2007 PROPERTY REPORT

Introduction2

Process of Acquiring Land

A. How can a Foreigner acquire land?3

B. Categories of Land Title Deed4

Process to Purchase a Condominium5

Thailand Longstay Management6

Property Financing for Foreigner11

Ten Common Problems of Buying Property12

Taxes for Buying and Selling Property13

Tax Calculation Example15

Frequently Asked Questions16

Siam Legal Property Services 19

INTRODUCTION

Acquiring property in Thailand is not as complicated as you have heard. Foreigners are allowed to acquire a property in Thailand under certain circumstances. Whether you plan to purchase a holiday home on the coast, a retirement home outside your country, or a business establishment in a growing country, this report will guide you step-by-step of how you, as a foreigner, can acquire a property in this beautiful country. It provides answers to your questions concerning Thai Property Law, including steps to acquire land or condominium, property financing, tax aspects, Ten Common Problems of Buying Property, Frequently Asked Questions, and Legal Services provided by Siam International Legal Group.

PROCESS OF ACQUIRING LAND

A. How can a foreigner acquire a land in Thailand?

Foreigners are generally not allowed to own land in Thailand, even though the Land Code, since it was first promulgated in 1954, has provided that foreigners may own up to one Rai (1,600 square meters) of land for private residence, but only upon being granted approval by the Minister of the Ministry of Interior. This approval has practically never been given. However, though Thai Property Laws prohibits a foreigner from owning land in Thailand, there are five alternatives on how a foreigner can acquire land, as follows:

  1. Through a Thai Limited Company***

A foreigner may have shareholding in a Thai company which owns the land. It is recommended that the foreigner not to use nominees in the Thai Company. The Thai Longstay Management Company (TLM) offers a sound alternative as the foreigner is a shareholder with a long term lease under a Thai Company with TLM in the Vacation Investment Program (

(see***)

  1. Investment (BOI)

A foreigner, who invests 40 million Baht for no less than 5 years, is entitled to buy up to one rai (1,600 square meters) of land for residential purposes. Permission from the Ministry of Interior must be obtained.

  1. By marriage to a Thai

In 1999, Thai property law, concerning a Thai married to a foreigner, has been amended in favor of the Thai spouse. Such couple may now legally own a land in Thailand provided that the land is registered under the Thai spouse.However, the Thai spouse must prove that the money used in the purchase of freehold land is legally solely theirs with no foreign claim to it. In this event, the foreign spouse must sign a declaration stating that the funds used for the purchase of property belonged to the Thai spouse prior to the marriage and are beyond his claim.

  1. Lease

Leasing is another option for a foreigner to acquire land. The maximum duration of a lease under Thai property law is 30 years, with a possibility to renew again (for another 30 years) if agreed. This is the least complicated option for a foreigner to have a right of usage of the land. The land lease over 3 years must be registered at the Land Department.

  1. Structure Ownership

A company or the Thai spouse of a foreigner may grant a Right of Superficies in favor of the foreigner, giving him the right to personally own all constructions situated on the land. By using this possibility, a foreign individual can be registered as the owner of a house without owning the land. The Right of Superficies can be conceded for a period of 30 years and can be renewed for another 30 years (but not automatically).

NOTE: Before buying land, an essential step to the process is to conduct a “Title Search”. Since there are different levels of land title deeds, it is recommended to verify with the Land Department the type of title deed of the land in which you are interested to acquire and its legality. This step would provide more information about the land; for instance, whether it is under any obligation. Also, due to a real estate boom in Thailand, some counterfeit title deeds have been found. It is strongly recommended to conduct a “title search” to avoid any unappreciated surprise in the future.

B. Categories of Land Title Deeds

Land title deeds in Thailandare divided into 4 categories as follows:

  1. Freehold Title Deed (Chanote or Nor Sor 4)

This type of title grants the holder of this document the full right over the land. The holder has absolute authority over the land. Thus, if you are planning to buy land in Thailand, this type of title deed is the best option.

  1. Nor Sor 3 Gor

A land awaiting a full title deed is granted the document Nor Sor 3 Kor. The land is measured by the Land Department; therefore, it has its exact boundaries. The owner knows exactly what he owns. This type of land may be sold, transferred, or mortgaged, as a land with freehold title deed (Chanote). The owner of the land may file a petition to the Land Department demanding to change it to a full title deed (Chanote), and the Land Department may do so if there is no opposition made against the petition.

NOTE:The person whose name appears as the owner of Nor Sor 3 Kor has a right to transfer, sell, dispose of and mortgage the Land upon registration with the relevant local land department in accordance with the Land Code and other regulations, notifications and announcements relating to it. Any transaction in connection with the real property (except where the lease is not more than 3 years) must be registered with the relevant local land authority and will be shown at the back of Nor Sor 3 Gor.

