1.) Investment Information about Thailand
As a developing country, Thailand has made a great effort to attract foreign direct investment from aboard as a means to enhance economic and technological development. The Board of Investment has been established to promote investment by providing incentives to foreign investors who have chosen Thailand as their preferred destination.
In addition, Thailand has signed a number of bilateral investment treaties with its trading partners to provide protection for each other’s investments. In addition, the Asian Investment Guarantee Agreement provides protection for investments among Asian member states. However, Thailand will accord such protection only to investments that have been specifically approved in writing for protection by the Ministry of Foreign Affairs of Thailand.
The Foreign Business Act has defined the terms and conditions for foreign investors to comply with, should they wish to make investments in the Kingdom. It lists the sectors or sub-sectors that require approval from the director-general of the Department of Business Development under the Ministry of Commerce; those that require approval from the Cabinet; as well as those that are prohibited. (Board of Investment (2012). Foreign investment in Thailand. http://www.boi.go.th, )
Even though specific laws and regulations exist for sectors and sub-sectors such as finance, telecommunications, logistics and insurance, there is still some resistance to taking foreign investors off the reservation lists.
At present, there is available a one-stop service for foreign investors asking for investment incentives and exemptions from The Foreign Business Act requirements at the Board of Investment. Those who want to have majority holdings in any service sector or sub-sector in List 2 or List 3 have to file for approval from the Department of Business Development, while those who want investment protection provided for under a treaty have to first get prior consent in the form of a certificate of approval for protection from the Committee under the Department of International Economics of the Ministry of Foreign Affairs, unless permits are given under the Foreign Business Act or Board of Investment. (Board of Investment (2012). Foreign investment in Thailand. http://www.boi.go.th, )
2.) Why Thailand Is an Intelligent Property Investment Location
- An exotic long haul destination, Thailand is also a sophisticated tourist destination with great universal appeal.
- For thousands of people who have worked in Asia for many years, Thailand is a very attractive retirement destination, in which the living environment will feel familiar.
- Retirement visas are available for foreigners over 50 years of age, according to financial means.
- Thailand has good schools, an efficient health care system and it is seen as a friendly country in which to live or visit.
- Thailand boasts beautiful mountains, dense forests and stunning beaches.
- With a tropical climate and cities teaming with culture, Thailand entices visitors back each year.
- Warm weather for winter holidaymakers between November and February.
- The relatively undiscovered nature of Thailand means that property prices here remain far below those in the more established European markets, although they are growing quickly and strongly (around 10-15% a year).
- Thailand is the largest growth market in Asia. Some businesses choose Thailand as a regional base from which to keep their employees working all around Asia.
- Thailand has recently attracted significant foreign investment. It has become one of the Asian economic leaders and is one of the fastest-growing economies in the region.
- The completion of the Suvarnabhumi-Bangkok International Airport is expected to spur growth in commercial property markets in eastern Bangkok as well as make Thailand even more accessible by air.
- Thailand is one of the cheapest places to fly to in Asia.
- The country has strong business links with China and has an excellent infrastructure as well as world-class facilities in many resort towns.
- Property is much cheaper in Thailand than elsewhere and an increase in overseas interest in property purchase has helped to create an economic recovery in Thailand. Property investors who bought post 1999 have witnessed impressive capital growth, particularly in major cities.
- Rental potential is great, due to increased government spending luring growing numbers of tourists.
- No capital gains tax for private investors, and low ongoing taxes.
- Today foreigners are regarded by the government as a big investment opportunity in Thailand.
3.) Tourism and Hospitality Industry in Thailand
Thailand is an exotic and beautiful country with natural sceneries varying from white sandy beaches to fresh mountains. Thai culture is also multifaceted and rich, ranging from modest country villages to cosmopolitan cities. Buddhism adds its own interesting characteristics with its temples and monks wandering the streets. Thailand also provides lots of opportunities for various hobbies and activities. (Tourism and Hospitality in Thailand. http://www.amk.fi/ opintokokonaisuudet)
- Tourism Organizations
There is the Ministry of Tourism and Sports – under which the Office of Tourism Development and the Tourism Authority of Thailand operate.
Most tourists to Thailand come from Japan, Korea, Malaysia, and China. The major representatives in Europe are Great Britain, Germany and Sweden. Many tourists also come from the USA.
The international objectives are categorized geographically and allocated to specific groups such as golf, wellbeing and spa, and family tourism, etc. Tourism products have been gathered under four clusters: 1. Sea and beach resorts, 2. Nature, parks and mountains, 3. History and culture, 4. Special interests such as food, golf, spa, and shopping.
Thai Government has approved a strategic plan for tourism, aiming to make Thailand the major tourism destination in Asia. The goal is to attract 20 million yearly tourists from all over the world and to make an annual profit of Baht 800 billion by the year 2021.
The Thai Hotels Association was founded in 1963 to serve hotel entrepreneurs and tourism, as well as to promote and strengthen cooperation between the members of the association. (Tourism and Hospitality in Thailand. http://www.amk.fi/opintokokonaisuudet, )
4.) Foreign Investment in Phuket
The demand has gone up with the rising number of foreigners planning to buy a second home in Phuket. Given the strong demand, a number of property developers from Bangkok and other provinces have scaled up their investment in residential projects in Phuket.
Phuket’s top-tier hotel market has a strong representation of guests from Asia and Europe. Asian guests come mainly from Japan, Korea, Hong Kong and Taiwan while Europeans come mainly from the UK and Germany. Thailand, and the key destinations of Bangkok and Phuket, will continue to be one of Asia’s most active hospitality-investment markets. At the peak of the tourism season – between October and mid-April – occupancy of up to 90 per cent is recorded, and even the off-season records between 60 per cent and 70 per cent occupancy.
Tourist numbers in Phuket recovered within a year of the tsunami disaster in 2004 and drove a number of property developers to expand their investment in the resort’s hospitality sector.
Phuket: Overview of Hospitality and Tourism business
Phuket accommodates 4.1 million tourists, and generates 66 billion Baht revenues from tourism, ranking only 2nd to Bangkok and Phuket accommodates 25% of foreign tourists visiting Thailand with generates 53 billion Baht tourism “export income.” Tourism Authority of Thailand (2020). The number of tourists visiting Phuket. www.tat.or.th, )
As a major tourism city, Phuket has
– Gross Domestic Product per capital 2.5 times of average Thailand
– Low unemployment rate
– Wage level 1.6 times of average Thailand
– Hotels and restaurants create value-added at 37% of Phuket’s Gross Domestic Product and employs 23% of labor force in 1999.
