Professionals at your service

Can I buy a property in Thailand in complete safety? Will I really be the owner and be free to make my own decisions about the property? Will I be able to rent it out with peace of mind and receive the benefits of my investment in complete freedom and in compliance with my country of tax residence? We are here to answer these questions and give you the most reliable and comprehensive information possible.

1 °/ I want to buy a plot of land to build my house in Thailand:

This purchase is the most delicate operation. Thai land law, which is regulated by the Land Code, the Ministry of the Interior, the Civil and Commercial Code and the 1975 reform on agricultural land, does not allow foreigners to own land in their own name. In practice, there are two scenarios:

a – You are a foreigner who transfers 40,000,000 baht to Thailand (approximately 1 million euros) in order to invest in various sectors and then you obtain an authorisation to purchase land from the Ministry of the Interior. In this case, you can become the owner for life of a plot of land measuring 1 Rai (1600 m2) or more, since since September 2011 the law no longer sets a limit.

b – You are a foreigner setting up an LLC (limited liability company) registered in Thailand in which you must own a minority stake. Your Thai partner(s) must have a majority shareholding. This company can then buy any type of building or land. This company must be set up and registered by a specialist Thai lawyer. The LLC has a single director: you.

This is most commonly used by non-Thais who wish to acquire land and retain control over it ad vitam. Your Thai partners will be selected by your lawyer and will have no power over the land or the house built on it. You will be free to sell, rent or extend without their permission. The LLC’s articles of association provide for a ‘partnership agreement’ that gives full power to the manager, even though he or she is not the majority partner. You will be the director of the LLC. So why do the Thai have an interest in being a partner? And do they receive funds from the rents collected or from the proceeds of the sale of the property? This is a question that comes up a lot and intrigues Westerners.

The Thais are familiar with this system and are not looking to go any further. This system gives them an illusion of control over land sharing and seems to allow the government to keep a low profile. What’s more, Thailand is a royal state which, like England, wishes to ‘retain’ a degree of control over the administration of the kingdom’s lands. Keeping face in Asia is fundamental!

In addition, Thai partners often receive a bonus when they sign up to the company, a very reasonable sum of a few hundred euros for their participation, so they can take pride in participating in several companies and thus have a more enviable social status.

Keeping face with their entourage. Finally, if you resell the land, you will resell the LLC, the purchaser will become the new director and the Thai partners will receive compensation. If the land, and therefore the LLC, is resold, the articles of association stipulate that the manager has exclusive rights to collect the funds.

collection of funds to the manager, so the Thais know that they have no claim to anything.

Once you own the land via the LLC (the surface area of which is calculated on the basis of an RAI of 1600 m²), you can build your house. The LLC will grant a 30-year lease, renewable twice, to the person who builds the house and is therefore the owner. In this way, you are both the director of the LLC that owns the land and the owner of the 30-year lease, renewable twice, known as the ‘ground lease’, which allows you to build the house and enjoy it freely (occupancy, rental, resale).

This system may seem complicated, but it distinguishes between the land and the house built on it. In the event of rent being received, this means that the Thai partners are excluded from any remuneration, since the rent is received by the owner of the house and not the owner of the land.

2 °/ I don’t want to buy the land but enjoy a house as an owner:

It’s a combination of renting land + buying the house on that land or building a house on the rented land.

The ground lease :

Long-term leasing (30 years) of land is equivalent to the purchase of a ground lease. Thai law allows a foreigner to purchase a land lease that authorises him to rent land for 30 years. When the lease expires, it can be renewed, either free of charge or at cost, for a further 30 years.

In total, the Land Act authorises 2 renewals, i.e. 90 years. This lease is risk-free and your rights are protected. You are the full owner of the property built on the land.

This means (as indicated in the paragraph above) that for a minimum of 30 years and a maximum of 90 years you have full and complete enjoyment of the house. You can rent it out and collect the proceeds yourself, and you can sell it within the first 30 years or 2 times 30 years thereafter. Of course, the sale price is calculated on a pro rata basis according to the number of years you have left to rent the land.

The advantage of this kind of solution is that you are 100% free, 100% in order with the authorities and you can own the land lease in your own name. There’s no need to set up an LLC or have Thai partners. What’s more, renting (leasing) the land is less
than buying.

