Bangkok House Investment Options for Foreigners
So far, our series of articles on foreign investment in Thai real estate have focused at the advantages of purchasing Bangkok property. We’ve reviewed the individual types of housing opportunities and the formats for acquiring condos, apartments, houses, and land in the Thai capital. In this piece we will look at the procedures involved for buying a townhouse or detached house in city.
Optimize Your Purchasing Decision
It’s advisable to seek advice from a Real Estate Agent or legal representative before buying property in Thailand. Although legal disputes are rare for foreigners purchasing real estate in Bangkok or beyond, getting professional guidance will place you in a much better position to optimize your purchasing decision. Additionally, a thorough property due diligence should always be conducted prior to securing any deals.
The “Grounded Property” Issue Explained
Unlike buying a condo, a townhouse or detached house is somewhat more complicated for the foreign investor. This is because there’s land involved in the purchase, and that means the property is “grounded.” Under the rules of land ownership in Thailand, foreigners are prohibited to own land outright. However, there is a way around this for those wanting to invest in grounded property.
In the Name of a Thai Registered Company
The most common approach used by foreigners wishing to buy land in Thailand is through the name of a Thai registered company. This is typically set up and managed by the foreigner. However, a non-national can only own 49% of the company, while the other 51% of shares must be in Thai hands.
What usually happens is that the 51% of Thai shares is divided between several different shareholders. This means the foreigner is the majority stakeholder and consequently has the majority vote on all company decisions. The format and preparation involved in setting up the company is done in such a way that the Thai shareholders are not able to contact each other, and therefore their voting right and control over the business is minimal at best.
Other Alternatives for Acquiring Land in Thailand
There are some other, less conventional ways for foreigners to obtain land in Thailand.
- Board of Investment (BOI) – foreigner invests cash into Thailand
- Marriage to a Thai National
- Leasing
Selling Your “Grounded Property”
As and when foreign owners want to sell their Bangkok Townhouse or detached house, it’s comforting to know that this is a fairly simple and cheap process, and certainly more straightforward than Thai nationals selling to one another. Land Taxes in Thailand must be paid upon the sale of any type of property in the Kingdom. These taxes are:
- Stamp Duty (Land Tax) – 2%
- Withholding Tax – 1.5%
- Business Tax (if the property has been owned for less than 5yrs) – 3.3%
However, if the property is held by a company, then the foreign owner only has to sell the business to the new buyer. This is a simple and inexpensive administrative exercise that involves little more than changing the shareholder’s details, that is, the foreign shareholder sells his 49% stake to the new owner, thus avoiding all of the above taxes.
The Conclusion
Although organizing the ownership of a townhouse or detached house in Bangkok/Thailand may seem troublesome at first, it does have its advantages. Furthermore, it is cheaper to sell grounded property on than it is for foreigners selling Thai condos that they own outright.