5.) Real estate and Developer in Phuket
According to Property Report (2019), there is grown demand for villas and condominium particularly for long stay tourists. There is also a growing demand from tourists to own their own resort properties in Phuket. Ellis (2019) revealed that resort property development is an extension of the tourist industry and is an important element in attracting high income short and long-term stay tourists. (Best Real Estate (2019). Real Estate in Phuket. http://www.best-real-estate-thailand.com/dest-real-estate-phuket, )
Trend of real estate market in Phuket
Phuket’s property market is enjoying a boom fuelled by rising demand from expatriates and across the entire spectrum of properties available. Transaction numbers and values in 2017 and 2018 so far have exceeded those for the same period in 2016. (Best Real Estate (2019). Real Estate in Phuket. http://www.best-real-estate-thailand.com/dest-real-estate-phuket, )
According to real estate agents in Phuket, the Phuket market is experiencing an upward trend which appears in no danger of ending anytime soon. Transaction numbers and values in 2017 and 2018 so far have exceeded those for the same period in 2016. Indeed, signals suggest that Phuket is the early stages rather than the later stages of growth, both in demand and prices. More buyers seeking the same type of idyllic properties with a good location and view will create an increase in land prices. When widely available financing becomes available, expect the rate of price increase to exceed that currently occurring.
Condominium demand and supply is booming
Total condominium supply on the island has more than doubled over the past two years; there are more affordable projects on the island’s east coast, which has long been a favorite of villa developers.
The West Coast of the island remains the preferred location for condominium developers, with 73% of units under development on this coast. According to a survey conducted by Raimon Land on the condominium sector, clearly shows that prices of condominiums have risen in the last two years.
In term of enquiries, 90-95% of the demand is foreign with 65% from prospects living outside of Thailand, mainly from the USA, UK, Australia and Scandinavia. (Best Real Estate (2019). Real Estate in Phuket. http://www.best-real-estate-thailand.com/dest-real-estate-phuket, )
Luxury condominium projects
The West Coast of the island is now seeing a shortage of land suitable for developments with sea views, leading to upward pressure on the unit prices in existing and future projects which encompass these traits. Higher development costs, especially for those with sea views combined with high beachfront land prices, have convinced developers to focus on condominium projects, rather than villas.
Due to the scarcity on beachfront land in Phuket, most condominium developments are built on the hillside to maximize views of the Andaman Sea. Building codes in Phuket force developers to build smaller scale projects with low-rise buildings. In addition, developments can be no higher than 80 meters above sea level, which further protects the island from over-development.
Very attractive rental market
Phuket is also experiencing a very positive response to the private home, apartment rental market. Many regular visitors who are familiar with the island find that the facilities offered by the traditional hotels or resorts to be somewhat cloistered.
With the current upswing in development in many areas of the island, Phuket is becoming known as a destination where you can take advantage of renting a privately owned home for either short or long term.
6.) Travel Agencies
There are many activities to join in Phuket as following :
- Scuba Diving : Phuket is the center the scuba diving business. Popular locations for diving include Similan, Surin and Phi Phi islands. Instruction and equipment are the main beaches, with teachers of various nationalities. Beginner courses are inexpensive, so if you have never learned to scuba dive, Phuket is a great place to learn it.
- Snorkelling : The bays in Phuket contain many interesting coral reefs. Equipment can be rented from dive shops around the island. Easily accessible reefs are at Patong, Kata and Kamala beaches.
- Swimming : Swimming at some beaches during the monsoon season is not recommended. Look for posted signs and flags indicating conditions for safe swimming for examples, the red flag indicates swimming in the ocean is dangerous and in most cases is not allowed.
- Sailing : Most classes of boats – from kayaks to yachts are available for rent. Sailing trips are available for half-day, day and overnight trips as well as sunset cruises. Sailing courses for beginners and intermediate are offered by several sailing school.
- Wind Surfing : Boards may be rented by the hour, half-day, full day, or week at most major beaches.
- Phuket Submarine : Phuket Submarine Co. Ltd. operates the first and only submarine tours in Thailand. The dives are in the surrounding waters off of the Southeast coast of Phuket. A fun and exciting speedboat takes customers to the submarine. After you board the submarine you will descend in air conditioned comfort to depths of thirty meters. It is an once in a lifetime opportunity to sail in a real yellow submarine.
- Deep Sea Fishing : Many travel agents operate deep sea fishing tours with well equipped fishing boats.
- Sea Canoeing : Touring the limestone caverns in Phang Nga Bay is an unforgettable experience. Inflatable canoes squeeze into the inner sea of the island. Day and Multi-Day tours are available. Tour packages include all transportation and lunch.
- Golf : Phuket has top golf courses with service that makes it a worldwide center for golf lovers.
- Horseback Riding : Guided tour tours on horseback are another way to relax while sight-seeing.
- Mountain Biking : It is easier than it looks. Anyone can enjoy himself on a mountain bike, which has gearing sufficient to take the mightiest incline.
- Herbal Saunas and Thai Massage : There are available in a variety of price ranges and levels of expertise. Spa packages are Banyan Tree and Evason Phuket & Six Senses Spa
- Thai Boxing : ‘Muay Thai’ as it is called in Thai, strikes blows at and with every part of the body. The stadium is located at Saphan Hin in Phuket Town and bouts are held Friday nights.
- Target Shooting : Take aim with guns from small caliber to big bore and shot guns
- Paintball : Paintball are play at war with guns that shoot paint instead of lead.
- Bungee Jumping :
Tarzans Jungle Jump
Jump from the top of a 53 meters crane toward a pond while connected to a long elastic bungee cord; very exhilarating.
Tarzans Catapult Bungee
It uses an elastic cord similar to the one mentioned above, but relies upon a catapult to shoot customer up in the air.
- Patong Go-kart Speedway : A well planned raceway and high-powered go-karts await go-karting enthusiasts.
- Phuket Water Ski Cableways : An inland water skiing course on a man-made lake. Skiers are pulled round the oval track at speeds of up to 30 years overhead cables. Instruction is free for beginners.
- Bowling : Let the balls roll at Pearl Bowl in Phuket Town
7.) Real Estate Agents in Phuket and Agency Law in Thailand :
Real estate agents are an integral component of the property industry in Thailand. As in all countries, such professionals facilitate sales and purchases of property. Indeed, for foreigners who may live outside Thailand for part of the year, selling a villa or condo is nearly impossible without the assistance of an agent. In order to use any professional service, it is worth understanding the extent of regulation touching that profession, to understand the level of service; integrity and ethical standards which ought to be present in a commercial relationship with an agent. (Image Asia (2019).
It should be noted that there are Thai real estate agent organizations in Thailand, some of which are reputable and carry weight due to their membership and organization. However, there is no single umbrella organization to point to as the only official organization. This is not specific to Thailand, as in many other jurisdictions there appear to be multitudes of “real estate agency organizations”.
Appointing an Agent
Appointment of an agent in connection with the sale and purchase of property must be in writing. According to Civil and Commercial Code, if an underlying transaction is required by law to be in writing, then the appointment of an agent pertaining to such transaction must also be written. Since sales of immoveable property (i.e. land or buildings) are required by law to be in writing, the appointment of a real estate agent in furtherance of the transaction must also be in writing. This, of course, emphasizes the need to avoid reliance upon verbal assurances.
