Condominiums may be purchased by foreigners subject to certain conditions being satisfied. Foreigners are free to own a building built on land owned by another person or to enter into a long term lease of real estate in Thailand.

Acquisition of land by foreigners

Foreigners may acquire land in Thailand in three cases: (1) Incentives under investment laws Certain foreign owned businesses that are promoted by the BOI, have oil concessions under the Petroleum Act or are located in certain industrial estates, can receive permission to own land to carry on their business. A BOI promoted business shall be permitted to own land in order to carry on the promoted activity to such an extent as the BOI deems appropriate, even in excess of the permissible limit under other laws. In the case where the BOI promoted person is a foreigner under the Land Code and dissolves his promoted activity or transfers it to another person, he shall dispose of the land he has been permitted to own within one year of the date of dissolution or transfer, or the Director General of the Land Department shall have the power to dispose of it under the Land Code. (2) Inheritance A foreigner may acquire land by inheritance as the statutory heir. In this case, the land devolved when combined with land already acquired cannot exceed that specified by law. For example, land for residential use cannot exceed 1 rai per household, land for commercial use cannot exceed 1 rai and land, for industrial use cannot exceed 10 rai,. (3) Investment for residential use A foreigner that brings into Thailand not less than Baht 40 million of foreign currency to invest for at least five years can, subject to certain other conditions, own land of not more than 1 rai (equivalent to 1,600 square metres) for residential use. The other conditions include: Permission must be obtained from the Interior Minister. Money brought into Thailand shall be invested in one of the prescribed businesses or activities e.g. government bonds, property funds and BOI promoted businesses. The land to be acquired shall be located in Bangkok Metropolis, Pattaya City or Municipality, or in the area specified as a residential zone according to the law on Town and Country Planning and shall not be located in a military safety zone according to the law on Military Safety Zones.

A Thai company that has more than 49% of its registered capital held by foreigners or with foreigners constituting more than half of its shareholders shall be subject to the same land ownership restrictions as foreigners.

The Land Department may investigate the acquisition of land by a Thai company prior to its registration to check whether the company was established to acquire the land for the benefit of foreigners. In 2006, the rules for conducting such an investigation were expanded to include a review of the financial means of the Thai shareholders, where the Thai company has foreign shareholders or directors.

The Condominium Act

Foreign ownership in a condominium is generally limited to 49% of the total floor area of the condominium. Foreigners that may acquire a condominium include:

1. A foreigner permitted to reside permanently in Thailand under the immigration law.
2. A foreigner granted permission to enter Thailand under the Investment Promotion Act.
3. A juristic person registered under Thai law i.e. a limited company, a public limited company, a limited partnership or a registered ordinary partnership, that is deemed to be a foreigner under the Land Code.
4. A juristic person that is deemed a foreigner under the Foreign Business Act and has been granted an investment promotion certificate under the Investment Promotion Act.
5. A natural or juristic person deemed under the Land Code to be a foreigner, who brings foreign currency into Thailand or withdraws the money from a non-resident Baht account or from a foreign currency account. The total amount of money must not be less than the price of the condominium unit.

For a period of 5 years from 28 April 1999 to 27 April 2004, foreign ownership of up to 100% of a condominium was allowed if the condominium was located in Bangkok or other designated areas e.g. the City of Pattaya and certain conditions were satisfied.

After 27 April 2004, a foreigner that has:

1. obtained a condominium unit by virtue of this provision; or
   
2. obtained ownership of a condominium unit from a foreigner in 1.,

may continue to hold the condominium unit, even if the holding by foreigners exceeds forty nine percent of the total floor space of all units in that condominium.

Registration fees and taxes

Taxes and fees are imposed under the Revenue Code and the Land Code when the transfer of immovable property is registered at the Land Department.

If a company sells immovable property, the taxes and fees applicable are summarised in the table below.

Taxes under the Revenue Code

Fees under the Land Code

Gains made on the sale of real estate by a company shall be subject to corporate income tax with few exceptions.

Similar taxes and fees apply to the sale of real estate by individuals. Special rules apply for calculating the withholding tax payable. The withholding tax may be treated as a final tax in some cases so that the gain is excluded from the seller’s personal income tax return.

Property funds

A property fund is a legal entity established under the Securities and Exchange Act. There is no prohibition on foreigners owning a majority of the units in the fund, unlike a Thai company.

The SEC has approved three types of property funds:

Type 1 – Property fund for public offering
Type 2 – Property fund for resolving financial institution problems
Type 4 – Property and claims fund

A Type 3 fund is a mutual fund for resolving financial institution problems

The SEC introduced Type 2 and 4 funds following the 1997 economic crisis to facilitate the acquisition of distressed properties by institutional investors. These types of funds can no longer be established.

A Type 1 property fund for public offering is now the only property fund that can be established. The fund must have an initial fund size of Baht 500 million and at least 250 unit-holders at the initial public offering. After the fund is listed in the SET, the total number of unit-holders may be reduced to 10.

Taxation of property funds

Property funds currently attract numerous tax benefits, including exemption from VAT, stamp duty and specific business tax.

A property fund is also not taxable on its net profits. The liability to Thai income tax on distributions received from a property fund will depend on the tax residency of the recipient and whether the recipient is subject to personal or corporate income tax.

Foreign companies not carrying on business in Thailand are not liable to Thai income tax on distributions received from a property fund.

Lease of immovable property by foreigners

In general, a foreigner may lease land in Thailand subject to the provisions of the Civil and Commercial Code. The period of the lease contract cannot exceed thirty years. Once the contract comes to an end, it can be renewed, but it must not exceed thirty years from the date of renewal.

Under the Lease of Immovable Property for Commerce and Industry Act that entered into force on May 19, 1999, a lease can be made for more than thirty years but not exceeding fifty years. In this regard, the parties may agree to renew the contract but it shall not exceed fifty years from the day the agreement is made. The lease contract must be made in writing and registered.

The Act provides specific rules and conditions in respect of the lease of immovable property for commercial and industrial purposes. Additional rules apply if the land leased exceeds one hundred rai.

Stamp duty on leases

A lease of commercial land or building space is subject to stamp duty under the Revenue Code at the rate of Baht 1 or fraction thereof for every Baht 1,000 or fraction thereof of the rent or key money or both, for the entire lease period. The lessor is primarily liable for the duty under the Revenue Code.

Lease registration fee

Leases of land or buildings exceeding three years are enforceable only for three years unless registered with the Land Department.

A fee of one per cent (1%) of the entire rent for the lease's duration is payable upon registration of a lease. The fee is borne equally by the lessee and the lessor, unless otherwise agreed.

Transfer of lease rights

In case a lessee desires to transfer the lease right to a third party and the lease on the property has been registered with the Land Department, the above taxes and fees are also payable when the transfer is registered. VAT may also apply in certain cases.