Foreign Ownership in Phuket Thailand
Introduction:
Foreigners from all around the world buy real estate, both residential & commercial in Thailand. These essays attempts to explain the current laws & legal options available to foreign (non-Thai) purchasers.
Please note that whilst every care has been taken in the research of the content herein, Garden Island Co., Ltd. accepts no responsibility for any errors or misinformation that may occur.
Should you find any "passages" to be ambiguous or need further clarification on any matter, please do not hesitate in contacting us.
A selection of essays prepared by BDO Richfield Advisory Ltd Tax & Legal Specialists prepared 2008 - 09..............click here for access
Ownership methods:
I. Investment / BOI:
Since 2002, a foreigner is permitted by the Ministry of Interior to purchase land up to one rai (1600 square meters) for residential purpose, on condition that he invests 40 million Baht in Thailand, for some purpose other than ownership of real estate itself. Actually, this option is problematical for the majority of foreign investors because of the legal restrictions involved and is relatively seldom used.
II. Leasing:
Leasing is a popular and straightforward option to acquire a property in Thailand. The maximum duration of a lease permitted under Thai law for non-commercial usage is 30 years, (for commercial usage 50 years), renewable for two additional terms of 30 years (commercial usage 50 years), if contractually agreed.
IMPORTANT! Any land leased for more than 3 years must be registered at the Land Department or it is only enforceable for the first three years.
It is possible under Thai law to lease land as an individual rather than through a Thai company.
III. Corporate Ownership:
A further option is to establish a Thailand-registered company, preferably a Thai limited company, to acquire land. It needs a minimum of 2 different shareholders at all times, but only one director who can be a foreigner. At the beginning this director may have to be Thai in order to apply for the Tax ID and VAT registration of the Company. Thai law (land Code) requires that at lease 51% of the shares are held by Thai nationals and a maximum 49% of the shares may be owned by foreign shareholder because the land Code prohibition on foreign land ownership includes not only foreign individuals, but also Thai registered companies in which foreigners own more that 49% of the shares. Because there's no restriction under Thai law that one share must equal one vote, it is allowed to issue classified shares: The A-Shares ("Ordinary Shares") where the holder one share is entitled to one vote and the B-Shares ("preferred Share") where a shareholder must have multiple shares in order to obtain one vote. The foreign shareholders will subscribe to all A-Shares, whereby the B-shares are held by Thai holders. This structure enables the foreign minority shareholder to hold fewer numbers of shares, but in fact control the company by voting rights.
Since the foreign shareholder of the Thai Company can be a natural or a juristic person, it is possible to use an off-shore entity, e.g.a BVI (British Virgin Island) Company, for tax efficiency.
IV. Managed Estates:
Currently, managed estates are very common. They all vary in structure. Normally the managed property is offered as a freehold purchase through Thai companies or with a leasehold structure concerning the buildings in combination with subscribing to a certain number of shares in a Thai company, which owns the land underneath the properties that are leased. This structure is advisable because the lessees of the buildings are more secure when they are also indirectly the "joint-landlords". With a land owning company which effectly protection that a lease is protected from being terminated by requiring typically at lease 75% of the owners to terminate a lease.
The potential problem with an "owner operated" managed estate is the necessity for the majority of the owners to confer & meet with each other. This may not be deemed as a practical or indeed attractive commitment.
V. Condominium:
Acquiring a condominium is gaining in popularity amongst foreigners. A condominium is a building that can have its separate portions sold to individuals or groups for personal property ownership.
Foreign purchasers are allowed under Thai law to purchase and own condominiums in Thailand.
There are five classes of criteria which alternative qualify foreigners as owners of condominium:
a) Holding a residency permit under Thai Immigration law, or
b) Permitted to stay in Thailand under the Investment Promotion law (BIO), or
c) A Thai registered entity with at least 51% of share held by Thai shareholder, or
d) Foreign juristic entity in receipt of a promotion certificate under the Investment Promotion law (BOI), or
e) A foreigner or foreign entity remitting a foreign currency into Thailand, or withdrawing money from Thai Baht account of the persons residing abroad, or withdrawing from foreign currency account.
Fortunately the last criteria applies to most foreign condominium purchasers and therefore it is the most typical way for foreigners to buy a condominium in Thailand.
According to the condominium act, foreigners or a foreign legal entity normally can acquire up to, but not exceeding 49% of a condominium block (direct freehold).
If a foreigner wants to register the purchase at the Land Office he has to submit a letter of guarantee from the condominium juristic person which proofs the proportion of foreign ownership among other documents. If the quota of 49% is already used, he can set a Thai company to purchase a condominium without restrictions. Another option is leasing. Condo-minium leases, like land leased are generally prepaid for 30 years with option s of renewing for two additional 30 year periods. In effect, the pre-paid rent is the same as a freehold or purchase price.
A further restriction according to the Condominium Act is that a foreigner must bring currency into Thailand to finance the purchase of the condominium. However, expats which are working in Thailand can use funds earned in Thailand on condition that their funds are paid into a non-resident account.
Further, the purchaser must obtain a Foreign Exchange Transaction form(FET) from the bank as proof of the remittance. This form will be issued by the receiving bank and is filed at the Land Department when the foreign purchaser registers the purchase. The amount of money fixed in the FET form must cover the whole of the condominium price. Should the remittance be less than $20000 USD, the bank will issue a "credit advice" in English which is not acceptable by the Land Office as proof of remittance for the condominium purchase. In case of this, the purchaser has to ask the bank to issue a "letter of guarantee" as evidence of remittance.
An Important addendum:
On May 25th 2006, the Thai Government issued an official statement concerning their determination to implement an aspect land transfer law (section 74 of the Land Act.) This was intended to crack down on property companies attempting to circumvent specific requirements of the act. This edict has caused some confusion unnecessarily. The following is a statement issued by the Chief of the Phuket Provincial Land Office (PPLO) "Supot Suwannachote" where he reassures business people that the Thai Government will do nothing to stem or cause a slowdown in Phuket's vibrant property sector:
Garden Island Real Estate & Property Services hopes that this essay has been of some assitance. We look forward to being of service to you in the future & welcome your enquiries.
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