| The Best
Way to Buy Thailand |
| It’s easy
for you to own land in Thailand.
All you have
to do is invest 40 million Baht (about $1 million) in a project considered
“useful for Thailand” (not real estate, mind you). That minor detail out
of the way, you then have to select the land you want from a list of approved
areas (you didn’t think you could buy anywhere you want, did you?)
Finally, you
can only continue to own property if your original investment is still
in Thailand (if your $1 million investment leaves the country, you have
a limited amount of time to sell the land). Piece of cake, right?
If, like me,
you don’t have a spare million dollars lying around (or the temperament
for the above rigmarole), there is a better way to own real estate in Thailand. |
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Although foreigners
can’t own land freehold (with the $1 million exception) there exist several
structures through which foreigners can legally purchase real estate:
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Buy a condominium:
The easiest way to own real estate in Thailand is to purchase a condominium
(in
an approved condominium complex). The only restriction is that the
percentage of units sold to foreigners cannot exceed 49% of the total number
of units in the condominium block, and that the funds used to buy the condominium
have been remitted from abroad. |
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| Lease with
an option to buy: A foreigner can have the right of possession of land
by registering a lease agreement for 30 years. The lease is renewable
and is a legally binding document registered at the land office. You should
incorporate into the agreement an option allowing you to purchase the land
outright, should the law change and permit foreigners to own land in Thailand.
Usufruct
interest: This type of agreement grants you temporary ownership rights
on the property. In practice, a usufruct is limited to a 30-year maximum
period, but can be successively renewed. The usufruct can be sold or transferred,
but it expires upon the death of the holder, so cannot be inherited.
Limited
liability company: This last option has recently come under scrutiny
by Thai officials. As with land, foreigners can’t own more than 49% of
a Thai corporation. |
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Offshore
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| A method that
has been used by foreigners to get around this is to have nominee share
holders who sign over their shares and then the shares are held by the
foreigner’s attorney in trust. This effectively gives full control of the
corporation and the land to the foreign owner.
Recently the
Thai government announced that it was going to start investigating the
source of the money “used” by these Thai shareholders who presumably
put up 51% of the property value when the corporation was set up.
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| However, the
way most attorneys have in the past documented the flow of funds is to
show the 51% provided by the Thai shareholder as coming from the foreign
partner in the form of a loan. This loan is collateralized by the shares
of the company adding another layer of comfort for the foreigner.
My contacts
in Thailand say it will be virtually impossible for the Thai government
to determine these loans invalid thus this method of ownership by foreigners
doesn’t seem in immediate danger by the scrutiny it is receiving.
Using this
corporation method to own property isn’t risk-free. Your attorney
must be trustworthy as he will typically provide the nominee shareholder
and hold the shares in trust.
The set-up
cost for such a structure is approximately $1,500; the annual maintenance
costs (including accounting fees and a corporate secretary) are
approximately $1,200. |
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| There may
be some property taxes payable, depending on the nature and price of the
property purchase but these should be low. If possible, try to keep the
accounts of the holding company balanced in such a way that the company
does not incur corporate tax.
In Thailand,
you’ll pay very little property tax, you’ll pay no capital gains tax (although
there is an income tax on property, whether it’s paid by the buyer or seller
is part of the negotiation).
You’ll arrive
at good airports and drive on decent roads. Plus, in Thailand, you can
buy a big apartment on an island with ocean view for less than $200,000.
This country
is much improved since my last visit, two years ago. The local economy
is doing better, infrastructure is improving, and communications, in some
areas, are excellent. Expats, businessmen, and real estate professionals
I spoke with are agreed: Thailand is open for business.
An attorney
I met who works with real estate developments told me “it’s easy to make
money in real estate anywhere in this country.”
I’m not as
bullish as that, but you will find opportunity in Thailand no matter what
type of real estate interests you: hotel development, raw land, a condo
to live in, condo developments to invest in, city apartments, beachfront
retreats, apartments for rental return or for a holiday home...
But the area
I’m most interested in right now is Hua Hin, a growing local beach resort
town on the west coast of the Gulf of Thailand, about three hours from
Bangkok. There is a lot of building going on here. Some foreigners are
investing in real estate, but it is mostly the destination for rich Thais
coming from Bangkok.
The King of
Thailand has a palace in Hua Hin and has taken up residence here full-time,
since he finds the air in Bangkok so disagreeable to his health. For his
80th birthday (two years from now), the government has committed to improving
the infrastructure in and around Hua Hin. The travel time from Bangkok
will be reduced with improved train and road access; the highway is already
being widened in some areas.
In addition
to two long beaches, the city has five golf courses with two more less
than an hour away and several others planned or under way.
Yet real estate
prices in Hua Hin ($1,200 per square meter) are no more expensive
than sleazy tourist hangout Pattaya—described by IL’s roving editor Steenie
Harvey as “a sea of bars and brothels.”
Where would
you rather put your money?
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