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Phuket
properties are
among the most sought after in Thailand, for
the properties in Phuket
offer the added advantages of peace, paradise
and a standard of living unavailable in other
parts of the country. I addition, any investment
in properties in Phuket will eventually repay
itself with handsome profits. There are many
different types of properties in Phuket, from
freehold to rentals. You do not have to be a
millionaire to purchase Phuket properties that
offer international standards, fantastic facilities,
and stunning views, as prices for Phuket properties
still manage to fall well below their equivalents
in Europe, Australia and the US.
FAQ
Can
Foreigners own property in Phuket?
Foreigners can own property in Phuket, but there
are some major limitations. Foreigners are allowed
to own a condominium unit in a fully registered
complex. They are also allowed to own a building.
This is good news. The only caveat is that they
cannot own the land on which the structures
sit. That's right; foreigners are not allowed
to own land in Thailand. However, it is possible
for a foreign individual to own land through
a Thai limited company, or to lease the property
up to 90 years. Each method has it’s pro’s and
con’s. Forming a limited Liability company is
very popular, and usually only takes about four
or five weeks to put together with the help
of a good lawyer and accountant. This method
must use Thai nominees and the purchaser’s interests
are protected through a nominee agreement and
pre-signed bought/sold certificates of the shares
held in the nominee's names. The advantage of
this route is that the purchaser can achieve
complete ownership of the land. The major disadvantage
is that the company requires on-going attention.
An example would be that the purchaser has to
appoint someone or a company to maintain the
registered address and agreements, to submit
twice yearly audited returns, and to file monthly
taxes. Many firms will provide this service
for a monthly fee. Land leasing is the other
very common method to owning land in Phuket.
Individual lease periods, under Thai law, cannot
exceed 30 years. It is possible to extend this
time period by adding two more 30-year lease
periods for a total of 90 years. These leases
usually include a provision that the buyer can
convert the lease to full ownership when the
law is changed to allow foreign ownership. The
drawback to this method is that the purchaser
does not have outright ownership. The bonus
of this method is that there is no on-going
paperwork, which would not be the case with
a limited liability company. An exception to
the methods laid out above came in 1999 in the
form of the Amendment Land Code Act. It roughly
states that if a foreigner wishes to acquire
land in Thailand, they must bring foreign currency
in an amount no less than 40 million Baht (1
Million Dollars U.S.) and obtain permission
from the Minister of the Interior. If you can
meet these requirements, you may be granted
permission to own land in an area not exceeding
one rai, ( 2.5 rais = 1 acre) and it must be
used for residential purposes as well.
How are Limited Liability Companies Formed?
A. Seven shareholders are required to form a
limited liability company within Thailand. Companies
with over one million Baht are the most frequently
formed, however, there is no official minimum
capital requirement. Twenty five percent of
the registered capital, at a minimum, must be
paid up front. The company can also not hold
treasury shares in itself or accept shares in
pledge. Other characteristics, which a company
must have, are that Thai nationals must make
up a majority of the shareholders. An example
of this would be that if a company had say 7
shareholders, and one million Baht in registered
capital, at least 4 of the shareholders would
have to be Thai, and they would have to hold
more than five hundred thousand Baht of the
total capital. Registering a company usually
requires a three-step process, and typically
takes between two to three months to complete.
The steps are to register the company name,
the company's Memorandum of Association, and
then finally to register the company itself.Registering
the company name usually involves providing
a list of at least three to four names, and
if they are English in nature, they must end
with "Co., Ltd." Or "Corp., Ltd.".
There will be a search by the Commercial Registrar's
Office to confirm that the name is not the same,
or deceptively similar to any name already in
use. The Memorandum of Association must be registered
within thirty days after the approval of the
company's name, or the name will be lost.The
registration of the Memorandum of Association
requires the location of the head office, the
company objectives, shareholder’s liability,
registered capital, and promoters. The location
does not need to be specific at this point,
just having the name of a province or district
will do. The company objectives are broadly
published in the Commercial Registrar's Office.
The registered capital must include the number
and par value for shares. The names, addresses
and occupations of seven promoters must be included.
Each promoter must purchase at least one share
of the company at the time of the company's
inception. The application for Memorandum of
Association usually takes one to two working
days. After the approval process, the company
must wait a minimum of eight days before the
registration of the company.Company Registration
requires a few steps. The first is to pay a
minimum of 25% of the company's capital. This
usually becomes an issue at the time of the
first audit made on the company. The remaining
steps entail including information.Information
to include is the head office address, a letter
from the landlord granting permission to lease,
the company seal, by laws of the company, and
the directors, or authorized directors. Other
information needed is the auditor to be used,
the fiscal year to be used, and the pre-formation
costs or contracts dealing with how the company
intends to reimburse it's promoters for expenses
incurred before the registration.
