The Truth About Farangs Buying Land

[Major Major]

There has been a lot of nonsense in this forum about farangs and land purchases. The Community magazine in Samui has this month come out with a totally irresponsible and sensationalistic article saying the law is going to be changed(an unattributed article).

The fact is that Thai law clearly allows foreign controlled Thai majority owned

companies. It is considered a Thai juristic person, just like a Thai individual. So

there are no restrictions to owning land. As this is the law, a foreigner who

operates within its confines can hardly be said to be "getting around"

the law.

From the taxation perspective, foreign controlled Thai majority owned

companies which can afford to purchase land should be making at least a

little bit of profit every year and therefore pay some tax on the said

profit. This would benefit the Thai economy. There are however, some

bad apples who abuse the situation by posting losses and therefore not pay

tax year in and year out. The Thai authorities are currently redressing

this situation. In respect of a company owning land and there is a house on

the said land, it shall be deemed that the land and house is let to the

director. The Revenue Department will inspect the house and assess the

rental. As the rental is corporate income, tax will be payable on the

same.

And yes, I am a lawyer.

[LaoPo]

There has been a lot of nonsense in this forum about farangs and land purchases. The Community magazine in Samui has this month come out with a totally irresponsible and sensationalistic article saying the law is going to be changed(an unattributed article).

The fact is that Thai law clearly allows foreign controlled Thai majority owned

companies. It is considered a Thai juristic person, just like a Thai individual. So

there are no restrictions to owning land. As this is the law, a foreigner who

operates within its confines can hardly be said to be "getting around"

the law.

From the taxation perspective, foreign controlled Thai majority owned

companies which can afford to purchase land should be making at least a

little bit of profit every year and therefore pay some tax on the said

profit. This would benefit the Thai economy. There are however, some

bad apples who abuse the situation by posting losses and therefore not pay

tax year in and year out. The Thai authorities are currently redressing

this situation. In respect of a company owning land and there is a house on

the said land, it shall be deemed that the land and house is let to the

director. The Revenue Department will inspect the house and assess the

rental. As the rental is corporate income, tax will be payable on the

same.

And yes, I am a lawyer.

<{POST_SNAPBACK}>

Interesting post, Major Major.

Do you have any ideas of how, and how much, the Revenue Department inspects the house and land and assesses the rent(al) income?

Do they do that per square Meter and how much would it be for a villa with pool?

LaoPo

[skipdivils]

Finally...a post on this forum from someone who KNOWS what they are talking about.

Pretty refreshing compared to most the bitter expats who reside on this forum, spouting all the scary stories about 'you WILL get ripped off' etc. etc. Although there are people who do get ripped off blatantly in Thailand I venture a guess that they are outnumbered by about 100 to 1 by those who have followed the law, and had no problem buying and owning land and/or a house in Thailand.

Thanks major for shedding the light on the situation.

[george]

Thanks Major Major. I have actually asked them for a copy of the article, as we couldn't find it published on the net. So far we have been unable to get a copy.

[Rooo]

Thank you Major Major,at last some sense.As always a lot of the negative posts,are from people who are misinformed or tried to short cut the system.

I for one am a retiree & after a lot of searching ,probing & legal advise , purchased land.As long as you keep within the law & don't try ripping the system off you should be ok.

[udon]

Major, is this the website for the mag?

http://www.samuicommunity.com/

If it is, there is nothing listed since April 6th.

Cheers

[RDN]

How interesting. One poster says what you all want to hear, and everybody starts thanking him.

[Gary A]

It IS interesting that a "knowing person" should be so sure of his facts. The law was not written to enable a foreigner to own a house. It was written to enable a foreigner to own a legitimate profitable company. Anyway you slice or dice it it is against the INTENT of the law and if/when a Thai politician gets a hard on for farangs the house of cards could/will come crashing down. Could it be that this lawyer makes money forming (legal ?) bogus companies? If your company enables you to own a house the Thai stockholders are also liable to prosecution.

