Information and advice when buying property in Thailand
Why invest in Thailand?
Thailand is a beautiful country with wonderful people and a pleasant climate. It has a stable government and a stable economy. It is reasonably foreigner friendly as far as buying/leasing land and setting up home. In most parts of the country, it is inexpensive for Americans, Australians and Europeans to buy land, buy or build a house and live here compared to a typical retirement destination such as Spain, France or Florida. Also, many people build or buy to rent out or use as an investment.
Hua Hin is currently experiencing a building boom unsurpassed in any other part of Thailand. Prices of land and property have in many cases more than doubled over the last 3/5 years and prices are still rising. It is possible to achieve up to 30% returns on investments per annum.
Can foreigners own land in Thailand?
The direct answer, unfortunately, is no, but there are ways foreigners can legally secure the right to use land and build or buy a house.
There are two preferred ways for foreigners to own land in Thailand.
- Buy the land in the name of a Thai person, usually your mate or someone you think you can trust, then lease it back for 30 years with an option to extend. Some developers already offer house sales using their own 30 year lease options.
- Start a Thai company in which you can own up to 49% of the shares and buy and own land through the company.
30 year lease with option to extend
The simplest way to own land in Thailand is to buy the land in the name of a Thai citizen and lease it back from them for 30 years with an option to renew. Any lease over 3 years must be registered at the Amphur (district office) and there will be a 1.5% fee for registration and stamp duty.
The lease agreement can specify any terms you want, such as the lease amount, what happens in the event of your or the Thai owner’s death, what happens if you want to sell the property etc. The lease should also include a statement that if the laws change to allow foreign ownership of land, the land title will be transferred to you.
Baan Thai Property can help you with all aspects of your lease agreement and will recommend a law office if you so require.
Create a majority Thai owned company
A more complicated and expensive way to buy land and houses, but one in which you have your name as a registered owner, is to start a majority Thai owned company, in which you can own up to 49% of the shares (but the majority of the voting rights). 6 or more people own the remaining 51% (or more) shares. There must be more Thai shareholders than foreign share holders and a minimum of 7 shareholders who all must be at least 20 years old. The company is legally able to buy and sell land and hold a mortgage, the same as a Thai individual.
The cost to set up a Thai company is about 10 – 30,000 baht plus an annual tax and accounting fee of about 15,000 baht. Typically your law office will provide names of several Thai citizens who will provide their names on share certificates, a photocopy of their ID cards and pre-signed share transfer documents.
When your law officer sets up your company, you will get about 15 pages of official documentation written in Thai. You may also want to get the English equivalent of each page. You will also get a company stamp. Do not lose this stamp! You will likely need copies of every Thai page plus the stamp for any action involving your company including:
- Setting up a bank account
- Buying Land
- Getting a visa
- Tabien Baan (house book).
Save yourself a lot of time and make several copies of the company documents (along with copies of your passport which is always required), and keep the originals in a safe place.
Can foreigners own a condominium in Thailand?
We are pleased to tell you the answer to this question is yes! A foreigner can acquire up to, but not exceeding, 49% of the total floor area of the combined condo units. Most foreigners purchase a condominium by showing evidence of an incoming remittance of foreign currency into their bank account from abroad as demonstrated by a valid Foreign Exchange Transfer Form (formerly a Thor Tor 3 form) from a Thai Bank. Condos may also be leased to foreigners for periods of up to 30 years and may have options to renew. Leases of greater than 3 years are required to be registered with the Land Department.
Transferring money to Thailand
Bank transfer is probably the safest and most cost effective way to transfer large amounts of money to Thailand. You will need to set up a Thai bank account first. This can be a private or business account.
When transferring money to Thailand you will get a much better rate if you transfer the money in your home country’s currency. Your bank in Thailand will convert t to baht and will give you a much better rate than a bank outside Thailand.
Most banks require you set up a wire transfer in person at the bank’s branch, which means you will have to transfer the money before you move to Thailand, unless you have telephone banking or online banking services.
Always keep a record of the money transfer. Stipulate to your bank the reason for the money transfer is to buy property. Get a Foreign Exchange Transaction Form (formerly called a Thor Tor 3 form), at the Thailand bank. You will need this form if you decide to transfer the money back out of Thailand, so keep it in a safe place.
