PPA buyers guide
PHUKET PROPERTY ADVISORS BUYERS GUIDE
Please read the PPA Buyers Guide for When considering buying real estate in Phuket, it is important that you are aware of Thailand's laws on property ownership. Buying a property in Thailand can appear complicated but by taking the right advice and guidance it is quite straight forward in reality.more detailed information.
Usually people looking to buy property in Phuket fall into 3 categories:
Firstly there is the Lifestyle Owner. Phuket is probably Asia's premier resort island with amazing natural beauty, idyllic beaches, superb diving, first-class hotels, spas, magnificent golf courses, yacht marinas, a plethora of fine restaurants, vibrant nightlife, good affordable healthcare, communications and ever improving retail choices. Phuket International Airport is a convenient transport hub with easy access to the rest of the world. Lifestyle Owners wish to settle down and live here all year around. Your priorities will be comfort, value, local amenities and transport to suit your lifestyle choices.
Secondly is the Property Investor. Phuket has one of the fastest growing real estate markets with an increasing number of high quality and luxury projects by international and local real estate developers. Environmentally friendly planning laws and height restrictions ensure that developments do not negatively impact the environment and remain low in density. Phuket is Thailand's wealthiest province and also the jewel in the crown of Thailand's tourism industry. Property Investors will look at ROI, location, rental returns, occupancy levels, project facilities and management. Having confidence in the project to deliver sound Investment over time is paramount.
Thirdly is the most common. A Combination of Lifestyle Owner and Property Investor, looking to have a holiday home in Phuket to enjoy while taking advantage of the terrific Investment opportunities that Phuket offers. Rather than have money sitting in a bank earning low returns they recognize the good sense of combining Investment and being able to enjoy owning property in a desirable location to visit at their leisure. Good facilities, brand name management, excellent rental program, prime location, owner benefits and no hassle are their priorities.
The cost of living in Phuket is very low when compared to Europe and other key Asian cities. International and regional travel is made easy via excellent flight connections at Phuket International Airport.
Rental returns on apartments and villas continue to remain high as more and more holidaymakers are opting for the privacy of a rental property over a hotel room. With visitor arrivals continuing to rise annually, the demand for holiday rentals will continue to grow. Future growth will be driven by the increase in domestic ASEAN Independent travelers looking to escape the package tours. While the traditional European markets continue to come, the demographic has been growing towards the Chinese, Malay, Singaporean and affluent Asian countries. With more direct flights coming from China, Korea and Japan this will continue. Occupancy levels are high all year around and room rates are affected accordingly. The traditional seasons are merging into a consistent business opportunity.
Infrastructure and services continue to improve at a fast pace. With several international standard hospitals on the island, quality healthcare is available at a fraction of the cost in the West. English language primary and secondary education is available on the island with international schools that follow the British or American curriculum.
Now the boring but necessary information!
It is important to get good advice. We can help to explain how these legal regulations affect your choices and walk you through the process.
If you are considering buying property in Phuket, the first thing you should know is that under Thai law, foreigners are not allowed to own land. However, foreign nationals do have the right to the ownership of buildings distinct from the land such as condominiums.
Foreign nationals may own:
· A unit in a registered Condominium.
· A building distinct from its land.
· A registered leasehold of up to 30 years for all types of titled land or buildings.
Foreign nationals may not own:
· Freehold land.
· More than 49% of the shares in a Thai company that owns freehold land.
Note: Before purchasing property in Thailand make sure you have a good lawyer. Contact us for a recommendation
Under the Condominium Act (1979) foreigners can own the freehold of 49% of the total unit space in any legally registered condominium building. The purchaser must request a letter of guarantee from the condominium juristic person setting out the proportion of foreign ownership which must be submitted to the Land Department upon transfer of ownership.