[community magazine]

totally irresponsible and sensationalistic article saying the law is going to be changed(an unattributed article)

The article in question:

" Foreign land ownership in doubt

A large number of foreigners have been buying land on Koh Samui despite the fact that officially they are not legally allowed to own it. Most non- Thai buyers get round this law by opening companies with Thai partners that own a 51% share, which means the land is essentially Thai owned. However, many of these companies never become active, and do not therefore contribute to the economy through taxation. The Thai Chamber of Commerce is currently investigating this issue and will be closing down all those companies that are not actively trading or paying tax. This throws some doubt on the status of any land that is owned by such companies, and especially the legality of foreign ownership. All foreign land owners should be aware that this issue will become increasingly apparent in the coming months and make sure that their companies operate within Thai law, are considered operational and pay annual taxes. If not, land may be forfeited when the company is closed down."

Did we say the law is going to be changed? Do you think the article is usefull for individuals who own land that way and do not pay taxes?

We like your suggestion about the rental though.

[udon]

Hi Comag,

do you have a website?

[Ajarn]

Maybe what scares some of these lawyers is that the article makes good sense, and it's good governing by the government, many citizens might feel. Making the law clearer might help enforcement, too, which could ultimately make it safer for farangs to own a home here in the future...

Or would you prefer the grey area it is now to continue being in limbo? Yes, it makes plenty of hay for lawyers, but it certainly can't give any investor here a good night's sleep, can it?

[taxexile]

There has been a lot of nonsense in this forum about farangs and land purchases. The Community magazine in Samui has this month come out with a totally irresponsible and sensationalistic article saying the law is going to be changed(an unattributed

community magazine should be thanked for publishing that article .

( probably the first article in a long time from that slickly produced but bland , please all lets not offend anybody or make waves journal , that is relevant to life on samui. )

it gives fair warning to those who own land to get their houses in order as there is a crackdown on the horizon.

plenty of landowners out there are poorly advised by estate agents and "lawyers" as to the correct way to go about land purchase , misinformation whether deliberate or accidental is almost a way of life here , and people who have put a lot of money onto that island could find themselves in trouble through no fault of their own.

magazines like community samui , as well as filling half the magazine with ads for desirable land and houses for sale , should be devoting some space regularly , to printing accurate and up to date legal information , not just what they might have heard from a local lawyer down the pub one evening , but undisputable legal certainties with references to the law , so that buyers know the score EXACTLY and are not led astray by agents that know little and (some) lawyers that have yet to learn the meaning of the word professionalism and duty to their clients.

that is not too much to ask from a magazine that titles itself "community"

the land article that was recently published was the first step. thank you.

Edited May 16, 2005 by taxexile

[simey]

I'm sure most people would want the grey area cleared up, landowners or not. But there is a big difference between an informed opinion being expressed and scaremongering.

One thing I have noticed in these posts is that the posters posting pro-company ownership tend to have a more informed perspective, and that goes for the community magazine also. A lot of the naysayers posts consist of 'if this happened' and 'it could happen'. Almost anything could happen, but you have to make an assumption based on the odds and your own information. Offering an opinion is one thing, but gleefully rubbing your hands together at any sign of problems seems to show that you actually want soemthing to go wrong - jealous of those of us that have the money to invest?

I suspect that this thread is separated into those who want to clear up the ambiguity (land owners or not) and those who are never happier than when something bad happens to someone else, e.g. 'you are going to lose everything'. For those people, I suggest you stick to watching eastenders and let the rest of us try to make progress with this.

[Gary A]

What is difficult to understand about this below section? This is NOT a grey area or a loophole. Does it say it is legal to have a bogus company set up to own a house? Are your stockholders legitimate? How much investment have they made in “your” company? Did you invest 40 million baht in Thailand to own your ONE rai? I have lived in Thailand full time for 10 out of the past 15 years. I would love to own my own home rather than my condo but I can read and I have talked to lawyers who tell the truth rather than wanting to set up a company for me. Do as you wish but don’t cry the blues if/when they pull the plug on your company.

http://www.bia.co.th/001.html This link refers to the Thailand legal guide. Below are a couple of copy and paste segments;

Foreigners sometimes buy land by using companies which are nominally majority Thai owned. Under the present law, a Thai company which is at least 51% Thai owned may buy land. In practice, the Land Department is reluctant to register transfers of land to any company, which is more than 39% owned by foreigners.

In any case where a company has any foreign ownership or where there are foreign directors the Land Department may refuse to permit a transfer until it is satisfied that the Thai equity in the company is real and that the Thai shareholders are not nominees of foreign interests.

In this respect, the Land Department may investigate the Thai shareholders to see if they have the resources to purchase their shares. Such an inquiry may involve a request to see income tax returns. Cases in which foreigners own more than 39% of the shares are referred to the Director General of the Land Department.

