Real Estate Law Thailand: 7 Key Areas Foreign Investors Must Know

A Complete Guide to Real Estate Law Thailand Sets for Foreign Investors

Foreign Ownership

Thai law generally restricts foreigners from buying or owning land under freehold title. However, there are exceptions that make it possible for foreigners to own land in the following circumstances:

• The Board of Investment (BOI) and the Industrial Estates Authority have the power to permit promoted companies to own land for the purpose of the promoted business.
• Permission can be granted under the Petroleum Act for use in approved projects.
• Banks and financial institutions that have become foreign-owned.
• A foreigner who invests at least THB 40 million in authorized securities in Thailand may buy up to 1 rai (1,600 sq. m.) for residential purposes for themselves and their family only.

These exceptions obviously do not cater to the majority of foreign investors. The following are the legitimate ways for a foreigner to acquire a property interest in Thailand.

Leasehold Property

Foreigners can lease land and/or structures on short- or long-term contracts. Leases may be registered at the appropriate land office for up to 30 years and often include a renewal clause for an additional 30-year period; however, Thai law provides for only one such renewal. Leases for industrial or commercial purposes have a term of up to 50 years, also renewable for an additional 50-year period. Most authorities agree that a renewal clause is enforceable against the original lessor, but not against a transferee lessor. Any lease of 3 years or more must be registered on the land title at the appropriate land office for the lease to be enforceable beyond a 3-year term.

Company Ownership of Freehold Property

A Thai Limited Company can purchase land as a juristic person, provided the company is permitted to own and invest in land under its objectives and Articles of Association. Foreigners can hold a maximum of 49% of the shares in such a company, with the remaining balance owned by actual Thai investors. It is also vitally important that annual accounts are completed and taxes paid on time.

Land Title Documents

The preferred land title in Thailand is the Chanote (literally, “Title Deed”), issued under the Land Act of 1954.

Chanotes are issued by the Land Department upon application from the holder of a possessory right document. There are three basic types of possessory right documents still in existence, many of which have yet to be upgraded to a Chanote: the Nor Sor 3 Gor, the Nor Sor 3, and the Sor Kor 1 (other forms may occasionally be encountered as part of a plot’s historical record).

Of these three, the Nor Sor 3 Gor is preferred. It contains an accurate measurement of the land and boundaries (though less accurate than a Chanote) along with verification of the land’s past use. A Nor Sor 3 is similar, except that a Nor Sor 3 Gor’s measurements and boundaries are more accurate, and a Nor Sor 3 transfer requires a 30-day public notice period, whereas a Nor Sor 3 Gor can be registered immediately.

The least preferable is the Sor Kor 1 — an unregistered document stating an occupant’s claim that the land belongs to them. Its measurements are vague or missing and can be easily disputed. Even so, a Sor Kor 1 can be purchased from its holder and upgraded to a Chanote, though the transfer requires a 30-day public notice period.

The process of upgrading a Nor Sor 3, Nor Sor 3 Gor, or Sor Kor 1 to a Chanote can take anywhere from three months to a year and a half, depending on the District Land Department.

There are also several other, far less common, legally recognized types of Chanote. These may not contain boundaries and measurements as accurate as a Land Act Chanote, but the Land Department treats them the same for purposes of transfer and registration of ownership.

In short, the many varying land title documents found in Thailand reflect the country’s complex, and sometimes conflicting, history of land development and ownership documentation. Even a properly issued Chanote can be subject to legal challenge. For this reason, it is advisable to conduct a thorough search of a property’s title history before purchase — a purchaser acquires any defects in title and potential claims against it along with the land itself.

Legal due diligence by qualified and experienced attorneys familiar with land documentation history and Land Department procedures should always be conducted prior to purchasing land. This process generally includes a complete review of title history, an encumbrance search, a land site inspection, and verification of land use and zoning regulations.

Ownership of Condominiums

The rules governing condominium ownership are similar to those for land. Condominium units carry a form of freehold title deed, with ownership transferred at the Land Department. Foreigners — both individuals and foreign-owned companies — may own up to 49% of the area of a condominium project. Foreigners without resident permits must provide proof that foreign funds were brought into Thailand to purchase the unit. Condominium units may also be leased by foreigners in the same manner as land or structures.

Ownership of Structures

Structures may be owned outright by foreigners in their own name. A foreign owner should hold a “superficies” right (the right to own a structure on land they do not own) registered on the land’s title deed. If they were the structure’s first owner, they should also retain evidence of construction, such as payment records to the builder, the building contract, and their name on the building permit. If they acquired the structure as a transferee, the transfer must be registered in their name at the relevant land office, subject to a 30-day public notice period.

Transfer of Ownership

Ownership of land and/or structures is transferred through written registration at the authorized Land Department. The transaction is recorded on the title deed and/or other relevant documents, with all supporting documents retained in official records.

In general, the current fees and taxes applicable upon registration of ownership of immovable property are as follows:

1. Transfer Fee: 2% of the land office’s appraised value.

2. Income Tax (payable as withholding tax):

• If the seller is a juristic person: 1% of the land office’s appraised value or the actual transaction value (whichever is higher). This withholding tax is credited against the company’s income tax payable for that year.
• If the seller is an individual: an incrementally applied personal income tax rate from 0%–35%, based on the land office’s appraised value, calculated using a somewhat complex formula tied to the property’s profit margin.

3. Stamp Duty or Specific Business Tax/Local Development Tax:

• Stamp Duty: 0.5% of the land office’s appraised value or actual transaction value (whichever is higher); or
• Specific Business Tax/Local Development Tax: 3.3% of the land office’s appraised value or actual transaction value (whichever is higher).

Generally, Stamp Duty applies if the land has not been transferred within the last five years; otherwise, the Specific Business Tax/Local Development Tax applies.

Leases

For registered leases, a registration fee and stamp duty of 1.1% apply to the total rental amount for the term being registered (excluding any renewal terms).

Mortgages

A mortgage over land and/or a structure can be granted to secure the performance of any obligation, including by foreign individuals. The fee and stamp duty for registering a mortgage is 1.05% of the amount declared in the mortgage agreement, subject to a maximum total fee and duty of THB 200,000.

Property Taxation

House and Land Tax is imposed on owners of a house, building, structure, and/or land, except for an owner’s first residential property. The rate is 12.5% of the property’s actual or assessed annual rental value — the amount the property could reasonably earn in rent over one year if offered for lease.

A Local Development Tax is imposed on any person who owns or possesses land. Rates vary according to the property’s appraised value as determined by local authorities, with an allowance granted for land used for personal dwellings that varies by location.

Given how much real estate law Thailand applies across foreign ownership restrictions, title documentation, and transaction taxes, thorough legal due diligence — covering title history, encumbrances, and zoning compliance — remains essential before any purchase, lease, or mortgage is finalized.