Can
Foreigners Own Property in Thailand?
Many foreigners
want to buy property in Thailand, whether they live in the
country or not. Some wish to purchase for investment purposes,
some wish to purchase a home for themselves. What are the options
available to foreigners?
Condominiums
Condominiums are gaining in popularity amongst foreigners. The
reason for this is that by Thai law, foreigners are permitted
to own a condominium providing they satisfy certain criteria.
There
are only five classes of foreigner considered to qualify
as owners of condominiums:
1. Foreigners
holding a residency permit under Immigration law;
2. Foreigners permitted to stay in Thailand under the Investment
Promotion law, such as the Board of Investment;
3. A Thai registered entity with at least 51 percent of shares
held by Thai nationals;
4. Foreign juristic entity in receipt of a promotion certificate
under the Investment Promotion law;
5. Foreigner or a foreign juristic entity remitting a foreign
currency into
Thailand or withdrawing money from Thai Baht account of the persons
who have residence outside Thailand or withdrawing money from
foreign currency account .
If
you do not fall in to any of the above classes, then you
are not allowed to own a condominium.
Further,
according to the Condominium Act, not more than forty-nine
percent of a condominium block can be foreign owned . In light
of this, a purchaser must request a letter of guarantee from
the condominium juristic person setting out the proportion
of foreign ownership. Such letter needs to be submitted at
the Land Office together with other documents when a foreign
purchaser is registering a purchase.
If the condominium
block is already held by 49% foreigners, does that mean a foreigner
cannot proceed with the purchase? Not necessarily. A Thai juristic
person can purchase a condominium, with no restrictions, therefore
if the foreigner is a director/shareholder of a Thai Limited
Company, the condominium can be bought by the company.
A further restriction exists with respect to the Condominium
Act. A foreigner must remit foreign currency in to Thailand
to finance the purchase. (There are a few exceptions to the
rule, one being if you work in Thailand, you can use funds
earned in Thailand so long as they were paid into a non-resident
bank account.) Further, the foreigner must obtain a Foreign
Exchange Transaction form (FET) from the bank as proof of
such remittance. The FET form must be filed at the Land Department
when the foreigner registers the purchase. The FET form will
be issued by the receiving bank. If the foreigner remits
Thai Baht from abroad, the bank will refuse to issue an FET
Form.
The amount
of money specified in the FET Form must cover the whole of
the condominium unit price.
Where the
remittance is less than $20,000 USD, the bank will issue a ‘credit
advice’. The credit advice is issued in English and is
not acceptable by the Land Office as evidence of remittance
for a condo purchase therefore you need to ask the bank to
issue a letter of guarantee in respect of the remittance, which
normally costs 200 THB per letter.
Land
Generally, foreigners are unable to purchase land in their own
name. One option available is leasing. The law permits a foreigner
to enter in to a lease agreement. Leases aimed at foreigners
often have a term of 30 years. This is the maximum term for a
lease which can be registered by law at the Land Office. However,
often a seller will agree to include a clause in the Lease Agreement
permitting the foreigner to renew the lease, sometimes for a
total of 90 years.
However,
foreigners do not always like the idea of leasing and would
prefer to own the freehold. Unfortunately, Thai law does not
allow foreigners to own freehold land in their own name. If
a foreigner has a Thai spouse then the foreigner could give
the purchase funds to the spouse and the spouse could buy the
property on behalf of the foreigner. This obviously carries
some risk because the property will be registered in the spouse’s
name and the foreigner may be requested to sign a form stating
that they have no right or interest in the property. Therefore,
if the spouse decides to sell the property at a later date,
the foreigner would have no right to claim the sale proceeds
because they have signed away their rights. In essence, the
money the foreigner gave to their spouse is treated as a gift.
Foreigners
do try to protect themselves by asking their spouse to enter
in to a contract with them, confirming that the funds belong
to the foreigner, that the property cannot be sold without
the permission of the foreigner and that on the sale of the
property, the proceeds are returned to the foreigner. However,
this sort of agreement would be unenforceable because it is
contrary to the law, thereby offering no protection to the
foreigner.
There is however, one lawful option available, which does offer
protection for the foreigner. A Thai Limited company can
purchase land, as a juristic person. Therefore, if a foreigner
is a director and shareholder of a Thai Limited Company,
they can, in essence, purchase land through the company.
The only restriction is that the company must be allowed
to own and invest in land in accordance with its objectives
and Articles of Association.
The only
problem presented is that a foreigner can hold only 49% of
the shares in a Thai Limited Company, the balance must be held
by Thai shareholders. Therefore, on the face of it, the foreigner
can never have control of the company. This is a common misconception.
It is possible
for a foreign shareholder to be issued with Preference Shares
which give them increased voting power and allows them to control
the Thai Company thereby controlling the assets of the company
i.e. the land.
A
House/Villa
A foreigner can purchase a house or villa in their name however,
they cannot purchase the land upon which the house is situated.
This is quite a strange concept for most foreigners. There is
an answer though. Foreigners can enter into a sale and purchase
agreement for the house and a separate lease for the land. Alternatively,
a Thai Limited Company can buy both the land and house.
Repatriating
funds
There is no Thai law preventing a foreigner from selling their
property and remitting the sale proceeds back to their home country.
The usual Transfer fees, Stamp Duties etc will apply however
there is no capital gains tax in Thailand.
Similarly,
if the foreigner sells his/her shares in a Thai Limited Company,
the sale proceeds can be remitted abroad.
There are
no fines or taxes applied to such remittances although you
may be asked to produce paperwork, such as a sale contract,
to show where the money came from. This may be requested by
the Bank of Thailand to check that you are complying with money
laundering laws.
Summarized by Knight Frank Thailand
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