Under Civil and Commercial Code, agents have two types of authority to act on behalf of the principal – general authority and special authority. General authority allows the agent to do acts of management on behalf of the principal, except for, among other things, selling or mortgaging immoveable property; and leasing of immoveable property for more than three years. Special authority allows an agent to do “whatever is necessary” to execute the matters entrusted to him or her by the principal. Thus, if someone requires an agent to sell property on his or her behalf, or lease property for a term greater than three years, such special authority is required.
An agent’s legal duties are also set forth by Civil and Commercial Code. Under the law, an agent has a statutory obligation to act according to the express or implied directions of the principal. It is thus important for a principal to clearly provide instructions for an agent pertaining to a transaction. Furthermore, the agent is required to provide the principal with all relevant information pertaining to the conditions of the transaction. As such, the principal has the right to be updated by an agent at all times. After the agency has come to an end, the agent is required by law to render an account to the principal concerning the matter.
8.) Foreign investment in Thai vessels
The Andaman Sea is one of the premier destinations for boating services in Southeast Asia. However, foreign investors who wish to participate in commercial activities in Thai waters, such as cruises, diving, and transportation and ferry services, among others, should be aware of Thailand’s regulations to ensure compliance.
Ownership of Thai Vessels
The primary law governing foreign ownership of vessels in Thailand is the Thai Vessels Act (B.E. 2481) (1938) (as amended by the Act B.E. 2540) (1997). The Vessels Act highly restricts foreign ownership of Thai-registered vessels that are used for the purposes of “trading in Thai waters”. It should be noted that “trading” is broadly defined under the Vessels Act, and includes any activity related to “transportation of passengers or objects or pulling objects from any port or place to other port or place within Thai waters for commercial purposes”. For example, a vessel operating a cruise around Phuket and surrounding waters would be considered “trading” for purposes of the law, and therefore subject to the limitations on foreign ownership. (Limcharoen Hughes & Glanville (2012). Ownership of Thai Vessels)
Foreign individuals are prohibited outright from owning Thai vessels for commercial activities. In other words, only companies or partnerships (known as “juristic persons” in Thai legal parlance) with a minimum of 70% Thai ownership may register a Thai vessel. The levels of foreign investment in Thai vessels engaged in commercial activities may be summarized as follows:
- Limited partnership: All of the partners must be Thai individuals and nationals. However, foreign investors can own up to 30% of the partnership’s capital.
- Limited company: A minimum of 50% of the company’s directors must be Thai nationals. A minimum of 70% of the company’s registered capital shares must be owned by Thai parties (i.e. foreign investors can own a maximum of 30% of the company’s shares).
- Public limited company: A minimum of 50% of the company’s directors must be Thai nationals. A minimum of 70% of the company’s paid-up capital shares must be owned by Thais parties (i.e. foreign investors can own a maximum of 30% of shares).
It is important to note that the ownership restrictions described above strictly apply to Thai vessels engaged in commercial ventures in Thai waters. The Vessels Act contains a separate set of restrictions on foreign investment in Thai vessels engaged in international maritime transport. Such vessels must be owned by either a limited company or public limited company, with a minimum of 51% of the company’s directors being Thai nationals, and a minimum of 51% of the shares owned by Thai investors.
9.) Legal Challenges in Phuket
- Foreign investment – overview
The Foreign Business Act (1999) governs investment by foreigners, regardless of whether such foreigners are individuals or corporations. Thailand, like most countries, places restrictions on investment by foreigners (see the section on restrictions, below) to protect certain industries and national interests. Thus, a key issue is determining whether an investor is considered a “foreigner” under the Foreign Business Act (1999), and thus subject to restrictions. For purposes of the Foreign Business Act (1999), a foreigner is a non-Thai individual or entity (e.g. a company or partnership); a company registered in Thailand where non-Thai individuals or entities hold at least 50% of the shares; or, an entity that has half of its capital invested by non-Thais. Under this definition, even if a company is formed and registered in Thailand, it will be considered “foreign” if non-Thais own 50% or more of the shares, or contribute 50% or more of its investment capital. (Limcharoen Hughes & Glanville (April, 2012). Foreign Investment Overview. http://www.windowonphuket.com/features_property_phuket/ limcharoen – glanville-056.htm,)
It should be noted that often there are high profile cases in the media and courts in Thailand regarding whether a company has become by virtue of sometimes complicated ‘cross-shareholdings’ a foreign company, when in fact it is supposed to remain according to the Foreign Business Act (1999), Thai. Such cases can become highly politicized, but can also have an effect on companies with foreign shareholdings operating in the same field or industry as the high profile case in dispute. (Limcharoen Hughes & Glanville (April, 2012). Foreign Investment Overview. http://www.windowonphuket.com/features_property_phuket/limcharoen-glanville-056.htm, [Online] Retrieved 20 January 2013)
Challenges of Basic requirements
Foreigners must meet certain requirements under the Foreign Business Act (1999) to operate businesses in Thailand. For example, foreigners are not allowed to invest in the Kingdom if they have been deported or have deportation pending. Investment is also disallowed if a foreigner resides in Thailand without permission under the immigration laws.
The Foreign Business Act (1999) also contains minimum capital requirements for foreign businesses. Generally, the minimum capital requirement is two million Thai Baht, but can be more depending on the industry. Moreover, for foreigners who receive permission to operate businesses in specific restricted sectors, the minimum capital requirement is not less than three million Thai Baht. However, under the Foreign Business Act (1999), these minimum capital requirements do not apply if the funds used by foreigners to invest in businesses were acquired through previously operated businesses in Thailand.
Restrictions under the Foreign Business Act (1999)
One of the most important elements of the Foreign Business Act (1999) is the limitation on industries in which foreigners can invest. The Foreign Business Act (1999) categorizes such industries into three lists, which generally include sectors, which involve national security; local culture; the environment; and fields that Thais are, according to regulation but not necessarily public opinion, not yet ready to compete with foreigners. Foreigners are prohibited from participating in the activities contained in the first list, while special permission from the government is needed with regard to the second and third lists. And even if such permission is obtained, which involves a complicated process, foreign shareholding is very limited. The restricted sectors are extensive, but a few noteworthy ones include: newspapers; radio and television stations; farming; forestry; land trading; land, waterway, and air transportation; production of gold ware and silverware; mining; accounting services; legal services; architecture and engineering services; construction (with certain specific exceptions); broker or agent business (with certain specific exceptions); advertising business; hotel business (except for hotel management services); and selling food and beverages (e.g. restaurants and bars). While foreigners can be observed operating in semi-ownership capacities in some of these fields, the nature of any structuring to accommodate foreign involvement in these areas requires proper knowledge of the application of the law. (Board of Investment (2012). Foreign Business Act. http://www.boi.go.th, )
Challenges of Nominee arrangements and penalties
Foreigners have, in some cases, attempted to circumvent the Foreign Business Act (1999)’s restrictions on investment fields by using “nominee” Thai shareholders. Using such nominee shareholders gives the appearance that the company is actually domestic (i.e. majority-Thai owned), even though a foreign party controls it. Such an arrangement is illegal and is criminalized under the Foreign Business Act (1999). The law expressly provides criminal penalties for Thai nationals and companies that participate in nominee structures. Furthermore, foreigners that illegally operate in restricted investment fields are subject to criminal penalties, including fines and prison. Such penalties extend to a company’s directors, partners, and shareholders, if the company itself is found to be operating in a restricted sector. It is not uncommon to hear foreigners publicly state that the authorities are lenient in application of the law, which can be a risky view should any business activity or dispute bring the scrutiny of the authorities. It is frequently not possible to rely upon protection from the law if the starting point is to be in breach of the law itself.
