Four Steps of Owning a New Condominium
1. Title Search
To verify the status of a land over which a Thailand Condo is constructed. Normally, a land would be under mortgage with a supporting bank.
2. Sale and Purchase Agreement
This document specifies the selling price, terms and conditions of the sale. It is advised that a contract is to be reviewed by a lawyer for the best protection of rights of the buyer.
Deposit: Normally, 1% of the total price of a unit is required as a deposit payment to reserve a right to purchase a condo.
Down Payment: a sum of 25% or 30%, depending on the agreement between a buyer and a seller, of the total price of a unit is required as a first payment of the price of a unit. There may also be some payments to be made between a down payment and a transfer date. This will depend on your written agreement with the developer. The buyer’s money to buy a condominium must be transferred into a Thailand bank account from abroad.
4. Registration of Ownership
After the delivery of condominium unit and the final payment, the seller will then transfer the ownership of the condominium unit into your name. The registration fee, stamp duty, and withholding tax must be paid at the time the transfer of ownership took place.
Four Steps of Owning a 2nd hand Thailand Condo
1. Title Search
Similar to a title search for a new condominium project, this step is essential for a purpose of verifying the status of the land where the building is located. Normally, as a used Thailand Condo, the land shall not be under mortgage, or, if it is, the buyer would acknowledge his position over such land.
2. Sales Agreement
If you buy a condominium from an individual, the sales agreement is normally a ready-to-use contract (An agreement which is not especially drafted for the sale betweenbuyer and seller).
A norm is that a buyer shall pay a full price of property to the seller upon the transfer of ownership at the Land Department.
4. Registration of Ownership
When buying a condominium, the buyer (or a seller, or both parties, depending on the agreement between parties) shall be responsible for the payment of registration fee, stamp duty (in case of having owned the property for more than 5 years) or a special business tax (in case of having owned the property for less than 5%), and withholding tax.
In the following is a copy of the official document of the Land Department Thailand:
Previously, an alien could have ownership in a condominium unit or bought a condominium unit in each condominium in a proportion not higher than forty percent of the total space of all units in that condominium at the time the application for condominium registration had been lodging. Later, on April 28th, 1999, the Condominium Act was amended to facilitate an alien in the purchase of condominium unit. As such, an alien may have ownership in a condominium unit in a proportion not higher than forty nine percent of the total space of all units in that condominium at the time the application for condominium registration is being lodged. The amended Act also provides that an alien may have ownership in a condominium unit exceeding forty nine percent if the following rules are satisfied:
1. Such condominium shall be situated in Bangkok Metropolis, municipality area or other local administrative area i.e. the Pattaya Ciity;
2. The total area of the land on which a condominium is situated, when combined with the land provided for common use or benefit of all co-owners, shall not exceed five rai;
3. Such condominium shall accommodate not less than forty condominium units;
4. Such condominium shall be registered not less than one year prior to the date an alien applies for ownership in the condominium unit;
5. Such condominium shall not be situated in the area of military safety zone under the law on Military Safety Zone;
6. An alien shall utilize a condominium unit in a way that is not contrary to the local custom or good living of the local community;
However, in a five year term as from April 28th,1999, the rules concerning the acquisition of ownership by an alien in a condominium unit in a higher proportion than forty nine percent shall take effect. After that it shall be repealed, and the alien obtaining an ownership in this regard and the alien receiving an ownership in a condominium unit transferred by the former are allowed to continue holding the ownership in that condominium unit even in a higher proportion than forty nine percent.
Land Department Thailand http://www.dol.go.th/
The Thai CONDOMINIUM ACT (No. 3) B.E. 2542 (1999)
The legal ownership of condominiums in Thailand is based on the Condominium Act. Here is a copy of the original document:
BHUMIBHOL ADULYADEJ REX.
Given on the 12th Day of April, B.E. 2542
Being the 54th Year of the Present Reign
Authorized Official Translation
His Majesty King Bhumibol Adulyadej has been graciously pleased to proclaim that:
Whereas it is expedient to amend the law governing condominium.
This Act has some provision concerning Section 29 and Section 48 of the Constitution of Kingdom of Thailand prescribing that the limitation of right and liberty of a person shall be done by virtue of law.