A foreigner, who invests at least 40 million Baht in authorized securities in Thailand, may be granted permission to purchase up to one rai (roughly 400 square metres) of land for residential purposes.

I'm sure most people would want the grey area cleared up, landowners or not. But there is a big difference between an informed opinion being expressed and scaremongering.

One thing I have noticed in these posts is that the posters posting pro-company ownership tend to have a more informed perspective, and that goes for the community magazine also. A lot of the naysayers posts consist of 'if this happened' and 'it could happen'. Almost anything could happen, but you have to make an assumption based on the odds and your own information. Offering an opinion is one thing, but gleefully rubbing your hands together at any sign of problems seems to show that you actually want soemthing to go wrong - jealous of those of us that have the money to invest?

I suspect that this thread is separated into those who want to clear up the ambiguity (land owners or not) and those who are never happier than when something bad happens to someone else, e.g. 'you are going to lose everything'. For those people, I suggest you stick to watching eastenders and let the rest of us try to make progress with this.

<{POST_SNAPBACK}>

[Khutan]

A foreigner, who invests at least 40 million Baht in authorized securities in Thailand, may be granted permission to purchase up to one rai (roughly 400 square metres) of land for residential purposes.

<{POST_SNAPBACK}>

Is that all. If I invest 80m can I buy 2 Rai. After all if I have that much money I want to build a really big house.

.cc Dr Pat, can you lend me a tennor ?

[taxexile]

Foreigners sometimes buy land by using companies which are nominally majority Thai owned. Under the present law, a Thai company which is at least 51% Thai owned may buy land. In practice, the Land Department is reluctant to register transfers of land to any company, which is more than 39% owned by foreigners.

that is crystal clear , and it would have been responsible journalism had the local magazine on samui decided to educate and inform its readers in a responsible manner rather than just half condoning and ignoring and sitting on the fence to so many of the little and not so little things that go on on samui.

the land dept. on samui , and probably in many other towns where foriegners buy land , are only too happy to stamp chanotes as if there were no tomorrow.

and when the thai authorities decide to shift the goalposts , instigate a crackdown , and stop turning a blind eye as they undoubtedly will , sooner if not later , there will be a mad rush to pay backtaxes , cook the books , and sort things out.

(with the paid help of all those grasping lawyers , accountants and agents that allowed their clients to walk blindfolded into the situation in the first place.)

[LaoPo]

A foreigner, who invests at least 40 million Baht in authorized securities in Thailand, may be granted permission to purchase up to one rai (roughly 400 square metres) of land for residential purposes.

one rai is roughly 400 square meters... ?

LaoPo

[SEAtramp]

1 Rai = 4 Ngan (or 1600 sq. m.)

[LaoPo]

1 Rai = 4 Ngan (or 1600 sq. m.) 

<{POST_SNAPBACK}>

Yes of course, I know....but the lawyers' company didn't....

LaoPo

[Rooo]

Where did Community magazine obtain their facts for their story?

The way the company is set up 51% Thai ownership ,issued ordinary shares & 49% to foreigner Preferential shares.

That means the foreigner is managing director.Ordinary shares are Non voting,Non transferable,Non cashable.

Now a person sets up a company , pays Bht ??????????? Million for land + Bht???/Million for house & he is still looked upon as a person not injec ting any funds in the Thai economy?

The thing about bringing in 40 Million Baht in one lump sum,is it has to be invested in a venture approved by BOI.The mountain of papers you have to submit is phenomenal.

BOI are there to stimulate Thai manufacturing & Export.

Back to the land,you can lease your own land from your company,pay an amount each month,company pays tax , profit returns to you.It might work lmao.

[Rooo]

Yes,I do own such a company & also in the process of starting a business venture, with funds far exceeding the required 40M, under another company name.

So of what I can understand from the previous posts , my money is welcome , but I loose the land , because it is purchased under a holding company.

I think a lot of people have to get professinal & sound advise before commenting,reporting or giving a point of view.

[simey]

Well, it seems I can either take the advice of my US educated Thai lawyer, or that of a two year old web site with no official backing that does not know how big a rai of land is. I think I'll stick to my lawyer, thanks.

