Userfruct And Paying Tax To The Tessaban?

[ThaiLawOnline]

I rarely read so much misinformation in one thread.

First, the question was about taxes on usufruct. I know NONE of them (no tax) and the OP is the only person I know having been asked about. The OP should ask to see the law, the regulation about it, ask a receipt and double check with an attorney. It is possible that a local tax applies, but I would be more than surprised if it is the case. Some of you have made 1 or 2 usufruct, we have done hundreds. I never heard of ANY tax anywhere. And the law about taxes does not make a difference about foreigners and Thais.

A Usufruct is a dismembership, as we call it in French civil law, of the right of property. It is NOT property itself.

Usufruct can be done on immovable property AND movable property. In Thailand, if done of Immovable property, to be enforceable against third party, they need to be registered.

What does that mean? If you make a usufruct with your wife, but do not register it, if she sells the land, you can not oppose your right and tell the new owner that you can stay there. You can sue your wife because she didn't respect your agreement but good luck! But if registered, any person must respect the usufruct registered.

Registration is always at the land department for Nor Sor Sam, and higher, like Chanotte. There is no registration for land titles at the Aor Bor Tor, the amphur,tessanban, etc. There is a special office for Sor Por Kor but we won't get into that.

Buildings CAN be immovable property in Thailand. They actually are normally immovable property. The concept of immovable property had nothing to do with "grow" or "not grow".

Under Thai law, buildings can be movable or immovable. That doesn't make sense to me but this is Thai law. Now how can this be movable? By fiction. A personal agreement, like a MOU, or superficies or registration at the local authorities.

Business is completely different from a usufruct. Don't mix things.

A usufruct is a right to use, possess, enjoy, get the fruits of it. Fruits are defined as natural fruits or legal fruits.

A usufruct contract could restrict the rights of a business on land, or don't restrict it.

If you have a business on that land, you must follow ALL the other laws about business.

Example. A foreigner normally needs a work permit to work in Thailand. Work = paid or not according to the law.

In many places, you can't for example build a factory of your land. There are regulations, zones, where municipalities decide where factories, or discos can be build.

Another important law in business is the foreign business act.

A usufruct is NOT full ownership or should not even be considered close to ownership.. Clearly, Common Law people from UK, Australia, USA don't understand that. It is similar as a right of management, or a lease. Is a lease full ownership? No. Why? Because ownership will incorporate a right or selling, normally, fundamental part of the rights of an owner. Now, how do we call the person who owns the land and gives a usufruct? We call it in French the "naked-owner" (le nu-proprietaire). It means they still are the owner, but have almost no clothes, nothing, except the right to sell.

What is very different from a lease in a usufruct?

A lease is a persnonal right. That means attached to a person. But when you register it, it produce effects to third parties.

A usufruct is a real right. That means attached to a thing, like land.

A lease is transmissible to your heirs.

A usufruct is not transmissible to your heirs.

Some people mentionned clause 1469.

Does ANYONE here know one case of usufruct that was cancelled by a court involving clause 1469? I don't think so.

I don't know any of them and my personal interpretation, based of having studied civil law, based on working under Thai Law with about 30 different lawyers since 2006, is that 1469 does not apply to registered agreements. Point. You can disagree but you probably never studied the concept of "publicity" in civil law and it's meaning. Publicity means that registered agreements do affects third parties. On top of that, I have other arguments should someone try to cancel a usufruct in Court for a divorce. For instance, if the usufruct was GIVEN for free, which is 95% of the cases we do, according to section 1471 to 1474 of civil code, a gift is a personal right and that is public order. It means a gift is a gift and you keep it. Meaning you could argue that you can't claim back the usufruct or cancel it as it was given.

We never pleaded these arguments in court and thai lawyers I have seen, won't think about 1469.

I have seen about 5 to 10 divorces with usufruct. In each cases, people made agreements or to stay on the land, or to sell the land, split profits, etc. None tried to cancel a usufruct to what I have seen. We do divorces each month.