The disadvantage is that you only own the land for a certain period of time, admittedly quite a long time, but you do not pass on a permanent asset to your heirs. As a result, at the end of a 30-year, 60-year or 90-year ground lease, the buildings that have been constructed revert to the owner of the land.

Lastly, you have a fixed 30-year lease, but nothing obliges the landowner to automatically accept renewal for another 30 years and another 30 years after 60 years. Only the first 30 years are guaranteed.

Leasing land involves a reduced purchase price and the payment of an annual rent for the duration of the lease. This solution is less expensive and less complicated. It allows you to build on the leased land a house on which you have usus, fructus and abusus for the duration of the lease.

abusus for the duration of the contract.

Hope also lies in the evolution of Thai law over the coming years. It is highly likely that, with global globalisation and constant migratory flows, Thai legislation will evolve to allow land to be acquired more simply, and in particular
to a tenant of a land lease…

Surface rights :

There is a second way of renting land in Thailand: ‘droit de superficie’. A Thai person or company can grant this right to a foreigner. It is the right to own a building on a given plot of land, which is defined and registered with the land registry. Like the ground lease, the right to build can be for 30 years and is renewable. In fact, it simply corresponds to owning a property on a Thai person’s land.

This type of lease is used in particular when you accumulate an LLC to buy the land and then wish to build your property on it. The two systems are equivalent; it is the lawyer who is able to tell you which of the two systems is the most protective and the most suited to your expectations and needs.

Obligation to register:

The land lease is registered in the buyer’s name with the Royal Thai Land Department. It is drawn up in Thai.

The ground lease is transferable in the event of resale or inheritance:

– the duration of the lease
– whether or not the purchaser has the right to resell the property (i.e. the lease and not the associated land)

– registration fees
– the heirs to the lease in the event of death: in this case, a will should be drawn up in consultation with a lawyer.

In all cases, remember that the ground lease must be registered with the Land Department, otherwise it would only be valid for 3 years, regardless of any date entered in the ‘duration of the lease’ section, which would be considered ‘unwritten’. Both types of lease involve your obligation to pay property tax.

3 °/ I want to buy a flat or a house in a condominium :

Foreigners have the right to buy a condominium in Thailand. The law authorises the acquisition of full ownership of a unit (flat, house) in a building, in a residence, by natural or legal persons of foreign nationality.

The property is therefore in your own name or that of your SCI or company under foreign law, without you needing Thai partners or setting up a company under Thai law.

To do this, you need to fall into one of these 3 categories:

a-Foreigners have a permanent residence permit in Thailand.

b-Foreigners are governed by the Investment Promotion Act.

c- The foreigner who brings in foreign currency, who withdraws money from a ‘non-resident’ baht account or a foreign currency account in order to buy a flat.

Most buyers fall into the latter category. When transferring funds in foreign currency to a Thai bank, you must make it clear to the bank that the reason for your transfer is ‘to buy a flat’ and this must be notified.

This means that if you open an account in a Thai bank and transfer euros, dollars or Swiss francs to this account for the purpose of ‘buying a condominium’, you will be authorised to purchase the property. The Thai lawyer will take care of all the formalities, including those with the bank.

A condominium can be a flat, a studio or a townhouse, as long as it is part of a building complex with communal areas.

In practical terms, the first step in buying a condominium is to open an account in your own name with a bank in Thailand, which will enable you to obtain the bank certificates you’ll need later. When your funds are credited to your Thai account, the bank must give you the ‘Foreign Exchange Transaction Form’, which you will need :

– to repatriate your money if you ever wish to sell your flat.
– to register your freehold purchase with the land registry.

The second step is to make your choice of purchase, but that’s our job!

Once you have made your choice, you will need to check with us that :

– The quota of units that may be held by foreigners in the building has not been reached. A foreigner can sell to a foreigner. But foreigners may not own more than 49% of the total surface area of all the units in the complex.

– You have read the co-ownership regulations and seen what the rules and constraints are.

– You have checked the amount of the co-ownership charges and the taxes to be paid per year.

Once the money has been paid into your Thai bank account, once you have made your choice of property, once you have checked everything with our help… The lawyer will draw up the preliminary sales agreement with the seller. If the purchase is off-plan, payments are made according to a
are made according to a progress schedule.