- Leasehold Structures – Overview
Phuket and neighboring provinces contain some of the finest villa developments in Thailand. However, under Thai law, foreigners are generally prohibited from owning land. However, they are, as many are aware, allowed to own buildings. Therefore, a common method for foreigners to purchase a villa is to lease a land plot (or plots) from a Thai landowner, and purchase (or construct) the villa. (Phuket Gazette – Thursday, January 17, 2013)
Thai law permits a maximum registration lease term of 30 years. At the end of the 30 years, the lease may be renewed together by the lessor (the landowner) and lessee (the buyer) but such a renewal agreement is by contract only, not pre-registration at the land office. Most land lease agreements for the leasing of land in Phuket’s villa developments contain provisions stating that the lease will be renewed for two additional 30 years terms. As such, a common lease arrangement is 30 years plus 30 years plus 30 years, for a total of 90 years, thus providing a time period that can be considered “near-freehold”. However, many potential buyers and their international legal advisor question the validity and enforceability of the renewal term.
Challenges of leasehold arrangements
As stated above, a significant drawback with such leasehold arrangements is that there is no legal guarantee that a landowner will actually renew the lease. Thai law does not require such lease renewals. A lessor’s “obligation” to renew a lease is merely a contractual promise. Therefore, if the lessor chooses not to renew the lease, it is a breach of contract, and not a violation of the law. The likelihood of a lessor breaking a contractual promise to renew a lease increases when the land is transferred to a third party, as is likely during a 30 years term, since such a third party may (incorrectly) conclude that it is not under the same obligations as its predecessor.
Additional, a lessee’s remedies are limited in the event of a lessor’s breach of a contractual obligation to renew a lease term. To compel renewal, a court action must be initiated. However, the damages that are available regarding a breach of a renewal clause are restricted to damages, and a lessee cannot “force” a renewal.
However, despite the challenges outlined above, a structure is available that can provide greater security for villa owners. The structure is known as “collective leasehold”, where owners, as a group, take a minority shareholding in the landowning company via a corporate entity. Through corporate and legal structuring, the owners would be able to provide their opinions on issues regarding the landowning company. Importantly, this would include renewal of leases.
This structure works by all the owners in a development each owning shares in an offshore (non-Thai) company. Usually, such shareholding corresponds with the land plots leased. In other words, if an owner leases two plots, they would own two shares in the “owners’ company”. This offshore company would then purchase a minority stake in the landowning company.
As such, the owners have a say in the landowning company’s corporate decision-making, especially regarding the development’s land. The end result of the collective leasehold structure is that owners have more control over their own villa investments.
The primary drawback of the collective leasehold structure is that it requires the full consent of the landowner to be implemented. For example, the lessor must agree to allow the lessees to own a stake (even if a minority portion). However, the structure can ultimately be beneficial to landowners, who are often the villa project’s developer; in that greater owner security means a more attractive project to potential investors.
- Purchase Condominium: Three key issues for Buyers to Consider
Foreign investors seeking to purchase condominium units in Thailand should consider three key legal issues when deciding on their investment. These issues are: 1) whether the condominium development where the unit being offered is (or will be) “registered” under Thailand’s Condominium Act; 2) whether the unit falls within the “foreign freehold quota”; and 3) whether the investor can meet the currency requirements as set forth under the Condominium Act. (Limcharoen Hughes & Glanville (May, 2012). Purchase Condominium. http://www. mydestination.com/phuket)
Condominiums are regarded as such by the law if they are registered under the Condominium Act. In other words, apartments not registered are not “condominiums”, as that term is defined by the law. This distinction is important in that an apartment may only be legally owned in Thailand if it is validly registered as a condominium. Non-registered apartments cannot be purchased and sold on a freehold basis. As a result, unsuspecting buyers of unregistered apartments do not have valid ownership. Moreover, buyers of unregistered apartments, as oppose to registered condominiums, are not protected by the numerous consumer-oriented provisions contained in the Condominium Act.
It is therefore incumbent on buyers of condominium units to conduct proper due diligence to ensure that the condominium development is validly registered under the Condominium Act. Note, however, that buyers often enter into contracts to purchase a condominium before, or during, construction, and prior to registration taking place. In these circumstances, due diligence must be carried out to ensure the developer has prepared the correct structure to comply with the necessary processes for registration. Additionally, a prudent buyer should ascertain whether the project’s Environment Impact Assessment has been approved and a valid construction permit issued. A buyer should also look into whether the developer has received sufficient financing from a financial institution, as well as the developer’s track record. Positive results on these issues would indicate that the building will likely be successfully registered.
Foreign Freehold Quota
In accordance with the Condominium Act, a maximum of 49% of a condominium’s total registration area is permitted to be owned by foreigners. In other words, Thai nationals must own the majority of a condominium’s registration area. If the “foreign freehold quota” of 49% has been sold out, the remaining units can only be leased, not sold, to foreigners. Therefore, a potential buyer should determine the foreign-to-Thai-ownership ratio in the condominium development, and ensure that the unit being considered for purchase falls within the 49% foreign freehold quota.
Under Section 19 of the Condominium Act, a foreign national (both individual and corporate) may own a condominium unit if the full purchase price is paid for via foreign currency remitted to Thailand. As such, foreign buyers of condominium units must provide evidence that the funds they used to purchase the condominium came from overseas through presentation of a Foreign Exchange Transaction Form at the Land Office. An Foreign Exchange Transaction Form serves to certify the transfer of currency from overseas to purchase property in Thailand. Furthermore, since most condominium transactions in Thailand are in Thai Baht, a foreign investor should pay close attention to the relevant exchange rates, as well as any currency fluctuations. (Limcharoen Hughes & Glanville (May, 2012). Purchase Condominium. http://www.mydestination.com/phuket)
On the Foreign Exchange Transaction Form itself, buyers are required to specifically state that the funds are being remitted to Thailand to acquire a particular condominium unit. If the foreign purchaser changes the unit number of the unit, the remittance form also must be amended for registration at the Land Office. Therefore, in any acquisition, an investor should retain all remittance slips and receipts from the condominium’s developer. It should also be noted that a foreigner’s possession or generation of funds in Thailand is not a prohibition from purchasing a foreign freehold condominium unit. In such a case, the foreigner will only have to provide evidence of the source of the funds.
