- brian ramsden
Property Law Thailand for Foreigners
An overview of the law
Property Laws in Thailand for Foreigners
These laws cover and include the right of use and possession and the restrictions for foreigners wishing to purchase real estate (Condominium, House, Villa and Land) in Thailand.
Buying real estate in Thailand (as a foreigner) can be challenging and you risk losing your investment if you break the law or try to circumnavigate it.
It is important to take independent legal advice from a law firm not associated to the seller of the property to obtain unbiased information and advice. That do not follow the law to entice foreigners into buying property.
There are many so called schemes that promise foreigners ownership of property in Thailand let lawyers for expats Thailand do due diligence for you to ensure the offer is legal and safe for you before you part with your money.
Follow the law and you will have the full backing and protection of the law it is simple.
Can foreigners buy property in Thailand of course they can anyone can buy anything and spend their money.
The question is Can foreigner’s own property in Thailand in their own name legally and the answer is NO. (Except Condominiums)
We often hear,” But my friend bought a villa in their name some years ago and everything is ok.
Or I bought a villa by setting up a limited company and everything is fine.
It is only when someone comes to sell it or when there is a problem that the issues raise their head.
Many people have bought villas and houses in Thailand and everything seems to be ok on the surface.
That is not to say hidden under the surface there is not a ticking time bomb of issues and problems for them.
We are not inferring that developers or real estate agencies are purposely going out of their way to cheat or break the law and cause problems for the buyer.
But we have come across a number of situations that have left the buyer in a precarious and volatile situation.
Here is a real situation
We just completed full due diligence for a client who was buying a villa from a foreigner who thought they were the legal owner of the property that they had purchased some time ago.
On completion of the due diligence and searches we discovered the foreigner was not the legal owner although they had paid for the property in full.
The developer did not have a developer license as they had built the project using two separate company names to circumnavigate the developer licensing laws and requirements to save money this is common practice unfortunately.
The land had not been split so there was no individual land title for this property.
The developer wanted the buyer to pick up the cost to split the land and pay the business tax which was going to cost with the transfer fee over 1 million baht.
The buyer pulled out of the sale as you can imagine this property did not pass the due diligence tests and they lost confidence.
What does the current resident legally own in this case?
There are many people that have bought property in Thailand and parted with their life savings and legally they do not have any recourse if something goes wrong or there is a problem.
Now this is not saying the current developer has purposely cheated them in any way they just have not followed the law and have left the current resident in a vulnerable position if something should go wrong,
What could possibly go wrong you ask?
In the situation where a property is owned by a company.
What would happen if someone sued the company and went after assets?
What happens if a shareholder of the company dies and their beneficiary puts claim on this property?
What if taxes are not paid?
What if the company decided to sell it what could the current (resident) do?
How can the resident who thinks he is the owner sell this property legally?
What are the financial implications?
What would happen if the resident should die?
Does the resident have a legally binding agreement?
Is it enforceable?
Do they have the full protection of the law?
This is just one incident there are many people under the illusion that they legally own their Thai property and they do not!
If the term scheme is used be careful that this is not a circumnavigation of the law?
If something is being offered and it does not follow the law then simply refuse it.
So, what can you do to check if the arrangement with your property is legal and safe?
You can contact us for a free property health check at email@example.com or call +66956583038 to arrange a free consultation.
Where you can find confirmation and see the laws relating to foreign ownership.
Thailand Condominium Act
Thailand Land Code Act
Civil code book III 'Specific Contracts (governing property leases and mortgages)
Civil code book IV 'Property' (containing laws governing ownership, possession, usufruct, superficies)
Foreigners are prohibited from owning land according to the land code act in Thailand, therefore making it impossible for foreigners to obtain outright ownership over land and a house in Thailand. Foreigners are allowed to own a unit in a condominium building under the Condominium Act.
For foreign ownership the Condominium must not be more than 49 per cent owned by foreigners once the quota has been reached the foreigners will need to have registered leased opposed to ownership.
Foreign land ownership in Thailand
Land ownership in Thailand is governed by the Land Code Act.
