Buying Land in Thailand, Koh Samui
Before making a land deal, it is always prudent to seek the advice of a licensed lawyer.
In general, foreigners are not allowed to own land in Thailand. In very rare cases, an individual foreigner can own up to 1 rai (1600 square meters) in specified areas for residential purposes through a Board of Investment (BOI) regulation (section 96 bis land Code Act) which requires another 40 million THB investment into Thailand in specified assets or government bonds beneficial to Thailand. This requires approval of the Minister of the Interior. In addition this type of ownership is not transferrable by inheritance. So, in practice, even if you are very wealthy, this is not a viable option. Besides this one exception, land ownership in Thailand is prohibited for foreign individuals.
Under Sec. 86 of the Thai Land Law, a foreigner may own land in Thailand only if permitted by a treaty. But in fact, Thailand does not have a treaty with any country permitting foreigners from that country to own land.
The policies of Land Offices vary from province to province, but in practice, they require Thais to own at least 60% to 70% of a company in order to register land ownership.
Under current Land Office policy, a Thai spouse can own land in Thailand provided that the foreign spouse signs a letter declaring the property to be the separate property of the Thai spouse and waiving any interest in the property.
Thailand Real Estate has grown in the past ten years as more and more foreigners discover Thailand and wish to build a second home here.
How to Buy Land in Koh Samui, Thailand
1. Form join venture companies with majority Thai ownership. You need to make sure that there are sufficient safeguards to protect the foreign minority interest.
2. Secure long-term leases with renewal options when the lease expires.
Cost of Buying Land in Koh Samui
When a land and/or building sale takes place in Thailand, the following land office fees apply:
The Transfer Fee is two percent of the "assessed value". Assessed value is the registered assessed value at the land office measured in square wah (4 square meters), and differs depending on where the land is located. This value is typically lower than the agreed sale price.
The Withholding Tax is approximately one percent of the registered sale price at the land office.
If the company is selling the land, then this tax is one percent. However, if the seller is a natural person, then the fee is based on a complex formula based on the period of ownership and the individual's personal tax bracket/circumstances.
Special Business Tax
The Special Business tax is 3.3% of the registered sale price at the land office. However this tax is not applicable if the seller is a natural person who has held the land for more than five years.
The stamp duty is 0.5% of the registered sale price. This tax is only applicable if the Special Business Tax is not applicable.
Therefore where the seller is a Thai company, the fees typically amount to 4.3% of the sale price PLUS 2.0% of the assessed value. Often times, the calculation works out to 6.0% of the registered sale price – although this can vary from case-to-case.
It is common practice to apportion the fees on a case by case basis. In other words, sometimes the parties agree to share these costs equally and sometimes the parties agree that one person shall be responsible for all registration costs. Therefore I would suggest that you simply indicate the costs associated with a single land/building transaction, rather than indicating the costs for the Seller and Purchaser separately.
The Seller is also subject to income tax on any gains derived from selling the land. Please note: income tax laws are inherently complex and the buyers/sellers should be encouraged to consult with a tax advisor in every case.
If the seller is a company with registered capital of 5,000,000 THB or less, then the following rates apply (starting 2013):
• 0% on 0 – 150,000 THB;
• 15% on 150,000 – 1,000,000 THB;
• 20% on 1,000,000 – 3,000,000 THB; and
• 30% on > 3,000,000 THB.
In addition, in order to distribute profit to shareholders by way of dividends, a 10% withholding tax applies. This can usually be avoided if the company is financed by shareholders’ loans as the profits can be used to repay these loans.
Legal and Accounting Fees
The parties should also consider the legal fees associated with a real estate transaction. These fees can vary significantly. However, the buyer can expect to pay between 150,000 – 250,000 THB plus VAT of 7% for legal fees. The Seller’s legal fees are typically lower.
In order to maintain a land-holding Thai company, one should budget for accounting fees of approx. 15,000 THB per year, in addition to any taxes accrued by the company.
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