How to buy a house in Thailand? Leasehold or setting up a Thai company?
Are you looking for a profitable investment or an exceptional holiday destination?
Buying a house in Thailand is an attractive solution.
However, you will need to familiarize yourself with Thai property law.
In this article, we explain how to become a homeowner in Thailand without pulling your hair out.
Thai property law
Thailand is unique in having complex regulations and protectionist laws. Here, the land belongs to Thai citizens.
Nevertheless, becoming a property owner when you are a foreigner is a perfectly conceivable act, but it must comply with the system in force.
To avoid many pitfalls, take the time to research and follow the advice in this article.
In the Land of Smiles, a foreigner is not allowed to own land in their own name. To get around this, you have two options:
- Buy in leasehold
- Purchased through a Thai company.
Buying a house in Thailand through a leasehold agreement
Although a foreigner cannot own land in Thailand, he can nevertheless rent it by registering a lease for a maximum term of 30 years, which in practice is renewable twice (i.e. for 90 years).
However, this remains at the owner's discretion at the end of the lease. This solution, commonly known as "leasehold," appeals to many foreign buyers.
Therefore, by signing a contract with the landowner, he then holds a very long-term lease of the land and full ownership of the real estate he will build.
Advantage:
- A legal and easy solution
- Economical solution: the lease registration fees are 1,1% of the value declared in the contract.
Disadvantages:
- Remain very vigilant regarding the lease, the plots of land, and the property titles.
- Resale and lease renewal are subject to the owner's approval
- Increased risks when contracting with a natural person (in case of death, absence or inheritance)
Buying a house in Thailand with a Thai Company
It's a slightly more complex solution.
Indeed, Thai legislation stipulates that real estate can be purchased by a company, provided that the majority of shares are held by Thais.
Thus you create a company, in which you are a minority shareholder (and Managing Director) and you partner with a majority Thai shareholder (51% of the shares).
The choice of local partner must therefore be carefully considered to avoid any complications. It is perfectly possible to draft the articles of association specifying that no decision can be made without the agreement of the minority shareholder. This is a way to maintain control of this company, which you do not own.
Like any company, the majority shareholder must keep accounts and file financial statements annually. If no revenue is generated, the company is removed from the commercial register.
Another risk. Remember that when you hold a long-term non-immigrant visa, you cannot work.
Therefore, by becoming the General Manager of your company without a work permit, you risk a penalty that could include exclusion from the kingdom.
Do not be tempted by easy solutions (straw partners, nominees, etc.) which are illegal and highly reprehensible.
Considered a violation of Thai law, you risk a fine of up to one million baht and a prison sentence of 3 years.
Advantage:
- No time limit. The company owns the land, without any time constraints.
- Reselling the house is made easy. If the ownership changes, you simply need to update the name of the managing director by registering with the commercial register. This avoids transfer tax fees at the land registry.
Disadvantages:
- The approach is more complex and riskier. The legal aspects of the company need to be carefully defined.
- Thai shareholders must indeed participate in the investment.
- Having confidence in its Thai shareholders
- Company formation costs and annual accounting fees
- Recommended more for people who have been living in Thailand for several years and have reliable local contacts, or for companies that already have a real business presence in Thailand.
Tips for a successful villa purchase in Thailand
Becoming a homeowner in Thailand can quickly become a real challenge. Follow these tips to avoid scams and potential risks.
- Have all documents relating to the transaction translated.
- Consult a trusted lawyer or legal advisor for assistance.
- Beware of illegal legal schemes
- Make sure your 30-year lease is properly registered with the Land Department; this is mandatory for any lease exceeding 3 years. If it is not registered, the legal term of your 30-year lease is reduced to 3 years.
- For long-term leases, avoid dealing with an individual. Opt instead for a legal entity (such as a property development company) to prevent any issues in the event of the owner's death.
- Remember to include renewal, inheritance, and resale clauses when signing the contract.
In Thailand, as everywhere else, it's important to fully understand the applicable laws when buying a house, to have assistance with the process, and to have your documents translated. This will ensure you understand what you're signing and what you're committing to.
Need more information about buying a house in Thailand ? Obsido Immo, a real estate agency in Thailand , is available to advise you.
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