Condominiums are popular among the various housing options available in Thailand due to their accessibility and ease of ownership for locals and foreigners. This guide delves into the step-by-step process of how to buy a condo in Thailand, addressing critical aspects such as establishing legal ownership, understanding the different types of property titles, engaging with real estate agents and property lawyers, and recognizing the significance of the Foreign Exchange Transaction (FET) form.
Can foreigners buy condos in Thailand?
Yes, foreigners can buy a condo in Thailand, but there are certain restrictions they must adhere to. Non-Thai buyers are allowed to own up to 49% of the total unit space of any single condominium development, with the remaining 51% required to be owned by Thai nationals. Additionally, foreign buyers must comply with Thailand’s foreign exchange regulations and often must remit funds from abroad to finance their purchases.
Eligibility criteria for foreign buyers
Before delving into the buying process, it’s crucial to comprehend the eligibility criteria for foreigners looking to own a condo in Thailand. In certain circumstances, foreign individuals and legal entities considered foreign by Thai law are allowed to own a condominium unit. These include:
- Foreigners with residence permission according to immigration laws.
- Foreigners entered the country under the investment promotion law.
- Juristic entities outlined in sections 97 and 98 of the Land Code are registered as legal entities under Thai law.
- These include limited companies or public limited companies with foreign ownership exceeding 49% of the registered capital, registered limited partnerships with foreign capital exceeding 49%, associations including co-operatives with foreign members exceeding half, and foundations with objectives primarily benefiting foreigners.
- Section 98 further stipulates that if a juristic person mentioned in Section 97 holds shares or invests capital in another juristic person under Section 97, it is deemed a foreigner. Therefore, these juristic entities are registered legal entities under Thai law, and their status determines the eligibility of foreign buyers in the context of condo ownership in Thailand.
- Juristic persons who have received a promotion certificate under the investment promotion law.
- Foreigners or juristic persons recognized as aliens by law, bringing in foreign currency or withdrawing money from a non-Thai currency account held by someone outside the country.
- Legally, an alien refers to any individual (or entity), not a citizen or national of a particular country.
Potential investors must enter Thailand legally, without a criminal record, and ensure that the funds used to purchase property originate outside Thailand, following a clear paper trail.
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What is a Thai condo?
As defined by The Condominium Act, The Commonly Owned Housing Act of 2522, a condominium features privately owned and common property. Condo owners hold legal freehold titles over private residences and a joint interest in common areas. Foreigners can buy and sell condos in their name. By Thai legislation, it is vital to remember that foreigners are restricted to owning a maximum of 49% of a condominium complex. This crucial factor should be considered to ensure compliance with the foreign ownership quota when embarking on a property search.
Who manages condominium complexes in Thailand?
A condominium complex is managed by a Juristic entity responsible for day-to-day activities. Condominium owners are included in the governing body of the complex and actively participate in General Meetings to make decisions about fees, maintenance, and by-laws. All owners must pay Common Area Management (CAM) fees and contribute to a ‘sinking fund’ to cover costs associated with repair, maintenance, and unexpected expenses.
Rules and regulations on Thai condominium ownership for foreigners
Reading and understanding the Rules and Regulations or By-Laws of the condominium are crucial, as they outline essential details such as:
Juristic person details
A juristic person refers to a legal or corporate entity, and foreigners can own a condominium unit through such entities. The juristic person could be a Thai company limited, a public limited company, or a registered partnership. The company must adhere to Thai laws, and Thai nationals must hold at least 51% of its shares. This entity acts as the legal owner of the condominium on behalf of the foreign individuals.
Objectives of the condominium
The objectives typically include developing, maintaining, and managing the condominium property, ensuring a harmonious living environment for all residents. Specific objectives may vary based on the condominium’s bylaws and declarations.
Location of the office
The condominium’s administrative office is usually within the premises. It is the central point for communication, document submission, and dispute resolution. The address of the office must be specified in official documents.
Sinking fund requirements
The sinking fund is a collective fund from new property owners within a project. Primarily allocated for significant expenses like major repairs, repainting, equipment replacement, structural fixes, and occasional large-scale expenditures, the reserve sinking fund is employed strategically. The calculation is based on the price per square meter of the property’s living area. This amount is paid upfront during the acquisition of a new property and is renewed when necessary to replenish the sinking fund. Typically, this fund is designed to cover one year’s expenses.