  1. Nor Sor 3

Same as Nor Sor 3 Gor except that the land with Nor Sor 3 has never yet been measured by the Land Department; hence the land has no exact boundaries. However, Nor Sor 3 may later be switched to a Nor Sor 3 Gor, then a freehold title deed (Chanote) in the future.

4. Possessory Right

This type of title deed is the least recommended. A land with a possessory right has never been substantiated by Department, but is only recognized by tax payments at the Local Administrative Office.

***Although Thai Law stipulates that a foreigner may not own land in Thailand, there is an alternative step of owning a land in Thailand. This involves registering a Thai Limited Company. A Thai Limited Company means that 51% or more of the company must be owned by Thai Shareholders (the remaining shares maybe held by non-Thais). This “Thai” company may then legally purchase land in Thailand.

We recommend foreign investors to form a “Thai Company Limited” because the Articles of Association of this form of Company can be varied to allow greater protection for foreign minority shareholders where majority Thai ownership is required under the applicable Law. The Article of Association can be changed to authorize the foreigner to be the sole director of the company, and the only person of the company who can commit or bind the company in any contractual dealing (buying or selling land), effectively giving the minority shareholders control over the company. (For more information, seeTHAILAND LONGSTAY MANAGEMENT)

PROCESS OF PURCHASING A CONDOMINIUM

Pursuant to Thai property law, a foreigner may have a freehold ownership over a unit in condominium under certain restrictions.

Four Steps of Owning a Condo - New Development

  1. Title Search

To verify the status of a land over which a condominium is constructed. Normally, a land would be under mortgage with a supporting bank.

  1. Sale and Purchase Agreement

This document specifies the selling price, terms and conditions of the sale. It is advised that a contract is to be reviewed by a lawyer for the best protection of rights of the buyer.

  1. Payment

a) Deposit: Normally, 1% of the total price of a unit is required as a deposit payment to reserve a right to purchase a condo.

b) Down Payment: a sum of 25% or 30%, depending on the agreement between a buyer and a seller, of the total price of a unit is required as a first payment of the price of a unit. There may also be some payments to be made between a down payment and a transfer date. This will depend on your written agreement with the developer. The buyer’s money to buy a condominium must be transferred into a Thailand bank account from abroad.

  1. Registration of Ownership

After the delivery of condominium unit and the final payment, the seller will then transfer the ownership of the condominium unit into your name. The registration fee, stamp duty, and withholding tax must be paid at the time the transfer of ownership took place.

Four Steps of Owning a Condo - 2nd hand sale in Condo Development

  1. Title Search

Similar to a title search for a new condominium project, this step is essential for a purpose of verifyingthe status of the land where the building is located. Normally, as a used condominium, the land shall not be under mortgage, or, if it is, the buyer would acknowledge his position over such land.

  1. Sales Agreement

If you buy a condominium from an individual, the sales agreement is normally a ready-to-use contract (An agreement which is not especially drafted for the sale between buyer and seller).

  1. Payment

A norm is that a buyer shall pay a full price of property to the seller upon the transfer of ownership at the Land Department.

  1. Registration of Ownership

When buying a condominium, the buyer (or a seller, or both parties, depending on the agreement between parties) shall be responsible for the payment of registration fee, stamp duty (in case of having owned the property for more than 5 years) or a special business tax (in case of having owned the property for less than 5%), and withholding tax.

THAI LONGSTAY PROGRAM

It is a dream of many foreigners to live in warm and sunny Thailand. Some purchase a second home to stay for their annual holidays or to escape the cold winters. Even more foreigners purchase property to live in Thailand for their retirement years. All are looking for a secure method of ownership for this substantial property investment. A new program introduced by the Thai Longstay Management Company will provide a secure structure for property ownership to the foreign buyer in Thailand. As many foreigners already know, purchasing property in a foreign country can be a confusing and frustrating experience; specifically the purchasing system operates differently than in their own country. Clearly, the foreigner cannot own land in Thailand. Hence, there is a need to have a solid method of ownership for the foreigner to build and live in their dream house. Let’s explore the Thailand Longstay program and see what it has to offer.

History of TLM

Thai Longstay Management Company (TLM) was established on the 11th of December, 2001. The Thai Cabinet had previously approved a proposal for long stay tourism. The Longstay Tourism Development and Promotion Project was set up to promote and to expand longstay tourism in Thailand and to encourage potential visitors to visit and stay in Thailand for longer periods. TLM is a private company which is 30 percent owned by the Tourism Authority of Thailand. It was reported that One Asset Management purchased a 15 percent share in February 2003. One Asset Management is the leader in Thailand’s asset management market and one of the primary mutual fund companies in the country. The largest shareholder and CEO of TLM is Police Colonel Ruamankorn Tabtimthongchai.

