There are a number of routes open to foreign investors wishing to acquire property in Thailand. Condominiums may be purchased outright provided there is not already a foreign ownership of more than 49%. Two further routes exist for overseas buyers wishing to acquire a property in this burgeoning property market.
The first is to set up a limited company in Thailand and buy property assets through that company. Thai law dictates that there must be a minimum of 7 shareholders and that foreign shareholders cannot own more than a 49% share in a company. A foreign investor must, therefore, appoint 6 other shareholders (it is probably easiest to nominate 6 local Thai shareholders) in a company where the investor is named as the sole executive director in the Articles of Association for the company. Each of the Thai shareholders must then sign updated share transfer contracts which effectively hand control of the company to the foreign investor and allows them to circumvent the obstacle of them not being the majority shareholder.
The alternative to this is the limited land lease option which grants the investor the right to lease land for a period 30 years. When this term expires there will be the offer of an automatic extension for a further 30 years and this cycle may be repeated for up to a maximum period of 990 years. It is possible, too, for the lessee to will their leasing rights to their prospective heirs.
Once an offer has been accepted for your selected property then you will be required to sign an initial purchase contract which will also require a 10% deposit in order to secure the property. This is legally binding on both parties so your deposit will be returned should the property fail to fulfil any of the conditions within the contract. At this stage your lawyer will check the history and validity of the title deeds. A small number of properties in Thailand may have title deeds but may not have been surveyed. In this case your lawyer would need to check ‘Nor Sor’ document which details transfer transactions but not actual ownership rights. Investing in such property is best avoided because of potential ownership disputes that may arise. Once everything is deemed satisfactory by your lawyer, the sale can be completed and the title deeds transferred into your name or the name of your company. Upon completion of the purchase you will have to pay; a stamp duty of 0.5%, a transfer fee of 0.01%, and business tax of 0.11%(where applicable this is levied against a property owner who has been in registered possession of the property for under 5 years).
If you are buying a condominium then you will be required to make a reservation deposit of $1,250 which will be deducted from the total price at a later stage. Once the agreement is signed, the buyer will usually pay a 10% deposit (this will be a proximately 10-15 days after signing). The remaining amount will then be due when the title is transferred (either as one payment or in instalments depending on the contract).
The two mains taxes that investors will encounter in Thailand are Annual Tax and Structures Usage Tax. Annual Tax (which is levied on land ownership) is often so small that the bodies charged with its collection rarely bother to do so or else they will do so after several years when the amount has accumulated. Structures Usage Tax applies solely to commercial properties and is charged at a rate of 12.5% on the actual or assessed gross rental value of the property (it is worth noting that this will be drastically lower than the commercial market rental value). If the property is purchased via a company, you should bear in mind that corporate tax is higher than personal tax and ensure you factor the cost of setting up the company into your initial investment. In Thailand, Income Tax is charged at between 1% and 3% although there is no Capital Gains Tax.
Thailand is a constitutional monarchy whereby the hereditary monarch is head of state and the prime minister is head of the government. Following a coup in 2006 when a military junta seized control of the country (eventually appointing their own prime minister) Thailand returned to a democratically elected government in late 2007 after a democratic general election took place on December 23rd.
Although the Thai baht could be subject to some volatility in 2008-09, as a democratically elected government returns to power, it will remain strong against the US dollar, appreciating alongside other regional currencies.
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