Usage of shared and individual properties
Condominium regulations specify the allowed uses of common areas and individual units. It may include rules about alterations to individual units, restrictions on noise levels, and guidelines for using shared facilities such as swimming pools, gyms, and parking spaces.
Procedures for general meetings
General meetings are essential for condominium owners to discuss and decide on various matters. The guidelines for general meetings, including notice requirements, quorum, voting rights, and decision-making processes, are typically outlined in the condominium regulations.
Maintenance fees are charged to cover the costs of managing and maintaining the common areas and facilities. The ratio for calculating maintenance fees is usually based on the size or value of individual units. The cost per square meter ranges from ฿ 25 ($0.70) to ฿ 60 ($1.68), depending on the age and equipment of the structure.
Restrictions and regulations
Condominium regulations may impose various restrictions and rules on aspects such as pet ownership, leasing of units, alterations to common areas, and the conduct of residents. These rules ensure harmonious living within the condominium community and protect all unit owners’ interests.
Buyers should carefully review these documents, often in Thai, with the assistance of a property lawyer, to avoid any surprises or conflicts after purchase.
Property ownership options in Thailand for foreigners
In Thailand, foreigners can buy property through three main types of ownership:
- Freehold: Condominiums are the only form of property that foreigners can own as freehold. This allows ownership in their name, with a title deed similar to a strata title. If you are buying a condo in Bangkok, most condominiums are sold under a freehold title.
- Leasehold: This arrangement allows foreigners to possess a physical structure (property) under the terms of Superficie or Usufruct. At the same time, the underlying land is owned by a Thai national or Thai Limited company. The lease for the land is typically granted for a duration of 30 years, with an option to renew for up to 90 years.
- Thai Limited Company: Land and structures can be owned through a Thai Limited company, where a foreigner can be a shareholder for a maximum of 49% shares. However, the company must have at least two Thai national shareholders holding a majority share (51%).
It is imperative to consult with a property lawyer during the due diligence process to understand ownership levels and legal implications clearly.
7 steps to buying a condo in Thailand as a foreigner
Foreigners can follow the seven steps below to buy a condo in Thailand.
Step 1: Determine eligibility
Ensure you meet the eligibility criteria for foreign ownership of condos in Thailand, as outlined in the Condominium Act. This typically includes restrictions on the percentage of foreign ownership in a given condominium.
Step 2: Engage professionals
A trustworthy real estate agent is essential due to its reputation and cultural nuances. These agents identify property opportunities, establish a local network, and serve as a bridge in terms of language and culture. Their responsibilities include working in the best interests of both buyers and sellers, streamlining property searches, offering alternatives, negotiating prices, and providing valuable insights into the history of buildings, developers, and areas.
Moreover, hiring a reputable local lawyer with experience in real estate transactions will guide you through the legal aspects when you buy a condo in Thailand. They can help you understand the laws, review contracts, and ensure a smooth process.
Step 3: Understand the rules and regulations
Key aspects include using a Juristic Person, allowing foreigners to own through entities like a Thai company with 51% Thai ownership. Objectives encompass development, maintenance, and management for a harmonious living environment. The administrative office, vital for communication and dispute resolution, is typically on-site. The Sinking Fund, calculated based on property area, covers significant expenses and is paid upfront during acquisition and subsequently replenished. It’s designed to cover one year’s costs.
Furthermore, regulations detail the use of shared and individual properties, while general meeting procedures and maintenance fees, based on unit size, ensure community governance. Condominium rules include pet ownership, leasing, alterations, and resident conduct restrictions to foster a harmonious living environment.
Step 4: Proof of funds
Foreigners purchasing a condo in Thailand need the Foreign Exchange Transaction (FET) form for Land Department registration. This form, vital under Section 19 of the Condominium Act, requires preparation by a Thai financial institution handling foreign exchanges over US$50,000.
Following the Board of Investments (BOI) banking regulations, the form reports the transaction to the Bank of Thailand. The original FET form is a necessary document for Land Department ownership registration. Importantly, all funds for the purchase must originate from outside Thailand, requiring a clear paper trail documenting the source, purpose, and currency conversion in the Thai bank account.
Step 5: Deposit and contract
The buying process begins with paying the deposit, often before signing any contracts. This deposit is a sign of good faith, and sellers may only remove a property from the market after its payment. Foreign investors must present evidence that their purchase funds come from outside Thailand, with all funds in foreign currency and a clear paper trail. Buyers can sign the contract once the deposit is paid and the property lawyer confirms the contract details.
