• real estate law

Buying a house in Thailand

Overall property laws and buying a home in Thailand has its own specifics but basically is not much different from buying real estate in other countries like Germany, Australia, or the US, except foreigners may not own land in Thailand. Land ownership in Thailand is governed by the Land Code Act. Foreign land ownership restrictions in Thailand land laws refer to the land only, not the building on the land or condominium registered under the Condominium Act. The land and the structure on the land could be owned independently by separate persons. Foreigners buying a home in Thailand can do this through a 30 year land lease agreement (and optional right of superficies) with the house owned as a separate personal property.

How to own a house distinct from the land it is on

In a standard situation a real estate sale in Thailand involves land and house. The owner of the land is the owner of the things fixed to it or forming a body with the land (section 139 Civil and Commercial Code). There are exceptions, and for example in case of a foreigner buying real estate in Thailand ownership of a house can be registered and transferred separate from the land it stands on. In case ownership of a house is transferred separate from the land the transfer procedure must be in accordance with the Thailand Civil and Commercial Code (Book IV 'Property') and:

1. be in writing, and
2. registered with the Land Department's branch or provincial office.

Buildings (apart from condos in a licensed condominium building) do not have a separate ownership deed in addition to the land tile deed. The procedure to obtain ownership of a structure/ building or house separate from the land is as follows (note: the rights to use and possess the land (land lease and/or superficies) must be created first):

1. If buying from a developer (depending on the sale and tax structure and liabilities the developer chooses) the sale of a house separate from the land lease is either by:
   • a land lease and a building sale and purchase agreement followed by the land office transfer procedure (see under 3), or
   • a land lease and a building construction contract (hire of work) with a building permit in the foreign purchaser's name.
2. In case an individual person is developing a plot of (leased) land the building permit should be issued by the Or Bor or in the name of the person that leases the land (the building permit can be used as proof of ownership of the house).
3. Sale and transfer of ownership of an existing building separate from the land requires the current owner and purchaser of the house to:
   • sign a standard land office Thai script sale of a structure document, signed at the land office in front of the competent land official (this official document is used as proof of ownership of the house)
   • followed by a 30 day public announcement/ posting of the house sale at specific locations
   • after the announcement period the parties return to the land office to complete the transfer (the Thai script sale of a structure agreement will stamped and issued by the land office and can be used as proof of ownership of the building)
   • property transfer taxes and fees must be paid (each party pays a share based on the agreement between the parties)

If the above procedure has not been followed the building could legally still be owned by the developer or another third party who owns the land and built the house (not recommended) - read more: buying and building a home in Thailand

Documents required for the transfer:

1. passports/ ID-cards
2. land title deed
3. house book (tabien baan)
4. building permit

The sale of an existing house separate from the land (land lease combined with house ownership) must be registered with the local land office to be complete and transfer fees and taxes must be paid when the transfer takes place. The land office is the only government authority in Thailand for the administration and completion of a transfer of ownership of a building. The transfer will take at least 30 days (announcement of the sale period) from the first visit to the land office to the issuance of the sale of a structure document. The 30 day announcement period is to see if anyone wishes to contest the ownership over the house. The issued Thai script sale document stamped and signed at the local land office (sample right column) is the document that proofs the purchaser's rights to the house. The sale of land and house and the transfer of land with a full title deed and building on the land together is completed om the same day - read more (building yourself)

Right of superficies, as a separate registered right in addition to a land lease agreement, is not common in Thailand. Superficies is used when the owner of the land is not the same as the owner of the house erected on the land. A right of superficies is registered on the land title deed - read more...

The Thai House Book

A Thai house book (Ta.Bian.Baan - read more (external)) should not be confused with a house ownership document. A house book is only a house address and resident registration document issued and administrated by the local government district amphur. This is not an important document for foreigners and unless the foreigner has residency in Thailand he is not registered in a blue house book, even though he is under Thai law regarded as the legal owner of the house. A special yellow house book for foreigners can be obtained and depending on the location the requirements for issuing a yellow book could include a work permit or Thai marriage certificate, non-immigrant visa and ownership document (condo title deed or the land office sale of a structure document). The document that could be described as the house ownership document (separate from the land) is the building permit (issued by the local Or.Bor.Tor) or the Land Office sale of a structure document issued by the Land Department.

