Condo Purchase, Expat Mortgage And Income Tax

[mmhasan]

Hi,

My wife and I (both non-Thai) are living and working in Thailand with decent jobs for the last 7 years. We have a some savings. Every year, when we file our income taxes, we ponder whether we could save some tax (as we pay substantial amount at 20% rate) by buying a condo (taking a mortgage). As we explored a bit, we are told that mortgage is unlikely from Thai bank unless one of the spouse is Thai. We are also told that the money must come from oversees. Is there any bypass/option for avoiding this strange requirement of "remitting money from overseas" when you are residing in Thailand with legal sources of income here?

Well, if it is possible to use our savings to buy a condo, that would not immediately give us the tax saving we were originally looking for. But after buying the condo, can we take a refinance/mortgage on the condo to enjoy some tax saving? Any advice from experienced people out there.

We are not good at money/investment kind of stuff. We just feel that the hard-earned money is not being utilized well. We opted for some LTF/RTF mutual funds investment, and got Bangkok Bank's Gain1st Type long-term insurance cum savings since we do no have any provident-funds etc. for our old days.

Your advice will be thankfully appreciated. Best regards.

[SAMCHAROEN]

Dear OP,

The following is based on my personal knowledge and opinions and thus may or may not be accurate. You must re-check with the proper authorities before making your decision.

1. As a foreigner, to buy a condo you must show money coming in from abroad. There is no exception to this rule.

However, you need not bring in full 100%... usually 80% is sufficient and the rest 20% you can use your savings here.

(I belive, 20% is considered cost of furniture and fittings of the property and not the actual real estate itself and so it need not be brought in from abroad.)

2. The current policy is not to lend money to foreigners for buying property. Period.

(Although I have heard UOB does give loans to foreigners if certain conditions are met.)

3. You can buy a condo using 100% of your own money provided the money comes-in from abroad as mentioned in point no.1 above.

4. Assuming that you dont have any funds in your home country, you can wire transfer your funds here to your home country.

Again assuming that you have been paying your taxes and your funds here are fully tax paid and you have all the supporting documents to prove it, you should not have any problem in doing so.

In fact, it will be an added advantage to you considering the current strong Baht.

After you have done this you may wire transfer these funds back here or you may look for a suitable investment back in your home country.

5. Since banks wont lend money to foreigners to buy condos you will not be able to refinance it later either. So getting a tax deduction does not arise.

6. If you buy a condo, you need to ask yourself - should I stay there myself or give it on rent? If the rental income you expect to receive from your condo is greater than the rent you are currently paying, you should give it on rent.

If not, you should stay there yourself and thus saving on your rental expenses.

7. In case you decide not to invest in a condo, there are only few other options where you can invest your money.

You have been buying into LTFs & RTFs which does gives you a tax saving. However, the returns are not so impressive in my opinion.

The lesser the risks involved the lower the returns. So if you want to make some real money you need to take some calculated risks.

Stocks, gold futures, agricultural futures are some of the riskier investments and you can invest a small part of your savings in these if you wish to take risks.

My safest bet would be to buy your condo and give it on rent. If you choose the property wisely you can easily make 8-9% annually on your investment.

You may even sell your condo later for a profit.

Happy investing !

[eljeque]

You should win "Most Helpful Post of the Week" for the above.

[manhattan55]

Apparently, there are now off-shore funds available which extend loans to expats living in Thailand for the specific purpose of financing the purchase of condos in Thailand. However, I do not know whether the interest payable on these loans (which are considered to be mortgages) are tax deductible against Thai income tax. If you are interested, I can look into this some more (I am not an expert on this). I suppose that such financing may be of interest to you in case you are looking to supplement your existing funds for the purchase of a larger property, and it would satisfy the requirement that funds must come from abroad.

[mmhasan]

Hi, thank you very much for all the helpful posts and personal messages.

A very special thanks to SAMCHAROEN for his comprehensive reply - I second eljeque's nomination of the "most helpful post",

Sincerely, MH

[tangoll]

The post from samcharoen is helpful, especially if it is correct. Unfortunately, there are some errors in it, and an omission. For non-Thais, the funds you bring into Thailand to purchase a condo must be equal to or greater than the amount that you declare as the transaction value of the condo at the time of transfer of ownership. It doesn't matter if it is all condo, part furniture and fixtures, or whatever. The amounts totalled on the Foreign Exchange Transaction Form(s) supplied by the bank must be equal to or greater than that transaction value.

If you rent your unit out, there is also tax on the rental receipts. You need to look into more detail on this, as I have no experience in renting out condo units.

In order to expatriate funds, Bangkok Bank requires very specific documents to support your application to convert Thai baht and export the converted foreign funds. You need to find out from whichever bank you use, exactly what documents must be supplied to them. It's easy to say, "supporting documents", but your assumption of what are "supporting" documents may be inconsistent with what the bank requires.

If you are working in Thailand and have a work permit, banks have some additional provisions for allowing you to set up special accounts that will enable you to satisfy the requirements for getting the FETF's. There are some threads on thaivisa forum that address this very specific issue and you should search for them to learn more.

In the past, Bangkok Bank branch in Singapore and UOB Singapore had offered non-Thai baht loans for property purchase in Thailand, but the terms and conditions were so onerous that I have never heard of anyone actually using this facility.

Be careful of following advice from thaivisa postings. Some helpful in general but a lot are lacking in specifics and wrong on the details.

[InterestedObserver]

Be careful of following advice from thaivisa postings. Some helpful in general but a lot are lacking in specifics and wrong on the details.

If you are looking for authoritative legal or tax advise you should always consult a reputable lawyer or accountant.