Step 6: Understanding the payment schedule
The contract outlines the amounts and time frames for all payments, including the deposit, balance of purchase, government fees, and taxes. The payment schedule may vary, especially in off-plan assets, with payments made at different stages of construction.
Key components of the payment schedule include:
- Deposit: Typically 10-15% of the purchase price, with variations up to 25%.
- Balance: Paid at the time of settlement unless specified differently.
- Government fees and taxes: Paid when documents are registered with the Thai Land Office, based on property value.
Different types of fees include transfer fees, stamp duty, withholding tax, and business tax, each calculated based on specific criteria related to property value.
Step 7: Finalize the transaction
Settlement involves finalizing documents, disbursing funds, and receiving the keys to the property. Ensuring settlement occurs after the title is complete or in the completion process, especially in off-the-plan purchases, is crucial.
Following the settlement, it is necessary to register every document at the local Thai Land Office. The property lawyer handles this process, ensuring the title registration and payment of all applicable fees.
Taxes and fees
The following are the taxes and fees to pay when foreigners buy a condo in Thailand:
- Special Business Tax (SBT): The SBT is a 3.3% tax on the sales price, applicable if the seller has owned the property for less than five years. If buying a unit in a new development, the SBT may apply, but the sales contract typically designates the developer to pay it. If the property has been owned for five years or more, a 0.5% Stamp Duty is incurred instead of the SBT.
- Transfer Duty: Transfer Duty or Fee is 2% of the assessed value, determined by the Land Department. The assessed value is generally lower than the actual sales price, and this tax is collected when the deed is transferred.
- Withholding Tax: The concept of withholding tax revolves around a prepayment mechanism for the income taxes owed by the seller. When purchasing a condominium from a reputable developer or company, it is essential to note that a withholding tax will be applicable. This tax is calculated at a rate of 1% and is based on either the assessed value or the sales price, whichever amount is higher. For secondhand condos purchased from individuals, the Withholding Tax is higher. It is calculated based on the assessed value and duration of the seller’s ownership and is typically paid by the buyer, although it is for the seller’s income tax liability.
It’s important to note that when buying a secondhand condo, the buyer usually bears the responsibility for paying all the taxes. At the same time, in new developments, the developer often covers the Special Business Tax and shares the remaining taxes 50/50 with the buyer.
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Frequently Asked Questions (FAQs)
How much does it cost to buy a condo in Thailand?
Entry-level condos are priced at ฿ 70,000 ($1,960) and below, averaging around ฿ 1 million ($28,000) for a 22-square-meter unit. Mid-range condos range from ฿ 70,000 ($1,960) to ฿ 90,000 ($2,520) per square meter. Luxury condos can go from ฿ 120,000 ($3,360) to ฿ 300,000 ($8,400) per square meter, with top-tier penthouses starting at ฿ 29 million ($812,000). Location, construction quality, amenities, and size influence property value.
Can you own a condo forever in Thailand?
No, you can not own a condo in Thailand forever, but you have two options if a condo building has reached the foreign ownership limit. Firstly, you can arrange a long-term lease lasting up to 30 years, with a possible renewal for another 30 years. Despite claims of perpetual renewal, leases are typically valid for 30 years. Ensure the lease includes a proper renewal clause and is registered at the Land Department. Secondly, you may sublease from another renter, provided their lease allows subletting, and your lease explicitly permits subleasing. Verification of property ownership or power of attorney is crucial when leasing.
Where can you find a condo for sale in Bangkok, Thailand?
You can find condos for sale in Bangkok through developers or on the secondhand market. Buying secondhand provides the advantage of knowing what you’re getting by touring the unit, but it can be pricier as sellers aim for profits. Purchasing from a developer, though based on a brochure, offers options in tourist destinations where foreign ownership limits apply. Ensure the developer has a proven track record for reliability. Caution is advised with first-time developers due to potential regulatory issues and financing challenges, but opportunities exist for those willing to take calculated risks.
Is buying a condo in Thailand a good investment?
Yes, buying a condo in Thailand can be a lucrative investment under the right circumstances. HBuyings essential to consider potential tax implications. Rental properties are subject to a 12.5% House and Land Tax on annual rental income. Thai income taxes, ranging from 0-37%, apply to the rental income. For properties rented to companies, a 5% withholding tax is deducted. If the rental income is sent offshore, a 15% withholding tax applies. A well-researched investment with a clear understanding of tax obligations can yield positive returns despite taxes.