BE IT ENACTED BY THE KING, by and with the advice and consent of the National Assembly, as follows:
This Act shall be called “The Condominium Act (No. 3) B.E. 2542”.
This Act shall come into force as from the day following the date of its publication in the Government Gazette.
The provision of Section 19 (5) of the Condominium Act B.E. 2522 amended by the Condominium Act (No. 2) B.E. 2534 shall be repealed and replaced by the following provisions:
“(5) Aliens or juristic persons deemed by Thai law to be aliens, who have brought into the Kingdom foreign exchange or withdrawn the money from the non-resident Baht account or withdrawn the money from the foreign currency deposit account.”
Of the provision of Section 19 of the Condominium Act B.E. 2522 amended by the Condominium Act (No. 2) B.E. 2534 shall be repealed and replaced by the following provisions:
“Section 19. In each condominium, aliens or juristic persons stated in Section 19 may have ownership in a condominium unit, when added together, must not exceed forty nine percent of the total space of all units in that condominium at the time of applying for the condominium to be registered under Section 6.
Any condominiums whereby an aliens or juristic person under Section 19 holding the ownership in condominium units in a proportion exceeding as allowed by paragraph one, such condominium shall be situated in the area of Bangkok Metropolis, municipal area or local public administrative area specified in the Ministerial Regulation; and the land, where the condominium is situated including the land allotted for common use, shall not exceed 5 rai.
The acquisition of ownership under paragraph two of the alien or juristic person under Section 19 shall be in compliance with the rules, procedures and conditions provided in the Ministerial Regulation.”
The provision of Section 19th (5) of the Condominium Act B.E. 2522 amended by The Condominium Act (No. 2) B.E. 2534 shall be repealed and replaced by the following provisions:
“(5) Aliens and juristic persons under Section 19 (5) shall present the evidence of bringing foreign exchange into the Kingdom or the evidence of withdrawing money from the non-resident Baht account or withdrawing from the foreign currency deposit account to the amount not less than the price of the condominium units intended to buy.”
The provision of Section 19 quarter of the Condominium Act B.E. 2522 amended by the Condominium Act (No. 2) B.E. 2534 shall be repealed and replaced by the following provisions:
“Section 19 quarter The competent official shall receive the documents and evidences submitted according to Section 19th and verify accordingly. if it is found that they are correct subject to the provisions of Section 19th and that the proportion of ownership in condominium units held by aliens or juristic persons under Section 19, who is already had ownership in condominium unit or that applying for receiving the transfer of the ownership of the condominium units, not exceeding the proportion as allowed by Section 19 bis paragraph two and three, the competent official shall proceed with the registration of rights and juristic act concerning the condominium unit in accordance with Chapter 4 in favor of the alien and juristic person who is a transferee.”
The provision of Section 19 (1) of the Condominium Act B.E. 2522 amended by the Condominium Act (No. 2) B.E. 2534 shall be repealed and replaced by the following provisions:
“(1) Aliens or juristic persons under Section 19 obtaining the condominium unit devolved upon him by statutory right or by will or by other means as the case may be, when added to the condominium units, in that condominium, having been already held by aliens and/or juristic persons under Section 19 exceeding the proportion as specified in Section 19 bis paragraph one or not complying with the rules under Section 19 bis paragraph two and paragraph three.”
The provision of Section 19 paragraph one of the Condominium Act B.E. 2522 amended by the Condominium Act (No. 2) B.E. 2534 shall be repealed and replaced by the following provisions:
“Section 19 Any person who obtains an ownership in a condominium unit whist enjoying the Thai nationality and subsequently loses it because of relinquishment, change or annulment of the Thai nationality, in accordance with the nationality laws and consequently becomes an alien under Section 19 and if he wishes to continue to hold the ownership in the condominium unit, he shall have to notify in writing to the competent official of the loss of his Thai nationality. He must also present the evidence proving that he is an alien under Section 19, to the competent official within one hundred and eighty days from the date of the loss of his nationality. However, if the ownership in condominium unit of that person exceeding the proportion as allowed by Section 19 bis paragraph one or not complying with the rules under Section 19 bis paragraph two and paragraph three, such person shall dispose of the excess unit(s), which is not under the aforesaid rules, within one year form the date of the loss of his Thai nationality. If he failed to dispose of within the said time, the provisions of Section 19, paragraph four shall apply mutatis mutantis.
