Under current Thai law foreigners are not allowed to purchase land freehold. It is however, possible to purchase a straightforward 90-year leasehold contract which provides the option to convert to freehold at any time, either should the law change, or should you wish to set up a company to buy the freehold title. This is the most common method that land is purchased in Thailand and a method fully endorsed by the Thai authorities. You will receive a 30-year lease with two subsequent renewal options, each of 30 years. A registered lease is easy to set up and there is no restriction on foreign participation. The standard Thailand residential lease is for 30 years and can be held in your own name. A lease registered with the Land Office remains in force during the term of each 30-year lease. After 30 years a new lease must be prepared and filed at the Land Office. Alternatively, you may convert the title to freehold. When you renew the lease there are no further payments to be made aside from a minimal local tax (approximately 1.1 per cent of the lease’s value).The only exception to this rule is if you have a large sum to invest – Thailand has already allowed investors investing 40 million baht to own up to one rai (1,600 sq. metres or 0.4 acres) of land in certain areas.
Buying A House
If however, what you want is a house, the fact that foreigner unable to acquire freehold land should not be a deterrent. You may own the building freehold and together with a well constructed leasehold (typically a 30 year lease with two prepaid 30 year renewals) and a purchase option for the land (that could be exercised in the event the laws of foreign ownership changed – or you sold the property on to a Thai person or legal entity) you will have effective ownership, yet still remain within the laws of Thailand.
Buying A Condominium
Thailand condominium developments are booming in cities like Bangkok, Phuket,Pattaya and Hua_Hin. Either you desire to purchase for residential purpose or for investment, buying a condominium is the easiest transaction for foreigner.Due to Thailand Condominium Act, foreigners can own condominiums in Thailand up to 49 % of the total space of all units in that condominium
Obtaining a mortgage to finance your purchase of property in Thailand is possible.
- There are currently Bangkok Bank and United Oversea Bank (UOB) which provide mortgage bonds to foreigner and they are concluded off shore at their Singapore branch.
- The home loans they provide to foreigners are based in foreign currencies. Your home loan/mortgage bond would be provided in either Japanese Yen, Euro or US Dollar. The interest rates also vary with each currency.
Transfer taxes and fee
Unless you are buying from a developer in a licensed housing or condominium development there is no fixed rule for who pays which part of the land office transfer fees and taxes. It is part of the overall price negotiation to come up with an appropriate formula for sharing these costs and it can vary from purchaser pays all to seller pays all. It’s most important that you have resolved this in the sale and purchase agreement so the seller doesn’t try to force in this provision a week before the transfer or you must work out such details when you arrive at the land office. It should clearly exclude the seller’s personal withholding tax, because of the wording in the contract it has happened that the buyer was forced to pay the seller’s personal income withholding tax, as this is part of the taxes to be paid at the land office when transferring land.
Costs only apply upon transfer of ownership. These fall into four categories :
- Transfer fees 2.00% over the appraised value of the property( Due to seller or shared)
- Business tax 3.3 % over the registered (sale) value or appraised valuewhichever is higher ( Due to seller)
- Stamp Duty 0.5% over the registered value ( Due to seller)
- Withholding tax ( Always due to seller)
- if the seller is a company withholding tax is fixed at 1% over the registered sale value or appraised value(whichever is higher)
- if the seller is a private person withholding tax is calculated at a progressive rate based on the appraised value of the property
Note on stamp duty and specific business tax (SBT):
- Stamp duty is exempt if Specific Business Tax is charged.
- Business tax consist out of 3% business tax + a municipal tax of 10% assessed on the amount of the specific business tax (total tax 3.3%).
- If the seller is an individual (not a company) Specific Business Tax does not have to be paid if:
- The seller has possessed the property more than five years before the transfer (the transferred real property has been used as the principal place of residence, and the seller’s name appeared in the house register for not less than one year from the date of acquiring such property).
- The seller transfers the real property to the legal heir or an heir by a will.
- The seller transfers the real property to a legitimate child, but not including an adopted child.
- The seller transfers the real property without consideration to government agencies.
- The seller transfers the real property without consideration to temples, churches or mosques.