I am not saying it is impossible to cancel a usufruct. A usufruct is a contract and if a party does not respect the contract, then they could ask to cancel the contract.

The first time we registered a usufruct was around 2006. At that time, we had a very simple contract. Often just using repeating Thai law in Thai and English. Since then, we added many different clauses to protect the usufructuary. This is a personal agreement made between 2 people and signed with 2 witnesses. Most land department do not keep a copy of that agreement and just register another simple 3 to 5 lines about the usufruct in Thai on their form. However, the personal agreement made between both of you, even if not kept by the land department, is valid between both of you and clearly an excellent idea to have if well drafted.

I have seen clients changing clauses about insurance.

Other changing clauses about transferring rights, like sub-leasing to third parties, to limit it or not.

Some change clauses about payment of the usufruct, time of the usufruct, there is nothing I have not seen.

But the land department will refuse a usufruct if it is too much, example, you add clauses with option to purchase, or you put other clauses that change the nature of the contract. In that case, better to make 2 separate agreements, like a usufruct and a MOU.

Actually, at this moment, we rarely only do usufruct alone. We combine usufruct with a MOU or with a loan agreement to make them stronger. Sometimes with a prenuptial.

I have seen people refused a usufruct for life because the land department says it is only 30 years.

I have seen people refused a usufruct for more than 1 Rai, because the land department says so.

I have seen people refused a usufruct because they were not married, as the land department requested.

This is all wrong and not in the law. But the land department has a very wide discretion and often, in small places, they still don't know what is a usufruct.

I hope this help. I think I posted the first text in English about usufruct in Thailand in 2008. You can read it on ThaiLawOnline. It is not updated and I would need to make some modifications. I will try to do that next week.

The law has not changed. But the attitude of land department did. It is easier these days to register a usufruct. Many of our clients just ask an agreement online and does the registration themselves. It is not complicated and does cost only about 75 baht per title deed.

Sebastian.

PS: I am currently working on a surrogacy text, something really good about last Will (a very long research I made since 2 years) and Rights of sale with redemption (commonly known as Kaifa in Thai). But it won't be ready before Songkran. Too busy now.

[Crossy]

Some off-topic posts removed.

[jamescollister]

I rarely read so much misinformation in one thread.

First, the question was about taxes on usufruct. I know NONE of them (no tax) and the OP is the only person I know having been asked about. The OP should ask to see the law, the regulation about it, ask a receipt and double check with an attorney. It is possible that a local tax applies, but I would be more than surprised if it is the case. Some of you have made 1 or 2 usufruct, we have done hundreds. I never heard of ANY tax anywhere. And the law about taxes does not make a difference about foreigners and Thais.

A Usufruct is a dismembership, as we call it in French civil law, of the right of property. It is NOT property itself.

Usufruct can be done on immovable property AND movable property. In Thailand, if done of Immovable property, to be enforceable against third party, they need to be registered.

What does that mean? If you make a usufruct with your wife, but do not register it, if she sells the land, you can not oppose your right and tell the new owner that you can stay there. You can sue your wife because she didn't respect your agreement but good luck! But if registered, any person must respect the usufruct registered.

Registration is always at the land department for Nor Sor Sam, and higher, like Chanotte. There is no registration for land titles at the Aor Bor Tor, the amphur,tessanban, etc. There is a special office for Sor Por Kor but we won't get into that.

Buildings CAN be immovable property in Thailand. They actually are normally immovable property. The concept of immovable property had nothing to do with "grow" or "not grow".

Under Thai law, buildings can be movable or immovable. That doesn't make sense to me but this is Thai law. Now how can this be movable? By fiction. A personal agreement, like a MOU, or superficies or registration at the local authorities.

Business is completely different from a usufruct. Don't mix things.

A usufruct is a right to use, possess, enjoy, get the fruits of it. Fruits are defined as natural fruits or legal fruits.

A usufruct contract could restrict the rights of a business on land, or don't restrict it.

If you have a business on that land, you must follow ALL the other laws about business.

