Foreigners planning to invest in real estate in Thailand must know the general rule that foreigners cannot own a land in their name, thus owning a house or a land in Thailand may be more complicated. Real estate investment in Thailand is good, real estate properties are sold in low price, while the value of your money appreciates through the years after acquisition. Thus despite the complications of owning a house and a land, investing in real estate still remains as an excellent choice. Negotiating the legal difficulty of acquiring a property in Thailand can be taken care of by qualified Thailand lawyers.
There are number of vehicles available for foreigners to control their investment in land in Thailand:
- Set up a Thai Limited Company
The nature of the laws in Thailand restricts foreigners to acquire a house in Thailand. For a foreigner who is looking to invest a house in Thailand, you will need to form a Thai company to purchase the property for you. As per Thai law, though a foreigner cannot own a land in Thailand, he may however own up to 49% of a Thai company, and the company if registered in Thailand can own property, including land. The formation of a Thai registered company is necessary and then the property can be purchased under that company.
In setting up a Limited Company you are required to have 3 shareholders. There must be at least 2 Thai national or juristic person who would own the majority shares which is 51% and you would own 49%. However we can restructure the company shares in such a way that you would have a 100% ownership of the company.
The minimal capital requirement to incorporate a Thai limited company is 2 million baht. This is required in order to support a work permit for foreign employee. When registering a limited company, at least 25 percent of the subscribed shares must be paid up.
The foreign shareholder can be issued with Preference Share. It will give them increased voting power and allows them to control the Thai Company thereby controlling the assets of the company (such as the land). Another option is to appoint the foreigner as a sole director of the company, although in this case a foreigner should obtain work permit.
Even though land ownership by a partly (up to 49%) foreign-owned Thai company is as such not illegal under Thai laws, the legality and land ownership by most of these partly foreign owned companies is controversial if not illegal. Thai government is restricting and discouraging the misuse of Thai companies to circumvent foreign property ownership restrictions in Thailand. Thus, it is recommended to register a Thai holding company only if they are intending to conduct real business in the Kingdom.
- Leasehold
Another way of land acquisition in Thailand would be through leasing for the maximum duration of 30 years. This will give the foreigner the right of usage of land. The lease agreement may grant two renewal periods of 30 years each. The lease can be renewed only when the owner is willing to renew it,and legally renewal is not enforceable in a court based on a promise made in a lease signed 30 years ago. This renewal of the lease must be re registered at the Land Department in Thailand to make it effective.
Contact a legal firm to assist you with variety of matters related to your real estate transaction such as company registration, title search, due diligence, contract review or drafting, and assistance with the registration of the lease and ownership. It is advisable that before agreeing to any transaction, conduct a due diligence to determine is the property is capable of being sold legally, to make sure that the seller is the current owner of the land, the title document is in order and to find out whether there is any registrable encumbrance on the title document of the land.
See also How to Buy Property in Thailand.
