Buying And Selling Condoes

[Sunny Valentine]

Ok, here's a thought:

Let's suppose I buy a Condo for 2 Mill Bt (Money brought in from Abroad, TT3) today.

In a Year, I sell this Condo to another foreigner for 3 Mill Baht. I guess I need a TT3 from him then to prove his Money comes from abroad, once I register the sale at the Land Office?

Now step 3: I buy a different Condo now with the 3 Mill I just got. What about TT3 and proof of foreign Origin of the Money? Can I do it at all? Or can I buy an other one with the 2 Mill (kind of "Re-use" the TT2 I got in the first place?) plus one more Million fresh from Abroad?

Sunny

[Thaiquila]

That is a very good question!

Note that the amount of the foreign sourced money only has to meet the land office value of the condo, not the full sales price, if the land office value is lower (as it usually is).

[daveb1]

Hi all interesting subject could someone explain what a TT3 is cheers

[Sunny Valentine]

TT3= Tor Tor San, Document issued by Thai Banks to document that the Money is of foreign Origin. You need this as a foreigner to buy a Condo in your name.

Still looking for someone to shed a light into this situation from a legal view.

I myself could possibly be in such a situation soon: I bought into a Condo development project in Jomtien Pattaya last Year, for 3,2 Mill Baht, now the building is almost completed (3 or 4 month I was told today) and the company sells the last Condos (of same size than mine, but they are 1st and 2nd floor, whereas mine is 7th and top floor) for close to 5 Million. Now this would be a profit of more than 100% (as I have only paid up half as of now according to my contract) and I am more than tempted to cash in.

Don't worry, I will definitely see a lawyer before I make any action, but I want to know about this before, so I can also evaluate the quality of advice from the lawyer ..... The one I know and briefly spoke about just said "don't worry, no problem", meaning obviously "I have no idea what you talk about".

Sunny

[piet pompies]

You can buy the condo in the name of an offshore company, eg. a Hongkong Co. quite legal. If you sell it just change the shareholders and director and collect the funds offshore. If you want something in your name to show you stay there, make a lease or a contract allowing you as director to use it.

[Sunny Valentine]

Piet, this is a widely used, although not strictly legal solution. As I have ownership in my name granted for the purchase, why should I revert to a maybe illegal solution? I also doubt that anyone with a sane mind would accept the transfer by just appointing him director of the old Company, as he (the buyer) can not be sure about any debts, fiscal or legal problems hidden within the company .....

Sunny

[piet pompies]

Yes there is the liability question. But the process is legal. Use a big firm like Johnson Stokes and Master, HK and BKK offices and documents drawn by them. Was assured it is OK. Also helps with inheritance. I was told that The Thais are not super familiar with BVI but HK companies are OK. This is only an alternative way.

[LaoPo]

You can buy the condo in the name of an offshore company, eg. a Hongkong Co. quite legal. If you sell it just change the shareholders and director and collect the funds offshore. If you want something in your name to show you stay there, make a lease or a contract allowing you as director to use it.

<{POST_SNAPBACK}>

Piet: is this route also possible if you buy land (eventual through/via a Thai company) and than build or buy an existing villa?

very curious

LaoPo

[piet pompies]

Land has to be held in the name of a Thai Co. As a foreigner you should not own more than 39% of shares. The shares can be Class A and B, each with different voting rights. The shares with the higher voting rights( 39%) can be an offshore co. ( it appears that in Phuket BVI's have been used.) You can sell your shares in the offfshore Co. and the ownership passes without the $ coming into Thailand. Many projects have been done like this. The house can be owned by you or an offshore Co. Use a good and reputable lawfirm. This structure has been checked by the big ones. Baker and Mackenzie ++. Not worth it for a small project. Ther are penalties for Thais"fronting " for foreigners. These big lawfirms will give advice, but not provide nominees.

[LaoPo]

Land has to be held in the name of a Thai Co. As a foreigner you should not own more than 39% of shares. The shares can be Class A and B, each with different voting rights. The shares with the higher voting rights( 39%) can be an offshore co. ( it appears that in Phuket BVI's have been used.) You can sell your shares in the offfshore Co. and the ownership passes without the $ coming into Thailand. Many projects have been done like this. The house can be owned by you or an offshore Co. Use a good and reputable lawfirm. This structure has been checked by the big ones. Baker and Mackenzie ++. Not worth it for a small project. Ther are penalties for Thais"fronting " for foreigners. These big lawfirms will give advice, but not provide nominees.

