Phangan Land Direct

 
 

 

Thai Land Law

Thai law stipulates that a foreigner may not own land in their name – they have the right of ownership of buildings only i.e. the actual house – bricks and contents etc but not the land upon which the house is built. If a foreigner wishes to purchase land to build a property they have two options:

Leasehold Option
The land is purchased on a thirty-year leasehold, with an option to extend the lease for further thirty year periods. Possession of the land is assured by virtue of the fact that the property occupies the land. The leasor cannot seize the property upon expiration of the lease as the property is separate from the land.

Company Formation Option
If a foreigner is going to operate a business in Thailand then they may purchase the freehold of the land through their Limited Company. The land will be owned by the company, not the individual. The structuring of this company with the majority of the voting shares belonging to the foreigner enables controlling interest. This is the most popular form of land ownership for foreigners in Thailand. The company needs to register and pay tax – this can be arranged through a local accountant.


There are two types of rights to private land. The first is the right of possession (possessory right) i.e. people who possess and use the benefit of land will have the right to possess such land under the civil and commercial code. The second is ownership by a person who has a title deed and documents concerning the land. A title deed is vital in purchasing land in Thailand to protect your investment and avoid land disputes.

There are many different types of land titles in Thailand, the majority of which do not allow for the legal right to build on that land. Only three land titles are recommended; Nor Sor 3, Nor Sor 3 Gor, and Chanote.

Nor.Sor.3
Is the lowest land title which allows for legally building a property and an instrument certifying the use of land issued by the government to the proprietor of land not a possessory title, i.e. it is confirmed by law that a person holding Nor. Sor 3 has the legal right to possess the land. This land title can be used as a legal document or to use the benefit of the land as an owner. Nor Sor 3 is a floating map with no parcel points. It is issued for a specific plot of land and is not connected to other land plots. This causes problems in verifying the land area. Any legal acts must be publicized for thirty days.

Nor.Sor.3 Gor
Is a legal land title with the same legal basis as Nor. Sor. 3. The difference being that Nor. Sor. 3 Gor has parcel points on the map, and is set by using an aerial survey to set the points and the land area. It is possible to verify a nearby land area. It always uses the same scale of 1:5000. There is no need to publicize any legal acts, and it is possible to partition (divide) the land into smaller plots.

Chanote
A Chanote is a certificate for ownership of land. A person having their name shown on the deed has the legal right to the land, and can use it as evidence to confirm the right to government authorities. The title deed has been issued by using GPS to set the area and boundaries of the land, which is a very accurate method. Any legal acts may be done immediately, as per the right of ownership. Land partition of more than nine plots must be carried out according to the land allotment law, section 286. This is the most secure type of land title and is highly recommended.

Condominium
Foreigners have the right to ownership of buildings only, where land is not included. Legal acts are unlimited. A suggestion for foreigners is to lease the land for thirty years with an option to an extension of the lease, and then purchase ownership of the house built on the land. Certainty of possession of land and house is assured, by being the owner of the house. The ownership of the land shall be leased out. If arranged as stated above, then the house will be separate from the land, and will not be a component part under the civil law. Ownership of buildings can be confirmed, and the leasor cannot seize the house upon expiration of the lease.

 

The units of land measurement in Thailand are the Wah, Ngan, and Rai. Conversion factors between Thai measurements and metric measurements are:

1 Wah = 2 meters
1 square Wah = 4 square meters
100 square Wah = 400 square meters = 1 Ngan
4 Ngan = 1 Rai = 1,600 square meters
Conversion factors between Thai measurements, meters and acres are:
1 acre = 4840 square yards
1 acre = 4,046.8561 square meters
1 acre = 2.529285 Rai (approximately)
hectare = 10,000 square meters = 2.471 acres = 6.25 Rai (approximately)

 

Tax and Finance

Tax Rates and Double Taxation Agreements (from August 2004)

Corporate Income Tax

A. Tax on net corporate profits Rate

(1) Ordinary Company 30%
(2) Small company (paid up capital <5m baht)

- Net profit not exceeding 1m baht 20%

- Net profit over 1m baht but not >3m baht 25%

- Net profit exceeding 3m baht 30%

(3) Company listed on Stock Exchange of Thailand (SET)

- Net profit for first 300m baht 25%

- Net profit for amount exceeding 3m baht 30%

(4) Company newly listed on SET 25%
(5) Company newly listed on Market for Alternative Investment (MAI) 20%
(6) Bangkok International Banking Facility (BIBF) 10%
(7) Regional Operating Headquarters (ROH) 10%
Note 1: Tax rate for companies in (3) to (5) apply for five consecutive accounting periods
Note 2: Tax rate for companies in (6) to (7) apply for qualifying income.

B. Tax on Gross Receipts
(1) Association and foundation [2% for income under Section 40 (8)] 2% or 10%
(2) Foreign company engaging in international transportation 3%

C. Remittance Tax
Foreign company disposing profits out of Thailand 10%

D. Foreign company not carrying on business in Thailand receiving income from Thailand
(1) Dividend income 10%
(2) Other types of income apart from dividend 15%

Personal Income Tax (Effective Jan. 1, 2002)

Level of taxable income (baht) Marginal Tax Rate
0 - 80,000 exempt
80,001 - 100,000 5%
100,001 - 500,000 10%
500,001 - 1,000,000 20%
1,000,001 - 4,000,000 30%
over 4,000,000 37%
Note: Expatriates working for ROH can elect to be taxed at the rate of 15% for 2 years instead of normal progressive tax rates

Tax on Income from Bank Deposits

A. For individuals 15%
B. For companies 1%
C. For foundations 10%

Value Added Tax
Level of taxable income (baht)
Over 1,200,000 7%

BIBF (Bangkok International Banking Facility)
Corporate Income Tax
Withholding tax on remittance of interest
out-out exempt
out-in* 10-15%
Withholding tax on remittance of profits
out-out exempt
out-in* exempt
Personal Income Tax
Withholding tax on remittance of interest
out-out exempt
out-in* 10-15%
* Rate depends on double Taxation Agreements

Withholding Tax
A foreign company or registered partnership not carrying out business in Thailand receiving the following income from or in Thailand: Rate

A. Remittance of profits 10%
B. Remittance of dividends 10%
C. Remittance of interest 15%
D. Royalties from goodwill, copyright and other rights 15%
E. Rentals from hiring property 15%

Double Taxation Agreements exist with the following:
Armenia, Australia, Austria, Bahrain, Bangladesh, Belgium, Bulgaria, Canada, China, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Korea, Laos, Luxembourg, Malaysia, Mauritius, Nepal, the Netherlands, New Zealand, Norway, Pakistan, the Philippines, Poland, Romania, Singapore, South Africa, Spain, Sri Lanka, Sweden, Switzerland, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States, Uzbekistan and Vietnam.

Business Info Thailand

For up to date information and advice on doing business in Thailand we recommend visiting the Thailand Board of Investment website http://www.boi.go.th/english/ which gives advice on the typical costs of starting and operating a business, labor costs, tax rates and double taxation agreements, visas, transportation costs- including fuel and freight rates, communication costs, utility costs etc.

There is also a PDF file available which charts some of these costs for you and is available from the TBI website or by clicking on the following hyperlink. TBI - Costs PDF file


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