Foreign Ownership in Thailand
Foreign Ownership in Thailand
Foreign Ownership in Thailand
Buying Land and Property in Thailand
Being aware of the restrictive rules in place when purchasing property in Thailand is essential, not only to comply with the regulations, but to also protect your own interests.
Land can be held in a foreign name for residential purpose only and the size of the property may not exceed 1 Rai.
To be able to actually profit from this rule you must also fulfil the following criteria:
Not less than 40 million Baht for investments purposes, must be transferred into your bank account in Thailand
The Minister of the Ministry of the Interior has to grant permission
The property cannot be resold for five years
The capital brought into the Kingdom has to be invested in one of the following businesses or activities:
To purchase bonds of the Thai Government, bonds of the Thai National Bank, bonds of State Enterprise or bonds on which the Ministry of Finance secures the capital or interest
An investment in a mutual property fund or a mutual fund for resolving financial institution problems established under the law on Securities and Stock Exchange
An investment in the share capital of a juristic person who is granted permission of investment under the law on Promotion of Investment
An investment in an activity as declared by the Board of Investment to be an activity eligible to be granted Promotion of Investment under the law on Promotion of Investment
Furthermore you need to acknowledge and understand the following:
The land to be acquired shall be located in the Bangkok Metropolis, Pattaya City, Tessaban Municipality or in an area specified as a residential zone according to the law on Town and Country Planning and shall not be located in a military safety zone according to the law on Military Safety Zones
A foreigner who is granted permission shall utilize the land only for residence for his/herself and the family in a way that is not contrary to the local custom or good living of the local community
If a foreigner who is granted permission to acquire such land does not comply with the rules and conditions specified, he/she shall dispose of such land in the portion of his/her possession within the period of time specified by the Director General of the Department of Lands. This shall be not less than one hundred eighty days and not more than one year. If the time limit elapses, the Director General shall have the power to dispose of such land
If a foreigner who is granted permission to acquire such land does not utilize the land for residence within two years from the date of registration of land acquisition, the Director General shall have the power to dispose of such land
Besides the above rules and conditions, a foreigner may acquire land by inheritance as statutory heir. In this instance, the land devolved when combined with the land already acquired shall not exceed that specified by law. For example
Land for residential purposes not exceeding 1 Rai per household
Land for commercial purposes not exceeding 1 Rai
Land for industrial purposes not exceeding 10 Rai
Land for agricultural purposes not exceeding 10 Rai per household
It stands to reason that individual holiday home buyers might be held back by the above regulations and will probably prefer to purchase apartments or condominiums, instead of buying a house with land. However, should they wish to purchase a condominium in a block that has exceeded its 49% foriegn ownership limit, the SPV as outlined below can be used to achieve a sale.
For foreign investors that wish to handle investments on a larger scale, the solution is the Thai Special Purpose Company or SPV. The SVP was established to comply with the Thai property ownership laws. The SVP has to fulfil the following criteria to avoid falling foul of the above restrictions:
The registered capital held by foreigners is not more than 49 per cent
Less than half of the shareholders consists of foreigners
Dividing the company's share capital into two different classes, Ordinary Shares and Preferential Shares, ensures that the controlling interest stays with the foreign investor. There is no law yet that handles the 'controlling factor'. The distributed classes of shares are then assigned to the Thai and foreign investors in such a way that the shares with superior rights which empower voting, liquidation, distribution and dividend, are held by the minority foreign shareholders, but still keeping the number of foreigners within the limit. The SPV then is able to buy land and property in Thailand.
When selling the Thai SPV owned property to a private buyer, transfer taxes and fees are due and are deducted at source. Transferring the foreign shares in the SPV to the new buyer instead avoids these taxes and fees, and so is beneficial if the buyer is also a foreigner. There is however the danger that the new buyer may end up buying shares that could bear the threat of fines and back taxes because the company taxation records have been mismanaged. It is imperative that if the purchase of a Thai SPV includes the foreign shares, the purchaser should seek the services of a competent and qualified professional to ensure all company records are audited and up to date, as required by the Thai taxation laws
Conversely, managing a SPV efficiently by the owner ensures an uncomplicated resale. It is vital therefore that all tax related administration is up to date and thoroughly processed. It is advisable to hire a professional accountant to ensure all financial and taxation records are correctly audited and accounted for. This enables the owner, should they wish to resell their shares, to prove that the SPV has no outstanding debts and that the management of the SVP was handled professionally. The new owner will not only be purchasing property in Thailand, but will have an effective vehicle with which to protect ownership rights, even he/she is not a Thai National.
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