A foreign purchaser must bring in 100% of the funds from overseas in foreign currency and will need a Foreign Exchange Transaction Form (FETF) from the Thai bank in order to provide evidence of this to the Land Department. Due to strict money laundering regulations, a FETF is also necessary to avoid complications and remittance tax when repatriating funds should the foreigner sell the condominium at a later date.
Note: You can only obtain a FETF for any inward remittance for amounts not less than the equivalent of USD 20,000. You should clearly indicate the payment purpose on the payment order form in the field for a message for the beneficiary, including the name of the condominium and the unit number.
The two most popular ways for foreigners to purchase land are:
Long-Term Leaseholds
Registered leaseholds are secure and relatively straightforward. Long term leasehold can be structured to be tantamount to freehold ownership. Typically, the land is leased for a period of 30 years, renewable a further two times giving a total of 90 years. Security of the possession of land is assured by the fact that you are the legal owner of the buildings which occupy the land. Therefore, the lessor cannot take possession of the property upon expiration of the lease as the property is separated from the land and will not be a component part under the Civil Law.
Limited Liability Company
If you are not comfortable with the leasehold method, the alternative is to set up a Thai company that you control, and which can legally purchase land. Put simply, as a foreigner you are allowed to own 49% of the shares in a Thai company. The rest of the shares must be held by Thai juristic persons (which your lawyer can arrange), who will sign over control of their shares to you. The land will be owned by the company. However, as managing director of the company, you control the voting of the other shares, and therefore you have control over the ownership of the land.
Note: Recently the Thai government announced that it will begin investigating the source of the money used by the Thai shareholders who own 51% of the shares in the company to determine if they are nominees. The use of nominee Thai shareholders is prohibited under the Foreign Business Act (1999).
Prior to 1998, any Thai woman who married a foreigner would lose her right to purchase land in Thailand. She could, however, still retain land that she owned prior to marrying the foreigner. However, the recent (1999) Ministerial regulation now allows Thai women married to foreigners the right to purchase land, but the Thai spouse must prove that the money used in the purchase of freehold land is legally solely theirs with no foreign claim to it. This is usually achieved by the foreign spouse signing a declaration stating that the funds used for the purchase of property belonged to the Thai spouse prior to the marriage and are beyond his claim.
Having a good lawyer can make all the difference. We can recommend local law firms to assist you in due diligence and contractual details.
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Thailand has its very own units of measurements when dealing with land, which can be a little confusing at first.
The units you will come across most often are talang wah and rai.
Talang means squared, so 1 talang is 1 sqm. Metric units are used when dealing with buildings.
Thai to Metric
1 Wah = 2 m
1 Talang Wah = 4 sqm
1 Rai = 1600 sqm
1 Rai = 400 Talang Wah
1 Rai = 0.40 Acre (approx.)
1 Rai = 0.16 Hectare
1 Ngan = 100 Talang Wah
Metric to Thai
1 m = 0.5 Wah
1 sqm = 0.25 Talang Wah
1 Acre = 2.53 Rai
1 Hectare = 6.25 Rai
As a buyer you need to be informed of the various land title deeds which exist so you may understand what you are being offered. A large percentage of the land in Phuket is not titled or even accurately surveyed. Actually, it is because there is a lack of complete surveys that comprehensive titling does not exist.
As a foreigner investing in land in Thailand, you should only consider land that comes with a Chanote, Nor Sor 3 or Nor Sor 3 Gor. These can be sold, leased and used as mortgage collateral and are the only titles over which a registerable right of ownership or lease can exist.
More importantly, you cannot apply for or obtain approval to build on such land without one of the aforementioned titles. In any event, make sure you have a good lawyer look over the paperwork and perform due diligence.
Chanote
True land title deeds are officially called Nor Sor 4 Jor or more commonly Chanote. This is a certificate for the ownership of land and can be used as evidence confirming the right to government authorities. It is issued by the Phuket Provincial Land Office using GPS to accurately plot and survey the boundaries of the land. This is the most secure type of land title.
