Buying Real Estate in Phuket and in Thailand generally
Land Purchase:
Thai law stipulates that foreigners may not own land personally. That is to say in their name. They have the right of freehold ownership on their own name of building(s) only. If a foreigner wishes to purchase land to build a property there are 2 options:
- The land is purchase on 30 year leasehold, with an option to extend the lease for further 2 issuements of 30 year periods (90 year in total). Possession of the fact the property occupies of the land. The lessor cannot seize the property upon expiration of the lease, as the property is separate from the land.
- If a foreigner is going to operate a business in Thailand then he may purchase the freehold of the land through his Limited Company. The land will be owned by the company, not the individual. The foreigner then exercises complete control and ownership.
Even recent amendments that allow a Thai spouse (male or female) of a foreigner to buy land require proof that the money used in the purchase of freehold land is a legally solely theirs with no foreigner claim to it.
House Purchase:
If however, what you want is a house, the fact that you can't acquire freehold land should not be deterrent. You may own building freehold and together with constructed (typically a 30 year lease with prepaid 30 year renewals) and a purchase option for the land (that could be exercised in the event the laws of foreigner ownership, to be a Thai person or legal entity) you will have effective ownership, yet still remain within the laws of Thailand. Again, this option is best arranged through the formation of Limited Company where the ownership of the land is desired.
Development Purchase:
Foreigner may own assets in Thailand such as a development constructed on the land. The owners of the development usually set up a legal structure and mechanism which enables the purchase of the property to own property.
Here is an example of how this is achieved:
Corporate Ownership of the property:
Thai corporate structures are very similar to British common law. Thai law allows for PLC;s LLC; Ltd partnerships and other types of corporate entities. Once formed they to as "Juristic preson" in Thai jargon (legal entities). A Juristic person in Thailand who owns land within a legal structure also held by a Thai majority are considered in terms of property ownership, to be a Thai person and therefore, may own property in Thailand. Note that equitable ownership which Thai law addresses, does not necessarily equate to actual control of Juristic person. The most popular from of corporate land ownership is the Limited Liability Company (LLC).
Control of the Limited Liability Company:
Thai law allows the issuing of classified or two tired stocks. Hence shares of the LLC may be issued as " Ordinary Share" where the of one share is entitles to one vote, and Preferred Share where a shareholder must have multiple in order to obtain one vote. The majority shares may be issued as "Preferred" and foreigner minority shares as "Ordinary". This allows the foreign minority shareholders to hold fewer numbers of shares, but in fact have control of the company by voting rights.
Typical Structure:
The land of the development is owned by XYZ Phuket Co.Ltd, which in turn is owned XYZ Phuket Holdings Co.Ltd (XYZCHL). The partner in the development holds the Reference Share in XYZCHL and the Ordinary share are owned by XYZ Owners Ltd ("OWNERS"). Each purchaser at XYZ Co,Ltd receives one equal pro rate of share of the common stock of OWNERS.
Ownership/Lease:
On completion of the agreed purchase amount each purchaser will own the Villa plus an equal share in Owners and lease.
Condominium Purchase:
Purchasing a condominium is the easiest, simple transaction. The law allow foreigner to hold 49% of the units in a condominium freehold which in certain condominium blocks a full 100% of the units can be foreigners on a freehold basis. One important requirement in order to qualify for freehold status is that the foreigner currency funds for the purchase have been remitted from abroad and correctly recorded as such by a Thai bank. The foreign freehold is definitely the preferred structure for purchase of condominium apartment.
Foreigners have the right to ownership of buildings only, where land is not included. Legal acts are unlimited. A suggestion for foreigners are to lease the land for 30 year with an option to an extension of the lease, then purchase ownership of the house built on the land. Certainly of possession of the land house is assured, by being the owner of the house. The ownership of the land shall be leased out. If arranged as stated above, then the house will be separate from the land, and will not a component part under the Civil Law. Ownership of buildings can be confirmed, and the lessor cannot seize the house upon expiration of the lease.
Land Title Search:
It is highly recommended that a proper land search at the land office is carried out prior to making an offer.
Building Survey:
If a second hand property is being purchased take care regarding its quality of construction "Buyer beware".
What will it cost?
Property tax - Does not apply to property being used for private residential purposes.
Costs only apply upon transfer of ownership. These fall into four categories:
- Transfer fees from 0.2%
- Stamp duty: depends on cos, please seek legal advise
- Business tax: depends on cost please seek legal advise
- Income tax (the Thai equivalent to capital gains tax - a variable rate).
Most of the fees are calculated relative to the government's "tax assessment value of the property" and this value is well below market value.
The precise methods of calculation are complex, but as a rough guide for residential sales, expect the total fees and taxes to work out to be approximately 2-3% of the property market value-and usually these costs are split between the buyer and seller.
Is my investment secure?
You should use a reputable business advisor and lawyer and carry out "due diligence" and have all contracts prepared or at least reviewer by your legal representative. Once this is done your investment is as secure as anywhere else in the world.
|
