Date borrowed with permission from Sallmanns Pips - Phuket Real Estate Investment Services

Buying a Condominium:

The Condominium Act entitles certain groups of foreigners both individuals and companies to acquire a condominium or apartment units in Thailand, provided that the foreign ownership in a condominium project does not exceed, in the aggregate, 49% of the total area of all condominium units in the condominium building.

Developers will usually offer a choice of two ownership options being "freehold" or "leasehold".

If the units being sold have not had their quota of foreign ownership met then you should likely be able to acquire a "freehold" interest in the condominium / apartment development. The "freehold" interest only give you rights to the building per se and not the land.

If the units being sold to foreigners have had their quota of freehold fully subscribed - then the developer is able to offer a lease interest in the condominium / apartment development. The longest duration a lease can be registered in Thailand is 30 years and it can be written into the contract that the lease is a lifetime lease meaning that you would have 2 options to renew at a max term of 30 years each.

The land upon which the condominium / apartments site is located would be owned by each individual with a majority Thai Shareholding and governed by a juristic entity or body corporate set up by an owners body.

Foreigners eligible to own a condominium:

Foreigners who bring foreign currency into Thailand to pay for the purchase of condominium units or withdraw money from a bank account of a non-resident, or withdraw money from a foreign currency account. Any one of the following documents is required:

• Having one or more foreign Exchange certificate know as the "Thor Tor 3", evidencing the sale or deposit of foreign currency in an authorized local bank. This form must bear the bank's authorized signature and seal in the authorized bank column. The Thor Tor 3 must specify that the purpose of the remittance of foreign currency be for purchase of a condominium unit or units and must in total equal or exceed the price of the condominium.

• Foreigners who are permitted to have residence in Thailand under the Immigration Act. The documents required are either a passport, residence permit and house registration, or else an alien book.

• Foreigners who are permitted to enter Thailand under the Investment Promotion Act. The documents required are a passport plus a letter from the Board of Investment of Thailand certifying permission to live in Thailand under the Investment Promotion Act.

• Foreigners who bring foreign currency into Thailand to pay for the purchase of condominium units or withdraw money from a bank account of a non-resident, or withdraw money from a foreign currency account.

Buying a Home in Thailand

People not resident in Thailand who wish to own a home, which for all intents and purpose is a land and house package, can do with the help of a legal and tax professional. Most company registrations can be done through a law firm at prices starting from around Bt 50,000.- for setup and Bt. 7,000 for each million in registered capital.

Bear in mind though that under the strict interpretation of the law, a foreign individual – per se, is not entitled to own land, unless special approval has been granted by the Interior Ministry or other government body. (i.e. a privilege has been received from the Board of Investment of Thailand or the Industrial Estate Authority of Thailand – which will not apply for most residential property transactions considered here)

A popular way to complete a house and land acquisition is to form a Thai Limited Company, which owns the property you wish to buy. A brief introduction about the procedure to set up a Thai Limited Company is detailed below.

Three 3 basic procedures exist for setting up a Limited Thai Company:

Firstly the proposed name is required to be reserved for use as the Company's name with the Ministry of Commerce, in order to ensure that the proposed Company name is not identical or similar to the name of any other registered Company.

The name reservation application is required to be signed by any one of the promoters.

Once the Company's name has been approved by the registrar, during the validly period of 30 days, the promoters shall apply for the registration of the Memorandum of Association. At this stage at least 7 individuals are required as promoters, of which at least 4 must be Thai nationals.

The Memorandum of Association must contain the following information:

There is no minimum capital requirement. However the fee for registering the memorandum is set at Bt 50 per registered capital of Bt 100,000 subject to a minimum fee of Bt 500

Following the registration of the Memorandum of Association all shares must be subscribed to by shareholders and all promoters must hold at least 1 share. At least 25 % of the value of each share is required to by law to be paid up.

The promoters shall then hold a general meeting of all subscribers, which is called the "Statutory Meeting".

The promoters are required to send to every subscriber a notice of the Statutory Meeting together with a statutory report at least 7 days before prior to the meeting-taking place. The notice of the Statutory Meeting shall contain the agenda of all business to be transacted. Normally the business to be transacted at the Statutory Meeting is as follows:

Following the Statutory Meeting, the directors shall run the business of the Company. The directors shall call for the payment for the shares to be made in money in the amount determined at the Statutory Meeting.

After the payment for the shares have been made, the authorized director(s) must apply for the registration of the Articles of Association of the Company. In practice the Articles of Association can be submitted 10 days after the date of registration of the Memorandum of Association. It will normally take at least 3 - 5 working days for the Registrar to consider the Articles of Association and the list of shareholders. (The promoters are required to hold at least one share each).

The completion of the incorporation of a Limited Company takes approximately 3 - 4 weeks.

The Tax Implications:

The registration of Transfer of Ownership of the Land and the Villa:

Please be advised that under the law, all fees and duties and taxes in relation to the registration of transfer of ownership of the land and the house or villa are subject to be paid up front to the Land Department official on the registration date every time there is a registration (which includes resale transactions). The rates of the fee and duty and tax are based on the official appraisal price, or the purchase price in that it is higher then the official appraisal price. The details are below:

Important Notes:

The Proposed name of the Company is required to be reserved with the Ministry of Commerce. It takes one day to obtain the result of the name reservation. The name is valid for 30 days.

