All the subtleties of real estate registration in Thailand

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Are you tired of the constant bustle of the city and the stress of the metropolis, and dream of a vacation or life on the coast of sultry, exotic countries?

Then weigh the pros and cons of such a decision. If the “for” still wins, then choose your “future home” based on the following criteria:

  • Affordable property prices.
  • Climate and ecology.
  • Political stability and the level of social tolerance.

Couldn’t make your choice? It’s simple – it’s about Thailand!

Why Thailand?

This country is one of the most dynamically developing, frequently visited and most interesting countries in Southeast Asia..

Thailand is distinguished by an abundance of amazing exotic plants, sandy beaches, friendly and helpful locals, and an incomparable oriental culture..

Real estate registration in Thailand

Thailand harmoniously combines all the unique beauty of the ancient East, and architectural innovations, Buddhist temples here alternate with giant skyscrapers. Thailand is characterized by its distinctive culture, vibrant nightlife, adherence to traditional “fire” cuisine, a huge selection of unique and extraordinary goods and services.

This country is actually created for relaxation and pleasure.!

The forecasts of analysts five years ago regarding real estate registration in Thailand came true in full – housing construction in the country is now a very promising investment.

Real estate registration in Thailand

A win-win investment in Thai real estate is due to: affordable price range, profitability, low taxes and a favorable tropical climate that attracts millions of tourists to the country.

Over the past few years, foreign investors have been actively buying Thai real estate, which led to the establishment of a number of legislative prohibitions on its registration for foreign citizens.

However, do not be upset. Bypassing any restrictions, there are legal “loopholes”, which you will learn about below..

You can buy real estate in Thailand, and at very “pleasant” prices. Renting out such housing will bring significant income and, due to the annual rise in prices, will become a promising investment. Agree, it’s worth it.

Real estate registration in Thailand

Real estate registration in Thailand has a number of features in comparison with other countries.

Due to the restrictions on land ownership by foreign citizens, the procedure for acquiring real estate is presented in three ways:

  1. Registration of real estate objects for a “Thai” legal entity.
  2. Registration of real estate objects through long-term lease.
  3. Acquisition of real estate in a condominium.

Real estate registration methods in Thailand

Thai Limited Company

The first option – Thai Limited Company, provides for the registration of a legal entity in Thailand. Subsequently, this or that property is acquired on the balance sheet of this organization.

Since foreign citizens are entitled to own no more than 49% of the company’s shares, 51% must be owned by residents of Thailand. Such an organization must include at least three shareholders, and at least one of them must be a Thai citizen. Control over the activities of the company, as a rule, is carried out by a foreign citizen, since it is he who owns the preferred shares, which give a significant advantage when voting.

The value of preferred shares in comparison with ordinary equity securities can be correlated as – 10: 1. That is, when voting, the owner of at least one preferred share will have 10 votes, and, therefore, the owner of an ordinary share will have only 1 vote.

Sometimes there is a provision in the charter of the organization that the owner of the preferred equity securities has the right to be the head of the company.

In order for the company to be fully controlled by foreign shareholders, and there are no complications in the future, the following mandatory conditions must be met:

The Memorandum and Articles of Association of a legal entity must contain information that the only account manager and director of the company is the owner of preferred shares in the capital of this joint-stock company (if necessary, the owners may be several people).

Based on the above data, the company registering authority issues a legally certified document (affidavit) containing information about all current directors of the company. The presence of this certificate allows authorized banks to open an account for the company and conduct transactions by accepting payment documents signed exclusively by the person indicated in the state registration certificate. Consequently, no transaction is valid without the signature of the foreign shareholder.

On the reverse side of the share or on an additional sheet, Thai nominee shareholders, in the presence of witnesses, make an appropriate entry on the transfer of rights under the specified document to a foreign legal entity – a so-called “clean endorsement” is carried out. That is, they transfer the right to alienate their equity securities to a foreign shareholder without specifying a date. Consequently, the foreign shareholder has the right to replace the resident shareholders as soon as the need arises..

Registration of a legal entity in Thailand allows you to acquire real estate, use it, divide, resell, carry out donation or inheritance transactions and much more.

Real estate registration in Thailand

However, the process of acquiring real estate by registering a “Thai” legal entity is rather complicated and very rarely applied in practice, since Thai government agencies are careful to verify the origin of the authorized capital of a legal entity. This is due to the need for real confirmation that the property was purchased in favor of Thai founders and the authorized capital of 51% is of Thai origin..

Registration of a Thai legal entity will require the impeccability of all the necessary documents, since the guarantee of effective control and use of the organization directly depends on you.

Managing a company in Thailand also means going through certain procedures on a regular basis, bearing appropriate responsibility, fulfilling tax obligations, which, of course, requires additional expenses. Annual accounting, payment of minimum taxes, and supervision of the activities of a legal entity costs about $ 500-600.

Thus, observing all the legal aspects of owning Thai real estate, you are guaranteed to get a land plot and a stable business..

For several years, this scheme has attracted a huge number of foreign investors to Thailand. Legal security and legality of registration of Thai real estate determines a powerful inflow of foreign capital. So, for example, in 2009 the volume of investments amounted to 675 billion baht (about 21 billion dollars), and in 2011 the inflow of investments amounted to more than 8 billion dollars in the first quarter alone!

Real estate registration in Thailand

Since foreign investment is a kind of “gold mine” of Thailand and the basis of the country’s economic growth, the Thai government has ensured the stability of the economic, political and social environment in Thailand for many years. That is why Thailand is one of the five most promising countries in Asia for long-term capital investment in order to make a profit..

Leasing agreement

The second option is the acquisition of a real estate object through a long-term lease or the so-called lease agreement.

