rate prescribed by the government agency pursuant to the law.
The medium value of the land is appraised on the last purchase price in good faith of lands in the same area of not less than 3 previous purchases within the period not exceeding 1 year before the date of appraisal, which shall then be averaged to obtain the medium value of the land without taking into account the value of the building and structure.
|
Print