Nor Sor 3
The Nor Sor 3 is a document certifying the use of land issued and maintained by the District Land Office to the proprietor of the land but is not a possessory title. That is to say the person holding the Nor Sor 3 has the legal right to possess the land in question and can use it as a legal document.
Nor Sor
3 is a floating map with no parcel points issued for a specific plot of land and not connected to other land plots, but its boundaries are recorded according to its neighbouring plots. Therefore, it may cause some problems in verifying boundaries due to lack of accurate surveys. Any change in ownership of the land must be publicised for 30 days before it can be registered.
Nor Sor 3 Gor
The Nor Sor 3 Gor has the same legal basis as the Nor Sor 3, with the difference being that in general Nor Sor 3 Gor has parcel points on the map of the land area set by using an aerial survey with a scale of 1:5000. It is a more accurately surveyed title as each plot is crossed referenced to a master survey of the land area and a corresponding aerial photograph. Therefore, it is possible to verify the boundaries of the land. However, it is still less accurately surveyed compared to a Chanote.
Sor Kor 1
Sor Kor 1 is a notification form of possessed land, which shows and maintains the existing rights to the particular land. On December 1st 1954, the government advised all land proprietors to notify their possession of land to the government using a 'Sor Kor 1' form.
After it was proven that such a proprietor had possessed and used the benefit of the land legally, the government would then issue 'Nor Sor 3' or 'Nor Sor 3 Gor' as an evidence, which are legal certificates stating the owner's name that they have the right to such land according to the principle land administration law. This right will be protected by the law and can be used as evidence in any dispute with a private individual or the government.
Condominium Title
A condominium title is a title to a part of a building or buildings with multiple owners, a fractional interest in the land, other common assets (such as a swimming pool) and common parts of the building (such as the stairwell or lobby). The title will state the floor area of the private apartment, the ground area of the common land and the percentage interest, in which that apartment has in the common property. This percentage also represents the voting interest in the condominium company or owners association.
Building Transfers
Buildings other than condominiums do not have any form of title document, but their sale or long lease can be registered at the District Land Office. Proof of ownership must be established either from proof of construction or a document showing sale and purchase. Do not confuse this with the House License document, which is only a registration of the house occupants. Transfer of a building, as distinct from its land, requires the posting of 30 days public notice, to see if anyone wishes to contest the ownership. Foreigners may own a building distinct from its land and register such transfer of ownership into their names at the Local District Office or Amphoe.
Taxes and fees is something that is not always mentioned when buying a property and you could get a surprise a couple of months after making your purchase in the form of a hefty tax bill.
Whenever a property in Thailand is purchased or sold there are four potential taxes/fees to be paid. Which of these taxes/fees will be applicable depends on the details of the transaction, the seller and the duration of the seller's ownership. It is also significant to note that most of the fees are calculated relative to the government's "tax assessment value" of the property and this value is usually well below the market value.
Transfer Fee (2%)
This is based on the appraised value of the property and is normally shared equally between both buyer and seller, although this needs to be agreed by both parties.
Lease Registration Fee
This is based on the total rent payable over the lease term, and is normally shared equally between the lessor and lessee, although this must be agreed by both parties.
Specific Business Tax (3.3%)
Specific Business Tax (SBT) is payable by companies and individuals who have owned the property for less than five years. It is based on the official appraised value or the contracted price, whichever is highest.
An individual may be exempt from SBT if they have used the property as their principal residence and have had their name in the household registration certificate for at least one year.
Stamp Duty (0.5%)
Stamp Duty is only paid when SBT is not applicable and is based on the official appraised value or the contracted price, whichever is the highest.
Withholding Tax (WHT) (1.1%)
If the seller is a company, the WHT on the sale of the property is calculated at 1% of the official appraised value or the contracted price, whichever is higher. If the seller is an individual, the WHT is based on the individual's marginal tax rate (except that the first 100,000 baht is taxed at 5% rather than falling under the tax- free threshold) after deducting from the official appraisal price a standard deduction based on the number of years of ownership.