Example. A foreigner normally needs a work permit to work in Thailand. Work = paid or not according to the law.

In many places, you can't for example build a factory of your land. There are regulations, zones, where municipalities decide where factories, or discos can be build.

Another important law in business is the foreign business act.

A usufruct is NOT full ownership or should not even be considered close to ownership.. Clearly, Common Law people from UK, Australia, USA don't understand that. It is similar as a right of management, or a lease. Is a lease full ownership? No. Why? Because ownership will incorporate a right or selling, normally, fundamental part of the rights of an owner. Now, how do we call the person who owns the land and gives a usufruct? We call it in French the "naked-owner" (le nu-proprietaire). It means they still are the owner, but have almost no clothes, nothing, except the right to sell.

What is very different from a lease in a usufruct?

A lease is a persnonal right. That means attached to a person. But when you register it, it produce effects to third parties.

A usufruct is a real right. That means attached to a thing, like land.

A lease is transmissible to your heirs.

A usufruct is not transmissible to your heirs.

Some people mentionned clause 1469.

Does ANYONE here know one case of usufruct that was cancelled by a court involving clause 1469? I don't think so.

I don't know any of them and my personal interpretation, based of having studied civil law, based on working under Thai Law with about 30 different lawyers since 2006, is that 1469 does not apply to registered agreements. Point. You can disagree but you probably never studied the concept of "publicity" in civil law and it's meaning. Publicity means that registered agreements do affects third parties. On top of that, I have other arguments should someone try to cancel a usufruct in Court for a divorce. For instance, if the usufruct was GIVEN for free, which is 95% of the cases we do, according to section 1471 to 1474 of civil code, a gift is a personal right and that is public order. It means a gift is a gift and you keep it. Meaning you could argue that you can't claim back the usufruct or cancel it as it was given.

We never pleaded these arguments in court and thai lawyers I have seen, won't think about 1469.

I have seen about 5 to 10 divorces with usufruct. In each cases, people made agreements or to stay on the land, or to sell the land, split profits, etc. None tried to cancel a usufruct to what I have seen. We do divorces each month.

I am not saying it is impossible to cancel a usufruct. A usufruct is a contract and if a party does not respect the contract, then they could ask to cancel the contract.

The first time we registered a usufruct was around 2006. At that time, we had a very simple contract. Often just using repeating Thai law in Thai and English. Since then, we added many different clauses to protect the usufructuary. This is a personal agreement made between 2 people and signed with 2 witnesses. Most land department do not keep a copy of that agreement and just register another simple 3 to 5 lines about the usufruct in Thai on their form. However, the personal agreement made between both of you, even if not kept by the land department, is valid between both of you and clearly an excellent idea to have if well drafted.

I have seen clients changing clauses about insurance.

Other changing clauses about transferring rights, like sub-leasing to third parties, to limit it or not.

Some change clauses about payment of the usufruct, time of the usufruct, there is nothing I have not seen.

But the land department will refuse a usufruct if it is too much, example, you add clauses with option to purchase, or you put other clauses that change the nature of the contract. In that case, better to make 2 separate agreements, like a usufruct and a MOU.

Actually, at this moment, we rarely only do usufruct alone. We combine usufruct with a MOU or with a loan agreement to make them stronger. Sometimes with a prenuptial.

I have seen people refused a usufruct for life because the land department says it is only 30 years.

I have seen people refused a usufruct for more than 1 Rai, because the land department says so.

I have seen people refused a usufruct because they were not married, as the land department requested.

This is all wrong and not in the law. But the land department has a very wide discretion and often, in small places, they still don't know what is a usufruct.

I hope this help. I think I posted the first text in English about usufruct in Thailand in 2008. You can read it on ThaiLawOnline. It is not updated and I would need to make some modifications. I will try to do that next week.

The law has not changed. But the attitude of land department did. It is easier these days to register a usufruct. Many of our clients just ask an agreement online and does the registration themselves. It is not complicated and does cost only about 75 baht per title deed.

Sebastian.