<{POST_SNAPBACK}>

Piet: Thanks for the clear answer.

Any suggestion to the costs of such a set-up through a company like Baker&Mackenzie or others?

How do you structure this if you buy land and divide it in smaller plots and than build or sell to/for other buyers?

The big issue of course is always where and how to find reliable Thai partners...

thanks in advance

LaoPo

PS: are you Dutch?

[LaoPo]

Piet: by the way, I thought that the 'farang' or (offshore) company could hold 49% in a Thai company...but you talk about 39%?

thanks

LaoPo

[piet pompies]

Not Dutch. Any company which owns land and has more than 39% foreign ownership must or will be investigated by land department, so avoid more than 39%. The structure therefore is the one explained.

There are alternatives with two companies, one controlling with 49% and the second with 39%owning the land, but it becomes cumbersome. Can't tell you about exact costs, but big firms charge about 8,000 baht/hour for a partner/senior person( and the fees can mount like with any law firm anywhere!) and nominees get 3-10,000 baht per year.

I recall about a Law firm in Phuket, Collins McElvee or something, they publish in Phuket gazette, and they seem to confirm what I found out expensively. I do not know about parceling and developing land.

Good luck

[Bobcat]

Any company which owns land and has more than 39% foreign ownership must or will be investigated by land department, so avoid more than 39%. The structure therefore is the one explained

This is no longer correct. There used to be a Land Department regulation (issued on April 26, 2001) which stated that before land was able to be transferred into the name of any company in which foreigners owned 40% or more of the shares, such transfer had to be submitted to the Land Department in Bangkok for consideration or, if up country, to the Governor of the relevant province. This necessarily involved an investigation into the structure of the company prior to the date of the transfer. Hence, in order to avoid this investigation process, structures were developed whereby the foreigner owned less than 40% - that's whre the 39% comes from.

This regulation was repealed in 2003 by the Ministry of Interior (Ministry of Interior letter No. MorTor 0515/ Wor 2657, dated August 5, 2003) and the Land Department now regularly register the transfer of land to Thai companies whose shares are based on the 49/51 structure. I have been involved in several such property transactions and speak from first hand personal experience.

As a matter of prudence, however, and given that perhaps not each office of the Land Department may even be aware that the regulation has been repealed by the MOI, I would still recommend the 39/61 structure to be totally safe.

Also, just out of interest, the regulation only applied at the time of the transfer. Therefore. it was possible to have 39/61 at the time of transfer and adjust the shareholding to 49/51 after the transfer of the land had been completed.

Edited March 10, 2005 by Bobcat

[piet pompies]

Bobcat,

thank you for the info,I will forward that and if I have response of interest from lawfirm will post it. Good info and good research. This will save 00,00? of baht if a legal challenge ever comes.

Best regards

Piet

[OldAsiaHand]

Piet, this is a widely used, although not strictly legal solution. As I have ownership in my name granted for the purchase, why should I revert to a maybe illegal solution? I also doubt that anyone with a sane mind would accept the transfer by just appointing him director of the old Company, as he (the buyer) can not be sure about any debts, fiscal or legal problems hidden within the company .....

Sunny

<{POST_SNAPBACK}>

You are quite right here. There's nothing wrong with owning Thai property through an offshore company, of course. The difficulty is that no one who isn't an idiot would ever buy the company from you to get the property without stacks of audited accounts from a major accounting firm to prove that the company has no other liabilites (and probably not even then).

Back to your original question about the TT3, I put the same question to a major local law firm about four years ago. The answer then was that you must send out the net proceeds from the first sale and then send in fresh funds for the new condo.

[Sunny Valentine]

Thanks for the answer to my Original Question, OH.

Does that mean that I am legally allowed to transfer all the money abroad, including the part considered as profit?

Also, does anybody know the fiscal consequences of such a sale with profit? Are there any legal limitations on selling a Condo with profit within a short time (for a foreigner)?

How much would I get taxed, assuming I am currently not earning any money in Thailand?