Building permission for a house in Thailand

The seller of the house must also have approval for the building (construction permit). The government issued building license is the evidence that shows the seller owns the building and obtained approval to build on the land (it does not say that the building is built according to the building permit!). If the seller can't show a building approval the house could be illegally built or may not be built according to local building or zone regulations. Unregistered houses or houses liable for demolition (conflict with the Building Control Act or zoning regulations) have been sold to foreigners in Thailand - read more...

Term of ownership of a house on another man's land

The right to own a house separate from the land always follows the term of the land lease and/ or superficies agreement. The contract for a land lease and/ or superficies can run for a term not more than 30 years or for the life of person or person's granted the right of superficies. If the land lease/ superficies is near termination the use and possession of the land can be renewed (the owner willing to renew it). The contract may contain a renewal option but as a mere personal contract promise that can only be enforced at the time when the registered lease term runs out this must be considered unenforceable as a contract - read more...

Thai property taxes: land and housing tax

When a land and house lease agreement is put in place (or land and house is owned by a company) land and housing tax shall be collected at the rate of 12.5% of the yearly rental according to the lease agreement or the annual value assessed by the Land Department - read more...

Ownership transfer of a house: land office tax and fees

The transfer of ownership of a house is as an immovable property subject to income withholding (personal or corporate income) tax, transfer fees, stamp duty, specific business tax calculated over the registered sale value or appraised value. The government's assessed (appraised) value of a house used by the land office depends among others on location, number of floors, floor space and materials used - read more...

See also

• real estate law
• land laws

Buying real estate, land and house

Land ownership in Thailand for foreigners

Author: Robert M. Spelde (LL.M)

Under the Thailand Civil and Commercial Code foreigners in principle have the same property rights as are available to Thai nationals, however it is under the Land Code Act B.E. 2497 (1954) prohibited for foreigners to own or possess land in Thailand. As ownership of land is an essential element of any real estate (land and house) ownership it leads to the conclusion that, besides an apartment in a licensed condominium, there is no freehold ownership of real estate (land and house) available for foreigners in Thailand.

Foreign ownership under a treaty

Under the Thailand Land Code Act foreigners may own land under the provisions of a treaty, however the last treaty allowing foreigners to own land in Thailand was terminated in 1970 and there is currently NO treaty with any country allowing foreigners to acquire and own land in Thailand. In fact anyone who contravenes with the above section shall be punished with a fine not exceeding twenty thousand baht or an imprisonment not exceeding two years, or both (section 111 of the Land Code Act).

Section 86 Land Code Act: 'Foreigners may acquire land by virtue of the provisions of a treaty giving the right to own immovable properties and subject to the provisions of this Code' .

Exemptions for foreign land ownership

In theory foreign individuals can own land up to 1 rai (1600 square meters) under section 96 bis of Land Code Amendment Act (1999) for residential purposes through the Board of Investment which requires a 40 million baht investment into Thailand in specified assets or government bonds beneficial to the Thai economy. If granted it is under strict conditions and in specified areas and requires approval of the Minister of Interior. In practice, even if you would be able to make an additional investment in the Thai economy of 40 million baht, this is not a viable option. In addition this ownership is not transferable by inheritance, therefore limited to the life of the foreigner granted the right to own land under this exception.

Foreign companies

Ownership of land is also not open to foreign companies, including Amity treaty (US) companies, BVI or Hong-Kong limited companies or any other foreign juristic entity. These companies may, similar to foreign individuals, have a minority shareholding in a Thai company but may not use nominee shareholding structures to create a Thai company for land ownership.

Foreign corporations with substantial investments benefiting the Thai economy may have special privileges and exemptions for land ownership granted for the duration of their business in Thailand under:

• Section 27 of the Investment Promotion Act
• Section 44 of the Industrial Estate Authority of Thailand Act
• Section 65 of the Petroleum Act

Foreigners inheriting land

Again in theory, a foreigner married to a Thai national may as a statutory heir with approval of the Minister of Interior inherit land under section 93 of the Land Code Act, however this section must be read in combination with the above section 86 of the Land Code Act (i.e. in relation to foreign ownership granted under a treaty) therefore it does not apply to foreigners inheriting land from a Thai spouse. They may inherit land but cannot register ownership and must dispose of the land within one year from the date of acquisition (Land Code Act).