PS: I am currently working on a surrogacy text, something really good about last Will (a very long research I made since 2 years) and Rights of sale with redemption (commonly known as Kaifa in Thai). But it won't be ready before Songkran. Too busy now.

Read through this a few times, lots of attempted legalese, but not much substance.

Take it you are not Thai, not a member of the Bar or law society or licensed to practice law in Thailand.

You seem to skip the important matters, like the land code, which actually refers to aliens and how they may not give money to a Thai national to buy land for the aliens use.

What about the document you sign making no claim to the land, usufruct is clearly a claim.

You mention sec 1469 of the CC, where pray tell does it say you need a court to cancel it, land office can avoid it, no court needed.

Usufructs give rights, which part of the CC state which limited rights cover aliens, you have a usufruct or you don't, it's a right to profit from the land. Work permits are a privilege.

Usufructs as far as I can see can be held by a Juristic person, why would Tesco, Toyota and other foreign companies not use them if they held water.

These law have been in place since the 50s I believe and no foreign national has contested them, I wonder why.

Sorry what you wrote has little to do with facts, just some loosely collected opinions.

I am not a lawyer, but have studied law, mostly criminal and spent a lot of time in court.

Issan lawyers may be of the opinion that a usufruct has some validity, but don't believe that is the opinion of the Thai law society. Jim

[ThaiLawOnline]

I won't answer each reply, but here's my reply to you:

- Read through this a few times, lots of attempted legalese, but not much substance.
Take it you are not Thai, not a member of the Bar or law society or licensed to practice law in Thailand.

I am a member in good standing of a Civil Law jurisdiction and also of the International Bar Association. I work with Thai lawyers and we do have Thai lawyers in our law firm, REGISTERED Thai lawyers and they think the same as me. I actually do explained and taught usufruct to Thai attorneys but this is not something they study a lot... What is lacking strength in your "opinion' is that you use the fact that I am a foreigner to try to discredit my reply and you specify that you are a NOT a lawyer, that you studied Law and add 'criminal law'... which has nothing to do with civil law. And you finish by adding you would need the opinion of a Thai lawyer, while we are a Thai law firm with Thai lawyers. Well, if I don't know what I am talking about, I am sure that you know more than me.

-You seem to skip the important matters, like the land code, which actually refers to aliens and how they may not give money to a Thai national to buy land for the aliens use.

Land Code had NOTHING to do with Civil Code. The Civil code defines the property according to Thai Law. A usufruct is not defined by the land code. Same for hire or property (lease). And the Civil Code applies to foreigners and Thai. This is why foreigners can do a usufruct and can normally not own land.

- What about the document you sign making no claim to the land, usufruct is clearly a claim.

This is call a CONFIRMATION LETTER. It is done according to a regulation. That document is not asked when you register a usufruct or a lease.

Read again what I wrote. And a usufruct would be as much as a 'claim' that a lease, superficies, or others.

-You mention sec 1469 of the CC, where pray tell does it say you need a court to cancel it, land office can avoid it, no court needed.

Usufructs give rights, which part of the CC state which limited rights cover aliens, you have a usufruct or you don't, it's a right to profit from the land. Work permits are a privilege.

This is very confused. A usufruct includes rights of LEGAL FRUITS, which is 'profits of the land' if you simplify. But it is wider and there are other specific laws that apply, I mentioned some of them. A usufruct could also excludes the profits of the land as these clauses are not public order. 1469 has nothing to do with that. 1469 is in the section about marital property and I explained why, it should not apply to register usufruct. And I asked if anyone knows a usufruct that would have been cancelled under 1469. I have been asking that for years. So far, I have seen NO EXAMPLE.

-Usufructs as far as I can see can be held by a Juristic person, why would Tesco, Toyota and other foreign companies not use them if they held water.

Usufruct CAN be done with juristic persons and we did it. But there are many problems:

1) The land department will refuse a usufruct FOR FREE from a juristic person because juristic person are there for PROFIT.