- Real Estate Agent and Broker – Overview
Thai law regulates agents’ conduct via the Civil and Commercial Code. The Civil and Commercial Code’s relevant provisions apply to all agents, and not just those involved in the real estate business. The Civil and Commercial Code also contains rules governing brokers (note the difference between agents and brokers – an agent acts on behalf of a principal, such as a seller or buyer, while a broker introduces an opportunity for a contract to be concluded); although often, an agent and broker may perform the same task. (Window on Phuket (May 2012). Real Estate Agent. http://www.windowonphuket.com)
Challenges of real estate agent
Importantly, an agent is liable for injury resulting from negligence or the non-execution of the agency. As a result, in a real estate transaction, if an agent commits a negligent act that causes harm to any of the relevant parties, the agent can be held liable. Furthermore, a principal is bound to third parties by the acts of an agent performed in the course of the agent’s duties. Thus, if an agent provides, say, a purchase price to a prospective buyer, the seller/principal is bound by that price if relied upon by the buyer. There are many ways for discussions on price or terms to be unclear or undecided. A common international method is to state that terms are “subject to contract”, which, in actual fact, can mean terms are agreed in principle and could be changed on either side without liability. This is a difficult area to assess when emails are exchanged quickly, combined with telephone calls and other actions. It is recommended to maintain a standard of communication which clearly states and repeats the principle terms in each exchange of correspondence.
If an agent acts outside the scope of his or her authority, the principal is generally not bound by the agent’s actions. The principal, however, can be bound if he or she “ratifies” the agent’s unauthorized action. If such ratification by the principal doesn’t exist, the agent is personally liable to the third party.
Challenges of Brokerage
The Civil and Commercial Code also provides rules governing brokerage arrangements. While agents may act on behalf of a principal, brokers facilitate a deal and introduce the parties to a contract. Under the Civil and Commercial Code, brokers are entitled to receive remuneration (usually in the form of a commission) only if their introduction/procurement of the parties was responsible for the conclusion of the contract. Importantly, a broker is generally entitled to remuneration even if no written contract exists between a party and the broker. Further, a broker can be reimbursed for expenses only if agreed upon by the parties. Expenses can be reimbursed even if the contract is not concluded. (Window on Phuket (May 2012). Real Estate Agent. http://www.windowonphuket.com, [Online] Retrieved January 2013)
Pursuant to the Foreign Business Act (1999), real estate agency and brokerage are restricted industries. They are categorized as being fields in which Thais are not yet ready to compete with foreigners. As such, foreign ownership in these fields is greatly limited. Any foreign participation in such business must be carefully structured in strict accordance the law. There are real estate agencies in Thailand which do have foreigners working for those companies – and any such companies must be mindful of compliance with the relevant rules regarding their own structures, payments to staff, ratio of foreign and Thai staff and allocation of duties.
- Foreign investment in Thai vessels
Challenges of Prohibition against nominee ownership
Importantly, the Vessels Act expressly prohibits Thai persons or entities from acting as an owner of a registered Thai vessel in the stead of a foreign party. As such, it is illegal for a Thai national to either individually own, or be a partner or shareholder in a registered Thai vessel in the place of a foreigner, when the foreigner actually “controls” the vessel. When registering the vessel with the relevant authorities, evidence must be submitted that the ownership requirements are met. First, a statement must be provided stating that foreign participation is limited in accordance with the Vessels Act. Second, actual evidence offering proof of the statement must be submitted.
Furthermore, the penalties for engaging in nominee arrangements are criminal in nature. The Vessels Act states that “nominee”-owned vessels may be detained by any competent official. Moreover, Thai parties who act as nominees in violation of Vessels Act are subject to a maximum penalty of five years imprisonment and a fine not exceeding 500,000 THB. Additionally, a foreigner who either employs or consents to the Thai nominee to commit the violation is subject to the same penalty as the actual violator. (John Frangos (2012).Nominee Ownership. http://www.windowonphuket.com)
Pursuant to the Vessels Act, foreign investors are prohibited from leasing Thai-registered vessels to engage in commercial activities. Additionally, every crew member of a Thai vessel that engages in business in Thai waters must be a Thai national. This includes vessels that are co-owned by foreign investors. However, crews on Thai vessels engaged in international maritime transport are subject to a more relaxed nationality proportion. At least 50% of all crew members are required to be Thai nationals on such vessels.
10.) Legal Frame work
- The Law system
Thailand has a codified system of law as a result of reforms instituted by King Chulalongkorn (King Rama VI), at the turn of the nineteenth century. The major legislative codes are the Civil and Commercial Code, the Penal Code, the Criminal Procedure Code, the Revenue Code and the Land Code. The content of the Codes was drawn from the laws of other countries having codified systems (e.g. France, Switzerland and Germany), from countries with common law system (e.g. Great Britain) and from the traditional laws of Thailand. (Doing business in Thailand (2011). Civil and Commercial Code. Abailable at http://www.thailandlaw.com)
The supreme law of Thailand is the Constitution .This is supplemented by Acts of the Thai Legislature, Royal Decrees, Emergency Decrees, Ministerial Regulation, Ministerial Notifications, other governmental notifications and local government regulation.
The objectives of the Constitution are outlined in the preamble: to promote and protect the right and liberties of the people; to provide for public participation in governance and inspection of the exercise of the State power; and to improve the efficiency and stability of the Kingdom’s political structure .The measures and principles of the Constitution are all intended to meet these objective.
Laws are normally drafted in broad term, especially laws regulation commercial activities. Broad powers are delegated to government ministries or organizations which are empowered to issue notifications or regulations. (Doing business in Thailand (2011). The Courts. Abailable at http://www.thailandlaw.com )
The Court of Justice is divided into three tiers: the Supreme court (Sarn Dika); the Court of Appeals (Sarn Uthorn); and the Court of First Instance (Sarn Chumtorn). There are also separate Juvenile, Labour, and Tax Courts. There are also a number of specialized courts; the Central and Regional Intellectual Property and International Trade court and the Central Bankruptcy Court. All these courts were created under their own enacting legislation, which also established their specialized procedures. The Constitution established a separate system of Administrative Courts to deal with administrative law and administrative contract matters. The constitution Court was also established to deal with governmental matters and constitutional questions. The Military Courts were established to try and adjudicate military criminal cases and other cases as provided by law. All cases are decided by judges, as there are no juries.
- Labour Laws
The labour force is largely non-unionized. Although labour unions do operate under the auspices of the Labour Relations Law, the working conditions of labour are governed more by statute than by collective agreements. (Doing business in Thailand (2011). Labor Laws. Abailable at http://www.thailandlaw.com)
Leave and Holidays
Under the Labour Protection Law, there are employees, whether full- or part-time, seasonal, casual, occasional, or contract, are entitled to weekly leave and traditional paid holidays. Employees are also entitled to paid annual holiday-leave. There are provisions for certain maximum periods of paid sick leave and military leave if military service is required by law, and partially paid maternity leave. Maximum working hours are fixed at eight hours per day and 48 hours per week, or seven hours per day and 42 hours per week for work.
