Essential Tips for Foreigners Buying Property in Hua Hin/Thailand
Introduction
Thailand is a beautiful country known for its breathtaking landscapes, warm climate, and welcoming culture. This makes it an attractive destination for foreign property buyers. From bustling cities to serene beaches and tropical green countryside, Thailand offers a variety of settings for everyone. This appeal is also because of the potential for investment growth and the lifestyle it offers to expatriates and retired people.
For foreigners interested in buying property in Thailand, it’s important to understand the legal framework surrounding it. Thailand has specific regulations in place regarding foreign property ownership. This is primarily to protect its land. While direct land ownership is generally restricted for foreigners, there are legal ways for those looking to invest in the Thai real estate market.
In this article, we will explore the essential aspects that foreigners must know when buying property in Thailand. From understanding the types of properties available to the step-by-step process of securing real estate, we aim to provide a detailed guide for those interested in the Thai property market.
Foreigners Can Buy Property
In Thailand, foreigners can buy property, but there are specific rules about what type of property they can own.
Condos
The most up-front option for foreigners is purchasing condominium units. According to the Condominium Act in Thailand, foreigners are allowed to own condominium units in their names directly, as long as foreign ownership within a single condominium complex does not exceed 49% of the total units. If a condominium complex has 100 condos, 51 of those must be owned by Thai nationals.
This law makes condos a popular choice for foreigners looking to invest in Thai real estate due to its simplicity. When buying a condo, it is essential to ensure that you are investing in a development that follows the said foreign ownership quota. For foreign quota ownership, payment for the purchase of the condo must be transferred in from outside of Thailand from a bank account in the purchaser’s own name, the receiving Thai bank will then be able to provide the relevant Foreign Exchange Transaction (FET) forms, this is essential and must be followed to be able to own under the foreign quota system.
Land and Buildings
When it comes to land ownership, the restrictions are tighter but for the actual building itself, this can be owned in the foreigner’s own name. Foreigners are generally not allowed to directly own land in Thailand but under certain conditions and with proper legal safeguards in place to protect your investment there are still options available for foreigners wishing to have a landed property here.
The most common is entering into a long-term land lease contract, this is normally for a period of 30 years which is renewable twice giving a total of 90 years. Under Thai law the first 30 years land lease can be registered at the government land office. Then for the extension of two further 30 years this is in the contract between the landowner and the lessee which should always be written or approved by your independent lawyer. It’s advisable to show in the contract that payment for the second and third 30 years terms has been paid for in advance and that the land can be sold as freehold to a Thai buyer in the future.
You can also purchase land through a Thai spouse or partner and make use of a Usufruct which is registered at the government land office. This gives the foreigner right to use the land until they pass away at which point the Usufruct expires and cannot be inherited. This option is becoming more widely used but it’s essential to have a Thai Will in place for both the Thai spouse and the foreigner.
Another option is holding the land in a Thai Limited Company which must be an active trading company which the foreigner can hold shares up to 49% in. As always, we recommend consulting with a lawyer experienced in land ownership. Â
Finally, there is the option of investment into Thailand of 40m Thai Baht, this gives the applicant the right to own up to 1 rai (1,600 sqm) of land. There are specific investment criteria which needs to be fulfilled for this option.Â
Understanding these legal methods and following the regulations is crucial for foreigners buying property in Thailand. It ensures a secure and compliant investment in one of Southeast Asia’s most attractive real estate markets. For a more in-depth understanding and to navigate these legalities smoothly, it is advised to consult with a real estate lawyer or a reputable property agent in Thailand who is experienced in working with foreign clients. At Location Real Estate, we help our client’s own property in the best of terms and as per their needs at the best possible rates.
How to Buy Property in Thailand: A Step-by-Step Guide
Buying property in Thailand as a foreigner involves several crucial steps. Here’s a simple step-by-step guide to help you navigate the process:
Step 1: Research and Identifying the Right Property
- Start by researching online to find properties that match your preferences in terms of location, type, and budget.
- If possible, visit Thailand to see the properties firsthand and get a feel for different areas.
Step 2: Understanding the Financial Implications and Arranging Finances
- Consider the total cost, including taxes, fees, and any renovations. Remember, there are restrictions on how foreigners can send money to Thailand for property purchases, so consulting with a lawyer is essential.
- Most foreigners will need to have funds available as getting a mortgage from a Thai bank can be difficult. Some new developers do offer financing options.
Step 3: Navigating the Legal Process, Including Due Diligence and Contracts
- For due diligence, hire a reputable lawyer to check the property’s legal status, ensuring no outstanding mortgages, liens, or legal disputes.
- Your lawyer should also review any purchase agreements before you sign. Understand everything you’re agreeing to, including payment schedules and what happens if either party doesn’t fulfill the contract terms.
Step 4: The Role of Real Estate Agents and Lawyers in the Buying Process
- A good agent, such as Location Real Estate, who is familiar with working with foreigners can guide you through the selection process, offering insights into the local market and helping you negotiate the best deal.
- A lawyer is indispensable for ensuring the legalities of your purchase are covered, from conducting due diligence to advising on the structure of your purchase for compliance with Thai law.
