Buying real estate in Thailand

Thailand condominium acquisition and conveyance costs, tax and fees

When ownership of a condominium apartment in Thailand is transferred taxes and fees are collected at the time of transfer by the land offices where the transfer of ownership takes place. Transfer of ownership of a condominium unit in Thailand is subject to the following government fees and taxes:

Thailand real estate laws basics

THAI LAND LAWS restrict foreigners from owning land in Thailand and Thai laws in general limits foreign property ownership in Thailand. Buying real estate in Thailand follows a different legal process than buying realty in a country offering outright property ownership for foreigners. Property laws in Thailand are straightforward (foreigners cannot own land) but sales structures aimed at foreigners are often complex and confusing. Real estate in Thailand can legally be divided into the following objects:

• Apartments registered under the Condominium Act of Thailand
• Apartments NOT registered unde the Condominium Act
• Land
• House
• Land and house

Real estate rights

Property rights under Thai law to obtain ownership or an interest in these real estate properties can be devided into:

• Freehold ownership of a condominium unit registered under the Condominium Act within the foreign 49% ownership ratio of such a condominium
• Ownership over a building separate from its land
• A registered leasehold of up to 30 years of: 
  • a condominium unit registered under the Condominium Act... 
  • an apartment unit not registered under the Condominium Act (as part of a building)
  • land and/ or house
  • land (combined with ownership over the building upon the land)
• Right of superficies (alienation by the owner of the surface of soil of all rights necessary for building on the surface)
• Right of usufruct
• Right of habitation
• Controlling shares in a company that owns real estate

Paying in escrow or to the developer

Buying a condominium off plan or in a project development stage

OFF PLAN CONDOMINIUM purchase in Thailand means buying a condo in a planning or pre-construction stage or a condominium not yet fully constructed. The standard payment schedule in an off-the-plan purchase of a condominium in Thailand could vary but usually includes paying a large part of the purchase price prior to completion of condo and prior to transfer ofownership:

1. if any, a reservation agreement with a reservation fee of 100,000 baht (approx 3300 USD)
2. a deposit of 10 to 20% of the total condominium price on the execution date of the condominium sale and purchase agreement
3. monthly installments during the construction of the condominium with a final amount upon completion and transfer of ownership of the condominium (see sample payment schedule in the clause 4 of this document).

Legal facts about a lease renewal option in a lease agreement

LAND LEASE agreements are commonly used in Thailand to transfer an interest in land to foreigners. The most common clause in a 30 year lease agreement aimed at foreign property investors is the lease renewal option, either included as 1, 2 (the 90-year lease) or more renewal terms.

UNDERSTANDING KEY-MONEY If you do not understand key money in Thailand this could lead to a foreseeable argument with the landlord when the lease ends or must be renewed. If you look at the term key money it is used differently in different parts of the world.

Buying a leasehold condominium in Thailand

Tourist resort condos are often sold leasehold and freehold to foreigners

THE UNITS IN A CONDOMINIUM registered under the Thailand Condominium Act can be foreign owned for up to 49% of the units in floor space. A higher percentage of foreign ownership in a condo building is not allowed under the Condominium Act. At least 51% of a condo project MUST be owned by Thai nationals. Expensive tourist resort condos are not popular among Thai nationals and the units in Thai side of the condominium often remain unsold or are sold to foreigners under a leasehold agreement.

Beware of the practical and legal differences of 'leasehold apartments' (unregistered condos) and lease of a licensed and registered condominium read more...

The old practice (before 2006)

Before the 2006 land office regulations preventing the misuse of Thai companies by foreigners for property purchases the apartment units in the Thai side of a condominium could, as an alternative to leasehold, be sold to foreigners under a Thai company structure. Since 2006 and a serie of new regulations issued by the Land Department this practice is currently less common and ownership in a partly foreign owned Thai company can only be registered by circumventing the law. The legality of condo holding companies is highly controversial or considered illegal but this structure is still promoted by the real estate sellers in the tourist areas to sell the remaining units in the Thai side of a condominium to foreigners - read more...