Foreign controlled Thai companies

Up till May 2006 it was common practice for foreigners to form a Thai company and to hold land under a Thai company structure. Since the land office guidelines starting in May 2006 followed by the business registration rules and the proposed amendments to the Foreign Business Act this practice is less common. Recent discussions in the Thai government to further clamp down on this structure through new laws and regulations have led to the conclusion that a Thai company structure is not a viable or secure vehicle to create a long term foreign controlling interest in real estate in Thailand.

Land Code Act limitation foreigners right Introduction Thailand property laws Building or buying a house in Thailand Buying/ owning a Thai condominium Land Ownership by a Thai nominee

Land holding companies Land Ownership title deeds Land Ownership transfer fees Nationality Act (Thai ownership) Land Code Act (updated)

Thai private limited company formation

Laws governing formation and incorporation of types of Thai business entity can be found in the Civil and Commercial Code of Thailand, title 12 'partnerships and companies'. Limited companies in Thailand have basic characteristics similar to those of Western corporations. A private limited company is formed through a process which leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (By-laws), as its constitutive documents. A Thai Limited Company can be set up relatively quickly if the paperwork is in order. The company incorporation process, from the reservation of a business name till the certificate of incorporation of the company, can under the new company formation rules be completed in a few days (formation sheet).

Starting (formation of) a business in Thailand

The first step is the reservation of a company name. This is done online with the Department of Business Registration. Usually 3 names are given, ranked by preference, and approval of the name will usually take up till 3 days. Certain names associated with the royal family, names of ministries and other governmental units, names with Thailand, names close to that of other companies, names against public moral, names that are misleading, are not allowed. The approved corporate name is valid for 30 days.

Memorandum

The Memorandum of Association of the company has to be filed with the Commercial Registration Department (Registrar of companies) and must include the name of the company that has been successfully reserved, the province where the company will be located, its business objectives, the capital to be registered, and the names of the three promoters. At least three individuals must sign the Memorandum of Association. The promoters can be foreigners and Thai nationals however, each promoter must be a shareholder of the company. The use of Thai nominee promoters/ shareholders by foreigners is prohibited under the Foreigner Business Act (and Land Code Act).

Share capital

There minimum capital requirements for a limited company in Thailand is 1 million baht. In general, the registered amount of the capital should be respectable enough and adequate for the intended business operation. If a foreigner requires a work permit the company concerned must have a registered capital of not less than Baht 2 million, fully paid-up for each 1 work permit., 4 million share capital for 2 and 6 million for 3 work permits (note registered share capital and company income tax rate).

Once the share structure has been defined, a statutory meeting is called during which the Articles of Incorporation and Articles of Association (by-laws) of the company are approved, the Board of Directors is elected and an auditor appointed.

Articles of association

The Articles of Association are the regulations of the company concerning its internal affairs such as weighted voting rights and matters requiring approval and protecting the foreign minority rights within the company through the issue of preference shares. In a later stage preferential rights may be attached to newly issued shares, in other words you have to buy the preference shares by increasing the register capital.

When operating a Thai company with a (Thai) partner (one or more persons who direct the same company), it is advisable to restrict or limit the signing power and independent authority of the directors in the by-laws by requiring joint signatures and joint consent of the directors in all matters of the company, other than maybe day to day management.

Share certificates

All shareholders must have a share certificate issued in their name by the limited company in Thailand and the company must have an updated registration book of shareholder kept at its registered (head) office of the company. Bearer shares are not allowed under Thai company laws - a share certificate is not the property of whoever happens to be in possession of the share, but who is registered and recorded as the owner with the Business Registration Department as the shareholder (also see last paragraph Foreign Business Act section 4).  

The company's fixed share capital cannot be altered except by an alternation of the memorandum of association in one of the methods authorized by the Civil and Commercial Code. Types of shares, ordinary or preference cannot be altered read more...

Statutory meeting

Within three months of the date of the Statutory Meeting the director(s) must submit the application with the Registry to establish the company.