Â
Selling The Property Afterwards
Selling property in Thailand might seem challenging, but with the right approach, it’s quite manageable. One key step is to consult a reputable lawyer when you first buy the property. This ensures you avoid potential problems when it’s time to sell.
Working with a trusted real estate service like Location Real Estate can make a big difference. We are known for providing excellent service and advice, crucial for both buyers and sellers in Hua Hin. We highlight the importance of being informed about the selling process, including understanding the fees involved. Knowing all the steps and costs upfront can make the selling process smoother and more transparent. This approach ensures sellers are well-prepared and can navigate the sale of their property in Thailand effectively.
Selling The Property Before the Land Lease Expires
If you’re a foreigner owning a property on a land lease in Thailand and decide to sell it before the lease ends, you can sell it to both Thai and foreign nationals if this is outlined in your original purchasing contract. For a Thai buyer, the land can be transferred to freehold. For a foreign buyer, a new 30-year lease can be initiated, or they can continue the existing lease.
For example, if you’ve held the property for 5 years, the new buyer would take over the lease for the remaining 25 years. While foreigners can’t own land, they can own the building on the leased land outright. Therefore, when selling, the building is transferred to the new owner and the land either transferred or a new lease given.
Consulting a good lawyer when first purchasing ensures terms like low or no fees for transferring leasehold or freehold rights are included in the agreement and means there are no surprises when it comes to sell.
Selling a House
Selling a house and land in Thailand involves understanding specific requirements and gathering necessary documents, all of which are typically in Thai. This is why having a Thai lawyer is crucial, as they can help translate and identify important documents. At Location Real Estate, we can guide you on the documents needed, such as the original land title deed, the property’s blue book (tabian baan), the official sales and purchase agreement, the builidng permit, and the Thai ID of the landowner or lessee’s passport. Each ownership type might require different documents, and our experienced consultants can offer more personalized advice.
Selling Condo
When selling a condo, the process is slightly different but also requires specific documents, including the original land title deed, the condo’s blue book, the sales and purchase agreement, and letters from the local juristic office confirming no outstanding debt and that foreign quota allocation is available for new ownership. More details are needed at the time of transfer, which our team can assist with, ensuring a smooth process whether you’re selling house and land or a condo in Thailand.
Transfer Fee Details
When selling property in Thailand, there are several government fees and taxes involved, which are different for houses and land compared to condos. Here’s a simplified summary:
For Both House/Land and Condos
- A government Transfer fee of 2% on the appraised value of the property, not the sale price.
- Specific business tax charged at 3.3% on the sale or appraised value, whichever is higher, if the property is sold within five years of purchase. Exceptions include transfers to legal heirs, government, or religious institutions, and properties used as the seller’s primary residence for over a year as long as the sellers name is registered in the house book (tabian baan).
- Stamp Duty charged at 0.5% on the sale or appraised value, whichever is higher. This is waived if the specific business tax applies.
- Personal Income Tax from the seller’s income from the sale, with rates depending on the ownership duration.
- Withholding Tax if the seller is a company is 1% of the sale or appraised value, whichever is higher.
Taxes and Fees Payment
In Hua Hin, it’s common for the seller and buyer to share all transfer cost such as the transfer fee, specific business tax, stamp duty, income tax and withholding tax equally. This should always be agreed upon at the time an offer is made on a property.
Other Considerations
Thailand used to have a general property tax, but its now called Land and Building tax which is paid annually. Rates depends on the type and usage of the property and are calculated from the appraised price. Typical residential rate would be 0.02% but rates are of course subject to change.
Inheritance
Thai inheritance laws differ from many Western countries. Under Thai law, foreign inheritance of property can be a complex process. Inheritance will be subject to Thai probate laws and court approval to appoint an executor is needed.
For Land lease the right and obligation can be inherited as long its stated in the original land lease agreement which is registered at the land office. If the property is held through a Thai company, then the shares in the company will be subject to inheritance. Condo’s which are held directly in the foreigner’s name can also be inherited.
For land that has been owned by a foreigners Thai Spouse or Partner then that land can be inherited by the foreigner, but they have a maximum of 1 year to then sell the land as they are unable to own it in their own name.
Consulting with a lawyer specializing in Thai property law is essential to ensure your wishes are met regarding the future of your property. They can advise you on the most appropriate way to structure your property ownership and can help you draft a will that is compliant with Thai law. Its essential that both foreigners their Thai spouse or Partner have a Will.
Conclusion
Navigating the process of selling or buying property in Thailand, whether it’s a house and land or a condo, involves understanding specific legal and tax obligations. From the initial stage of having the right documents and understanding the transfer fees, specific business tax, stamp duty, income withholding tax, to the negotiation of who bears these costs, it’s clear that thorough preparation and clear agreements are key.
Consulting with a knowledgeable lawyer or real estate professional, such as Location Real Estates can significantly smooth this complex process. Remember, the costs and procedures outlined, including the transfer fee, specific business tax, and others, serve as a general guide. Actual costs and legal requirements may vary based on individual circumstances and the specific details of the property being transferred.
Â
Please note that this article is for information purposes only and does not constitute legal advice.