Leasehold purchase of condos by foreigners is NOT governed by the Condominium Act but by the chapter Hire of Property Civil and Commercial Code (sections 537 - 574). Leasehold is under Thai law in essence a normal hire of property contract with a (prepaid) fixed term. As a contract right the lessee cannot buy and sell his leasehold (it is not a real asset) and as a hire of property contract a leasehold is not automatically transferable by inheritance. Rights associated with leasehold are limited and a lease agreement in Thailand can be terminated prior to the agreed term (e.g breach of contract, death of the lessee).

Voting rights

Voting rights in the condominium meetings associated with ownership of the condominium often remain with the owner of the unit and are not transferred to the leasehold purchaser. Unless specifically arranged differently voting rights remain with the owner (developer) and as usually only a few owners turn up in the condominium general meetings the developer controls the meetings and matters concerning management and maintenance fees in which he has an interest. Selling leasehold condos could disturb the democratic voting system in a condominium.

Selling and assigning the condo

The primary right of a leasehold purchaser of a condominium is a personal right of possession of the unit for a specified term. The leasehold purchaser does not have any rights himself to sell or assign the leased condo apartment during the lease term (assignment of a lease is a three party agreement between the owner, the current tenant and new lessee/ tenant). Only the registered owner has the right to transfer ownership or to assign the lease to another person and have it formally registered with the Thailand Land Department. Also sub-rent is only allowed if this is agreed with the owner of the condo in the condominium lease contract, otherwise Thai hire of property laws prohibit sub-let of the unit by the lessee (section 544Translation Civil and Commercial Code section 544: Unless otherwise provided by the contract of hire, a hirer cannot sublet or transfer his rights in the whole or part of the property hired to a third person. If the hirer fails to comply with this provision the letter may terminate the contract). The leasehold purchaser's rights relate primarily to possession of the condo for the registered term only.

Inheritance of a leasehold condo

A foreign freehold owner of a condominium can pass on a condominium by inheritance in Thailand to another foreigner. Lease in Thailand is a contract right and under hire of property and Thai contract law this type of contract is terminated upon death of the lessee (as confirmed by the Thailand Supreme Court). A lease agreement or right of possession of the condo will not automatically transfer to the heirs of the lessee (lease in Thailand is a contract right of the lessee, if he dies the contract is dissolved). The lease agreement must include a succession clause however this does not offer full guarantee. Transfer of ownership of the condominium does not break rent under Thai law, death of the lessee does!

Term of the contract

Real estate lease agreements in Thailand cannot exceed 30 years. Any longer term will be reduced to 30 years pursuant section 540 Civil and Commercial Code. Pre-agreed renewals, pre-signed consecutive contracts or even registered contracts suggesting a longer term are not enforceable under Thai contract law because of the conflict with section 540 Civil and Commercial Code. Selling a condominium freehold in a development is by law a government contract controlled business, meaning that the content of the condo sale contracts must comply with minimum standards and consumer protection laws. Selling the same units in the project leasehold to foreigners is not contract controlled and these contracts are primarily written to generate sales and often include terms that are in practice unenforceable under Thai hire of property laws - e.g. a contract promise to renew the lease upon expiration 30 years after signing (see the standard wording relating to renewal of the lease in clause 4 and especially 4.5 of the downloadable sample condominium lease agreement which is nicely written but in practice not enforceable as a contract).

Tax burden

As opposed to owner occupied freehold properties, leasehold condominiums in Thailand are subject to a rental tax at a rate of 12.5% over the actual yearly lease price or annual assessed lease price, whichever is higher. This is a yearly additional financial burden for the leasehold buyer of a condominium as this is always passed on to the leasehold buyer in the lease agreement - see standard wording in clause 7.5 of the sample condominium lease agreement.

Transfer of ownership of a condominium is subject to conveyancing tax and fees, buying a condominium under a lease agreement is subject to a lease registration fee of 1.1% of the total lease price. Income from lease is taxed as personal or corporate income tax.