What regulatory board governs foreign investment?
The Board of Investment (BOI) is the primary
bureaucratic body regulating foreign investment
in Thailand. Most ventures will not however
be tackled by just a visit to just the BOI.
There are many bureaucratic bodies eager to
tangle you in red tape. For the most part, foreigners
in Thailand have the same legal rights as Thai
citizens. The only differences are the rights
to working, or investing in the country. If
your corporation is an alien as defined by the
Alien Business Law, restrictions can be placed
on your business. The Alien Business Law is
the most important statute for foreign investors
in Thailand. It basically sets the definition
of who is an alien, or foreigner. An alien is
a natural person or a juristic person (corporation)
without Thai nationality. If your business will
be beneficial to the economy, you will usually
have permission granted to carry on with your
venture. The BOI maintains and continually upgrades
lists of activities it considers to be in the
national interest, and offers development incentives
to local and foreign private firms in these
areas. Projects approved by the BOI can generally
secure investment incentives such as favorable
land deals, tax breaks on corporate earnings
and import tax relief. BOI projects eligible
for incentives are industries which.
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Significantly
strengthen Thailand's balance of payments
position, especially through exports.
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Significantly
increase employment in Thailand.
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Locate operations
in provinces outside of major cities such
as Bangkok.
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Aid in the development
of the country's resources.
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Replace imported
energy supplies, or conserve energy.
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Considered important
and of need to the government.
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Development,
or the establishment of industries which further
technological development.
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Help in the building
of the country's infrastructure and utilities.
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Promote a healthy
environment.
How hard is it
to work in Phuket?
Generally, it is very hard for a foreigner to
find work in Thailand. Most of the work that is
found is usually in the hotel industry in areas
such as management, finance, or accounting. These
positions are usually found from abroad, however.
Second to hotels in hiring, are the English schools
and International schools. These schools are generally
on the lookout for qualified teachers since education
and the English language have become so important
to the tourism trade. The third group of legally
employed foreigners found in Thailand is owners
and proprietors of small to medium sized businesses.
After finding a company willing to hire a foreigner,
a work permit must be acquired before the individual
can legally work. The company doing the hiring
generally must apply for this, and it is a long
and grueling process, fit with more than it's
share of red tape. The company must be registered
with at least 3,000,000 Baht in capital, or show
that the work cannot be done by a Thai worker.
Applications sent in are judged on an individual
basis, but generally are judged to the degree
to which the above hold true.
What type of documents does one need to live
in Phuket?
Any foreigner wishing to reside in Phuket needs
a visa. There are four types of visas currently.
They are: Resident, Non-immigrant, Tourist, and
Transit. Transit visas are of no use to the purchase
of property, so they will not be discussed. Resident
Visas are hard to obtain because they are so rarely
issued. These visas are issued based on a quota
system, which is very selective. Some of the qualifications
listed are that you must be fluent in speaking
and writing Thai, have an above par financial
status, and have influential references.Non-Immigrant
Visas are usually issued abroad in the foreigner's
country. They generally are valid for 90 days,
starting upon the first day of arrival. This visa
can usually be extended to up to one year at a
time. The three ways to obtain and renew a Non
Immigrant Visa are:
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By becoming employed
and getting a work permit in Thailand.
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Having a Thai
family.
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Providing proof
of adequate financial means capable of supporting
you during your stay.
Tourist Visas are
also issued by embassies abroad. These vary from
country to country, but generally are between
60 and 90 days. Multiple visas may be applied
for at one time, and you may use these visas consecutively.
Many of the foreigners living in Thailand have
tourists' visas, and they simply renew them by
taking a trip out of the country every time they
expire.
What guarantees does one have as an investor?
To safeguard business investments in Thailand,
made by foreign currency, the government has set
some security guarantees. The government of Thailand
will honor these guarantees, as long as the desire
for foreign investment exists. Guarantees by the
government state that it will not:
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Grant tax relief
to competing imported goods.
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Allow the establishment
of competing businesses in the industry.
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Impose price
controls on the business's products.
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Nationalize the
investment of the business.
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Withhold permission
for exporting.
What are the
Costs of Building in Thailand?
The cost advantage of setting up businesses in
countries like Thailand can certainly be misleading.