The last stage is ‘transfer of title’: the final payment and finalisation of the transaction take place at the Thai land registry. You will pay with a bank cheque. We’ll be there to help you.

An estate agent will save you a lot of effort and time by offering you a range of properties to suit your price range and needs. Despite what many people believe, buying a property directly from a developer can involve greater expense than you had originally anticipated, unlike using an agent.

We have been specialising in off-plan development for many years and are used to negotiating with developers for ‘options’. The idea is that the final price should be ‘turnkey’. Since properties in Thailand are generally offered at a fixed price, a competent agent will act as a valuable liaison between you and the developer or vendor. He or she will be better placed to obtain the most reasonable price and represent your interests at every stage of the process.

In Thailand, negotiation is a one-off. If you don’t, the deal is lost and the owner won’t come back! Don’t forget that the most important thing in Asia is not to lose face!

On the other hand, if you are buying a property from a foreigner, you are under the authority of a classic negotiation that will involve several ‘back and forth’ meetings between the parties.

4 °/ Am I free to rent out my property, short or long term?

When you invest in Thailand, you may want to rent out your property when you’re not there, particularly if you only come to Thailand for a few weeks a year. Profitability in Thailand is very good, and aiming for a gross return of 10% or 12% is perfectly feasible. This obviously depends on the rental periods, the value for money and the facilities on offer.

In theory, there is no limit to seasonal rentals in Thailand. You can rent out your property for as long as you like, but for periods of at least 1 month. Your tenant must stay in your property for at least 1 month. This would seem to put the brakes on traditional seasonal rentals for 3, 5, 7 or 10 nights. The Thai government wanted to protect hotels and hotel residences from unfair competition.
.

The legislation has been made more flexible, and now allows short-term rentals. All you have to do is register your property with the Ministry of Tourism as a ‘hotel residence’ and meet a certain number of criteria, justifying the ‘homestay’ classification.

Long-term rental is no problem (3 months, 6 months, 12 months or 36 months), and there is a lot of demand for it too, but the profitability is lower, at around 5 or 6% gross.

We take care of managing the entire file, finding tenants throughout the world, managing the transfer of funds, checking the state of the property before and after departure and then, throughout the year, looking after the general state of the property (garden, swimming pool, maintenance and repairs).

Don’t hesitate to ask us about these points.

5° / What happens to my money?

This is obviously the question that investors in Thailand are asking themselves. Can I legally repatriate them to my country of tax residence?

Whatever happens, whatever investment you decide to make, you will have a personal bank account in Thailand and perhaps even a business account if you set up an LLC. You will therefore be free to use the electronic payment methods (debit cards, transfers) made available to you by the 

Thai bank throughout the world without having to justify yourself. You will also be able to repatriate your rental income to your country of tax residence once you have paid the Thai property tax and your Thai accountant or lawyer has sent you your tax certificate. Thailand and your country of tax residence have signed a ‘tax treaty’ together. This is the case between France and Thailand, for example.

It goes without saying that Thai property tax charges are much lower than those in other countries. If this is not the case, or if your taxation is more favourable in your country of tax residence than in Thailand, all you have to do is declare your property income in your country of tax residence and provide the Thai tax authorities with proof that it has been paid in your country.

Some tax treaties provide that if there is a difference in taxation between the two states, the taxpayer must declare and pay the difference to the tax authorities in his state of tax residence. In this case, it would be appropriate to create a Thai LLC for property rental, subject to Thai law. subject to Thai law.

The advice of your Thai lawyer and tax advisor will obviously be invaluable in the event of tax optimisation issues.

6° / How much will it cost me?

For the purchase of a property, you will have to pay Thai land registry fees (equivalent to notary fees) which are calculated on the sale price freely declared by the parties at between 3 and 5%.

You will also have to pay fees for the creation of an LLC (if this option is chosen), lawyers, tax advisers and registration fees, which you will have to negotiate with the law firm. A few thousand euros.

5% fixed real estate agent fees for the whole of Koh Samui and for all agents.

For the management of rented houses 20% of the rents collected for the managing agent and some accountant fees for the declarations.

All this information is for information purposes only and has no legal value in the contractual sense of the term. We recommend that you consult a local legal and/or tax advisor. This information is provided on an ‘as is’ and ‘as available’ basis.