Related:

• Condominium acquisition: most asked questions
• Intro Thai real estate law: condominium ownership
• Legal definitions:  registered condos vs unregistered (leasehold) apartments 
• Off-plan purchase: use of Escrow Act in property developments
• Lease laws: articles hire of property

CONDOMINIUM INHERITANCE. The fact that the foreigner who died qualified for ownership of a condominium does not qualify his foreign successor(s) for ownership of the condo. Basically the right of foreign freehold ownership ends at death of the foreigner who qualified for ownership under the Condominium Act. Foreign outright ownership of a condominium is not automatically transferable by inheritance to another foreigner. The Condo Act deals with inheritance of a condominium unit by foreign nationals in section 19/5 (under 1) and section 19/7 of the Condominium Act. Only foreigners who qualify under section 19 of the Condominium Act are eligible and allowed to register ownership of the inherited condominium apartment unit within the 49% foreign ownership quota (as specified in section 19/2 (bis) of the Condominium Act B.E.2522).

Who (foreigners) qualifies for ownership of a condo in Thailand

Condos in Thailand may be inherited by foreigners through testamentary or intestate succession, however, in order to legally register ownership of the unit with the Land Department he must submit proof that he qualifies for ownership under section 19 of the Condominium Act. Under section 19 only the following foreigners qualify for condominium ownership registration:

1. Foreigners permitted to have residence in the Kingdom under the Immigration law;
2. Foreigners permitted to enter into the Kingdom under the investment promotion law;
3. Juristic persons as provided in Section 97 and 98 of the Land Code and registered as juristic persons under Thai law;
4. Juristic persons which are foreigners under the Announcement of the National Executive Council No.281 dated November 24, B.E. 2515 (note: repealed by the foreigner definition in section 4 of the Foreign Business Act) and have obtained promotion certificate under investment promotion law;
5. Foreigners or juristic persons regarded by law as foreigners who have brought in foreign currency into the Kingdom or withdraw money from Thai baht account of the person who have residence outside the Kingdom or withdraw money from a foreign currency account.

Qualified and unqualified foreign heirs for ownership of a condo

Section 19/5 of the Condominium Act permits qualified foreigners under section 19 (i.e. foreigners 1 to 5 above) to register ownership over the condominium unit acquired by inheritance, as long registration does not exceed the 49% foreign ownership quota within the condominium.

'When the alien or juristic person stipulated in Section 19 (a qualified foreign natural or juristic person) has acquired an apartment unit by legacy in the capacity of statutory heir or inheritor under will or by other means (e.g. gift) as the case may be, and when included the apartment already held by aliens or juristic persons stipulated in Section 19 exceeding the ratio prescribed in the first paragraph of Section 19 bis.'

Section 19/7 of the condominium Act deals with unqualified foreigners (i.e. not listed in section 19, 1 to 5 as listed above). Other foreigners inheriting a condo must sell the unit within 1 year of the acquisition of the unit by inheritance. 

'An alien or juristic person regarded by law as alien other than those specified in Section 19 who acquires an apartment by inheritance as statutory heir or legatee or otherwise, as such case may be, shall notify in writing the Competent Official within a period of sixty days from the date of acquisition of ownership of apartment, and shall dispose of such apartment within a period of not exceeding one year from the date of acquisition of ownership of apartment. If disposition is not made within said period, the provisions of the fourth paragraph of Section 19 quinque shall apply mutatis mutandis.'

Ineligible foreign heirs of condominiums

In case of an unqualified foreign heir of a condominium apartment unit the solution could be to become qualified under section 19, e.g he buys the condominium out of the estate for a price at least equal to the government appraised value. In this case he must transfer foreign currency into Thailand equal to the appraised value and exchange it to Thai baht. By exchanging the amount of foreign currency into Thai baht inside Thailand he is able to show a FET-form and qualifies for ownership registration under section 19 No. 5 of the Condominium Act.

When it comes to inheritance by foreigners the Condominium Act is not foreign friendly and in general foreign heirs must dispose of the unit acquired by last will or succession laws within 1 year of the date of acquisition by inheritance. If the successor fails to dispose of the condo the Director-General of the Land Department is authorized to dispose of the condominium and retain a fee of 5% of the sale price before any deductions or taxes.

