OTHER EVIDENCE OF RIGHTS
IN LAND IN THAILAND

Leases

Although foreigners usually may not buy land, they may lease land on a short or long term basis. Leases for up to three years may be entered into by simple contract and need not be registered.

Leases for more than three years are valid for only three years unless the lease is registered on the Title Deed or the Certificate of Use. Leases for three years with an option to renew may in certain cases be treated as a lease for more than three years and the renewal option may not be valid, unless the lease with the renewal option is registered.

Leases may be registered for up to 30 years (or the life of either party) and where the lease is for a period of years it may provide for a renewal clause allowing the lease to be renewed for an additional period of up to 30 years. However, the renewal provision is not automatic, the parties must appear at the Land Department to register the renewal. There are court decisions which indicate that

the renewal clause is personal to the landlord, and thus may not be binding on his heirs or successors.

In 1999, a change in the law was made to permit a lease for industrial or commercial purposes to be granted for a term of up to 50 years, and this may also include an option to renew for a further 50 years. The granting of such longer leases has not yet become common in practice.

Superficies

Superficies is a right granted by an owner of land in favor of another whereby the grantee (superficiary) is granted the right to own buildings, other structures or plantations situated upon the land. It is similar to a lease, and the rules concerning leases apply to superficies.

Usufruct

Usufruct is a right granted by an owner of land in favor of a grantee (usufructuary) whereby the grantee has the right to possess, use and enjoy the benefits of the property. Specifically, a usufructuary /grantee normally has the right to exploit forests, mines and quarries. The rules concerning usufructs are similar to those concerning leases.

Habitation

This is a right to inhabit a building as a dwelling without paying rent. It may be granted for the life of the grantee or for a period of time not exceeding thirty years subject to the right to renew for an additional period of 30 years. The rules concerning habitations are generally similar to those concerning leases.

Servitudes

A piece of real property may be subject to various types of “servitudes” for the benefit of another piece of real property. A servitude may, for example, be granted, consisting of an easement giving access to a parcel of land, to construct a roadway through and adjoining piece of land, or to run utility pipes or cables across adjoining land. Servitudes may be acquired by prescription but normally must be registered on the applicable title deeds in order to be effective and, just as importantly, to provide third parties with notice of the servitude. Servitudes by necessity also exist in favor of parcels of land to which there would otherwise be no access or unduly difficult access.

Charges

A piece of immovable property may be subject to a charge entitling the beneficiary to a periodic performance out of such property or to a specified use and enjoyment thereof. A charge may be created for the life of the beneficiary or for a period of 30 years, subject to a right to renew for an additional period of 30 years.

Mortgages

A mortgage may be granted by an owner in favor of a person, bank or financial institution, to secure the performance of any obligation. Whilst there is no law restricting the right of foreigners to be granted mortgages over land, the Land Department normally does not allow foreign individuals to be granted such a right, as it deems that such mortgages may be a subterfuge for the foreigner to secure beneficial ownership of the land.

For residents of Thailand, only individuals and licensed banks and finance companies can be granted mortgages, where the mortgage finances the construction or purchase of the immovable property. But any company can be granted a mortgage to secure trading debts or other obligations.

Divided Ownership of Land and Buildings

It is common in Thailand for buildings to be owned separately from the land. Since there are no nationality restrictions on owning buildings, it is common for foreigners to own buildings and to lease the land on which their factories or other buildings are constructed. Ownership of buildings may be transferred at the Land Department or Amphur at the same time that the ownership of the land covered by a Title Deed or Confirmed Certificate of Use is transferred. Otherwise, ownership may be transferred at the Amphur only after notice of the proposed transfer has been posted and 30 days have elapsed without any objection.

Apartments may be leased in the same manner as buildings, but cannot be owned separately from the whole building.

