Foreign Ownership

Foreign purchasers are allowed under Thai law to purchase and own condominiums in Thailand. There are five criteriafor eligibility:

a)    Holding a residency permit under Thai Immigration law, or

b)    Permitted to stay in Thailand under the Investment Promotion law (BIO)

c)    A Thai registered entity with at least 51% of share held by Thai shareholder, or

d)  Foreign juristic entity in receipt of a promotion certificate under the Investment Promotion law (BOI), or

    e)   A foreigner or foreign entity remitting a foreign currency into Thailand, or withdrawing money from a Thai Baht account of the persons residing abroad, or withdrawing from a foreign currency account.

Fortunately the last criteria applies to most foreign condominium purchasers and therefore it is the most typical way for foreigners to buy a condominium in Thailand. According to the condominium act, foreigners or a foreign legal entity can normally acquire up to, but not exceeding 49% of a condominium block (direct freehold).

If a foreigner wants to register the purchase at the Land Office he has to submit a letter of guarantee from the condominium juristic person which proofs the proportion of foreign ownership among other documents. If the quota of 49% is already used, he can set a Thai company to purchase a condominium without restrictions. Another option is leasing. Condo-minimum leases, like land leased are generally prepaid for 30 years with options of renewing for two additional 30 year periods. In effect, the pre-paid rent is the same as a freehold or purchase price.

A further restriction according to the Condominium Act is that a foreigner must bring currency into Thailand to finance the purchase of the condominium. However, expats who are working in Thailand can use funds earned in Thailand on condition that their funds are paid into a non-resident account.

Further, the purchaser must obtain a Foreign Exchange Transaction form(FET) from the bank as proof of the remittance. This form will be issued by the receiving bank and is filed at the Land Department when the foreign purchaser registers the purchase. The amount of money fixed in the FET form must cover the whole of the condominium price. Should the remittance be less than $20000 USD, the bank will issue a "credit advice" in English which is not acceptable by the Land Office as proof of remittance for the condominium purchase. In case of this, the purchaser has to ask the bank to issue a "letter of guarantee" as evidence of remittance.

Since 2002, a foreigner is permitted by the Ministry of Interior to purchase land up to one rai (1600 square meters) for residential purpose, on condition that he invests 40 million Baht in Thailand, for some purpose other than ownership of real estate itself. Actually, this option is problematical for the majority of foreign investors because of the legal restrictions involved and is relatively seldom used.

Leasing is a popular and straightforward option to acquire a property in Thailand. The maximum duration of a lease permitted under Thai law for non-commercial usage is 30 years, (for commercial usage 50 years), renewable for two additional terms of 30 years (commercial usage 50 years), if contractually agreed.

IMPORTANT!  Any land leased for more than 3 years must be registered at the Land Department or it is only enforceable for the first three years. It is possible under Thai law to lease land as an individual rather than through a Thai company.

A further option is to establish a Thailand-registered company, preferably a Thai limited company, to acquire land. It needs a minimum of 7 different shareholders at all times, but only one director who can be a foreigner. At the beginning this director may have to be Thai in order to apply for the Tax ID and VAT registration of the Company. Thai law (land Code) requires that at lease 51% of the shares are held by Thai nationals and a maximum 49% of the shares may be owned by foreign shareholder because the land Code prohibition on foreign land ownership includes not only foreign individuals, but also Thai registered companies in which  foreigners own more that 49% of the shares.  Because there's no restriction under Thai law that one share must equal one vote, it is allowed to issue classified shares: The A-Shares ("Ordinary Shares") where the holder one share is entitled to one vote and the B-Shares ("preferred Share") where a shareholder must have multiple shares in order to obtain one vote. The foreign shareholders will subscribe to all A-Shares, whereby the B-shares are held by Thai holders. This structure enables the foreign minority shareholder to hold fewer numbers of shares, but in fact control the company by voting rights.

Since the foreign shareholder of the Thai Company can be a natural or a juristic person, it is possible to use an off-shore entity, e.g.a BVI (British Virgin Island) Company, for tax efficiency.

Currently, managed estates are very common. They all vary in structure. Normally the managed property is offered as a freehold purchase through Thai companies or with a leasehold structure concerning the buildings in combination with subscribing to a certain number of shares in a Thai company, which owns the land underneath the properties that are leased. This structure is advisable because the lessees of the buildings are more secure when they are also indirectly the "joint-landlords". With a land owning company which effectly protection that a lease is protected from being terminated by requiring typically at lease 75% of the owners to terminate a lease.

The potential problem with an "owner operated" managed estate is the necessity for the majority of the owners to confer & meet with each other. This may not be deemed as a practical or indeed attractive arrangement.

Always consult a lawyer in any property conveyancing matter

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