Tax, Company tax, Value Added Tax

Thai Companies as a vehicle to own land on behalf of a foreigner is not allowed under Thai law

Thai law allows land ownership by a partly foreign owned Thai company as long as the foreign shareholding does not exceed 49% of the shares and the majority of the shareholders are of Thai nationality (section 97 land code act). It is not allowed for foreigners to use nominee Thai shareholders to create a majority Thai owned company for the purpose of land ownership. The use of nominee shareholders to circumvent the Thailand Land Code Act or Foreign Business Act is illegal and any foreigner setting up a company with nominee shareholders is violating foreign ownership restrictions and creates an unlawful foreign ownership, irrespective the number of shares he owns in the company.

Up to the May 2006 Land Office guidelines aimed at preventing the misuse of Thai limited companies and Thai nominee shareholders by foreigners it was common practice for foreigners to purchase land or condominium beyond the foreign ownership quota in a nominee structured majority Thai owned but foreign controlled Thai limited company. As long as the company had a majority Thai shareholdings there were no practical restrictions when purchasing a property and the partly foreign owned company was treated as any other Thai company. Currently the government has issued new regulation preventing circumvention of the law by foreigners through Thai companies and currently this structure is only possible by circumventing the law and regulations.

Is the company foreign or Thai?

Land Code Act

In the Land Code Act a company is defined as 'foreign' or 'alien' if more than forty-nine per cent of its capital is owned by foreigners or more than half of whose shareholders are foreigners. Since July 2008 the private limited company must have a minimum of 3 shareholders at all times, and to be considered Thai under the Land Code Act the company must have at least 2 Thai shareholders opposite 1 foreign shareholder who may hold up to 49 percent of the shares.

Foreign Business Act

Under the Foreign Business Act a company is deemed foreign if half or more of the juristic person's shares held by foreigners or a juristic person having foreigners investing with a value of half or more of the total capital of the juristic person. A company is still considered Thai under the Foreign Business Act if the company has only 1 Thai shareholder as long as he owns the majority of the shares in the company.

Thai nominee shareholders

If it is deemed that the partly foreign owned company is using Thai nominee shareholders the company is deemed foreign irrespective the number of shares held by the foreigner and the foreigner is violating foreign business or ownership restrictions. In a nominee shareholding structure the actual owner of the shares is considered the foreigner and therefore the company majority foreign owned and thus foreign.

The main drawbacks of owning property on the name of a Thai company:

• Setting up a company with the purpose to circumvent the laws prohibiting foreign businesses or ownership of land or condominium (exceeding the foreign ownership quota) has an illegal purpose and therefore void pursuant to sections 150 and Section 172 of the Civil Code.
• Foreigners are restricted from using Thai nominee (straw men) shareholders partners in the company. The use of nominees by foreigners is illegal and because of the nominee structure it will lead to unlawful foreign land ownership or unlawful engagement in protected businesses under the Foreign Business Act.
• The foreigner will be a director of a Thai Limited company and will thus be obliged to fulfill his duty as a director, comply with the Foreign Business Act and Alien Employment Act. A foreigner acting on behalf of a company without a work permit could be prosecuted and deported out of Thailand.
• The company must be active and comply with the law and money should pass through the company books, shareholder meetings must be held, minutes of meeting prepared, and yearly accounting must be filed or the director could be liable for fines and even removal from the register of companies read more...
• The company formation must have a legitimate business purpose which are stated in the company objectives and start operating a business within a reasonable period of time from formation and registration of the company. It cannot be a dormant company.
• If land and house is owned by a Thai company and the property is used as the director's residence or holiday home the company must pay housing and land tax even if the company does not receive any income out of it or does not operate a business - read more...
• The company structure is not immune for future changes in the law or stricter enforcement of existing laws (like the planned Foreign Business Act amendments in which voting rights and management was included as a criterion in defining partly foreign owned companies foreign or Thai).

New Regulations

Before the May 25 2006 guidelines and July 21 2006 Standard Practice Letter 'how to deal with a partly foreign owned company' for Land Registry officials, the standard practice of the local land offices in the tourist resort areas was to investigate only the number of shares held by the foreigner and if the majority of the shareholders were Thai nationals. Now it not as simple any more.

Read: initial articles in the press...

