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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