Legal Brief

Legal Brief

Thai Law generally restricts foreigners from owning land under freehold title, although it is possible under some circumstances involving substantial business investment. However, for the majority of foreigners, the following are legitimate ways to invest in property in Thailand.

 

1. Leasehold

Foreigners can lease land on short or long term contracts. Leases may be registered for up to 30 years and often have a renewal clause for additional periods of 30 years. A recent change in the law allows leases for industrial or commercial purposes to be for a term of up to 50 years, also renewable for further 50 year periods. Any lease of 3 years or more must be registered on the land title at the appropriate land office, in order for the lease to be enforceable.

2. Protected Leasehold

This option often applies to estates with several individual owners within one development. Each owners owns the buildings & structures in his name, but all the owners collectively own the company that owns the land, and each owner leases his plot from that company. This way the owners have the possibility to extend the leases indefinitely.

3. Freehold through a Thai Company

A Thai Limited Company can purchase land as a so-called ‘juristic person’ if the company is allowed to invest in and own land in accordance with its Objectives and Articles of Association. Foreigners can hold a maximum of 49% of the shares in such a Thai Limited Company with the remainder being Thai owned. It is vitally important that annual company accounts are completed and taxes paid on time.

4. Foreign Freehold of Condominiums

Individual condominium units have a form of freehold title deed which is registered at the Land Department. Foreigners are entitled to own up to 49% of the total area of a condominium development. If a foreigner does not have permanent residence, there must be proof that funds were brought into Thailand to purchase the unit. Condominium units may also be leased by foreigners in the same way that they may lease land.

Land Title Deeds

The preferred land title in Thailand is the Chanote (which literally translates as “Title Deed”) issued in accordance with the Land Act of 1954. Chanotes issued under the provisions of this Act are registered with the Land Department and state the ownership, exact boundaries, area measurements and encumbrances on the property (such as mortgages or servitudes). The purchaser of a Chanote is registered as the legal owner of the land with the Land Department at the time of transfer.

Chanotes are issued by the Land Department through application by the holder of a possessory right document for the land. Chanote is the highest and safest grade of land title in Thailand. Although other forms of possessory documents may occasionally be encountered as part of the historical record of a plot of land, there are three main types:

Nor Sor 3 Gor contains a semi-accurate measurement of the land and boundaries, along with verification of the utilisation of the land in the past.

Nor Sor 3 is similar to the Nor Sor 3 Gor except that the measurements and boundaries are even less accurate and a 30-day public announcement period is required before any registration changes can take effect.

Sor Kor 1 is an unregistered form stating a claim by an occupant of land that the land belongs to him or her. The measurements are vague or missing and can easily be disputed.

Theoretically, all of the above titles can be purchased from the holder and upgraded to a Chanote, which can take anywhere from 3 months up to 1.5 years depending on the Land Department.

The many varying land title documents encountered in Thailand stem from the complex, and sometimes conflicting, history of land development and ownership documentation. Along with the land itself, the purchaser of land acquires any defects in the title and potential claims against it, and even a properly issued Chanote can be subject to a legal challenge. Therefore, legal due diligence by qualified and experienced attorneys should always be conducted prior to purchasing any land. This process will generally include a complete review of the title history of the land, encumbrance search, land site inspection, and verification of land use and zoning regulations.

 

Transfer of Ownership

Ownership is transferred by a written contract made before the Land Department. The transaction is recorded on the title deed or other document and all supporting documents are kept in official records. In general, the transfer fee, taxes and other expenses incurred from the registration of ownership transfer are as follows:

1. Transfer Fee
2% of the land office appraised value of the property.

2. Withholding Tax
– 1% of the land office appraised or the actual transaction value of the property, whichever is higher, if the seller is a corporation.
– Sliding scale based on the land office appraised value of the property, if the seller is an individual.

3. Stamp Duty OR Specific Business Tax
– Stamp Duty is 0.5% of the land office appraised or the actual transaction value of the property, whichever is higher.
– Specific Business Tax: 3.3% of the land office appraised or the actual transaction value of the property, whichever is higher.

4. Other Expenses
For leasehold transactions, there is a registration fee of 1% of the total lease amount plus a stamp duty of 0.1% of the total lease amount.

Property Taxation

Building and Land Tax is imposed on the owners of a house, building, structure and/or land except for the first residential place. The tax rate is 12.5% of actual or assessed annual rental value of the property.

A Local Development Tax is imposed upon any person who either owns or is in possession of land. The tax rates vary according to the appraised value of the property being determined by the local authorities. There is an allowance granted for land utilized for personal dwellings. This allowance differs according to the location of the land.

 

DISCLAIMER

This page is a general introduction only and does not represent legal advice. We strongly advise that professional legal advice be sought before conducting any business in Thailand, and we disclaim any liability whatsoever for any damage caused by reliance on the contents of this page.