For investors not familiar with the Thai law, purchasing property in the Kingdom can seem like a daunting task. With years of local experience, Samui Sunset Investment are well positioned to guide clients through the legal maze, advise on all the available options and suggest the best solutions. This includes conducting due diligence on a property, during which the land title and ownership papers will be throughly checked, the contract negotiated and drawn up, then transfer and registration of ownership completed once the property is legally purchased.
1. Company set up.
We can assist foreign investors looking to set up a Thai limited company, which is a preferred way for foreign investors to gain controlling interest on a plot of land.
By law, there is a minimum requirement of two Thai shareholders holding at least 51% of the company’s shares. As part of the company set-up, open-dated share transfer forms are signed by the Thai shareholders should the foreigner wish to replace them or transfer them to new owners in the future.
The lawyers used to set up the company structures the shares to protect the foreigner’s interests, which can be done in several ways. This includes specifying that the foreigner’s shares are preference shares with majority voting power, or specifying the foreigner as the only official signatory in the company’s contractual dealings.
2. Laws on transfer ownership.
Foreigners in Thailand are allowed to own landed properties but they are prohibited by law to own the actual plot of land the house sits on. There are, however, two ownership options in which foreigners can in effect own a plot of land.
Through a Thai limited company
A foreigner can set up a Thai limited company which in turn owns the plot of land on a freehold basis. With the land owned outright on a freehold basis by the Thai company, the foreign investors are then able to sell, lease, or transfer ownership rights.
Investors should note that with this option, the company books have to be maintained, taxes filed, and shareholder meetings held and recorded. Typically, an accountant would be able to maintain the company accounts for a nominal fee of around THB20,000 per year, excluding company taxes and other expenses.
Leasing the land
As an alternative option to setting up a Thai limited company, foreign investors can also purchase a 30-year lease over land, which can be extended for two additional 30-year periods, adding up to a total of 90 years on the lease. The renewal options can be built into the initial contract, which can also include the option to purchase the land on a freehold basis if and when the Thai law is revised to allow for this.
It is possible for foreign investors to lease the land and own the house on the land, but for ease of resale, many investors opt to set up a Thai limited company so they own both the land and the building on it.
3. Tax/transfer fees
Taxes and transfer fees are payable when the transfer of the property is registered. The percentage depends on two home valuations – the government-assessed value, and the sales price.
Withholding tax is 1% of sales price or government-assessed value (whichever is higher),if the seller is a company. If the seller is an individual, this is calculated at a progressive rate.
Government transfer fee is 2% of the value of the property as assessed by the government.
Stamp duty is 0.5% of the registered sales price (waived when specific business tax is levied).
Specific business tax is 3.3% based on registered sales price or government-appraised value (whichever is higher), but waived when the seller has held the property for more than five years before transferring it to a new owner
A corporate income tax is applicable if the property sale is by way of share transfer from one company to another.
4. Thai measurements in land
The standard measurement for land in Thailand is the RAI, NGAN, and TALANG WAH (square wah or sqw). Land sale and lease prices are usually quoted per rai.
1 rai = 4 ngan = 400 sqw = 1,600 sqm
1 rai = 0.4 acre (1 acre = 2.53 rai)
1 rai = 0.16 hectare (1 hectare = 6.25 rai)
5. Different land titles
Issued by the Land Department, land title deeds shows rights and ownership of land. There are several different kinds of title deeds, but investors should only consider three of the most secure which permit buildings on them – Chanote, Nor Sor Sam Kor, and Nor Sor Sam – which can be sold, leased, and used as mortgage collateral.
Nor Sor Si Jor (Nor Sor 4 Jor or Chanote)
The most secure of land title deeds, the Nor Sor Si Jor (Nor Sor 4 Jor), more commonly known as a Chanote clearly describes the piece of land in relation to the national survey grid, with its GPS plotted and boundaries marked by numbered posts. Ownership of a Chanote can be transferred, a straightforward process that can be completed within a day. Chanote-titled land can be sub-divided into smaller parts, and due to its clear and secure nature, this is the preferred title deed for foreign investors.
Nor Sor Sam Kor (Nor Sor 3 Kor)
The Nor Sor Sam Kor (Nor Sor 3 Kor) describes a plot of land with fairly certain boundaries set by parcel points using an aerial survey, though they are not designated with official markers. This type of title deed can be upgraded to a full Chanote pending an official land survey by the land department.
Nor Sor Sam (Nor Sor 3)
The Nor Sor 3 title offers its holders the legal right to possess the land. The boundaries of the land plot specified in this type of title deed are recorded in relation to neighboring plots, with discrepancies up to 20% not unheard of. Land boundaries for the Nor Sor 3 are difficult to verify as they are not measured nor recognized by the land department. Change in ownership will take over a month as a public notice of 30 days is required before transferral can take place.
6. New building regulations and zoning on island.
In order to ensure the property market on Koh Samui grows at a sustainable pace, there are zoning laws on the island. Of the 12 zones, three are residential – low density, medium density, and high density – and each comes with its own set of regulations.
Homes built in the low density residential area, for example, must be under 12 metres in height and not exceed 2,000 sqm in a built-up area, representing a maximum of 60% of the land plot. No building should be erected within 10 metres from the ocean, and anything within 50 metres from the high tide line should not exceed 6 metres in height.
Exceptions do exist, and building regulations and rules are updated regularly by the government. Samui Sunset Investments provides clients with the most updated information, depending on each individual case.