Buying and selling property in Thailand – what you need to know. Buying freehold condos v house and land Foreigners can outright own a condominium in Thailand 100% freehold. Imagine a building has 100 units. Now, 51 of those units must be owned by Thai nationals. A maximum of 49 of those units can be owned 100% freehold by foreign nationals. If a building’s foreign quota limit is reached, the only way to purchase a freehold condo at that building is to buy from a foreigner with an existing freehold title. Alternatively, the foreign national can choose to buy from a Thai national but only on a leasehold ownership. Foreign nationals cannot own land in Thailand as freehold. The most common practice for foreigners buying house and land in Thailand is to do a leasehold structure of a maximum of 30 years with the landlord. This is a watertight contract that is given by the local land office and the foreign national can then technically own the land for that period of time. The lease can also be extended by two terms of 30 years each, giving the lessee a total of 90 years. This has to be a separate contract between landlord and lessee and we would always recommend that you consult with a reputable, qualified Thai lawyer to have this contract drawn up. Should you wish to sell the land and house in future before the leasehold term expires, you may do so freely to a Thai or foreign national. The landlord must sign the freehold land transfer to the Thai buyer or accept a new term of 30 year lease if it is a foreign national who wishes to apply for a new leasehold term of 30 years. The foreigner purchasing from you can also simply take over the existing leasehold term if they wish. Meaning if you have owned the property for 5 years, the buyer will be taking over the remaining 25 years of the leasehold term. Even though foreign nationals may not own land, the building itself can be owned outright by a foreigner. It is also possible for foreigners to setup a Thai company in order to purchase the land (and house) in the name of the Thai company, however it is highly advisable to always consult with a reputable, qualified Thai lawyer that can speak English. Spending a small amount of money for peace of mind can avoid having to spend a lot of time and money in future when you try to sell your house and you find out that it wasn’t done properly the first time. Best discuss all details with your lawyer to have a full understanding of the situation before committing to a purchase. Selling property in Thailand. Selling property in Thailand can be challenging, but not necessarily difficult. Part of the reason why it is of paramount importance to consult with a reputable, qualified lawyer when you BUY the property, is so that you do not run into problems when you want to SELL your property. Selling with Stonehead Real Estate guarantees the best service and advice available in Hua Hin. Selling house and land v selling a condo: Selling house and land means you have a number of things you need to know and documents you need to have before you sell. All of these documents are in Thai, which is another reason why it is necessary to have a Thai lawyer to either translate the documents for you or at least indicate with English markers which documents are which; original land title deed (front and back) with the current land owner’s name or the lessee’s name on the back in Thai blue book or as they say in Thai, tabian baan of the property with the residential address sell and purchase agreement from the land office in Thai construction permit that is in Thai Thai ID of land owner or passport of the lessee. Depending on the type of ownership there will be different documents required in each case. Contact one of our experienced consultants to find out more. Selling a condo requires you to have the following documents: original land title deed with the current land owner’s name or the lessee’s name on the back in Thai blue book or as they say in Thai, tabian baan of the property with the residential address sell and purchase agreement from the land office in Thai letter from the local juristic office confirming there is no outstanding debt regarding maintenance fees etc (only required once you have a confirmed buyer, a deposit has been paid and you have confirmed a final transfer date) letter from the local juristic office confirming there is still available allocation in the foreign quota ownership for the development (only required once you have a confirmed buyer, a deposit has been paid and you have confirmed a final transfer date) at the time of transfer there are a few more details required. Contact one of our experienced consultants to find out more. Transfer Fee Details Transfer fee The transfer fee is not a tax but a government fee (like stamp duty) on the sale and transfer of ownership of real property and collected by the local land office upon transfer of ownership. The fee is imposed at the rate of 2% over the appraised value of the property. The appraised value or government assessed value is not the sale price but an assessed value of the real property based on a calculation method by the Land Department and the Treasury Department and is used by the land office to determine the amount of tax that must be paid. The registered sale value is the actual registered sale price between the parties. The appraised value used by the land office value is often pretty much lower than the actual sale