Any employee who has worked for a continuous period of 120 days or more is entitled to severance pay if their employment is terminated without cause, and “cause” is very limited under the law. Employees are not entitled to severance pay if they are hired for a maximum period of two years and for work that is, by its nature, occasional, casual, or seasonal, or for work under a project in respect of which the employee and the employer have executed an employment agreement in writing stipulating the commencement and termination dates of employment. Severance pay entitlement depends on the period of employment and ranges from 30 days’ wages for service of 120 days to one year, to 300 days’ wages for service of 10 years or more. Regardless of the amount (if any) of severance pay due to the employee, the Labour Protection Law and the Civil and Commercial Code require the employer to provide the employee with notice of termination. Such notice must be given at or before any time of payment, to take effect at the following time of payment, although not more than three month’s notice is required. Payment for an equivalent length of time can be given in lieu of such notice. (Doing business in Thailand (2011). Labor Laws. Abailable at http://www.thailandlaw.com )
Regardless of the amount (if any) of severance pay and notice or payment in lieu of notice, if the dismissal is unfair, then the employee may claim for damages or reinstatement.
Any employer with 10 or more employees must make an annual contribution to the Workmen’s Compensation Fund of the Labor Department. The amount due depends on the type of business and ranges between 0.2 – 2.0% of the employees’ annual wages. Every employer who regularly employs 10 or more employees must establish, post, and file work regulations covering working conditions, including such matters as working days, holidays, overtime, wage payment, rules regarding leaves of absence, discipline, and submission of grievances and termination of employment.
- Immigration, Visas, and Work Permit
According to the Interior Ministerial Announcements dated 1 October B.E. 2545 (2002), 20 December B.E. 2545 (2002), 18 October B.E. 2547 (2004) and 6 May B.E. 2548 (2005), passport holders from 40 countries and 1 special administrative region – Hong Kong SAR – are not required to obtain a visa when entering Thailand for tourism purposes and will be permitted to stay in the Kingdom for a period of not exceeding 30 days on each visit. Foreigners who enter the Kingdom under the Tourist Visa Exemption category may re-enter and stay in Thailand for a cumulative duration of stay of not exceeding 90 days within any 6-month period from the date of first entry. (Doing business in Thailand (2011). Visas and Work Permit. Abailable at http://www. thailandlaw.com )
Foreigners entering Thailand under the Tourist Visa Exemption category must possess adequate finances for the duration of stay in Thailand (i.e., cash 10,000 Baht per person and 20,000 Baht per family).
Temporary visitors to Thailand for the purpose of pleasure who are exempted from applying for entry visas must be of the nationality of and holding valid passports or travelling documents issued by:
A visa from a Thai embassy or consulate or a permit-to-stay does not constitute permission to work. Such permission is only granted by the Alien Occupation Division of the Ministry of Labor and Social Welfare, with the issuance of a work permit, for which entry on a non-immigrant or immigrant visa is a pre-requisite.
On 30 June 1997, the government established a One-Stop Service Center to facilitate the issuance of relevant work permit and immigration authorizations. The center’s service can be extended to investors who meet certain criteria, and only investors from certain countries are eligible to use the Center.
The current process of procuring a work permit and related immigration approvals is extremely complicated and requires continued, separate dealings with the Immigration Bureau of the Ministry of the Interior and the Alien Occupation Division of the Ministry of Labour and Social Welfare. This can be a very time consuming and frustrating process for foreign employees and their families and may, in some cases, require departure from and re-entry into the country.
Visitors to Thailand should be aware that overstaying a visa constitutes a very serious offence. The penalties include mandatory imprisonment in some cases. Another concern to keep in mind is that holders of permits-to-stay must report to Immigration every 90 days to keep their permit up-to-date. Fines are now being levied against foreigners who fail to report to Immigration every 90 days. This requirement is not enforced against foreigners who exit and then re-enter within the 90 days, because the exit constitutes reporting under this regulation. However, if foreigners reside beyond the 90 days, then they must report toward the end of their current 90-day stay. (Tourism Authorities of Thailand (2019). Visas and Work Permit. www.sawadee.com/thailand/info/tat02.html#Visas)
The principal tax law is the Revenue Code, and five main forms of taxation are imposed under it: corporate income tax; personal income tax; VAT; specific business tax; and stamp duty. There are also a number of specific revenue-collecting statutes that impose taxes such as customs and excise, property and land taxes and petroleum income tax. (Revenue Department (2012). Doing business in Thailand. http://www.rd.go.th )
Corporate income tax applies to companies (including branches of overseas companies), registered ordinary partnerships, foundations, associations, and unincorporated joint ventures between two or more companies or partnerships, or between companies or partnerships and individuals. Moreover, certain payments, such as dividends, royalties, capital gains, remittance of profits, interest, and fees to non-residents (including overseas companies not conducting business in Thailand) are generally subject to withholding tax. Personal income tax applies to individuals, including residents and non-residents, and Thailand has treaties for the avoidance of double taxation with a number of countries, which relate to income tax only.
Every person, resident or non-resident, who derives assessable income from employment or business conducted in Thailand, is subject to personal income tax, whether such income is paid in or outside of Thailand. Exemptions are granted to certain persons (UN officers, diplomats and some visiting experts) under the terms of international and bilateral agreements.
An individual who is present in Thailand for at least 180 days in any tax year (calendar year) is treated as a resident of Thailand. Residents are also subject to income tax on any income from foreign sources that they bring into Thailand.
Value Added Tax (VAT) is levied at a flat rate of 7% and is collected on most goods and services. Specific business tax is levied on several specific businesses, e.g. banking, real estate trading, life insurance etc, whereas stamp duty is imposed on documents that are listed in the Stamp Duty Schedule of the Revenue Code. (Revenue Department (2012). Doing business in Thailand. http://www.rd.go.th )
Importers are responsible for paying customs duties, which can sometimes be eliminated or reduced under various incentive schemes, notably the Investment Promotion Act, the Industrial Estate Authority of Thailand Act and the Petroleum Act.
- Corporate Income Tax
Corporate income tax applies to companies and juristic partnerships that are registered under Thai law or that conduct business in Thailand, even if formed under foreign laws. This tax also applies to members of an unincorporated joint venture, registered partnership, foundations, and associations engaged in business activities. If the taxable entity is incorporated or established under Thai law, its worldwide income is taxable in Thailand. If the taxable entity is established under foreign laws, but is conducting business in Thailand, then only income derived or gained in or from Thailand is taxable.