Sunny

[Gary A]

I think what Old Asia Hand is telling you is what would be required. As I understand condo ownership, the owner is intended to use it for living and not for business purposes such as resale or rental. A lot of farangs are manipulating condo ownership by buying, selling and renting but this may come back to bite them. If the Thai government ever decides to investigate bogus companies and guys doing this type of thing a lot of guys will get seriously hurt financially. IMHO!

Piet, this is a widely used, although not strictly legal solution. As I have ownership in my name granted for the purchase, why should I revert to a maybe illegal solution? I also doubt that anyone with a sane mind would accept the transfer by just appointing him director of the old Company, as he (the buyer) can not be sure about any debts, fiscal or legal problems hidden within the company .....

Sunny

<{POST_SNAPBACK}>

You are quite right here. There's nothing wrong with owning Thai property through an offshore company, of course. The difficulty is that no one who isn't an idiot would ever buy the company from you to get the property without stacks of audited accounts from a major accounting firm to prove that the company has no other liabilites (and probably not even then).

Back to your original question about the TT3, I put the same question to a major local law firm about four years ago. The answer then was that you must send out the net proceeds from the first sale and then send in fresh funds for the new condo.

<{POST_SNAPBACK}>

[Sunny Valentine]

I think what Old Asia Hand is telling you is what would be required. As I understand condo ownership, the owner is intended to use it for living and not for business purposes such as resale or rental. A lot of farangs are manipulating condo ownership by buying, selling and renting but this may come back to bite them. If the Thai government ever decides to investigate bogus companies and guys doing this type of thing a lot of guys will get seriously hurt financially. IMHO!

Gary, I know that renting a Condo requires you to have a WP. I also know that many who rent Condoes do not have that and are therefore doing something illegal.

I once asked around with some authorities about this, and got the answer that as long as you use the service of a legally established agency, you would be allright. As most of the foreigners who buy Condoes in Thailand do not live here full time, making rental absolutely illegal would make no sense ....

The other Question is selling Condoes. I have heard that you have to pay taxes for the profit, unless you invest in a Condo again with a Year or so from sale. Are there any other legal ramifications?

I understand that buying and selling Condoes on a regular scheme might get you in trouble for working without a WP, as you are obviously doing it for profit. But doing it just once in your Life, or every 5 or ten Years?

Sunny

[Gary A]

I have a friend who buys a condo, lives in it, fixes it up, sells it and then buys another. He has never paid any tax nor had problems buying the next one. The next time I see him I'll ask him about the funds that he used to buy the next one. As you know the government gets most of their tax from the transfer fees. The transfer fees are pretty expensive. I think when I bought mine the tax was nearly 10 percent. I was fortunate in that the Thai guy I bought mine from paid the major share of them. When I bought mine I DID have to have information and a letter from the bank that the money did indeed come from my account in the USA. I think that if you are out of Thailand and renting your condo that would be legal. If you are living in Thailand you do need a work permit to rent one out.

I think what Old Asia Hand is telling you is what would be required. As I understand condo ownership, the owner is intended to use it for living and not for business purposes such as resale or rental. A lot of farangs are manipulating condo ownership by buying, selling and renting but this may come back to bite them. If the Thai government ever decides to investigate bogus companies and guys doing this type of thing a lot of guys will get seriously hurt financially. IMHO!

Gary, I know that renting a Condo requires you to have a WP. I also know that many who rent Condoes do not have that and are therefore doing something illegal.

I once asked around with some authorities about this, and got the answer that as long as you use the service of a legally established agency, you would be allright. As most of the foreigners who buy Condoes in Thailand do not live here full time, making rental absolutely illegal would make no sense ....

The other Question is selling Condoes. I have heard that you have to pay taxes for the profit, unless you invest in a Condo again with a Year or so from sale. Are there any other legal ramifications?

I understand that buying and selling Condoes on a regular scheme might get you in trouble for working without a WP, as you are obviously doing it for profit. But doing it just once in your Life, or every 5 or ten Years?