Under Thai land laws only Thai nationals are permitted ownership of land or have a confirmed right of possession of land. Foreigners may not own land unless there is a treaty or exemption allowing the foreigner to own land (section 86). There is currently no such treaty with any country allowing foreigners to be able to own land in Thailand.
Any foreigner who violates the foreign land ownership restrictions can be fined and/or sent to prison for breaking this law.
The penalty is a Prison Term of up to 2 years as quoted in (Land Code act section 111).
Section 96 of the Land Code Act refers to allowing a foreigner to own up 1 rai) of land for residential purposes only in specified areas. Foreign land ownership under section 96 requires a minimum investment of 40 million Baht into BOI approved Thai bonds and assets which must be beneficial to the Thai economy and requires approval by the Minister of Interior. If granted foreign land ownership under this exemption is limited to the life of the person granted the right to own the land (not transferable, not inheritable). Permission for foreign land ownership under section 96 of the Land Code Act is rarely applied for or granted for obvious reasons.
This is not to be confused with setting up a Limited company for the sole purpose of property ownership which is illegal.
We are going to upset some people here especially the people who have been persuaded to set up a Thai company to use it as a tool to purchase property in Thailand.
We are pointing out the law and the dangers surrounding this and if you are a foreigner and have set up a company to own your house or villa in Thailand we suggest you read this and contact us to see what can be done to assist your situation. Buying Land Through a Thai Company
A Thai Limited Company – having foreign shareholders (not more than 49%) and/or director(s) – can purchase land and register the land in the company name, but this carries certain risks when not done correctly.
To register a company solely for the purchase of a private property is not legal and is not safe.
A Thai company must first be conducting legitimate business, and generating revenue, and providing a profit to its shareholders.
It should be paying tax and employing staff.
For legitimate business reasons, a company may want to acquire property, but it must be managed according to the corporate laws of Thailand.
It is important for the director(s) to know the exact laws and how they apply to their situation. The right legal advice is crucial, as any failure to adhere to the law could make the directors criminally liable.
Lawyers for expats Thailand can provide unbiased independent legal advice just call us on +66956583038
Facebook and bars are full of self-acclaimed unqualified experts in this field who will advise you on how you should purchase and own property in Thailand as a foreigner.
Take the advice of a law firm who does not work for the developer or real-estate agent selling the property who actually knows the law and the dangers of not following it.
For many current home owners, (villas) and for many who have recently been persuaded to buy landed property, this can be a very sensitive subject. It is impossible to challenge someone’s existing beliefs, especially when they have already parted with their money and no matter what is said on the subject, it is bound to upset someone (if it hasn’t already).
This is not our intention we are here to help and assist and hopefully prevent someone from making the wrong choice and to help those people who may have made the wrong choices to protect their investment the best they can.
Let us just reiterate a simple fact: foreigners are prohibited from owning land in Thailand, and this applies to landed property such as houses and villas. Furthermore, as mentioned previously and contrary to “bar talk”, those who lease land, then build a house on it, do not automatically gain subsequent perpetual ownership rights over the building contrary to what your sales agreement might say.
It all may have sounded convincing after a few drinks, but it is not true.
When it comes to villas and houses, everything depends on the underlying contract to lease (not buy!) the land, and whether that contract mentions who owns any buildings or what happens to those buildings after the lease expires. Which brings us to everyone’s favorite “loophole” for buying land, villas and houses in Thailand.
Buying Land Through a Thai Company
Buying Landed Property Through a Thai Company
Loopholes exist where there is ambiguity in the law, i.e. there is more than one plausible interpretation, allowing clever legal minds to devise means of bending the law to suit their own ends.
Loopholes remain legal as long as the law is ill-defined, but on two specific points, Thai property law is unambiguous: Foreigners cannot own landed property, and a foreigner cannot control a Thai company using nominee shareholders.
As mentioned previously, the Land Code Act states that foreigners are allowed to own land by virtue of the provisions of a treaty, but fails to mention there has been no such treaty for nearly 50 years.