[SAMCHAROEN]

The post from samcharoen is helpful, especially if it is correct. Unfortunately, there are some errors in it, and an omission. For non-Thais, the funds you bring into Thailand to purchase a condo must be equal to or greater than the amount that you declare as the transaction value of the condo at the time of transfer of ownership. It doesn't matter if it is all condo, part furniture and fixtures, or whatever. The amounts totalled on the Foreign Exchange Transaction Form(s) supplied by the bank must be equal to or greater than that transaction value.

If you rent your unit out, there is also tax on the rental receipts. You need to look into more detail on this, as I have no experience in renting out condo units.

In order to expatriate funds, Bangkok Bank requires very specific documents to support your application to convert Thai baht and export the converted foreign funds. You need to find out from whichever bank you use, exactly what documents must be supplied to them. It's easy to say, "supporting documents", but your assumption of what are "supporting" documents may be inconsistent with what the bank requires.

If you are working in Thailand and have a work permit, banks have some additional provisions for allowing you to set up special accounts that will enable you to satisfy the requirements for getting the FETF's. There are some threads on thaivisa forum that address this very specific issue and you should search for them to learn more.

In the past, Bangkok Bank branch in Singapore and UOB Singapore had offered non-Thai baht loans for property purchase in Thailand, but the terms and conditions were so onerous that I have never heard of anyone actually using this facility.

Be careful of following advice from thaivisa postings. Some helpful in general but a lot are lacking in specifics and wrong on the details.

The post from samcharoen is helpful, especially if it is correct. Unfortunately, there are some errors in it, and an omission. For non-Thais, the funds you bring into Thailand to purchase a condo must be equal to or greater than the amount that you declare as the transaction value of the condo at the time of transfer of ownership. It doesn't matter if it is all condo, part furniture and fixtures, or whatever. The amounts totalled on the Foreign Exchange Transaction Form(s) supplied by the bank must be equal to or greater than that transaction value.

Dear tangoII,

At the risk of being off-topic, let me expand on what I posted earlier:

The actual funds which you bring into Thailand to purchase a condo must be equal to or greater than the amount that you declare as the transaction value of the condo at the time of transfer of ownership - agreed.

But the transaction value need not be what you actually pay - meaning you can deduct the estimated value of the furniture & fittings from the actual value. Whatever amount remains you bring -in that much and declare it as the cost of the real estate.

The reason being:

1. The land dept. does not need to tax you for furniture/fittings which came along with the real estate.

2. We dont need to show money coming from overseas to buy furniture.

Consider this: if you were to buy an up-market condo which came with imported Italian marble, Italian furniture, fittings, jaccuzi, whirlpool etc...costing at least a couple of mil. bt. , would it make sense to pay the land dept taxes on these furnitures & fittings whereas taxes have already been levied on them via other means? under these circumstances even the floor tiles (imported from Italy) would be considered as a fitting and not part of the cost of the real estate as such.

If you rent your unit out, you would in theory be required to pay tax on your rental income. Sorry for not mentioning it in my post.

I'm not a lawyer so meeting with a real estate agent or a visit to the land dept. to get the details will not be a bad idea.

[tangoll]

"If you are looking for authoritative legal or tax advise you should always consult a reputable lawyer or accountant. "

I would say "knowledgeable" might be preferable than "reputable". True story, I kid you not. About five years ago, there was an exhibition of Thai property in Hong Kong, and a "reputable" law firm from Phuket had a farang lawyer host a seminar on the legal ins and outs of buying property in Thailand. On the issue of the Foreign Exchange Transaction Form (formerly known as Tor Tor 3), he said that form is issued by the Bank of Thailand and that after import of funds, you need to allot about one week's time in order to apply for and obtain this form from the BOT. At that time, I had already done 2 of these import transfers, and I said at the seminar, that at Bangkok Bank in their head office on Silom Road in Bangkok, it takes all of 45 minutes to get the form from the bank department handling the import of funds. Needless to say, he was not a happy lawyer to obtain actual experience on a matter that he had presented himself as an expert on.

samcharoen, nowhere in my post did I say that transaction value is or is not the selling price or cost of the real estate. The transaction value technically is declared by the seller and not the buyer because the seller is responsible for actual payment of the tax/fees due. (In actual practice, these tax/fees can be negotiated to be shared, but the receipt from the Lands Dept is issued to the name of the seller.) In the case of a transfer from a developer's project, the developer declares what the transaction value is (normally the contracted sales price), and you as buyer have no way to separate out what is the furniture and fixtures portion of that transaction value, or any other item that's built into the transaction value, like profit, expenses, etc. I have never met a developer who willingly will separate out the fixtures portion of the contracted sales price to reduce the transaction value to be declared, and I have dealt with Sansiri, Plus Property, Noble Development, and Asian Property, all big Thai property developers.

The key point is that the buyer better find out what transaction value will be declared at transfer of ownership and make sure his FETF's cover that amount. Don't even think that importing 80% of the sales price, alloting 20% for F+F, would be sufficient for the FETF.

[mmhasan]

Thanks again for new posts - specially to tangoll and samchareon. Things are getting clearer to me. best regards, MH

[Furbie]

Apparently, there are now off-shore funds available which extend loans to expats living in Thailand for the specific purpose of financing the purchase of condos in Thailand. However, I do not know whether the interest payable on these loans (which are considered to be mortgages) are tax deductible against Thai income tax. If you are interested, I can look into this some more (I am not an expert on this). I suppose that such financing may be of interest to you in case you are looking to supplement your existing funds for the purchase of a larger property, and it would satisfy the requirement that funds must come from abroad.

manhattan55, please provide some more details on this - such as a company name and contact info, as well as some ball-park costs if possible. PM me if you prefer. Thanks.