Corporate Income Tax Rates
All companies and registered partnerships regardless of whether they are listed on the Stock Exchange of Thailand pay a flat rate of 30% of net profits. (Note that the flat rate has now been reduced from 30% to 23% effective from January 2012) There are special provisions for standard deductions for foreign-incorporated companies or partnerships that conduct business in Thailand but cannot prove their expenses for the tax year. Standard deductions are allowed depending on the type of business activity that gives rise to income. The resultant net profits are taxed at the normal rate of 30%. Any Thai or foreign-incorporated company or registered partnership conducting business in Thailand that fails to file a return in accordance with the law may, with the approval of the Director-General, be assessed income tax at a rate of five percent of the aggregate of either its gross receipts or total sales, without any deductions. (Revenue Department (2012). Doing business in Thailand. http://www.rd.go.th )
Certain types of business are subject to corporate income tax on their gross receipts or gross sales instead of net profits. For example, companies engaged in the business of international transportation of passengers or goods, pay a three percent corporate income tax on gross receipts collected on gross freight or passengers carried out of Thailand. Foundations and associations pay corporate income tax at a rate of two percent or 10% of gross income, depending on the type of business activity in which they are involved. Small- and medium-sized enterprises with registered capital not exceeding Baht 5,000,000 are subject to progressive corporate income tax at the rate of 20% for their first net profit of Baht 1,000,000, 25% for net profits over Baht 1,000,000 but up to Baht 3,000,000, and 30% for net profits over Baht 3,000,000. However, in 2005, the 20% tax rate on any Small- and medium-sized enterprises first Baht 1,000,000 net profits will be reduced to 10%. (Revenue Department (2012). Doing business in Thailand, 2011. http://www.rd.go.th )
In order to stimulate the growth of investment in the Stock Exchange of Thailand and the Market for Alternative Investment, the normal corporate income tax has been reduced to 25% for existing Stock Exchange of Thailand-listed companies and newly Stock Exchange of Thailand-listed companies and to 20% for newly MAI-listed companies. However, eligible listed companies must satisfy certain conditions.
Corporate Income Tax Categories
Corporations are taxed in one of two ways, depending on whether the company is considered to be conducting business in Thailand “onshore” or “offshore.”The definition contained in the Revenue Code of “conducting business in Thailand” is very broad and stipulates that: “If a juristic company or partnership incorporated under a foreign law has, in Thailand, for carrying on its business, an employee, a representative or a go-between and thereby derives income or gains in Thailand, such juristic company or partnership shall be deemed to be carrying on business in Thailand…. “An independent sales agent will not be regarded as an “employee, representative or go-between” if the agent also engages in business independently of the principal company or partnership and meets other criteria. (Revenue Department (2012). Doing business in Thailand, 2011. http://www.rd.go.th )
A company operating “onshore” pays the normal spectrum of corporate income tax and must withhold certain amounts at source on account of income tax on some transactions. An offshore entity receiving income from Thailand must pay income tax only at a fixed percentage of gross income, and the party in Thailand who pays the income is generally required to withhold the tax at source.
Determination of Net Profit for Corporate Income Tax
Corporate tax is usually imposed on net profits of the business for the tax year. The tax year can be any 12-month period selected by the company. Net profits are ascertained according to the conditions imposed in the Revenue Code. An all-inclusive concept of income is used and all realized economic gains are treated as income (including capital gains) whether they occur regularly or only occasionally.
Corporate income tax is generally computed on an accrual basis, i.e. income accruing in any accounting period is included as income in that period, whether or not it has been received, and expenses may be deducted as they accrue whether or not they have actually been paid out.
As a general matter, expenses incurred for the purpose of acquiring profits or from conducting business in Thailand (other than those specifically excluded) are deductible for determining net profit. Therefore, normal business expenses, qualifying bad debts and depreciation at maximum rates ranging from five to 20% per annum (depending on the item) are allowed as deductions. Any accounting method may be used to calculate depreciation, as long as the resulting depreciation is not faster than that provided by using the straight-line method at the rate prescribed in the Revenue Code. (Revenue Department (2012). Doing business in Thailand. http://www.rd.go.th )
The following items, among others, are not allowed as deductions:
- Reserves (other than those required by law);
- Private expenses, including gifts for customers;
- Gifts to charitable institutions exceeding two percent of net profit;
- Non-maintenance capital expenditure; and
- Corporate income tax, penalties, surcharges and criminal fines.
Entertainment expenses, up to a maximum of between 0.3% of gross revenue or paid-up capital of the company, whichever is higher, are deductible if they are generally necessary for that type of business, but such entertainment expenses can be deductible only up to 10 million Baht. Certain bad debts can generally be written off if reasonable efforts have been made to recover them or if such action is clearly impractical, such as in the case of the bankruptcy or death of the debtor. Net losses may be carried forward for five consecutive years.
Remittance Abroad of the Profits of a Branch Office
This tax generally applies only to profits transferred overseas from a Thai branch. It is levied at the rate of 10% of the amount to be remitted and must be paid by the Thai remitting office of the company within seven days of the date of remittance. (Revenue Department (2012). Doing business in Thailand. http://www.rd.go.th )
Withholding of Income Tax on Payments to Offshore Companies
The Revenue Code requires that most payments to an “offshore” company or juristic partnership paid either from or in Thailand, be subject to income tax. It is the responsibility of the payer to withhold the tax at source. The rates range from 10 to 15 percent, depending on the source of the income. If payments are made to an offshore company or juristic partnership incorporated in a country which has a double taxation agreement with Thailand, then the rate of withholding may be reduced or waived under the terms and conditions of the agreement. (Revenue Department (2012). Doing business in Thailand. http://www.rd.go.th )
Generally, if a Thai limited company pays dividends to another Thai limited company, 50% of the dividends paid are exempt income in the recipient company. If the company receiving the dividend payment is listed on the Securities Exchange of Thailand, then the whole dividend is exempt income. The total dividend is also exempt income if the company receiving the payment holds at least 25% of the voting shares and the company paying the dividend does not hold any shares in the receiving company. In order to qualify for either the 50% or the 100% exempt income status, the receiving company must have held the shares for at least three months prior to the dividend declaration and must have continued to hold them for three months after the dividends were declared. Dividends paid by a Thai limited company, whether to an onshore or offshore corporate shareholder, are generally subject to 10% withholding at source, unless it is exempt income. For these purposes, the dividend can be treated as exempt income even if the receiving company does not hold the shares for three months before and after the dividends are declared. (Revenue Department (2012). Doing business in Thailand. http://www.rd.go.th )
Other Taxes Withheld on Account of Income
In addition to the foregoing, the Revenue Code requires the payer of certain income to another company conducting business in Thailand to withhold additional sums on account of corporate income tax at source. These rates vary from 0.75% to 5% depending on the type of income. The amount withheld can be credited against the corporate income tax of the recipient company. (Doing business in Thailand, 2011)
Filing Returns and Payment of Corporate Income Tax
Corporate income tax is payable twice a year. The first installment is 50% of total tax, based on estimated net profits for the year. This is due within two months after the close of the first half of the financial year of the company. An annual income tax return must be filed within 150 days of the close of the company’s financial year; in case of failure, a penalty of twice the amount of tax due is imposed. If tax is to be paid on the basis of net profits, then the return must be accompanied by an audited balance sheet and a profit and loss account. If tax is to be paid on a gross receipts basis, then a statement of gross receipts must be filed along with the return. Currently, filing can be done either in paper-form or electronic form. (Revenue Department (2012). Doing business in Thailand. http://www.rd.go.th )
- Personal Income Tax
Taxable income includes any payment for services and any other money, property, or benefits derived from hire of service or employment. It also includes dividends, interest, and any royalties or technical assistance fees. Capital gains are considered to be normal income except in the case of the sale of movable property acquired with no intention to trade or make a profit. Personal income tax paid and absorbed by the employer (in effect giving the employee a net salary) is also considered taxable income to the employee, leading to a “tax pyramid” effect. Also included in taxable income are living allowances, the monetary value of rent-free accommodation, school fees paid by the employer, travel allowances for annual leave, and the monetary value of any other benefit provided by the employer.