You may hear the term “Amity Treaty”. An Amity treaty company allows American citizens to own a majority share in a Thai company., but that company can not own land in Thailand. To own land, the company must have at least 51% Thai share ownership and at least 7 shareholders as noted above.
1 Rai, 40 million baht
A foreigner may be allowed to own up to 1 rai of land in their own name if they invest 40 million baht in Thailand and receive a “Board of Investment” approval. The land must be used for residential purposes and other conditions apply.
Long term lease from current owner
Many properties are offered on a long term or “never ending” lease by the current owner. You would agree on a price, payable at 1, 3 or 5 year intervals, or for the duration of the contract or any other interval. The terms of the lease are generally open to negotiation with the owner. If you are not paying the full lease amount up front, the contract should specify the periodic payment schedule, the amount payable and, if the amount is allowed to change, there should be a formula describing how the change is calculated, i.e. inflation rate plus 2% per year (for example).
This method has the advantage that you may not have to commit a large amount of money up front. Also, the transaction is relatively simple, however, any lease over three years must be registered with the Oar-Bor-Tor office (District Office) and tax must be paid on the lease amount. For protection, you should register the lease with the land office. The land must have a lease that allows leasing i.e. Nor Sor 3 or Chanoht.
This may be a good method if you do not want to commit too much money up front or if you prefer a lease to the company method but you do not want to buy the land in the name of a Thai person. You should be aware however, that this method may prevent you from being able to sell your property. You should have the option to sub lease the land and sell the house or rent the land or house out as described above.
Taxes and Fees
When transferring land there will be a 2% transfer fee, a 1% withholding tax and 0.5% stamp duty. If the land is being sold by a company or an individual that has owned it for less than 5 years, there will be a business tax of 3.3%. Also, company income tax or capital gain tax for individuals must be paid on the profit.
Taxable value for calculating transfer fees is based on the higher of the purchase price or the government valuation. A buyer usually negotiates with the seller to pay some or all of the costs.
Land Types and Titles
Thai law recognizes two types of land holding: the right of possession (Possessory Right) says that land can be used by an individual for it’s benefit (agricultural use etc.) under the Civil and Commercial Code; and the right of ownership, where an individual or company holds title deeds and ownership to a piece of land. Nor Sor 4 Jor, or Chanoht (often spelt Chanote or Chanoot), is the preferred title deed for land purchase in Thailand. Baan Thai Property will only sell land and houses which have a full chanoht title deed.
A Chanoht is a certificate of land ownership. The title deed indicates the GPS-verified area and boundary to the land, although the GPS coordinates do not appear anywhere near the document. The owner named upon a title deed, may use the title as proof of ownership in all legal undertakings. Banks are usually willing to loan money with a Chanoht as collateral. Chanoht land can be sub-divided but more than 9 sub-plots must follow the Land Allotment Law, Section 286, and sub-dividing requires you to get permission from all the neighboring land owners.
Chanoht land will normally have a uniquely numbered government peg (concrete posts), at the corner points and possibly other places as well. This will be drawn on the Chanoht document. A government peg is a concrete post, about 10cm in diameter, buried in the ground with the top poking out. The land owner should show the government posts (if they exist).
There are other types of land titles but Baan Thai Property only sell land that they have ensured is Chanoht land, so there is no point to explain the other types here!
A condominium title (first established under the condominium act 1979), is a title to a part of a building or buildings with multiple owners, and a fractional interest in the land (always a chanoht) and other common assets, such as a swimming pool, and other parts of the building, such as the stair well or reception area. The title will state the floor area of the private apartment, the ground area of the common land and the percentage interest which that apartment has in the common property. This percentage also represents the value of the voting interest in the condominium company or owners association.
For foreigners to be eligible to purchase a condominium in Thailand, they must present proof to the Land Department that the funds have been remitted from overseas in foreign currency. (See above transferring money to Thailand)
All land documents refer to lot sizes in rai, ngaan and data-raang waa and the numbers will be written in Thai.
Waa A waa is 2 meters.
Data-raang waa. A square waa (data-raand waa) is 4 square meters.
Ngaan A Ngaan is 100 dtaa-raang waa or 400 square meters.
Rai A Rai is 1600 square meters. 1 acre is 2.53 Rai and 1 hectare is 6.25 Rai.