In Thailand there are two types of legal ownership of real estate: freehold – the purchase of real estate in full ownership, and leasehold – purchase of real estate on a lease basis for 30 years with the right to extend twice for 30 years, i.e. total ownership will be 90 years.
Foreigners in Thailand can buy an apartment in their own name in a freehold condominium. A condo’ is a residential complex, where each property has its own owner, but the common areas are owned by all the owners. Developers can sell to foreigners in full ownership no more than 49% of living area of the building. The remaining 51% can be issued only in leasehold. Both types of ownerships are legal and the buyer can choose to fit their own preferences.
Type of ownership – Freehold
Freehold is a type of full ownership of real estate. Purchased freehold property can be sold, inherited, donated or leased in the future. Most often, this type of property is acquired for personal use. Foreigners are able to purchase both new and resale property. Payments for freehold property must be made via bank transfers from overseas.
Freehold positive and negative aspects
- Full disposal of the property: you can give, sell or bequeath it.
- There are no renewals compared to leasehold and no need to keep in touch with the previous owner.
3. When selling, freehold units are in high demand.
- 1.Freehold property must be declared and tax applicable.
- 2.Registration fee is much higher compared to leasehold:
- Registration fee – 2% of estimated value of the purchased property.
- Stamp duty – 0.5%.
- Withholding tax is 1%.
- Specific business tax is 3.3% (if property owned less than 5 years)
Type of ownership – Leasehold
Leasehold is a form of ownership for 30 years with the right of two-fold extension (up to 90 years), in fact, a multi-year lease. Purchases of lease property can also be sold, inherited, donated and leased. Upon purchasing, you will get a contract, registered and certified by the Land Department. This type of ownership is more often used for investment. Foreigners are able to purchase both new and resale property.
Leasehold positive and negative aspects
- The market price of Leasehold property is lower than in Freehold by 5-10%
- Registration fee when register Leasehold unit is lower and amounts is 1% of the unit cost plus Stamp duty 0.1%
- An apartment in a long-term lease is not subject to taxes and is not declared as a property in a buyer Country.
- The owner has no right to do anything with the object transferred to you for management. And he is obliged to make a deal with any other person you provide. That is, you can resell the lease.
- The lease must be renewed twice every 30 years – for a total of 90 years.
- To complete this procedure, you need to maintain constant contact with the owner.
- You, as a tenant, will not be able to make a deal on your own to sell your apartment. We’ll have to contact the owner (Developer).
Are Foreigners allowed to own land in Thailand?
Generally, foreigners are not allowed to directly purchase land in Thailand. Simply put, Thai laws prohibit foreigners from owning land in their own name, although theoretically there is an exception, it is yet to be seen in practice.
This notwithstanding, there are alternatives available to foreigners for successful land acquisition. The most common option is to set up your own Thai Limited Company to own the land on your behalf. Another option is to enter into a long term leasehold with the landowner. It is a commonly unknown fact that although a foreigner cannot own land in Thailand, they can own the house or structure built thereon. Therefore, foreigner is able to purchase both new and resale house or villa in his own name in a freehold.
Company Ownership of Freehold Property
A Thai Limited Company can purchase land as a juristic person. The company must be allowed to own land and invest in land in accordance with its objectives and Articles of Association. Foreigners can hold a maximum of 49% of the shares in such a Thai Limited Company, the balance must be owned by Thai investors.
It is also vitally important that annual accounts are completed and taxes paid on time.
Foreigners can lease land and/or structures on short or long-term contracts. Leases may be registered for up to 30 years and often have a renewal clause for additional periods of 30 years, however, it should be noted that Thai law provides for only one such renewal. A recent change in the law allows leases for industrial or commercial purposes to be for a term of up to 50 years. This again is renewable for periods of 50 years. The majority of authorities agree that any such renewal clause is enforceable against the original lessor not, however, against a transferee lessor. Any lease of 3 years or more must be registered on the title to the land at the appropriate land office in order for the lease to be enforceable for any term beyond 3 years.
Land Title Deeds
The preferred land title in Thailand is the Chanote (which literally translates to “Title Deed”) issued in accordance with the Land Act of 1954. Chanotes issued under the provisions of this Act are registered with the Land Department and state the ownership, boundaries, area measurements and encumbrances (such as mortgages or servitudes) with particularity. The purchaser of a Chanote is registered as the owner of the land with the Land Department at the time of transfer.
Chanotes are issued by the Land Department by application from the holder of a possessory right document for the land.