Legal Overview
Foreigners and Land Ownership in Thailand
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.
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 Although however Thai law prohibits foreigners from owning land in Thailand, structures have developed to enable foreigners to effectively own land interests, and still comply with 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.
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 is important that the Company is structured correctly pursuant to Thai law
The Company must file accounts and pay any applicable taxes on time. Accounts are filed once in the year of incorporation and twice annually thereafter.
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 periods. Despite this, it should be noted that Thai law only provides for one such renewal. Although a renewal clause may be inserted in the lease it cannot be guaranteed against a purchaser/successor of the freehold 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 3 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, if the law changes to allow foreigners to do so.
- Ownership of Condominiums
A condominium is the term used to describe a multi-unit apartment-type building wherein the units 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 groups for personal property ownership Condominium units have a form of freehold title deed which foreigners can own and ownership is dealt with at the Land Department.
There are two main restrictions placed on foreigners purchasing a condominium:
- In general, non-Thai nationals may purchase condo units in condo 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.
- The funds used to purchase the condominium have been sent from abroad and correctly recorded as such by a Thai Bank on a Tor Tor Sam (an official bank document issued by the receiving bank upon the receipt of foreign currency into a Thai bank account).
Purchases of condominiums by foreigners are dealt with in accordance with the Condominium Act B.E 2522,2534,2542 (1999) and 2551 (2008) and the Building Control Act. 2522 (1979). Condominiums may also be leased by foreigners as previously discussed above.
Foreigners may own structures outright in their own name. They must have the right to own structures (known as superficies) over the land, registered in their name on the title deed to the land that the structure is on.
In order to provide satisfactory evidence that they built the structure the first owner of the structure should be in possession of:
a) The Building Contract/Permit,
b) Records relating to payments to the builder,
c) The owner’s name on the Building Contract/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 is possible for a mortgage to be registered over a land or structures. A mortgage granted by a foreign finance company can be registered on the title deed.
- Acceptable Classes of Land Title to Foreigners
Although other many classes of title are available, foreigners are advised to limit their search to two classes of land title, namely Chanote title and Nor Sor Sam Gor.
In the case of Nor Sor 3, the superior Nor Sor 3 Gor is preferable since the borders have been more accurately measured. The Chanote and Nor Sor 3 Gor are the only land titles where registered rights of ownership or lease can exist. Therefore any land titles lower than these are not recommended for foreign investment.
1. Chanote (Nor Sor 4 Jor)
This is the only document which can be 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, boundaries and area measurements are noted. Any encumbrances burdening the property such as mortgages or servitudes are also registered.
It is possible to sub-divide the land and this class is regarded as the best available in Thailand.
2. Nor Sor 3 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. The 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. This is generally regarded as the second best title and again may be sub divided. This class of title can be upgraded to Chanote at the Land Department.
Any land titles lower than Chanote or Nor Sor Sam Gor are not recommended for foreign investment
- Transfer of Ownership (Registration at the Land Department)
All registered dealings in land and structure are recorded at the Land Department. There is a local office located on Koh Samui.
Transfer of ownership, lease, mortgages, lien, servitude (easement), sub-division, upgrade etc. are all applied for and registered at the Land Department. 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.
- Mortgages
The fee and stamp duty payable for registration of a mortgage is 0.06% of the declared mortgage amount, with maximum fee of 200,000THB of the amount declared in the mortgage agreement and capped at a maximum of 200,000 Thai Baht payable, if the property is;
(a) part of a licenses development, condominium, house or commercial building, or;
(b) if land, if there is a registered structure upon it, and the land area is less than 1 rai.
If not within the above, then the fee will be 1.05% of the declared mortgage amount, with maximum total fee again 200,000 THB for land in excess of 1 rai that is not situated in a licensed development.
- Leasehold
Leaseholds for terms longer than 3 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% of the total lease value.
- 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 vary and are valued by local authorities. There is an allowance for land used for personal dwellings and this 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.
- Transfer Costs
Sale & Purchase
There are 3 government fees to pay at the land office:
1. Transfer Fee - Land only
2% of the Land Office appraised value
or
- Land & House
0.01% of the Land Office appraised value
2. Income Tax:
- When the Seller is a Company…1% of the Land Office appraised value of the property or actual transaction value (whichever is the higher)
- where seller is a person – calculated on Land Office appraised price on sliding scale of personal income tax
- such tax is deducted from the income tax bill for that year
+ either
3. Stamp duty (applicable when the seller is a person – not a Thai Co. Ltd)
- 0.5% of the of the Land Office appraised value of the property or actual transaction value (whichever is the higher)
– applies only if land has not been transferred within the previous 5 years
(Not applicable between March 2007 - March 2009 where reduced SBT only applies - see below)
or
3. Special Business Tax (SBT)
Currently reduced to 0.11% of the Land Office appraised value or actual transaction value (whichever is the higher)
(Reduced rate applicable March 2007 - March 2009)
When purchasing a Condominium Unit or a property from a Licensed Development
There are 3 government fees to pay at the land office:
Transfer Fee
0.01% of Land Office Appraised value (reduced rate applicable March 2007 - March 2009)
Withholding Tax
1% of the declared purchase Price
Special Business Tax (SBT)
0.11% of the Land Office appraised value
(Reduced rate applicable March 2007 - March 2009)
(These fees are correct at the time of going to press – fees may be adjusted at the end of March 2009)
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 appropriate Non-Immigrant visa from a Thai Consulate outside 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 restricted occupations and professions which are prohibited to foreigners under Royal Decree B.E. 2522 (1979) and a work permit for these occupations cannot 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 have affiliated offices in Bangkok, Vietnam, Cambodia, Laos and Myanmar and employ lawyers and consultants qualified in England and Wales, America, Hong Kong, Thailand, Australia, Canada, Philippines, Laos, Vietnam, Cambodia (need clarification)
This information is for reference purposes only. DFDL Crawshaws strongly advise that professional legal advice is sought before conducting any business in Thailand and disclaim any liability whatsoever for any damage caused by the information provided therein.
DFDL Crawshaws
Samui Office: 157/21 Moo 1, Bophut, Koh Samui, Suratthani, 84320
Tel: 66 (0) 77 246 081s
Fax: 66 (0) 77 246 082