Inheritance of a leasehold condominium apartment

Inheritance of a leasehold condominium is limited by laws relating to succession of lease right under the Civil and Commercial Code and not governed by the Condominium Act read more...

• Condominium Practical Q&A's (pratical legal, answes to FAQ)
• No Inheritance tax at this time (2009) 
• Condominium transfer tax

Land Upgrades in Thailand - dealing with the Nor Sor 1 land documents

Source: Bangkok Post 09 02 2010

Holders of Sor Kor 1 land documents nationwide have been flocking to local Land Department offices. Yesterday was the last day they could apply to upgrade the documents into land title deeds without seeking court approval.  A Sor Kor 1 document shows its holder occupies land in a particular location. Holders of this document have the right to ask for the issuance of a land deed. However, individuals can ask a court to approve an upgrade but this will only be done on a case-by-case basis.

Transfer tax, income withholding, fees, stamp duty, business tax are paid at the land office

CONDOMINIUM TRANSFER tax in Thailand is a tax imposed by the Thai government and paid at the local land office when transferring ownership of a condominium in Thailand. There are a variety of taxes and fees involved when transferring a condominium unit in Thailand; transfer fee, stamp duty, withholding tax (personal or corporate) and specific business tax (if applicable).

Transfer tax in case of a re-sale of an existing condo

Total transfer fees and taxes could range from a small amount to a relatively larger amount depending on the amount of income tax involved for the seller. Another variation of the transfer taxes and fees in case of a re-sale condominium relate to the agreement between the seller and buyer and how the buyer and seller of the condominium unit have agreed to share these costs.

Transfer tax and fees in a off-the-plan condominium project

Developing and selling new condominiums is a contract controlled business in Thailand and must comply with government regulations. One condition is that the buyer of a new unit or in an off-the-plan purchase of a condominium cannot be charged more than half of the 2% ownership transfer fee only. All other duties and taxes related to the registration and transfer of ownership must be borne by the developer. It is common that developers of condos in Thailand try to pass on transfer cost to the buyer for which they are by law responsible for.

How to divide the conveyancing costs of an existing re-sale condo

In the end, how these cost are split in a private sale and at what percentage depends on the bargaining power of the parties. As there is in a private sale no fixed rule or legal requirement how to split these costs it can vary from seller pays all to buyer pays all (which could include paying the seller's personal withholding tax). It is advisable for a purchaser of a re-sale condominium to clearly confirm with the seller in the condominium sale and purchase agreement who will be responsible for transfer fees and all taxes and/or at what percentage.

The local custom in Thailand in a private sale of a condominium is to divide the taxes and fees involved with the transfer of a condominium as follows:

* Stamp duty does not have to be paid is specific business tax is paid. Withholding tax is fixed at 1% if the seller is a corporation, for individuals this is charged at a progressive income tax rate. Some specific exemptions on condominium transfer fees and taxes may be applied based on the number of years of possession of the condominium and if specific business tax is paid by the seller.

 ** Withholding tax (retention tax): if the seller is a company withholding tax is fixed at 1% over the registered sale value or appraised value (whichever is higher), if the seller is a private person withholding tax is calculated at a progressive rate based on the years of ownership and appraised (government assessed) value of the property. Under Thai tax laws the land office must take the income withholding tax at the time of transfer, even if the the seller of the condo is a foreigner who is a resident in a different jurisdiction.

Sample clause Condominium SPA

Sample existing condo transfer tax calculation in Thailand

Condo transfer taxes and fees relate to the transfer of ownership of a condominium unit. In case of obtaining a registered long term leasehold interest in a condominium there are lease registration fees of 1,1% over the total rental involved and rental income from renting out the condo is subject to personal income tax.

The Thailand transfer sample tax and fees indication below is based on the transfer of a condominium apartment unit in Thailand with an appraised and registered sale value of 5 million Thai Baht and 3 years of ownership by the current owner. Approx transfer tax and fees of a condo in Thailand (value of 5 million):

1. Transfer fee 2% over 5,000,000 THB = 100,000 THB
2. Specific Business Tax Local Tax 3.3% = 165,000 THB
3. Individual Withholding Tax approx 100,000 THB
4. Application fee and others approx. 300 THB