New regulations restricting the use of Thai nationals as nominee or proxy shareholders:

In case of foreign involvement in a company, upon registration of a company the business registration department must investigate the Thai shareholders to see if these are not straw men acting on behalf of the foreigner Business Registration Rules). When applying for registration of ownership of land by the company then the land officer must again under the new Land Office Guidelines investigate the Thai shareholders to see if they are real investors in the company and not straw men acting on behalf of the foreigner. The Thai shareholders must among others submit proof of income and monthly salary they earned. Under the new regulations a shareholder can't be the cleaner from the law office setting up the company.

Management and control of the company

In the planned Foreign Business Act amendments the idea was to include voting rights and management as a criterion in defining partly foreign owned companies foreign or Thai, read ups.... If this would have become law it would likely have affected existing partly foreign companies as re-election of a foreign managing or sole director in a Thai company would simply be restricted. In case of re-election of a foreign director (section 1152) the company would automatically become a foreign company! and as a foreign company the company would no longer be allowed to own land.

Beware of the dodgy advice you get in Thailand

Most of the local property law and accounting offices in the tourist areas of Thailand aiming their services at foreigners have the same interest as the real estate agents and fully depend for their income on property sales or have a direct interest in the real estate market. Can you trust them? Not really. Local lawyers and accountants still suggest loopholes in the law as it generates income (their main source of income), but it is not using a loophole when you transfer land to a 100% Thai owned company and the next day transfer 49% or 39% of the (preference) shares to the foreigner. If the company uses nominees (currently defined in the Land Office guidelines and Business registration rules) or is not in operation or set up to circumvent the law the foreigner is violating the law and could on investigation at a later date be forced to sell the land and the foreigner will be criminal liable.

The only reason to set up the company without a foreign shareholding is obviously because the land office would not allow registration as the structure is illegal. Despite the complicated lengths some will go to suggest ways around the law, it is all doubtful if not plain illegal

Section 100 Land Code Act:

'If a juristic person who acquired land while not within the scope of the provisions of Section 97 and 98 (meaning foreign), but later comes within their scope, the provisions of Section 95 (forced sale) shall apply mutatis mutandis'

Local corruption

The recent land registration rules from the Land Department and Ministry of Interior must effectively prevent the use of nominee structured limited companies by foreigners for land purchase, but local land officials may turn a blind eye because of corruption and pressure from leading figures with a financial interest in the property market. The law is actually applied in different ways and you could say that because of corruption on a local level the law and latest regulations are not fully enforced. It is well known that several high-end officials were involved in land transactions with foreigners or have a direct financial interest in the property market. Just look at the alleged involvement of Thai Rak Thai politicians in forest encroachment and land speculation on the Samui island or a recent Samui land scam or public land encroachment cases in Phuket involving government men and ranking civil servants. This is just the tip of the iceberg of many more examples where the officials who must apply the law allow a breach of the law because they have a financial interest in the deal where land is in fact sold to foreign investors.

Another 2012 quote in relation to illegal land scams and corrupt officials selling land to foreigners: 'some prime areas were to be cleared and divided into small plots and sold to foreigners who would then build resorts worth more than 80 million baht each...' read more...

This latest policy change by the government is not the closing or removing of a loophole but enforcement of existing laws. Even though still offered by local law and accounting firms, setting up companies with nominee shareholders to own land on behalf of foreigners is and always has been illegal.

Work permit

Work in the Foreign Employment Act is defined very broadly in the law; 'engaging in work by exerting energy or using knowledge whether or not in consideration of wages or other benefit' (section 5 Alien Working Act). The foreign director acting on behalf of the company without a work permit could in the worst case face criminal charges and even deportation out of Thailand. A foreign managing director acting on behalf of the company (like opening a company's bank account, applying for telephone lines, registering a land transfer, filing balance sheets, applying for updated company documents) may in addition to a passport, minutes of meeting and updated company documents be required to show a work permit issued by the Alien Employment Division of the Labour Department before any signed document by a foreign director will be accepted (it falls under the definition of 'work'). Any document signed by the foreign director could be rejected until a work permit has been issued. It is in the Bangkok area for example not possible for a foreign director to open a company bank account without a work permit, and if he owns 2 companies he needs 2 separate work permits, one for each company!

To comply with the requirements to obtain a work permit could be impossible for a foreigner director of a practically dormant company. Approved and pending amendments (May 2007) to the Alien Employment Act in Thailand will make it even more difficult for foreigners to obtain a work permit.

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