Sunny

<{POST_SNAPBACK}>

[Sunny Valentine]

I have a friend who buys a condo, lives in it, fixes it up, sells it and then buys another. He has never paid any tax nor had problems buying the next one. The next time I see him I'll ask him about the funds that he used to buy the next one. As you know the government gets most of their tax from the transfer fees. The transfer fees are pretty expensive. I think when I bought mine the tax was nearly 10 percent. I was fortunate in that the Thai guy I bought mine from paid the major share of them. When I bought mine I DID have to have information and a letter from the bank that the money did indeed come from my account in the USA. I think that if you are out of Thailand and renting your condo that would be legal. If you are living in Thailand you do need a work permit to rent one out.

I guess your friend is lucky getting by with it without taxes and a WP. But I understand that this is still possible, but probably risky.

My situation is different: I bought into a Condo development last Year, for the intended purpose of using it for a living. The Condo will be completed very soon, in maybe 2 Month from now.

It is a Low rise Cono Block in Jomtien. My unit ("lage" 1 BD, 94 sq. m) I purchased for 3,1 Million Baht. The Company now sells the last 4 or 5 units (all on 2nd floor, whereas my Condo is on the 7th and top floor) for 4,950.000 Bt, and I still see them selling about 2 a month.

Last Year the same company finished an identical Condo Block to mine, a few Condoes of the same size are now on the market, labelled around 5 Million baht.

Now, as I see a good chance to sell my Condo for around 5 Million Baht, I am rather inclined to cash in on that profit and keep on renting my house in Jomtien.

So far I asked two Lawyers about legal and fiscal consequences (both Thai): Lawyer 1 said "Don't worry, no problem"; Lawyer two said "Big Problem, cannot do!" Both Lawyers (Thai they were) did not elaborate on why it was a problem or no problem, just kept repeating their mantra .......

Sunny

[Gary A]

I think I probably gave you the wrong impression about my friend. He hardly knows one end of a hammer from the other. He is creative and comes up with many very clever decorating ideas. He uses Thai labor for the actual work.

Did you buy in that low rise development on Thapraya between Pattaya and Jomtien? I think that's an ideal area.

I recently read that the Thai government was going to start looking closely at rentals because they want to collect the tax on the rent. The article said that tax on rentals is a flat 12 1/2 percent. It didn't mention farangs but they may come to light and the sh!t could hit the fan for them.

I think the reason the government overlooks the bogus companies is because if they crack down on them there would be a huge glut of properties for sale and no buyers. It is possible that they could legalize them to avoid that glut but I'm not holding my breath. Many farangs believe that those companies are legal.

I have a friend who buys a condo, lives in it, fixes it up, sells it and then buys another. He has never paid any tax nor had problems buying the next one. The next time I see him I'll ask him about the funds that he used to buy the next one. As you know the government gets most of their tax from the transfer fees. The transfer fees are pretty expensive. I think when I bought mine the tax was nearly 10 percent. I was fortunate in that the Thai guy I bought mine from paid the major share of them. When I bought mine I DID have to have information and a letter from the bank that the money did indeed come from my account in the USA. I think that if you are out of Thailand and renting your condo that would be legal. If you are living in Thailand you do need a work permit to rent one out.

I guess your friend is lucky getting by with it without taxes and a WP. But I understand that this is still possible, but probably risky.

My situation is different: I bought into a Condo development last Year, for the intended purpose of using it for a living. The Condo will be completed very soon, in maybe 2 Month from now.

It is a Low rise Cono Block in Jomtien. My unit ("lage" 1 BD, 94 sq. m) I purchased for 3,1 Million Baht. The Company now sells the last 4 or 5 units (all on 2nd floor, whereas my Condo is on the 7th and top floor) for 4,950.000 Bt, and I still see them selling about 2 a month.

Last Year the same company finished an identical Condo Block to mine, a few Condoes of the same size are now on the market, labelled around 5 Million baht.

Now, as I see a good chance to sell my Condo for around 5 Million Baht, I am rather inclined to cash in on that profit and keep on renting my house in Jomtien.

So far I asked two Lawyers about legal and fiscal consequences (both Thai): Lawyer 1 said "Don't worry, no problem"; Lawyer two said "Big Problem, cannot do!" Both Lawyers (Thai they were) did not elaborate on why it was a problem or no problem, just kept repeating their mantra .......

Sunny

<{POST_SNAPBACK}>

[Sunny Valentine]

Did you buy in that low rise development on Thapraya between Pattaya and Jomtien? I think that's an ideal area.

