Garden Island Real Estate Guide

The people are friendly, the food is delicious, the weather is wonderful and the international airport assures ready and frequent access to anywhere you choose.

We trust you will enjoy our "guide". A great deal of time and care has gone into it. "Garden Island" considers the "guide" to be both current and accurate at the time of writing, but must stress that it is only meant as a guide. Laws change, visa requirements are amended or updated and we are sure we have not remarked on every subject to meet every need.

We would welcome any comments you may have and or suggestions for other aspects of Phuket that we might comment upon.

We look forward to being of service to you!

"SAWASDEE"

Frequently asked questions.

Legal issues & costs involved in purchasing property in Phuket.

"Garden Island" strongly recommends that our clients retain the services of a qualified solicitor to peruse and advise on all matters of contractual agreement and engage a financial advisor to deal with tax issues.

Purchasing property in Phuket is straightforward. The initial inquiry should be to ascertain that the seller owns the property free of liens & encumbrances. Normally unless full payment is made immediately, a contract is entered into wherein the details of the purchase are defined. These would include a legal description of the property, purchase price, method of payment, schedule of payment, date of completion or possession etc. Upon signing (a resale contract), a deposit would be lodged (normally equal to 10% of purchase price). The final payment to be paid in one sum at a mutually agreeable time.

Purchasing "off-plan" is becoming increasingly popular in Phuket. Buying in this manner is extremely advantageous to the "Buyer" as the purchase price is much lower (in most cases) than the property would command upon completion.

Attendant costs to property purchase

As of January 2004 whenever a property is bought or sold anywhere in Thailand three taxes have to be paid. There are some exceptions and these are discussed below.

At the time of "posting" this notice we believe the information to be both current and correct. However we accept no liability for mistakes or misinformation and urge all prospective buyers to engage a solicitor when purchasing and conveyancing any type of property or business. Garden Island would be pleased to arrange the necessary introductions.

Whenever a property in Thailand is bought or sold three taxes have to be paid. Many buyers (especially foreigners) fail to take these into account when calculating what it costs to buy a property.  Please bear in mind that these fees and taxes apply to Thai nationals as well as foreign buyers.

It should be decided beforehand whether the buyer or seller will be responsible for paying transfer fees and taxes. Because of the peculiar local system of taxing property (an arbitrary assessed value is determined by the Land Department rather than true market value), these taxes could amount to considerable percentage of the purchase price.

 In most cases these fees are shared 50/50 between the buyer and the seller.       There is a property sales tax of 2 % of assessed value of the sale price, as well a transfer fee of 3.3% of the assessed value of the land. Also a stamp fee of 0.5% of the assessed value or the sale price, whichever is higher a seller may ask the buyer to accept an official receipt showing a lower purchase figure for the purchase to avoid paying excessive tax often, the official receipt shows the value of the property assessed by the Land Department. This receipt will be sent to the Land Department. In this case you should insist on a second receipt showing the full purchase price and make sure your lawyer keeps a copy on file of the property purchase documents for you.

However, there is no property sales tax if:

·        The seller has owned the property for at lease five years.

·        The seller has used the property as his primary residence for at least one year prior to the sale.

·        The seller received the property as an inheritance.

If you haven't determined during the negotiations that the seller will pay the taxes upon transfer, you could get a nasty shock when a tax bill arrives-often some 2 or 3 months after the sale is completed – since the seller often neglects to mention this liability (and after all, why should they tell you if you don't already know or ask? As in all business transaction anywhere, caveat emptor is the rule: (Let the buyer beware.)

Once you have acquired the property, you must pay property taxes on it. If you rent out the property, the tax is 12.5% per year of the annual rental revenue. (Which is why so many local owners want the lessee to pay tax for them as they don't want to lose 12.5% of their revenue?

There is also a tax on non-rental property. This depends on location and land classification, and varies from 0.25% to 0.95% a year.

In addition, if the house is purchased through a company, one has to bear in mind that corporate tax is higher than personal tax and the cost of setting up the company has to be considered as part of the initial investment outlay, even if this is a relatively modest additional cost – perhaps around $US 1,000 all told.

Then, when you want to sell the property, it is simply a matter of transferring the shares of the holding company to the buyer without the necessity of re-registering the land titles. There are of course fees involved in this exercise, but typically only a few thousand Baht all told. Again, get a professional business representative or lawyer to do it all for you.

If you sell a property 'naked' (i.e.: without a company 'wrapper'), you may be liable for all of the fees that were applicable at the time of purchase (see above). You would also have to pay income tax on the sale amount.

Deductions are calculated using a table from the Land Department, which is based on how long you have held the property. If you (or your wife/girlfriend) received the land from an inheritance, there is a standard deduction of 50%.

Otherwise, the deductions are as follows: 92% if you have held the property for one year, 84% for two years, 77% for three years, 71% for four years, 65% for six years, 60% for six years, 55% for seven years, and family reaching 50% for eight years or more.

For example, if you have held the land for four years, the deduction is 71%. Therefore, if you sold the property for 1.25 million Baht, you would be liable for tax 362,500 baht. This taxable income is then divided by the number of years you held the property (divide 362,000 by 4 to get 90,625).

The tax owed is then calculated from the standard personal income tax brackets (see the table at the end of this article). From the tax brackets, 90,625 Baht is liable to tax of 531.25 Baht. You then have to number of years you held the property take 531.25 and multiply by 4 to get the final tax figure of 2,125 Baht.

If may seem a bit silly to divide, and then multiply by the number of years you held the property. However, this means that in the end you pay less tax, because a lower base is used for the tax bracket calculation. If this division and multiplication did not occur, in the example above you would have had to pay 27,250 Baht in income tax at current rates.