Leasing arrangements are often structured by the preparation of several documents, rather than a single document. Since landlords are liable to pay land and house tax of 12.5% of the gross rental derived from renting out land and buildings, but only 7% VAT is charged on services provided, landlords in order to minimize their taxes often prepare two or three separate agreements.

The first agreement will be a lease of the apartment or building. The rent will be subject to 12.5% land and house tax. Other agreements, for example providing for the use of furniture of for other services, are exempt from land and house tax, but are subject to Value Added Tax, currently at 7%.

Condominiums

The law regarding condominiums is to be found in the Condominium Acts (1979-2008).The rules concerning ownership of condominiums are similar to those concerning land. Condominium units have a form of title deed and ownership is transferred at the Land Department. Since each condominium unit carries with it a proportionate ownership of the land, foreign ownership of condominiums is strictly controlled.

Foreigners, meaning foreign natural persons, foreign companies or foreign majority owned Thai companies, may currently own up to 49% of the units in a condominium project. For foreign natural persons without a residence permit, there must be proof that foreign currency was brought into Thailand to purchase the unit. Different rules apply to persons in BOI promoted companies and foreigners with residence permits.

Notwithstanding the above, units may be leased by foreigners, in the same manner that they may lease land.

The Condominium Act (2008) contains detailed provisions designed to ensure good management of condominiums, and grants enhanced rights to unit owners to take action in cases of non-compliance with duties imposed under the Act.

For additional information on The Condominium Act please see our page on Condominium Act information by Clicking Here.

Fees, Stamp Duty and Tax

The fees, stamp duty and taxes that arise on the sale, lease, or mortgage of land, buildings and condominiums are described below:

Transfers of Land, Buildings or condominiums

The land transfer fee for transferring ownership to land, buildings or condominiums is 2% of the assessed value, no matter what amount is declared. In addition, there is stamp duty of 0.5% based on the amount declared or the assessed amount, whichever is higher. For those who sell land or buildings held for less than five years (less than one year, if the owner has his registered domicile at the place being sold) there is a specific business tax due of 3.3% (inclusive of municipal tax) of the declared amount. But if this tax is paid, then the 0.5% stamp duty referred to above is not payable.

Sale by Juristic Person

For juristic persons that sell land, buildings and condominiums, there is a 1% income tax withholding payable at the registration office. Full corporate income tax must be paid on the profit at the time the selling company files is annual or semi-annual income tax return. A credit is allowed for the 1% withheld.

Sale by Natural Person

Natural persons who sell land, buildings or condominiums (but not in the course of a business) must pay income tax on the capital gain at a rate from 0% to 20%, at the time the transfer is made. The tax is assessed on the assessed price, less a standard deduction based on the length of time that the seller has owned the property.

The usual progressive natural person tax rates are applied to the deemed profit but in any event the tax may not exceed 20% of the gross sale price. When a natural person files his annual income tax return, he can choose to declare the actual profit or loss, or he can ignore the matter, and the tax paid at the registration office will be deemed to be the actual tax.

Fees on Leases

Natural or juristic persons who register a lease of land, buildings or condominiums (or other similar right, such as a superficies, usufruct or habitation) pay a 1% fee of the assessed rental value. In other words, the total monthly or assessed rental value for the term is calculated and the tax is paid on the total amount.

In addition, there is stamp duty payable of 0.1% of the above figure, and additional stamp duty of 0.5% based on the receipt of rent or any prepaid rental recited in the lease. If there is no prepaid rent, this stamp duty is not due until the rent is actually paid and a receipt given.

Fees on Mortgages

The fee for registering a mortgage on land, buildings or condominiums is 1% of the amount declared in the mortgage agreement, subject to a maximum fee of Baht 200,000. In addition, proof must be presented that the 0.05% stamp duty due on a loan agreements (subject to a maximum duty of Baht 10,000) has been paid. If the stamp duty has not already been paid, it must be paid at the time that the mortgage is registered.

 

Special thanks is given to Stephen Frost of BIA for certain contributions contained herein.

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