Labor costs are generally much cheaper than in
some countries, but the costs of materials, electricity
and other utilities may be higher. Imported materials
and prime beachfront land cost more than some
would expect. Proximity to the ocean is probably
the biggest factor in the cost of land, and can
cost up to fifty times that of land plots in the
interior. Building costs and rent may also be
rather expensive depending on where you plan to
be situated.Even though labor costs may be cheaper,
productivity and sometimes skills and attitudes
may be lacking. “Mai Pen Rai” is often the attitude
of many of the workers, which may translate into
not planning, based on the belief that everything
will work out fine anyway.Other factors in the
costs of building in Thailand have to do with
decentralization. Thailand has an active policy
of promoting rural developments. The government
would like to see investment made away from overcrowded
locations such as Bangkok. To further this objective,
the government is offering additional financial
incentives to encourage investment in rural areas.
The choice to consider is whether you would like
to be in an established area, which already has
good facilities, or take the incentives and build
in a new area.There are three methods for determining
the division line between rural and non-rural
areas. The three methods are as follows:
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Areas within
the country are split into three "zones",
which are based on their distance from Bangkok.
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Based on the
government's social goals of segregating domestic
and industrial land use, there are likely
to be "industrial estates", where
new industries are encouraged to locate.
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An "Export
Processing Zone", or "Free Trade
Zone" may exist near an industrial estate
in which the government may encourage new
industries to locate.
Purchasing Condominiums
When purchasing condominiums, there are three
acts that have relevancy. The first is the Condominium
Act of 1979-No.2. The second is the Condominium
Act of 1991, and the third is the Condominium
Act of 1999. At this point in time, foreigners
can own up to 49% of the total percentage of the
condominium units. Until recently, foreigners
could only hold up to 40%, so things are getting
a little more liberal. As an attempt to sell some
of the markets overburdening condominiums, there
has been an update to the Condominium act. An
exception so that foreigners, or foreign owned
companies, can now own 100% of Condominiums. These
developments must have development areas under
5 rai. This is supposed to be true through at
least April 27, 2004. There are a number of regulations
related to foreigners who can own a condominium
unit. Basically they boil down to any foreigner
who can enter Thailand legally, can buy a condominium.
Factors to look for when purchasing a condominium
When considering what to look for in a condominium,
the three universal laws apply in Thailand. This
may be true more so than anywhere else-location,
location, location. Whether you want to live in,
or rent it out, there is a definite correlation
between location and the price to be paid. The
better the location, the higher the rent is the
golden rule. Being close to your work, or your
children's school if you have them, should be
a big consideration, unless you prefer spending
time driving. If you do not have transportation
readily available, being far from a main road
could be a problem. This would be especially true
if you are hidden toward the back of a complex.
Taxis, or Tuk Tuk's, are generally found at main
intersections. If you have a car, make sure you
check out whether or not you have assigned parking.
Having to park far down the street can be a big
pain when someone has taken your convenient spot
out front. Having stores close by should also
be figured into your decision. Shopping becomes
even more of a pain when the stores are far away,
when your ice cream melts on the way home. If
you are interested in having a view, make sure
that there are no plans others may have to build
in your view sight. Visiting the building during
several times of the day and week can prevent
you finding out too late that you have an unacceptable
traffic situation on your hands. Make sure you
open electrical and pipe shafts to see their condition,
such as whether they were sealed off between floors
to prevent fire rising, in the event of an accident.
Check for signs of any leakage around windows,
doors or ceilings. Make sure that your building
is not in a flood plane. Water marks on the walls,
or sandbags lying around, could be good clues
that flooding is possible. Examine whether or
not there are any burglary, or fire alarm systems
to protect you, along with checking the status
of fire escapes and their access. Having a sprinkler
system, which is in good working condition, is
also a necessity. Checking the mechanical plant
room for cleanliness and upkeep would also help
in determining the level of management involvement.
Management involvement is of utmost importance.
Find out who manages the complex, whether it's
an individual or company, to see if they are reputable
would be recommended.
First Steps After Deciding a Condominium Purchase
As with the purchase of anything, great care should
be placed on being informed and aware of what
and with whom you are buying from. Today, in Thailand's
property market, it is, unfortunately, safer to
buy once the project is finished. Buying on the
"plans" of some developers is sometimes
risky business. There have been several cases
in the past few years, where consumers have paid
deposits only to find the developer has stopped
working on the project temporarily, or all together.
Since there are no legal assurances for escrow
accounts in this country, the buyer is very much
at the mercy of the developer. There is really
nothing one can do to recover their deposit other
than taking civil action, or taking it to the
consumer protection board. Buying in a well maintained,
completed building or resale unit seems to be
the best advice in most cases.