The Thai company appears to opens up the options for ownership for foreigners to Buy a villa or a house. Buy a plot of land and build or if the condo you like is sold out of the 49% allocation to foreigners? Since you are now “Thai” by virtue of the Thai company you can feel free to buy property from among the other 51% Thai shareholders of the company.
The problem is a company established solely for the purpose of buying a home to live in – a company with no other function or real business activity – is a violation of the law. A company with Thai nominee shareholders (owned “from the shadows” by a foreigner) is flagrantly against the law.
We see many properties being offered freehold to foreigners how the foreigner is told to set up a Thai company in some cases the foreigner is even helped with setting up the company.
Words such as don’t worry its technically against the law and everyone is doing it are bounded around and should be avoided at all costs.
In May 2006 the authorities began clamping down on what was (and remains) an illegal activity.
Procedures were put in place to ensure that Land Department officials made additional, thorough checks to prevent land registration by any company with foreign shareholders. Specifically, they were trying to identify companies established purely to buy land, houses and villas.
The immediate effect of this policy was to reduce the practice, but four months after the enforcement began, on 19 September 2006, Prime Minister Thaksin Shinawatra was deposed in a military coup. Changes in governments often result in changes in priorities, and a succession of new governments did not take up the mantle left by Thaksin.
Recent whispers from Bangkok have suggested that another round of legislative amendments, guidelines and regulations could be on the cards. And yet newcomers to Thailand are being told by some that the government would be shooting itself in the foot if it were ever to crack down again.
If a further clamp down does come, one which targets the use of Thai companies with nominee shareholders to acquire landed property, foreign shareholders could find that the “loophole” they bought into does not exist. Instead, they could face the forced sale of their home, which would be a huge inconvenience, a good deal of stress and in all likelihood some financial loss.
Buying Thai Properties Through a Company
Buying Property Through a Company
Using a company to own Thai real estate is commonplace, but it is not necessarily recommended because there are potential legal and commercial liabilities.
While a company registered in Thailand can own land, there are certain rules which must be followed. Basically, there must be at least two shareholders of Thai nationality, who between them own in excess of half the share capital of the company. It is essential, however, that the Thais individuals have a legitimate stake in the company, i.e. that they have paid for their shares, and invested actual capital in the company.
It is illegal if such Thai shareholders are “nominee shareholders”, meaning they were shareholders in name only, who were given shares to satisfy Thai company ownership laws, but whose real purpose was to facilitate the purchase of a property by the foreign director of the company.
Companies without business purpose are not recognized under Thai law. A company established for the sole purpose of owning assets, but which does not conduct any regular trade or business activity (which would mean it is also avoiding paying any taxes) may be dissolved.
Any foreigner who establishes such a company, and seeks to benefit from the use of Thai nominee shareholders, will be subject to fines, imprisonment, or both. It is possible in such a case that the company would not only be subject to dissolution, but that the land office would also require that the company sell any land that it owns.
It is a very dangerous game to play.
The Commercial Liability
Owning a property through a Thai Company Ltd. could be costlier than you first expected because a Thai Company is responsible for the following annual expenses:
preparing and filing audited accounts;
preparing and filing a tax return (which is a semi-annual tax return after the first year).
The following are also requirements for a Thai Company:
it must have a registered address. A company is required to be registered at a property which qualifies as an office address, should it not have one already;
if the company earns rental income from real estate which it owns, the company shall be liable for taxes for the income. If the director of company lives in a property owned by the company rent free, personal income taxes may also be due on the market rate of the rental income not paid. (These taxes would obviously not apply to any villa or condo owned in an individual’s name.);
the sale of any property which an individual has owned in their own name is subject to a stamp duty of 0.5%of the sale price. This applies equally to a villa or a condominium, and is payable at the time of transfer. Under Thai tax law, however, the identical property owned for five years or more in the name of a company will be liable for 3.3% tax on the sale price; and
any income tax which may apply to the sale of a company-owned property may be considerably higher than it would be for an individual owner.
If you want to secure your investment and follow the law so you are safe and legal visit us www.lawyersforexpatsthailand.com or email firstname.lastname@example.org or telephone +66956583038 to arrange a free consultation