price. Specific Business Tax This transfer tax is generally charged if the seller is a company (specific exemptions applied) or if the seller is a natural person and sells the property within five years of the purchase registration date. Specific business tax is an assessment tax on the transfer of real property calculated over the registered sale value or the government appraised value of the real property, whichever is higher. This tax is imposed at a rate of 3% plus a municipal tax of 10% assessed on the amount of the specific business tax bringing the total tax rate to 3.3%. The transfer of real property would not be subject to the specific business tax if the seller is an individual and meets the following conditions: The seller has possessed the property more than five years before the transfer and used it as his residential home (it was the seller’s domicile starting not later than one year from the date of purchase). The seller transfers the real property to the legal heir or an heir by a will. The seller transfers the real property to a legitimate child, but not including an adopted child. The seller transfers the real property without consideration to government agencies. The seller transfers the real property without consideration to temples, churches or mosques. The exemption is limited to the transferred portion which does not make the total area of the estate acquired by temples, churches or mosques exceed than 80,000 square meters. The transferred real property has been used as the principal place of residence, and the seller’s name appeared in the house register for not less than one year from the date of acquiring such property. The property transferred was acquired through inheritance, etc. Specific business tax is an assessment tax, check the relevant section in the Thailand Revenue Code Stamp Duty Stamp duty is charged at a rate of 0.5% over the registered or appraised value, whichever is higher. The obligation of payment of stamp duty depends if the seller is also subject to specific business tax or not. When specific business tax is applicable the seller is exempt from the payment of the stamp duty, however, if stamp duty in this case has been paid the seller has the right to claim for the refund of stamp duty in full within 6 months after the payment. Income Withholding Tax Personal Income Withholding Tax When you are a foreigner (e.g. selling your apartment) you must make a tax withholding payment to the local land office. The payment must be made at the time of transfer of ownership but before the transfer is recorded on the deed. Income withholding tax for natural persons is calculated at a progressive rate based on the appraised value of the property with a deduction depending on the number of years of possession (exemptions are applied in certain specific situations but usually do not apply to foreigners). When you sell your condo apartment the land office will issue a tax receipt that you will need to transfer the proceeds of the sale out of Thailand. Corporate Income Withholding tax If the seller is a company then withholding tax is fixed at 1 % over the registered or sale price or government assessed value of the property (whichever is higher). Sample tax calculation Simple sample tax calculation (what to pay at the land office) of the total cost applicable for the transfer of a condominium unit with a 5 million baht value and 3 year ownership by a private owner: Transfer fee of 2% over 5,000,000 THB 100,000 THB Specific Business Tax 3.3% 165,000 THB Income Withholding Tax approx 100,000 THB Other application small fees and others approx. 300 THB Total amount to be paid to the land office at the time of transfer of ownership (approx): 365,300 THB Who pays the tax and transfer fees In a normal sale of real property in Thailand there is no standard fixed rule for who pays the transfer fee, stamp duty, specific business tax or even personal withholding income tax associated with the transfer of ownership. This is usually a subject the seller and the buyer must agree upon in the sale and purchase agreement. The recommended schedule in Hua Hin is: Transfer fee: shared by the seller and the buyer Specific business tax: shared by the seller and the buyer Stamp duty: shared by the seller and the buyer Withholding tax: shared by the seller and the buyer Also, any and all other fees incurred as a result of a property transfer of ownership are to be shared equally between the buyer and the seller. Only in a new build government licensed housing or condominium development the law specifies that only up to half of the 2% transfer fee may be transferred to the buyer by the developer. All other transfer costs are by law the responsibility of the developer. Other taxes: when owning a real property in Thailand there are no general property taxes (reforms have been proposed in 2010). Real properties put to commercial use (residential houses not ‘owner occupied’ and commercial buildings) must under the Building and Land Tax Act pay a ‘rental’ tax at a rate of 12,5 % of the annual rental value. For undeveloped land there is a very small annual local land development tax depending in the size and use of the land – (building and land tax). Own more than 5 years: Transfer fee 2% Duty stamp 0.5% Income tax ~ 1.5% Own less than 5 years: Transfer fee 2% Business tax 3.3% Income tax ~ 1.5% Company Tax and transfer fees: Transfer fee 2% Business tax 3.3% Income tax 1%