Further steps that might minimize risk
Other steps which might minimize risk to the purchaser
of land or condominiums, would be to ask to see
both the front and back of the title deed. Make
sure you have a faithful translator to translate
the deed. It should have the shape and orientation
of the land, along with any borders it might have
with public property. Examples would be roads,
or possibly bodies of waters. There should also
not be any endorsements or liens, unless you have
been made aware of them.It might be a good idea
to actually measure the land yourself with a tape
and compass to make sure you have the right deed
for the land you are looking at.Easements are
also necessary to consider when you are dealing
with a project still under construction. Make
sure that there is a registered easement for vehicle
and utility connections. Apparently, some consumers
have been promised an easement during the purchasing
process, and later, found that the seller reneged
on their promise leaving them no access to the
property.Look out for clauses stating that the
sales price can be adjusted "pro-rata"
according to the final titled area. This could
be a clue that something might be wrong. There
have, apparently, been cases in which a seller
has deliberately understated the area of a property.
Documents needed when purchasing a condominium
In order to buy a condominium in Thailand, you
need a passport and a document called a Thor Tor
3. The Thor Tor 3 document is proof that you have
brought foreign currency into Thailand for use
in the purchasing of property.The documentation
is very extensive, and even more so if the purchase
is in the name of a company.
Steps to insure the smooth transfer of ownership
The first step toward a smooth transfer of ownership
is to do some due diligence work. A reputable
lawyer or real estate agent can do this for you.
For the most part, the description of the property
has to match the description on the title deed
representing it. The property's boundaries have
to match especially, so as to insure there are
no disputes. The seller has to be confirmed as
the owner of the property and there should be
no encumbrances registered against the property.
This could prevent the transfer of ownership,
or obtaining an unencumbered registered lease.When
all the above have been confirmed, it is time
to cover the contract. There are many different
contract formats out there, and it would be wise
to have an experienced lawyer look over things
to make sure that none of the details are overlooked.When
purchasing a completed property from a private
seller, the standard approach would be to draw
up a purchase option contract, or reservation.
This contract holds you and the seller to the
sale of the property with a given schedule and
price. This is a contract that binds you and the
vendor to the sale of the house at a specific
price in accordance to a specific schedule. The
contract will usually set up penalties in case
of default on the part of either party.A ten-percent
deposit is usually required to secure a property.
Closing payments will usually be expected within
thirty to sixty days. Longer closing terms are
sometimes used but usually a greater deposit is
usually involved. Deposits are usually not refundable,
unless there is a default on the part of the seller.Usually
there is a corresponding and equal commitment
from the seller, where he will commit to a refund
of your deposit and a penalty payment in case
of default on his part. Deposits in escrow accounts
are still rare in Thailand, but it is becoming
an increasingly recognized way of moving along.
Escrow accounts generally trade greater security
for the buyer's deposit versus a weakened claim
for damages in the event of default on the part
of the seller.Along with the price, payment and
closing schedules, it's imperative that the contract
includes clauses to cover who will pay for all
the other fees. Legal fees, transfer fees and
taxes are examples. There is often a business
tax and always an income tax assessment made at
the point of sale. The sale will also have to
be declared. This is usually at, or close to,
the government minimum assessed value.It would
be wise to sit down with the seller or someone
who knows how to do the calculation of these various
fees and taxes, and agree upon a formula for sharing
the expenses. It would be great to have this worked
out before you arrive at the Land Office. There
seems to be no rule set in stone concerning this.
It can range from the buyer or seller pays everything,
to a split between the two parties.
Purchasing Land
The laws concerning the purchase of land in Thailand
are quite rigid. Basically, Thai law does not
allow a foreigner to own land in Thailand. On
the individual level, even Thai nationals who
marry foreigners are not allowed to own land in
Thailand, unless the foreign spouse signs a document
which declares that the property is separate,
and that he or she has no interest in the property
in any way. Land laws are not just aimed at the
individual. Both partnerships and companies fall
under this land prohibition, if foreigners control
too large a share. The Alien Business Law, which
regulates the investment of land by foreigners,
states that "land trading" is considered
a Schedule one activity, and is prohibited to
foreigners. A foreign controlled company is defined
under Section 87 of Thai land law, and states
that any Thai registered companies or partnerships
with more than 49% of the companies total capital,
or more than half the shareholders being non Thai,
are considered foreign. To emphasize this point
even more, it is even difficult for a company
with a 51% Thai/ 49% foreign ownership to purchase
land. Having an even higher percentage of the
ownership being Thai is usually necessary to acquire
land in Thailand. There are some slight exceptions
to the above, and the first falls into the hands
of the Board of Investment.Under Section 27 of
the Investment Promotion Act, the Board of Investment
may allow foreign owned companies the permission
to own land if the land is used for the purpose
of conducting a "promoted activity".