Foreign investors looking to purchase rental properties inThailand will often have the choice of purchasing the property in their own name or in an offshore company. The preferred ownership structure will require a careful analysis of the respective costs and benefits, taking into account the particular circumstances of the owner.
From a tax perspective, this will require consideration of the tax laws in Thailand as well as the tax laws in the owner’s home jurisdiction and an analysis of the impact on the investment returns after tax if an offshore company is interposed between the owner and the property. An important tax issue to consider is the taxes payable on rental income.
Taxes on rental income Foreign individuals will be subject to Thai personal income tax on rental income generated from real estate situated in Thailand. In most cases,15% withholding tax will be deducted from rental receipts paid to foreign individuals that are not tax residents of Thailand. The tax withheld is not a final tax. On the other hand, if the property is held in a foreign company’s name and the rents are similarly taxed at 15% at source, the withholding tax is considered a final non-refundable tax payment
for the company.
How to pay less than 15% tax.
A foreign property owner residing outside Thailand could actually end up paying much less
than 15% tax in Thailand if he has purchased the property in his own name. For a foreigner to pay less than 15% tax on rental income, the first step will be to file personal
income tax returns with the Thai Revenue Department to declare the rental income. The
withholding tax deducted from rents can then be used as a tax credit to offset the tax payable on the return. The reward for fi ling a tax return is that the taxpayer can then request a refund of surplus withholding tax credits from the Thai Revenue Department.
Preparing and fi ling a personal income tax return in Thailand is not a difficult exercise. Rental income is normally assessed on a cash basis and should be easily determined from the property manager’s rental reports. A property owner is allowed a standard deduction of 30% against rental income, no questions asked. A personal taxpayer does have the option of claiming the actual expenses incurred in deriving the rental income which are necessary and reasonable, but the expenses claimed must be supported by documentary evidence, which may very well need to be furnished for audit before the tax refund is approved.
A personal taxpayer can earn net income up to Baht 150,000 (approx. USD 4,500) in a tax year and not pay income tax in Thailand. Unlike some countries that seek to tax foreigners at higher rates or deny them the tax free threshold, the tax scales for residents and non-residents are the same in Thailand.
Individuals are liable to personal income tax in Thailand on their net income, after deduction of expenses and allowances, at the following rates:
Net taxable income Marginal rate
1 – 150,000 0%
150,001- 500,000 10%
500,001- 1,000,000 20%
1,000,001- 4,000,000 30%
More than 4,000,000 37%
As the rates of tax are greater than 15% for net income over Baht 500,000 (approx USD 15,000), there will come a point where the tax payable will be greater than the withholding tax credits.
By my reckoning, the property would need to be generating around USD 90,000 per annum in gross rentals before it came to the point where the withholding tax credits would not be enough to cover the income tax payable when the personal income tax return is filed. The benefit of filing a tax return is best illustrated by an example. Let’s take the case where a property generates gross rental income of Baht 1,000,000.00 (approx USD 30,000) for the tax year.
The following tax calculation for a typical property owner illustrates the potential tax refundable in this case.
Taxable net income Thai Baht
Gross rental income 1,000,000.00
Less: rental expenses (30% standard deduction) (300,000.00)
Less: taxpayer allowance (30,000.00)
Total deductions and allowances (330,000.00)
Net income 670,000.00
Tax payable on net income 69,000.00
Less: withholding tax credits (15% of gross rental income) (150,000.00)
Tax payable (refundable) (81,000.00)
The tax payable in this case is equal to 6.9% of the gross rental income, resulting in more than half of the withholding tax deducted from rents during the year being refundable.
The figures speak for themselves and clearly demonstrate one distinct tax advantage for foreigners owning Thai rental properties in their own name.
This article was written by Paul Ashburn, Senior Partner, BDO Advisory Limited.
Visit the BDO website at www.bdo-thaitax.com.
Turn your Pattaya Condominium into a working investment.