[Rooo]

QUOTE

Acquisition of Land by Alien

According to Section 86 of the Land Code, an alien may acquire land in Thailand only by virtue of the provision of a treaty providing him with the right to own immovable property. Obtaining such acquisition is subject to the provision of the Land Code and the Ministerial Regulations issued under the Code, and the permission must be obtained from the Ministry of Interior. Before the termination of the treaty which was made on February 27th, 1970, there were 16 countries bided to the treaty ; USA, England, Switzerland, Germany, Denmark, Norway, the Netherlands, France, India, Belgium, Sweden, Italy, Japan, Burma, Portuguese, and Pakistan. Since then, Thailand has no longer made any treaty with any country to allow an alien to acquire land in Thailand by virtue of a treaty.

However, the Land Code has been amended with Section 96 bis providing that since January 19th, 2002, an alien is allowed to purchase land in Thailand for residential purpose and the land to be purchased shall be not more than one rai in area, and the following rules and conditions must be met:

1. Bringing money not less than Baht forty million into the Kingdom for investment and maintaining the investment not less that five years;

2. Permission must be obtained from the Minister of Ministry of Interior;

3. Money brought into the Kingdom shall be invested in one of the following businesses or activities;

3.1 to purchase bonds of Thai Government, bonds of Thai National Bank, bonds of State Enterprise or bonds which the Ministry of Finance secures the capital or interest,

3.2 an investment in a property mutual fund, a property mutual fund or a mutual fund for resolving financial institution problems established under the law on Securities and Stock Exchange,

3.3 an investment in share capital of a juristic person who is granted permission of investment under the law on promotion of investment,

3.4 an investment in an activity as declared by the Board of Investment to be an activity eligible to be granted promotion of investment under the law on promotion of investment;

4. the land to be acquired shall be located in Bangkok Metropolis, Pattaya City, or Tessaban (Municipality), or in the area specified as residential zone according to the law on Town and Country Planning and shall not be located in a military safety zone according to the law on Military Safety Zone;

5. an alien, who is granted permission, shall utilize the land only for residence for his/herself and the family in a way that is not contrary to the local custom or good living of the local community;

6. if an alien, who is granted permission to acquire such land, does not comply with the rules and conditions specified, he/she shall disposes of such land in the portion of his/her possession within the period of time specified by the Director General of the Department of Lands which shall be not less than one hundred eighty days and not more than one year. If the time limit elapses, the Director General shall have the power to dispose of such land;

7. if an alien, who is granted permission to acquire such land, does not utilize the land for residence within two years as from the day the registration for land acquisition is made, the Director General shall have the power to dispose of such land.

Besides the aforementioned rules and conditions, an alien may acquire land by inheritance as statutory heir, in this instance, the land devolved when combined with the land already acquired shall not exceed that specified by law, for examples, land for residential purpose not exceeding 1 rai per household, land for commercial purpose not exceeding 1 rai, land for industrial purpose not exceeding 10 rais, and land for agricultural purpose not exceeding 10 rai per household.

An alien whose spouse is a Thai national either legitimate or illegitimate, that Thai national can purchase land but the alien spouse of that Thai national must give a joint written confirmation that the money which that Thai national will expend on purchasing the land is wholly the separate property or personal effects of that Thai national and not the Sin Somros or jointly acquired property.

--------------------------------------------------------------------------------

[Major Major]

In reply to one post above,I understand that the Revenue has its own formula based on the land office valuation, not on current real valuations.

[Digger]

In reply to one post above,I understand that the Revenue has its own formula based on the land office valuation, not on current real valuations.

<{POST_SNAPBACK}>

Yes the land office have pre-determined values that they use as historically Thai's have said they are selling the land for XXX baht, well under its market value to minimise tax. Therefore to counter that issue and the endless debate between buyer, seller and land office everytime somebody sold land, they just set a value and use that value. The value varies of course by area.

[sbk]

Besides the aforementioned rules and conditions, an alien may acquire land by inheritance as statutory heir, in this instance, the land devolved when combined with the land already acquired shall not exceed that specified by law, for examples, land for residential purpose not exceeding 1 rai per household, land for commercial purpose not exceeding 1 rai, land for industrial purpose not exceeding 10 rais, and land for agricultural purpose not exceeding 10 rai per household.

--------------------------------------------------------------------------------

Can anyone explain this one in clear english please? Sorry, I am still a bit jetlagged and can't quite follow what they mean. What is a statutory heir? Does this mean, if my husband dies I can inherit one rai of his property??

