An essay on the legalities of property ownership & work visa requirements in Thailand.
Courtesy of, DFDL Crawshaws.
OWNERSHIP
An introduction
Ownership of land in Thailand is governed by the Civil and Commercial Code, Land Reform for Agriculture Act BE 2518 (1975), Land Code BE 2497 (1954) and regulations issued by the Ministry of the Interior.
Foreigners and Land Ownership in Thailand
Is a foreigner allowed to own land in Thailand?
The answer is generally no, with limited exceptions which are not open to the vast majority of foreign buyers. However, although Thai law prohibits foreigners from owning land Thailand, structures have developed to enable foreigners to effectively own land interests, and still comply with the existing Thai laws.
Freehold Property-Company Formation and Acquisition
The purchase of freehold land in Thailand can be achieved through a Thai-registered limited company. In order to do this the company objectives and Articles of Association must allow the company to own land and deal in property transactions Under Thai law foreigners can hold a maximum of 49% of the shares in the company, while the remainder must be Thai owned. It’s important that the company is structured correctly must be filed and any applicable taxes paid on time. Accounts are filed once in the year of incorporation and twice annually thereafter.
Leasehold Property
Foreigners are permitted to lease land and/or structures in Thailand for a maximum of 30 years and, subject to a renewal clause being included in the Lease, for additional 30-years periods. Despite this, it should be noted that Thai law only provides for one such renewal. Even though a renewal clause may be inserted in the lease, it cannot be guaranteed against a purchaser/successor of the freeholds interest.
A lease of commercial or industrial premises can be for a term of up to 50 years with, again, an option to renew for further 50-year periods.
Foreigners can lease land and/or structures on a short or long term basis.
Any leases in excess of three years must be registered with the relevant Land Department in order for it to be enforceable.
Leases often include a clause that the Lessee may buy the freehold title to the leased land at any time during the term of the lease should the law change to allow foreigners to do so.
Ownership of Condominiums
A condominium is the term used to describe a construction of multi-units that can be sold with individual ownership rights. A condo can be defined as a building that can have its separate portions sold to individuals or group for personal property ownership. Condominium units have a form of freehold title deed which foreigners can legally own, and the ownership is dealt with at the Land Department.
There are two main restrictions placed on foreigners purchasing condominiums:
1. In general, non-Thai nationals may purchase condominiums units in condominium buildings throughout Thailand, as long as their purchase would not cause the foreign ownership ratio of combined units in the building to exceed 49% of the total floor area.
2. The funds used to purchase the condominium have to be sent from abroad and correctly recorded as such by a Thai Bank on a Tor Tor Sam (an official bank upon the receipt of foreign currency into a Thai bank account)
Purchases of condominiums may also be leased by foreigners as previously discussed above.
Ownership of Structures
Foreigners may own structures outright in their own name. They must have the right to own structures (known as superficies) over the land that the structure is on.
In order to provide satisfactory evidence that they built the structure , the owner of the structure should be in possession of all of the following:
a) The Building Contract/Permit.
b) Records relating to payments to the builder.
c) The owner’s name on the building Contact/Permit.
Any subsequent transfer of the structure requires a 30-day public notice period before the land Department will register the transfer of ownership.
Mortgages
It’s possible for a mortgage to be registered over a land or structures. A mortgage by a foreigner finance company can be registered on the title deed.
Acceptable Classes of land Title for Foreigners
Although many classes of land title are available in Thailand, foreigners are advised to limit their search to just two classes, namely Chanote and Nor Sor Sam.
In the case of Nor Sor Sam, the superior title of Nor Sor Sam Gor is preferable, since the borders have been more accurately measured.
The Chanote and Nor Sor Sam Gor are the only land title where registered rights of ownership or lease can exist. Therefore any land title lower than these are not recommended for foreign investment.
1. Chonote (Nor Sor 4 Gor)
This is the only document which can be accurately described as a land title deed, because this alone confirms ownership of the land and is registered with the land Department. The land is accurately surveyed and plotted in relation to a national survey grid; meaning the ownership, bond such as mortgages or servitudes are recorded. Any encumbrances burdening on the property,such as mortgages or servitudes are also registered.
It’s possible to sub-divide the land and this class of title is regarded as the best available in Thailand.