An Investment in Properties was a good idea in the past, it is right now and it will be in the future. Anyway the functions of the property market today are already complex and can be quite confusing. If you are looking for a save investment with good margins, you have to set up your investment goals, choose the right products and stick to a clear strategy. The property market is full of investors who all want to earn money. If you want to be more successful than your competitors, you need some knowledge, proper information and the strengths to do your own decisions. It will take a bit time to work out your entire investment strategy. However start right now with the property you already own. If you own a Condo, turn it into an investment, and to do so, I think the following information could be helpful for you:
If this is your situation:
1. Your property doesn’t generate any money, and it’s difficult to sell it.
2. Your liquid Capital is blocked, and your situation doesn’t look healthy for your bank.
3. On the property market, there is a lot of Supply but low demand for your kind of property.
Then this will be your Goals:
1. Let your property earn money!
2. Get liquid capital!
3. Get a stronger market position!
1. Furnish the unit
- An unfurnished Condo looks empty, dirty and dead.
- An unfurnished Condo can’t be used.
- An unfurnished Condo will cost money.
- An unfurnished Condo appears as an object without value.
+ A furnished Condo looks like a Home and a place where you want to be.
+ A furnished Condo can be promoted on the Internet
+ A furnished Condo can be rented out.
+ A furnished Condo can be used.
+ A furnished Condo can generate income
+ A furnished Condo appears as a valuable object
2. Rent it out
A condo which is rented out will produce money every day, and renting out is the best support for a quicker sale because:
o Rental tenants are also potential Buyers
o A Condo with people and life is much more attractive for every potential buyer
o A condo which is earning money is attractive for an investor
3. Sell with finance
Work like a bank: don’t pay interest, get it!
o The Condo is much quicker to sell, because much more people can effort it.
o Liquid capital is available.
o The buyer is paying a nice interest.
o No risk involved.
o Every Bank loves steady income.
o A financed sale offers some tax benefits.
Pattaya is a great place to work, live or to spend the holiday, besides these well known facts it is also a great and promising place to invest money beneficially in off-plan condominiums. There are attractive locations available and fine projects to invest in. Jomtien beach, Central Pattaya and Wongamat area are the most popular and attractive areas which offer quality developments from well established property developers on the Eastern Seaboard in Thailand.
You may ask why buying off-plan is beneficial. This is very simple most of the condominiums in Pattaya are already sold before the developers start to build. Plans are drawn by architects, EIA approval is in process and these conditions guarantee the buyer a huge profit when the project is completed. The risk that changes to plans could be requested to receive the EIA approval is present, yet when choosing an experienced developer with a good track record you can reduce this risk to nearly zero. Off-plan projects are always offered at a cheaper price and provide the opportunity to buy multiple units and then resell them for a higher price.
When you\\\'re planning to buy a condominium in Pattaya there are a few things to be aware off which I have listed below.
1. Choose the project wisely make sure to buy your condo from a firm that is well established and is in business for several years.
2. Do a background check to see how many condominiums and projects they have completed this is a very important issue to make sure that the investment is risk free.
3. Beach front areas like Jomtien beach are recommended, they are easy to resell or ideal for short time rentals (from 4 weeks on) for holidaymakers that spend their vacation in Pattaya.
4. Central city location of property developments are ideal to rent out for permanent residence to people that live and work in Pattaya and Eastern Seaboard.
5. Prior to buying a condo one important factor should be clarified, does the building provide easy access to public transport? This is a highly important issue for tenants or buyers. Easy access to public transport will make the property very attractive because the city center, the work place and popular locations can be reached fast.
6. Discounts are a very important thing you should discuss when buying a condo in this little beach paradise. Discounts may vary and are handled on a case by case base, however every property developer or real estate agent in Pattaya city will be able to give you an agreeable discount. So make sure to negotiate when buying and do not be shy.
7. Most of the condominium developers offer good contracts which you can trust. You do not have to make extra expenses to hire a lawyer for this purpose. Just make sure everything is listed as you like and ask for corrections when necessary.
The real estate industry in Pattaya is still booming and the city will expand until Bangsary in the next 10 years. It will be one of the biggest cities in Thailand after Bangkok with a well organized infrastructure. New train lines and a sky train in Pattaya are in planning.