[ProThaiExpat]

There is no certainty in any law in any country, no matter how much lay people want it.

Lawyers only interpret the law, in western countries they have published case law to guide them when giving legal opinions and legal advise.

Reasonable men, including lawyers, differ in their opinions and that is why there are legal cases in court.

When a lawyer is asked "How can I legally own land in Thailand" the lawyer may reply, go the "company" route since having a Thai own the land, which you paid for, even when renting if for 30 years, is not "owning" it.

The question asked is not what do you think the long term legal effect of this route is. If too many falang own too much land in Thailand through this method, it is a simple matter for the government to determine which companies were formed with a legitimate business purpose and which were formed for the sole purpose of owning land, which is contrary to Thai Government Policy, even now.

Those in this forum who are so opposed to renting property for 30 years from a Thai, fall into a category of people who just plain feel better when they "own" something. These people have great difficulty, and in fact, rarely, acquire the long term use of property though leasing, even though 99 year leases have been around for centuries, with little problem.

Most Indian land in the U.S. can only be leased and there is an

incredible amount of land in California leased from Indians, and which is administrered by the Department of Indian Affairs that must approve each lease.

It would not be an exageration to estimate multiple Billions of investment dollars resting on leased land.

All of these factors affect why some of us choose the company loophole route and some of us choose the 30 year lease route. One can cite numerous "dangers" in either route, suffice to say, only if litigated would one really find out which one is more viable and I doubt such court decisions are published in Thailand. Your taking a chance, either way you go, its just up to you to determine which way is less risky.

Piano movers who have dropped a piano, move pianos in a different manner than those who have not dropped a piano. So go lawyers.

It is probably obvious, I went the lease route because of the overall policy against land ownership by foreigners in Thailand and the paperwork and other problems that are entailed in setting up a company. Also, I have purchased and sold expensive homes on leased land before, so I don't have the "fear" of not owning the land under my humble home.

[udon]

Good post PTE.

[patrick murphy]

very good point about community mag, i have been to their office in lamai with some real community issues and they dont seem the least bit interested, strange people

There has been a lot of nonsense in this forum about farangs and land purchases. The Community magazine in Samui has this month come out with a totally irresponsible and sensationalistic article saying the law is going to be changed(an unattributed

community magazine should be thanked for publishing that article .

( probably the first article in a long time from that slickly produced but bland , please all lets not offend anybody or make waves journal , that is relevant to life on samui. )

it gives fair warning to those who own land to get their houses in order as there is a crackdown on the horizon.

plenty of landowners out there are poorly advised by estate agents and "lawyers" as to the correct way to go about land purchase , misinformation whether deliberate or accidental is almost a way of life here , and people who have put a lot of money onto that island could find themselves in trouble through no fault of their own.

magazines like community samui , as well as filling half the magazine with ads for desirable land and houses for sale , should be devoting some space regularly , to printing accurate and up to date legal information , not just what they might have heard from a local lawyer down the pub one evening , but undisputable legal certainties with references to the law , so that buyers know the score EXACTLY and are not led astray by agents that know little and (some) lawyers that have yet to learn the meaning of the word professionalism and duty to their clients.

that is not too much to ask from a magazine that titles itself "community"

the land article that was recently published was the first step. thank you.

<{POST_SNAPBACK}>

[daveb1]

"I'm sure most people would want the grey area cleared up, landowners or not. But there is a big difference between an informed opinion being expressed and scaremongering.

One thing I have noticed in these posts is that the posters posting pro-company ownership tend to have a more informed perspective, and that goes for the community magazine also. A lot of the naysayers posts consist of 'if this happened' and 'it could happen'. Almost anything could happen, but you have to make an assumption based on the odds and your own information. Offering an opinion is one thing, but gleefully rubbing your hands together at any sign of problems seems to show that you actually want soemthing to go wrong - jealous of those of us that have the money to invest?

I suspect that this thread is separated into those who want to clear up the ambiguity (land owners or not) and those who are never happier than when something bad happens to someone else, e.g. 'you are going to lose everything'. For those people, I suggest you stick to watching eastenders and let the rest of us try to make progress with this." quote from simeys post

Well done Simey i think you have hit the nail on the head!

Edited June 24, 2005 by daveb1