Thai law requires at least 7 people to be the promoters of the Company and in order to be considered a Thailand Limited Company at least 4 of the promoters must be Thai nationals.

As the Company will have Thai nationality, the Company is therefore free to set its own objectives, which should not be contrary to public order or good morals.

In fact the Ministry of Commerce provides a standard form of objectives of the Company containing 40 clauses including to owning a land and house.

The shares of the Company must be or par value and the amount of a share may not be less than 5 baht.

The shares of the company can be issued only as ordinary or as preferred shares. The preferred shares have special rights attached to them as prescribed in the Articles of association. If preferred shares have been issued, the preferential rights attributed to such shares cannot thereafter be altered.

Normally, to protect the foreign shareholder, two types of share holdings are suggested. The Thai shareholders hold preferred shares with limited privileges (i.e. less voting right, limited dividend, or limited right to asset surplus) whilst the foreign shareholders hold ordinary shares with better privileges.

Shares are transferable without the consent of the Company unless otherwise provided by the Articles of Association of the Company. Both types of shares are transferred by delivery of a certificate. A transfer of shares entered in the name certified must be in writing and executed both by the transferor and the transferee, whose signatures shall be certified by at least one witness. The transferor shall be deemed to remain the holder of the shares until the particulars of the transferee and the shares transferred are recorded in the register of shareholders.

A Thai Company is a company in which Thai shareholders hold more than half of all issues shares, this is 51%. Foreigners therefore can hold only 49%. A company must have at least 7 shareholders whose names addresses and shareholdings are filed in public records at the Ministry of Commerce. Shareholders can be natural persons or corporations of any nationality, and residence. The rights of shareholders are:

Under the Land Code and the Land Department Notifications, a Company in which more then 39 % of the shares are held by foreigners is required to be investigated by the Land officials regarding whether the Thai shareholders are nominees holding share on behalf of foreigners. This investigation can take 2 - 3 weeks if not longer.

In order to minimize any extra time or risk of investigation most law firms will suggest that in the first stage the buyer should structure the shareholding ration at 39 % foreign and 61% Thai to avoid time being consumed by the government investing company shareholding structure. After the completion of the registration of the transfer of ownership of the land, the new company can be restructured so that the foreign holding is at the maximum percentage available.

The registered capital should not be less than the purchase price of the land. This is because the Land Department official has sole discretion regarding whether to investigate the Company if they consider that the Company has been established with Thai shareholders to hold the land on behalf of the foreigners.

Alternatively, it is suggested that the buyer sets the registered capital at nominal amount of 1 million baht. The difference between the purchase price and the registered capital can be made in the form of a loan to the company from a foreign director. In this case, evidence can be shown to the Land Department that the Company has a source of money to purchase the land. In additional if in the future the Company wishes to remit funds outside Thailand they may be able to do so under the premise that those funds are for payment of a loan from a foreign director.

Under Thai law, there is no requirement of a minimum number and nationality of the directors. It is therefore allowable to have all directors as foreigners. Please note that a director need not be a shareholder.

Under Thai law, it is required that authorized directors shall be appointed from any of the directors of the Company, to sign any document for an on behalf of the Company. Again there is no requirement regarding the number and nationality of the authorized directors.

The Company books and accounts must be kept in the registered office and are to be a true and complete account of the sums received and expended by the Company. The accounts must show the assets and liabilities of the Company and its profit and loss account. The balance sheet and the profit and loss account has to be examined by the Company's auditor and submitted to the general meeting for consideration. Accounts must be audited once a year and filed with the Revenue Department and Commercial Registration.

Foreign investment in a Thai Company is limited to 49 % while Thai nationals must hold the remaining 51 %. This provides for ownership of the majority shares by Thais, however, there are a number of means available to provide minority shareholders with a degree of management control of a company. Thus for example, minority shareholders may be given the sole right to elect a percentage of the Board of Directors, or the right to have more voting rights then the majority shareholders (i.e. a foreign shareholder who holds 49 5 ordinary shares has 1 vote per 1 share whilst a Thai shareholder who hold 51 % holds preferred shares and has 1 vote per 10 shares, or by including a stipulation that all shareholders resolutions require a minimum vote of 80 % to be passed which ensures that minority approval is required. Thus, it is possible to give minority equity investors a degree of control over the activities of the company.

All provisions regarding the protection of the minority shareholders will be stipulated in the Company's Articles of Association, to be registered with the Ministry of Commerce.

Disclaimer

Information given here is just to get you started. It does not negate advice from property agents and legal offices. We do not claim to be legally proficient. As far as we know the data provided are accurate, but subject to change. Do not take any action or buy any property based solely on the data provided, but seek further advice from professionals. BUYING A CONDOMINIUM MAY STILL BE A EASY PROCESS. HOWEVER, BUYING A HOUSE ON LAND HAS BECOME SOMEWHAT OF A HOT ISSUE, AND THE GUIDELINES MENTIONED ON THIS PAGE MAY NOT BE UP TO DATE AND CHANGING. LAWS ARE IMPLEMENTED IN A DIFFERENT WAY, AND SETTING UP COMPANIES WITH THE PURPOSE OF ACQUIRING LAND AND/OR A HOME NOT SUCH A STRAIGHTFORWARD AND ACCEPTED PROCESS.

Date borrowed with permission from Sallmanns Pips - Phuket Real Estate Investment Services