12.) Land title deeds in Thailand
A foreigner buying land in Thailand, should only consider land that comes with a Chanote, Nor Sor 3 or Nor Sor 3 Gor. These can be sold, leased and used as mortgage collateral and are the only titles over which register right of ownership or lease can exist. (Mark B., (2008) Property. http://www.articlesbase.com/real-estate-articles/property-in-phuket-investors-turn-to-the-east-468661.html. [Online] retrieved 12 November 2012.
True land title deeds are officially called Nor Sor 4 Jor or more commonly Chanote. This is a certificate for the ownership of land and can be used as evidence confirming the right to government authorities. It is issued by the Local Land Office using GPS to accurately plot and survey the boundaries of the land. This is the most secure type of land title but land with a chanote can often be hard to find.
Nor Sor 3
The Nor Sor 3 is a document certifying the use of land issued and maintained by the District Land Office to the proprietor of the land but is not a possessory title. That is to say the person holding the Nor Sor 3 has the legal right to possess the land in question and can use it as a legal document. Nor Sor 3 is a floating map with no parcel points issued for a specific plot of land and not connected to other land plots, but its boundaries are recorded according to its neighbouring plots. Therefore, it may cause some problems in verifying boundaries due to lack of accurate surveys. Any change in ownership of the land must be publicized for 30 days before it can be registered.
Nor Sor 3 Gor
The Nor Sor 3 Gor has the same legal basis as the Nor Sor 3, with the difference being that in general Nor Sor 3 Gor has parcel points on the map of the land area set by using an aerial survey with a scale of 1:5000. It is a more accurately surveyed title as each plot is crossed referenced to a master survey of the land area and a corresponding aerial photograph. Therefore, it is possible to verify the boundaries of the land. However, it is still less accurately surveyed compared to a Chanote.
Sor Kor 1
Sor Kor 1 is a notification form of possessed land, which shows and maintains the existing rights to the particular land. On December 1st 1954, the government advised all land proprietors to notify their possession of land to the government using a ‘Sor Kor 1’ form. After it was proven that such a proprietor had possessed and used the benefit of the land legally, the government would then issue ‘Nor Sor 3’ or ‘Nor Sor 3 Gor’ as an evidence, which are legal certificates stating the owner’s name that they have the right to such land according to the principle land administration law. This right will be protected by the law and can be used as evidence in any dispute with a private individual or the government.
A condominium title is a title to a part of a building or buildings with multiple owners, a fractional interest in the land, other common assets (such as a swimming pool) and common parts of the building (such as the stairwell or lobby). The title will state the floor area of the private apartment, the ground area of the common land and the percentage interest, in which that apartment has in the common property. This percentage also represents the voting interest in the condominium company or owners association.
- Land Measurement
Land in Thailand is measured in Rai, Ngan, and Talang Wah.
1 Wah = 4 sqm
1 Ngan = 100 Wah or 400 sqm
4 Ngan = 1 Rai or 1600 sqm In comparison to Western Standards.
- Rai = 1 Acre
- Rai = 1 Hectare
- Foreigner ownership of Condominium
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 thought to be followed correctly: Foreigners buying condos 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, ie. the buyer. It is also common to transfer funds to the escrow accounts of estate agents or lawyers administrating the condo purchase, who can 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 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/when the condo 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, required for the purchase of condos, so a qualified agent or lawyer can handle this matter. Condominium Act. http://www.windowlifestyle.com/features_useful_info/property_thilaw.htm
13). How can foreigner own properties in Thailand
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. (www.thaiblogonline.com, October 2012)
If the intention of the seller is to transfer rights equivalent to freehold ownership to the buyer and a leasing solution is used as the best legal alternative, the actual purchase contract will reflect this intention by featuring clauses concerning renewal of the lease or freehold sale of the property, putting control of these with the lessee and obliging the lessor 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.
Thai land lease contracts, therefore, are all based on the register 30 year period for which a standard contract is often used, and thereafter make the appropriate agreements between buyer and seller in the purchase contract. The registered 30-year lease contracts are in the Thai language but they are, of course, accompanied by notarised English translations. With all this paperwork in order, the future of a lease can be considered legally fully secure.
The registration fee payable at the Land Office is 1% of the property value stated in the contract, which is normally equal to the Land Office’s appraised value of the property, which in turn is normally far less than the actual market value. (www.thaiblogonline.com, October 2012)
This option has long been 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 still highly viable and effective.
Many properties are already owned by foreigners under the company model, and the most expedient way to buy these is as follows: One does not actually buy the property; one buys the company director’s shares and is 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.
There has been some speculation that the Thai government (perhaps a future, extremely nationalistic one) would at some point cause upset by declaring all these companies illegal and confiscating these properties. However, HH-property Estate Agents Co. Ltd. has been assured by government officials at the Land Office where the land registry is maintained, and at the Commercial Registrations Office where companies are registered, that such companies are safe as long as they adhere to the regulations governing companies. The most important issues are annual audits and displaying of the company name at its registered address. Furthermore, there is general agreement in the international community that any such extreme actions by Thai authorities would immediately halt international investment and be disastrous for the Thai economy, and that a breakdown of this type is most unlikely to occur. (www.thaiblogonline.com, October 2012)
Buildings other than condominiums do not have any form of title document, but their sale or long lease can be registered at the District Land Office. Proof of ownership must be established either from proof of construction or a document showing sale and purchase, which is totally different from the House License document as it is only a registration of the house occupants. Transfer of a building, as distinct from its land, requires the posting of 30 days public notice, to see if anyone wishes to contest the ownership. Foreigners may own a building distinct from its land and register such transfer of ownership into their names at the Local District Office or Amphoe.
When property is transferred from seller to buyer, there are some taxes to pay at the Land Office. The Land Office has its own, evaluations of land in different locations, and this is how the “appraised” value of the land is set. These two values together constitute the basis for calculation of the Registration Fee (2%) and the Stamp Duty (0.5%). Then there is the “registered” value of the property, which is the basis of the Withholding Tax (1%, falls away if the seller has owned the land for more than 5 years) and the Business Tax (3.3%). It would be entirely correct to register the property at the price one is actually paying, but this never done (to lessen the tax impact), except with condos where the purchase contract must be presented at the Land Office. Normal practice decrees that buyer and seller agree what value they will state at the Land Office, and this value is normally set just a little over the appraised value. It would also be entirely correct for the buyer to pay the Registration Fee and Stamp Duty, and for the seller to pay the Business Tax and Withholding Tax, but arrangement is seldom made. Normally, the entire tax bill is equally by both parties. (Revenue Department (2012). Property Tax. www.thaiblogonline.com/real_estate_thailand )