Property Taxes
Once you have acquired the property, there are 2 different types of tax levied on property in Thailand that you need to be aware of:
Land Tax
This is an annual tax levied on land ownership equivalent to just a few Baht per rai. The amount is often so miniscule that in practice the body charged to collect it, rarely bothers to do so. When they do collect it, it's usually after several years when the amount has accumulated.
Structures Usage Tax
This only applies to properties used for commercial purposes. This is applicable at the rate of 12.5% on the actual or assessed gross rental value of the property. However, this notional value is well below the commercial market rental value.
Notes:
If the house is purchased through a company, you need to consider that corporate tax is higher than personal tax, and the cost of setting up the company has to be considered as part of the initial investment, even if this is relatively modest. If you wish to purchase property in Thailand using Thai Baht, ensure that your funds are transferred to Thailand in foreign currency and converted to Thai Baht here. The receiving bank will issue a Foreign Exchange Transaction Form confirming the transaction for individual inward transfers exceeding 20,000 US$, which is one of the documents you may need in the future if you wish to repatriate funds without incurring tax penalties.
Repatriation of investment funds and repayment of overseas borrowing in foreign currency can be remitted freely upon submission of supporting evidence. One of these documents would be the Foreign Exchange Transaction Form mentioned above, or in respect of a foreign currency loan and the loan contract. Remittance of funds without proper documentation could be regarded as income and become liable for tax.
10 REASONS TO BUY IN PHUKET
Compared to similar properties in other countries, Phuket prices are a bargain. Property prices in London, Sydney, Hong Kong, Singapore and China are far more expensive. Investing in Phuket gives you better value, a lower entry point and the opportunity to spread your property portfolio over a wider range easily.
All the major SE Asian business centres are easily accessible through Phuket International Airport. It’s easy to fly in for a short break or extended holiday. This means Phuket is an open market to visitors to enjoy, boosting tourist numbers, demand and occupancy.
While some of the tourist areas like Bangla Road can be pricey most of Phuket is still very cheap. The cost and quality of food is excellent, labour costs are low and compared to other places living here is very affordable.
Investment in new Hotels, Restaurants and Attractions to cater for the booming tourist trade is obvious. International Companies and Brands are queuing up to come to Phuket. New Shopping Malls, Water parks and Corporate facilities are under construction or planned. Their confidence attracts further investment.
Getting a decent return on your money in Europe from property or Banks is disappointing. The same applies to many Asian countries, the best you can expect is around 2-6%. Here in Phuket rental returns start at 6% and if you pick the right investment can be as high as 15%. Getting good, reliable advice is essential to guide you to the right investment.
There are minimal or NO taxes on property ownership in Thailand. Maintenance fees are low. Compared to the property taxes and Body Corporate charges in Europe, Australia and Asia ownership costs in Phuket are negligible.
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Low crime, being able to safely walk the streets without fear. Being able to relax and enjoy your time in Phuket is one of its biggest attractions.
The joy of the Thai people and their culture makes it one of the world’s happiest places to be. The land of smiles, everywhere you go you can feel the warmth. Thai culture with her incredible Temples, natural beauty, fun loving character and peaceful demeanour brings us back time and again.
New infrastructure projects are planned which will have a huge impact on Phuket's future growth. Approval for another International Airport has already been given, Chinese plans for a fast train connection to Bangkok are well advanced, building a shipping canal across the country from the Gulf of Siam to Phang Nga bay are under discussion. Phuket’s future is extremely positive.
FOREIGN INVESTORS from all over the world are flocking to Phuket to take advantage of the opportunities. Chinese investors are snapping up the bargains and fuelling the massive growth in investment. In 10 years time those smart investors that have placed their money wisely will be enjoying the fruits of their decision.