Condominiums

Foreigners can own a freehold condominium under Thai law. According to the condominium act, a foreigner can typically acquire up to, but not exceeding 49 percent of a total space of a condominium project. However, not everyone wants to live in a condominium. In many areas such as Phuket and Pattaya, the foreigners generally acquire 80-90 percent of the condominium projects. But only 49 percent of the foreigners can own it as freehold, the others must lease or use a Thai company structure.

Land Ownership Issues

There has been considerable news locally and worldwide about Thailand property ownership. These reports have focused on the “nominee” shareholder issue of a Thai registered limited company which is utilized by foreigners to acquire property in Thailand. Before the government review of the issue, foreigners were holding 49 percent shares in the Thai company. This Thai company could hold any size of land and it was registered at the Land Department with no questions asked. In May of 2006, the Land Department began closer inspection of land transfers by a Thai company structure in which foreigners were shareholders and/or directors. If a Thai company structure with more than 39 percent foreigner shareholders attempted to register land, the government officer at the Land Department requested the financial proof of the Thai shareholders’ investment. In addition, if there was a transfer of over one rai of land, the officials again asked for proof of the Thai shareholders’ investment. This now seems to be the common practice for the foreigner who desires to hold land with a Thai company. He/she simply holds 39 percent share of the company and registers not more than one rai of land. This is not the best method, as government authorities may consider this practice as using Thai persons as “nominees” for land ownership, which they could regard as a serious infringement of the land law in Thailand.

Leasing As An Alternative

The preferred method of acquiring land for building a home is by leasehold. The foreigner safely acquires the right to use the land and registers the right with a 30 year lease at the Land Department. A lease contract is carefully drafted to guarantee the initial 30 year lease with two renewal periods of 30 years each. In Thailand, the maximum time period for a lease registration of residential property is 30 years, hence, the need for two renewal periods in a contract to provide for a 90 year lease. The foreigner can construct a house on the land. The construction permit is applied for in the name of the foreigner. The foreigner will own the structure in his/her own name. The advantage of leasehold is a lower registration fee (1.1 percent on the amount of the land lease). The disadvantage comes at the end of the initial 30 year lease. Will the land owner be available to sign for upon the 1st renewal period? This risk can be reduced by leasing from a reputable Thai company. However, it still leaves some doubt in the mind of the buyer.

TLM’s Vacation Investment Program

The Vacation Investment Program (VIP) was set up mainly to ensure and to benefit the purchase of properties in Thailand for foreign investors. The program provides a business venture with the foreigner (VIP member) and Thai Longstay Property (TLP) which is an entity of TLM for the property purchase.

HOW IT WORKS

  1. TLM has established Thai Longstay Property (TLP) to be exclusively responsible for the management and investments in property business. TLP invests in the potential property and will authorize for the required VIP member to lease the property. TLP will create a new sub-company to exclusively invest and to manage the new property acquired.
  1. TLM property will select high quality condominiums and housing projects in Bangkok, Pattaya, Hua Hin, Phuket, Samui and Chiang Mai to join the VIP property listings. These listings will be available to the new VIP members or the foreigner may select another property on his/her own.
  1. TLP will purchase the request property and lease this property to the VIP member for a period of 30 years with a contractual agreement to renew for an additional 30 years for two times (90 years)
  1. The new sub-company will draft a loan agreement to purchase the property:
  2. A loan from a commercial bank
  3. A private loan from the VIP member who enters into a long term lease

5.The new sub-company is the legal owner of the property

  1. VIP members will receive a Share Pledge Agreement with a fixed annual interest rate of 3.5 percent as security.
  2. VIP members and TLP sign Memorandum of Understanding for the members’ exclusive and sole rights of the property.
  3. VIP members will jointly execute and affix the official seal of the company and can transfer authorization to another family member.

Benefits to Investors from VIP

  1. Investors will become a member of TLM for 30 years.
  2. Investors will have access to TLM Fast Track Immigration Services and One Stop Service which will entitle the holders to a one-year visa and assistance at Thai International Airports including Suwannaphumi, Samui and Phuket.
  3. Investors will be able to request for special attention and care from Tourist Police.
  4. Investors will have access to the TML multilingual call centre which is available in English, Japanese, and Korean.
  5. Discounts and privileges from TLM partners including hotels, golf courses, spa, restaurants, shopping centers, hospitals and insurance companies. Partners offer between 5-50 percent discounts depending on conditions.
  6. TLM offers assistance with work permit applications.
  7. Investors will have the right to receive the revenue and profits from the sub-lease or resale of the invest properties.
  8. After the first 30 years, investors will receive 3.5 percent interest per year on the value of the property.
  9. TLP offers mortgages for its VIP members
  10. TLP offers members certain loans secured on their property.

Exchange Program