Long-term lease is a type of property contract in which property is transferred for long-term ownership and use to a tenant for a rent.

Real estate registration in Thailand

A long-term lease allows you to own a property for a certain period of time. In Thailand, this lease is for 30 years, with a double renewal with a maximum period of 30 years.

In 2008, the Government of Thailand reduced the cost of state registration of lease agreements. Now, when registering such a transaction, it is necessary to pay 0.1% of the agreement amount against the fee charged by the Land Department.

The long-term lease agreement is designed in the event of a future change in legislation allowing foreign citizens to own land.

A leasing agreement can be drawn up at any local notary organization.

Due to its simplicity and mobility, the method of acquiring real estate through registration of a long-term lease is the most relevant and attractive for potential buyers. A leasing agreement does not require a complex and lengthy creation of a legal entity.

You just need to agree with the landlord (individual or legal entity) of the land on the amount, conclude an appropriate contract and register it with the Land Office, paying a small fee for the preparation of the necessary documents.

The lease contract provides the owner with a lifetime right of use over the property and all the adjacent things located on the surface of the site. This is another additional guarantee of the serious intentions of the parties..

Condominium

The third option is to purchase real estate in a condominium. Thai law grants foreign citizens the right to purchase real estate, however, the total area of ​​objects registered as condominiums should not exceed 49% of the sales area of ​​real estate objects.

Real estate registration in Thailand

Buying properties in a condominium is an excellent method of investing private capital.

Real estate owners “look” into their apartment no more than once a year (for a couple of weeks), as a rule, during their holidays, and the rest of the time the property is rented out to tourists or students.

Thailand is in great demand among our compatriots. For example, from the beginning of 2012 to May inclusively, the influx of Russian tourists increased by 10%, that is, 578 thousand Russian citizens visited Thailand in less than six months. At the same time, in May, the largest influx of tourists was recorded, exceeding the indicators of 2011 by almost twice.!

European tourists make up 1/3 of all visiting visitors to Thailand. Compared to other countries, Russia is undoubtedly the leader in terms of the number of tourists. For information, 372 thousand people from Great Britain visited Thailand during the same period, 326 thousand tourists from Germany, and 276 thousand tourists from France.

Real estate registration in Thailand

Thus, real estate in Thailand is a highly sought-after commodity, especially during the peak of the holiday season..

Now, having familiarized yourself with the main options for purchasing real estate in Thailand, you will probably decide on the choice of housing and the best way to purchase it. You decide…

  1. The annual growth in property prices in Thailand on average increases by 5-7%, which means that the purchase of such housing will significantly increase the invested capital.
  2. The annual rental income of real estate is about 6-10%. It is impossible to ignore the fact that more and more foreign citizens prefer to rent real estate rather than buy it, therefore, the average cost of rent tends to constantly increase..
  3. Investing multi-apartment buildings (condominiums) under construction is a very profitable purchase and guarantees a significant profit, since the end of construction work in such houses causes a natural rise in price by an average of 10-15%.

Taxes and other duties

Paying taxes is typical for any sale and purchase transactions, because receiving income from the transaction, you must pay a mandatory tax on this income.

Real estate registration in Thailand

The clear advantage of buying real estate in Thailand is the extremely low taxes:

Commission fee in the amount of 2% of the cadastral value of the land. The cadastral value of a land plot is determined by the authorized state bodies by conducting a cadastral valuation, taking into account the classification of the real estate object according to its intended purpose.

The cadastral value implies the registration of land and the assignment of a registration number by the cadastral registration authority.

Stamp duty in the amount of 0.5% of the cadastral (estimated) or sales value of the property (as a rule, the higher value of the property is paid). The rate of this tax depends directly on the value of the property, that is, the higher the cost, the higher the interest rate.

VAT in the amount of 3.3% of the cadastral (appraised) or sales value of the property (paid according to the same principle as Stamp Duty). This tax is paid on the sale of companies or non-commercial properties, if the property has been owned for less than 5 years.

Income tax in the amount of 2-3% of the appraised value of the property. Any individual who has any tangible assets located in Thailand, or receives income from employment in this territory, in accordance with Thai law, will be recognized as a taxpayer, regardless of whether the payment of income tax occurs within the country or abroad..

Income earned from renting out real estate is subject to taxation. Certain categories of persons are subject to exemption from this tax: UN employees, diplomats, some international experts and other persons specified in bilateral agreements concluded between countries..

Thailand’s real estate taxation system is based on the appraised value of real estate established by a specialized agency.

Registration of Thai real estate is an integral part of the sale and purchase transaction.

For your information: taxes on real estate in Italy are about 2 times higher than in Thailand. Consequently, Thai taxation is significantly lower than in other countries.

“Nature does not have bad weather” or “everything is not so cloudless”

It is well known that the subequatorial and tropical zones (in which Thailand is located) are characterized by heavy rains. Every year, Thailand receives from 200 to 2000 mm of precipitation, with about 90% of it falling in the summer. The pronounced season of heavy and short-term rains usually occurs in August..

Real estate registration in Thailand

It should be noted that at the end of October last year, Thailand was affected by a terrible flood, which killed more than 350 people. This cataclysm was the most destructive natural disaster in the country over the past half century. The flooding left a third of the country’s northern provinces unable to reach the mainland by land and damaged the homes of thousands of Thais. In addition, after the cataclysm, the influx of tourists to the country has significantly decreased..

But, of course, there are more advantages!

The main advantages of purchasing real estate in Thailand are: undoubtedly profitable and profitable investment; minimum tax rates; profitability of the acquired property; developed tourist infrastructure attracting millions of tourists from all over the world.

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