I recently read that the Thai government was going to start looking closely at rentals because they want to collect the tax on the rent. The article said that tax on rentals is a flat 12 1/2 percent. It didn't mention farangs but they may come to light and the sh!t could hit the fan for them.

I think the reason the government overlooks the bogus companies is because if they crack down on them there would be a huge glut of properties for sale and no buyers. It is possible that they could legalize them to avoid that glut but I'm not holding my breath. Many farangs believe that those companies are legal.

Yes, it's probably the one you mention. I don't want to disclose the name though as it might constitute a breach of forum rules, because I mentioned it is on the market ....

With 12,5 % tax and 10 - 12% collected by the Agencies renting out a Condo would make no sense financially for a foreigner to rent as an investment. If this would really be followed up it could mean a huge slump in Condo prices, as lots of investors would probably turn away from that market ... One more reason for me to sell now, maybe.

Sunny

[piet pompies]

Still following the thread. From what I have understand with RBE etc work permit to rent condo is not necessary. Many persons buy in Laguna 6% return guaranteed.Many from HK. Selling seems to be Ok, seems some taxes to pay . not much though. Sell your condo, make a profit.

What about Northsore Development?

[OldAsiaHand]

I have heard that you have to pay taxes for the profit, unless you invest in a Condo again with a Year or so from sale. Are there any other legal ramifications?

<{POST_SNAPBACK}>

You really do need to consult a property lawyer, my friend. You're asking the right questions, but the answers are complicated and not necessarily logical and, if I may say so, you seem to have a tendancy to lean too quickly on what you may have "heard."

The tax situtation when you sell a property here, for example, is very murky and reinvestment has nothing at all to do with it.

Yes, you will pay a transfer tax at the time of sale, but in addition to that you will pay income tax on gain. The odd thing is that 'gain' has nothing to do with accounting gain in any rational sense of the term. Your 'capital gain' is calculated based on a percentage of the gross selling price of the property, adjusted for how long you have owned it. Please note that this means that, even if you sell at a huge loss, the tax authorities will insist you have a gain and demand a large tax payment. Also note that the longer you have owned a property, the greater this implied gain may be.

Believe-it-or-not, the following senario is absolutely true.

You buy a property for B25 million and sell it five years later for B20 million. In addition to the loss you have taken, you will owe income tax on slightly over B10 million of capital gain, or a little over 50% of your gross revenue from the sale. Yes, of course this makes no sense, but this is exactly why you need to pay a good property lawyer to provide you detailed counsel that is relevant to your circumstances.

I think you've more than exceeded your quota of free legal advice here.

[TRIPxCORE]

I have a question for you lot talking about buying & selling condos.

I own a condo in BKK that I wish to sell. Have had it for about 1 1/2 years. Asking around 2.3 M baht for it. In your opinion or through your experience, can you inform me of the best avenue to go down in order to sell it? I have heard that there isn't really any "real estate agents" I can turn to to help me do this. I have listed it on a Thai real estate web site but that won't be enough I am sure. Any help would be appreciated. Thanks!

[Sunny Valentine]

I think you've more than exceeded your quota of free legal advice here.

Thanks for the info so far.

Funny isn't it: I asked two Thai lawyers, both came with different answers, unwilling to explain ..... ("Can do no problem" and "Cannot do big problem.")

Now, here in the forum I got two reasonable answers, from you and Piet, one "Can do no problem" and one "Can no do big problem!" Although I have to concede your answer gave some insight to the potential problems.

Are you a property lawyer? Or can you name one for me?

And why do I keep hearing stories from foreigners that have sold thier Condos without huge problems concerning taxes, and so far have not heard of one story of a foreigner getting smashed by Thai Revenue?

Sunny

[piet pompies]

Dear OldAsiaHand,

regarding your answer of "free legal advice" , many of us have no problem in paying for the advice, the question is where to pay and get the right info. The topic has been very enlightening. I was told by JSM( and did) to transfer the funds out and then back in when one offer to buy did not go through.

I have not dealt with taxes yet.

[spacebass]

I believe that purchasing a condo for 3mil plus (Land Registry value) brings some visa priviledge, this does not apply to buying second hand condos, so this may account for a bigger differential than might normally be expected between the market price of a new and second hand condo, making the the large possible profits referred to above less attainable..