This usually involves some manufacturing activity.
The lands use must be limited to the promoted
activity, and the size of the land must be reviewed
as well to insure that it fits within the said
purpose. If the business is later dissolved for
some reason, the land in use must be sold within
one year of the termination.The second exception
in which foreigners may acquire land is to lease.
At this point in time, Thai law allows a maximum
term of 30 years for a lease on land. It is usually
possible to extend this to 90 years by renewing
the lease for 3 consecutive terms. At the ending
of each term, both the seller ad buyers must register
the renewal with the Land Department and pay government
fees, and other expenses, such as stamp duty.
With this second option, one can effectively "own"
the land they are on for the entirety of their
lives, so it has become a popular choice.
Land Measurements
In Thailand there are a number of unique land
measurements in use:
Land Titles and
Deeds
A Land Title Deed is a legal certificate of land
ownership. Whoever has their name shown on the
deed has the legal right to the land. This certificate
can be used as evidence when dealing with governmental
bodies. Global positioning satellites are used
to set the boundaries of the land, which is the
most accurate method to date. The possessor may
do any legal acts immediately. Land partition
of more than 9 plots must be carried out according
to Section 286 of the Land Allotment Law.
Concerning documents and deeds, it is important
to understand that in most cases, all land in
Thailand is not titled, or even surveyed accurately.
This is especially true in the hilly, forested,
rural areas of the country and much of the land
bordering the coast. Exacting titles cannot be
completed without complete surveys of the land,
and unlike many of the world's countries, surveys
of national land are still not complete. Staking
claims was possible up until a couple of decades
ago. One could simply register the claim and develop
the land in some way such as farming. This is
no longer possible. The government stopped this
and claimed that all the remaining hills and forested
lands were considered National Parks, and controlled
by the Forestry Department. Encroachments on these
lands, and disputes over ownership have occurred
since these lands have not been surveyed in any
detail. To define once and for all the boundaries
of the disputed lands, and prevent further turmoil,
a policy of granting land, which has been accurately
surveyed, to landless people has been in operation,
although many of these disputes have not been
resolved.
Sor Kor 1
This is a document stating the possession of land.
It certifies the right to a certain land. The
basis of this certificate goes back to December
1st of 1954 when the Thai government issued a
statement notifying all land proprietors that
they should state, in writing, that they had possession
of their lands. The Nor. Sor 3, or Nor Sor 3 Gor
would be issued after it was proven that the proprietor
had used and possessed the land in question legally.
According to principle law, Nor. Sor 3 and Nor.
Sor. 3 Gor are legal certificates, which provide
that the given name shown on the title is a person
who has the right to the land stated within. This
right is recognized by the law and can be used
as evidence in any disputes with individuals,
or the government.
Por. Bor. Tor 6
Por. Bor. Tor 6 is a document for the issuance
of a tax number. This is for the purpose of paying
tax for any benefits made from the land. The ownership
of this land has usually not been assessed at
this point. In the event that there is no title
for the land, then it may be land in a conserved
forest, public land or land which existed under
Sor Kor 1, Nor. Sor 3, Nor. Sor. 3 Gor or a title
deed. Any of these titles must have a Por. Bor.
Tor 6 for tax purposes. This is true of any land
without a title.The right to land under Por. Bor.
Tor 6 cannot be used as evidence in any dispute
with government agencies.
Sor. Por. Gor 4-01
Sor Por Gor 401 is an allotment of land from
the land reformative committee. This land cannot,
under any circumstances be bought or sold. It
may only be transferred to heirs of the property
This title land for agriculture only.
Nor Sor 3
Nor Sor 3 is an document certifying the use
of land issued by the government to the proprietor
of land. It is not a possessor's title. In other
words, the person holding the Nor Sor 3 has a
legal right to possess the land by law. The Nor
Sor 3 has no parcel points, so it's rather like
a floating map. This can cause problems with verification
because of the lack of connection to other land
plots.With this type of document, legal acts,
of any kind, must be publicized for 30 days or
more.
Nor. Sor. 3 Gor
Nor Sor 3 Gor is a legal land title legally
set up the same as Nor. Sor. 3. The major difference
between the two is that Nor. Sor. 3 Gor has parcel
points on the map. These points are placed using
an aerial survey to set the points and the land
are, making it possible to verify a nearby land
area. Nor Sor 3 Gor always uses the same scale
of 1 : 5000.Publicizing legal acts are not necessary,
and the partitioning of the land into smaller
sections is also possible.
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