2) If done TO a juristic person, it is not for lifetime but maximum 30 years.

3) Toyota or Tesco lotus can apply for BOI approval and get FULL OWNERSHIP OF THE LAND. Why do a usufruct?

4) Commercial leases can be done for 50 years. Better than usufruct for 30 years.

5) Leases have combined tax of about 1.1% while usufruct has a tax of 1.5%. Again, it is beneficial to make a long term lease than a usufruct.

6) Under Thai Law, it was not widely used to make usufruct. Because Thai people could own the land, or they leased it. It doesn't mean usufruct are weak. Many registered Thai lawyers have very small knowledge of it because it is not common between Thais. Same as a prenuptial is not common between Thais. Doesn't mean it is invalid.

-These law have been in place since the 50s I believe and no foreign national has contested them, I wonder why.

You are wrong. There are decisions of the Supreme Court on usufructs. But like I said, it was not commonly used, as there are other ways to do things.

- Sorry what you wrote has little to do with facts, just some loosely collected opinions.

Actually, not "collected opinions" but it is the doctrinal position on usufruct, what is taught in civil law systems and universities, the basic of usufruct and what the practice of it in Thailand.

- I am not a lawyer, but have studied law, mostly criminal and spent a lot of time in court.

This is what I said. You claim that WE (a law firm with Thai attorneys) are wrong and that you are right. And you used the fact that you studied law, CRIMINAL LAW, and have an English name. I would guess you are American, British or Australian, which are Common Law jurisdictions. Not only is usufruct not present in Common Law, but we are talking about questions that have nothing to do with Criminal Law. And I did STUDY CRIMINAL LAW in a Common Law jurisdiction too. I am from a mixed Law system, just as Thailand, which is kind of rare.

- Issan lawyers may be of the opinion that a usufruct has some validity, but don't believe that is the opinion of the Thai law society. Jim

It is not an opinion but the LAW. If usufructs were NOT VALID, it won't be in the Law. And the "Thai Law Society" doesn't exist as an entity. You have the Thai lawyers council, which a the bar association of Thailand. Each lawyer can have a different opinion of a subject. Anyone knowing what is a real right and a personal right can explain you why they are strong. Ask a Thai attorney if you wish. And ask him how many usufruct he registered, or if he read decisions about them from the Supreme Court. I would be surprised if he or she did.

And you can't be more VALID as when it is registered by the land department!

Usufructs are only about 14 clauses in the Civil code. Have you heard about what is a CHARGE ON IMMOVABLE PROPERTY? Probably no. Because this is not widely used. But it also exist. Strangely enough, you have registered usufruct for at least 7 years made from us. Strangely enough, Thaivisa is a wide community. No case of a broken usufruct has been found so far. And members here have posted their info about usufruct, stating that it actually helped them when the storm of divorce came toward them....

Just my OPINION as a NON THAI LAWYER but managing director of a Law Firm with Thai attorneys.

[Crossy]

OK chaps, consider this a Public Warning to stop the baiting and infighting.

Any further posts along the same lines will result in a nice vacation.

[mark131v]

I cannot understand why this warning has been issued, the information from Issan Lawyers is very useful and it is good to hear a proffesional opinion on this subject. His replies are detailed and there is none of the usual bitching and name calling going on. A lot of people myself included have spent a lot of time on this subject and this is by far the most detailed answer I have seen so I am struggling to see the problem with it......

[LennyW]

I cannot understand why this warning has been issued, the information from Issan Lawyers is very useful and it is good to hear a proffesional opinion on this subject. His replies are detailed and there is none of the usual bitching and name calling going on. A lot of people myself included have spent a lot of time on this subject and this is by far the most detailed answer I have seen so I am struggling to see the problem with it......

Perhaps something to do with the poster above Issanlawyers being banned. Amen to that!

We are very greatfull for the details from Issanlawyers, many of us understood those details before, but some people just wont listen!

[harrry]

It is very complete and useful information.

[Crossy]

Gentlemen, please refrain from commenting on moderation on the open forum.