2. Nor Sor Sam Gor
The Certificate of Land Utilization, more commonly referred to as a ‘Nor Sor Sam Gor’, signifies the land occupier’s right to utilize the land. That land is generally surveyed and each plot is cross-referenced to a master survey of the area and a corresponding aerial photograph. The boundaries are accurately marked and this is generally regarded as the second best title. Again, under this title the land may be sub-divided and this can also be upgraded to Chanote at the Land Department.
Transfer of Ownership (Registration at the Land Department)
All registered dealings in land and structures are recorded at a land Department. Transfers of ownership, leases, mortgages, lien, servitudes(easement), sub-division, upgrade, etc. are all applied for and registered. The Land Department does not have in place any procedure for carrying out Due Diligence when transferring land; this is normally carried out by qualified legal professionals.
Cost
1. Mortgages
The fee and stamp duty payable for the registration of a mortgage is 0.06% of the declared mortgage amount, with a maximum fee of Bt200, 000, if the property is:
a) Part of a licensed development, condominium, house or commercial building, or;
b) Part if a licensed development, condominium, house or commercial building, or;
c) With land, if there is a registered structure upon it and the land area is less than one rai,
If not within the above, then the fee will be 1.05% of the declared mortgage amount, with the maximum total fee again set at Bt200, 000, for land in excess of one rai that is not situated on a licensed development.
2. Leasehold
Leaseholds for terms longer than three years must be registered at the land office. The registration fee payable upon registration of a lease at the Land Office is currently 1.1% if the total lease value.
3. Land and Property Taxation
Building and Land Tax is imposed against the owner of a house building, structure and/or land, subject to the first residential property exemption rule.
A local development tax is levied against any person owning or in possession of land, the applicable rates owning or in possession of land, the applicable rates vary and are valued by local authorities. There is an allowance for land used for personal dwellings and this also varies upon the location of the land.
The tax rate is 12.5% of the assessed annual rental value of the property for both residential and commercial premises.
4. Transfer Costs – Sale & Purchase (correct up to March 2009)
There are three government fees to pay at the land office:
A. Transfer Fee – Land only
2% of the Land Office appraised value.
Or
Land & House
0.01% of the Land Office appraised value
B. Income Tax
When the seller is a company, the fee is 1% of the Land Office appraised value of the property of the actual transaction value (whichever is the higher).Where the seller is a person, the fee is calculated on the Land Office appraised price based on a sliding scale of personal income tax; such tax is deducted fro the income tax bill for that year
Either
C. Stamp duty
(Applicable when the seller is a person – not a Thai Co., Ltd.) This is 0.5 % of the Land Office appraised value of the property, or the actual transaction value (whichever is the higher). This applies only if the land has not been transferred within the previous five years.
Or
Cost(continued)
D.Special Business Tax (SBT)
Currently reduce to 0.11% of the Land Office appraised value, or actual transaction value (whichever is the higher).
(Reduced rate applicable between March 2008 and March 2009.)
5. Purchasing a condominium unit or a property from a Licensed Development
There are three government fees to pay at the Land office:
A. Transfer Fee
0.01% of Land Office appraised value (reduced rate applicable between March 2008 and March 2010)
Work Permit / Visa
It is illegal for a foreigner to engage in any kind of work, whether paid or unpaid, without a valid work permit. Any violation is treated very seriously by the authorities and penalties are severe.
In order to apply for a work permit a foreigner must first obtain the the appropriate Non-Immigrant visa from a Thai Consulate outside of Thailand. The requirements and supporting documentation for obtaining a Non-Immigrant visa are subject to frequent change therefore it is important to obtain up-to-date information before application,
A work permit is issued for a specific occupation, for a specific company in a specific location. It is illegal to work outside these parameters without first applying to change the work permit to the new job, employer and/or location.
There are several considerations
There are restricted occupations and professions which are prohibited to foreigners under Royal Decree B.E 2522(1979) and a work permit for these occupations can not be obtained.
For foreigners not planning to take up employment in Thailand there are other visa options available subject to meeting the qualifying requirements,
DFDL Crawshaws has affiliated offices in Bangkok, Vietnam, Cambodia, Laos and Myanmar and employs lawyers and consultants qualified in England, Wales, America, Hong Kong, Thailand, Australia, Canada, Philippines, Laos, Vietnam and Cambodia.
This information is for reference purposes only.
Garden Island Co., Ltd strongly advises that professional legal advice is sought before conducting any business in Thailand and disclaims any liability whatsoever for any damage caused by the information provided therein.
|
