Thailand's property and land ownership laws can at first appear fairly restrictive when applied to overseas buyers, although foreigners may own buildings, condominium units or houses, in their own names, Thai law stipulates that foreigners cannot own Thai land in their own names.
The ways in which foreigners can acquire land rights in the Kingdom of Thailand are as follows
Repeating 30-year lease
Leasing is legally the simplest, most straightforward way to own land rights in Thailand, a solution used by foreigners and Thais alike. Land lease contracts can cover periods of 30 years, or 3 times 30 years, or can confer rights equivalent to freehold ownership to the buyer.
In this arrangement, where the seller intends to transfer rights equivalent to freehold ownership to the buyer then a leasing solution is used as the best legal alternative, the actual purchase contract will reflect this intention by containing clauses concerning the renewal of the lease or freehold sale of the property, putting control of these with the lessee (buyer) and obliging the lessor (seller) to provide and sign (and stamp if a company) the required documents at any given time. This is a business agreement concerning the buyer's right to resell, not the buyer's ownership rights, and is supported by Thai commercial and civil law.
The actual contract to lease the land for the first 30 years, and the buyer's rights therein to build and own, is the part of the whole agreement which is covered by Thai land law and which can be registered with the Land Department. If the intention of the buyer is to lease for 30 years only, a retirement plan or perhaps a commercial plan, this part of the agreement covers all ownership aspects.
Limited Company
This option is the most popular way of enabling foreigners to acquire land in Thailand. It involves the incorporation of a limited company, a "Thai Juristic Person" with the undeniable right to own land, using the identities of voluntary Thai persons as shareholder nominees and the establishment of the foreign investor as sole executive director of the company. During 2006, the Thai government made moves to control use of this solution because it has been abused by many foreigners conducting real estate business with Thai land without any real involvement of Thai people, which is illegal.
The company solution is facilitated and allowed for domestic property acquisitions by a generous interpretation of applicable laws by government officers because of the enormous value of foreign investment in Thai property. Creating such companies is a little more difficult and costly to do than before, but this solution is highly viable and effective.
Many properties are already owned by foreigners under the company model, and the most expedient way to buy these; simply you purchase the company director's shares and become installed as the company's sole executive director, thereby taking over full control of the company and its asset, the property. This takeover procedure must, of course, be administrated by a law firm or agency with the knowledge and experience to do it properly. All documents are in the Thai language, but English translations can be provided and notarized.
It cost about THB 95,000 and takes around one month to incorporate a new company and register the property. The transfer fees payable at the Land Office normally amount to 6.35% of the property value stated in the registration documentation, which is normally agreed by buyer and seller at a value far less than the actual purchase price.
Annual audits and the displaying of the company name at its registered address are required.
Condominiums
Under condominium law, up to 49% of the units in a condominium complex can be owned by foreign nationals. To ensure that the registration of ownership goes smoothly, there are clear procedures which must be followed correctly. Foreigners who purchase condominiums must transfer funds in foreign currency from a bank account outside Thailand to an account at a Thai bank. The name of the transferee must be the same as the name that will appear on the final purchase contract, i.e. the buyer.
The Bangkok Bank or Kasikorn Bank are the only two banks with full international services and English speaking staff, you need to be sure that the funds transfer documentation stipulates that the funds will be used to purchase a condominium. It is also common to transfer funds to the escrow accounts of estate agents or lawyers administrating the condominium purchase, who ensure that the correct documentation is collected from the receiving bank. Transfers must be made in amounts USD 20.000 or more in order to qualify for Foreign Exchange Transaction Forms issued by the receiving bank to verify that the originating funding came from outside Thailand and in a currency other than Thai Baht. This bank certificate confirms the origin and purpose of the funds and furthermore facilitates the repatriation of the funds if or when the condominium is later sold. The Department of Lands (Land Office) may refuse to execute ownership transfers if these bank certificates cannot be produced. There is a great deal of paperwork, which can be very awkward to correct if first done wrongly so it is very important to use a qualified agent or lawyer to handle this.
The typical cost of a condominium acquisition service using a local lawyer is THB 65,000 which includes full cooperation with banks and the with seller. The registration fees and taxes payable at the Land Office can amount to 6.35% of the purchase price.
Vacation Investment Program
On 25 November 2006, the Royal Thai Government presented its first fully-comprehensive solution for foreign ownership of Thai property at a public meeting in Hua Hin and it represents the most secure solution by virtue of its governmental endorsement and management, this solution is, however, the most expensive, although it does come with several advantages.
A private enterprise named Thai Long stay Management Co. Ltd. (TLM) has been established in a joint venture between the private sector and the governmental Tourism Authority of Thailand. When a foreigner buys a property in Thailand using TLM's Vacation Investment Program (VIP), the buyer pays the seller in the normal way and a new company is formed with the name Thai Longstay Property (TLP) (Customer's Name) Co. Ltd., co-directed by TLM and the VIP customer. The buyer's money is secured via a loan agreement between the buyer and this new company. This loan agreement also documents the funds used for the company's share capital (equal to the purchase price of the property), and the property is then transferred to the new company. The buyer's investment is further secured with repeating 30-year leases (maximum 90 years) which can be sold or sub-leased.
Entrance fees to the Vacation Investment Program are rather high. For example, purchase of a 10 million baht property costs 1.1 million baht and yearly management fees of 98,000 baht. In return, buyers get absolute legal security and further advantages including long-stay visas, "Fast Track" services through Thai international airports, discounts at participating commercial outlets such as hotels, golf courses, restaurants, hospitals and insurance companies, telephone SIM cards, legal advice, and property taxes, and accounting and auditing costs are covered. The VIP charges an exit fee of 5% of the capital gain when the property is sold offset by an interest calculation of 3.5% of the initial investment. This "interest" amount is exempt from the exit fee.
The Vacation Investment Program was officially launched in Bangkok at the Ministry of Tourism and Sports on Wednesday, November 29, 2006.
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