There are two further requirements:

·       For sale of inherited, non-commercial of non-investment property, the final tax figure must be no more than 20% of the sale price

·        No matter how long you have held the property, the number of year you use in the division and multiplication process for the tax calculation cannot exceed 10.

There are also certain special cases where the income tax does not apply:

·        The property is inherited or is an unsolicited gift, and is in a rural area, and the sale price is no more than 200,000 baht.

·        The property is given to your children, or is appropriated by the government.

*Please note as with many other countries. Phuket apartments & condominiums (& free standing homes in some gated communities) are subject to a monthly maintenance fee. This is usually with a range of 20- 50 Baht per sq.mt of living space. This fee is usually charged annually in advance.

Example, 150 sq apartment (at 35,000 Baht per sq.mt) = 5,100 pcm (62,100 per year)

This expense usually covers the upkeep & maintenance of such things as swimming pool, security, common lighting, elevator maintenance, gardening of common areas, rubbish removal etc.

Rubbish removal (for a home exempt of maintenance fees).

This cost is fixed by the local "tambon" (government office) & is usually priced at 50 Baht p.c.m.

Insurance

Insurance costs are of course based on each individual policy requirement. In the case of insuring a home (of any description) the cost for a fully comprehensive cover including contents would average 2 % of the total value of the total value of the insured home & contents.

Garden Island specializes in this type of insurance cover & we would be pleased to facilitate this service upon request.

Garden maintenance

The upkeep of a private garden can be easily arranged. Employment may be arranged on a fully or part time basis or subject to a casual arrangement.

A gardener may be employed within a salary range of 4,000-8,000 p.c.m. If employed on a casual basis, the hourly rate would be approximately 300 Baht.

Cleaning service

A cleaner may be employed within the same guidelines as those that apply to the hiring of a gardener. 

Electricity

Billed monthly, this is based on usage. The more you use, the more you pay. But, suffice to say that electricity costs are lower than most western or first world countries.

Fixed line telephone

The bill is charged monthly. Installation cost is 3,500 Baht. ADSL may be arranged. This is vital in ensuring a reasonable speed if you use the line for internet access. Because mobiles are so popular in Thailand the two (2) fixed line supply companies, TOT & TT&T are completive in their marketing. This ensures cheap phone access. A five (5) minute local call would cost 15 Baht. A five minute call to the UK would cost 45 Baht.

Other issues

What if I want to buy land & build my own home?

A.    A foreigner (non-Thai national) may not own land in their own name. It is necessary if the foreign entity wishes to own & control the land to from a "legal Thai entity" (a company). This is a very straight forward matter & many expatriates & off-shore investors hold land in this manner.  A foreigner may however own a construction (house etc.) on land owned by their controlling Company or land that has been leased. Building your own home can easily be arranged and "Garden Island" will be pleased to provide information on the most reputable architects, builders, civil engineers & other relevant professionals that can assist you.

Surveys of resale properties?

A.         A survey as it is understood in the west is not a legal necessity in Thailand. However, Garden Island recommends that a professional is engaged to undertake a full structural survey where any doubt exists as to the condition of a property. Again, Garden Island can assist with introductions in this regard.

 Is Finance available?

A.     Currently, it is not possible for foreigners to arrange mortgages within Thailand.

When I sell my property, may I remit the proceeds to my own country?

A.   Yes, you may! It is vital however that when you transfer money via SWIFT or TT Bank to Bank, that you instruct the forwarding Bank to advise the receiving Bank that the funds are to be used for the purpose of purchasing property in Thailand. Keep all receipts as these would be necessary to show the Bank in question should you wish to remit funds from an eventual sale to your home country.

Who pays estate agency fees in the sale of a property or business?

A.    The "Seller" always pays the agency commission.

How will I deal with the payment of standard bills, e.g. electricity, water, telephone etc?

A.   There are a number of ways, an expatriate living here permanently may choose to deal with these matters personally or arrange standing orders with their Thai Bank to pay them on their behalf.  An expatriate or overseas investor that may be receiving income from a rental arrangement may choose the same method as above.

*In the instance where a Buyer purchases property through Garden Island, we offer a management service, whereby we undertake to deal with these issues & arrange any attendant services that might be required cleaning, gardening etc. This service is not offered as a "stand-alone" service. It is undertaken as an additional service to our clients. The fee starts at Baht 1,000 p.c.m, paid annually in advance. We recommend to all of our clients that are not in a position to monitor their investment personally, to avail themselves of this service.

How long can I stay in Thailand as a tourist?

A.   This depends to a great extent on the country of origin. Most Thai Consulates & Embassies in the west (including but not restricted to Australia UK & the USA) will issue an initial tourist visa for up to 3 months. Following on from this, one can extend a visa month by month. There are many types of "visa" that govern how long & under what conditions you may stay in Thailand. Your local Thai Consulate or Embassy should be able to advise you comprehensively on this matter. Or visit the Thai Government website on: www.thaigov.th/

* An important point to remember is that one does not require a specific visa to own property in Thailand. This can be done holding a tourist visa only.

Where can I send my children to school?

A. There are several international schools available in Phuket. Some offer a combination of boarding and day attendance. All of them offer a first world standard curriculum. 

  Are there medical & health insurance facilities & services?

A.   Phuket has three (3) international standard hospitals of the highest repute. Along with these are a number of other hospitals (usually frequented by Thai nationals). All are extremely well equipped & rival those of any country in the world in expertise, range of services & service delivery.

Along with these is an array of general practitioners & other health professionals.

Private medical insurance is easily arranged through such companies as BUPA, ING etc. "Garden Island" will be pleased to arrange all of your insurance needs in these matters.