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Download Condominium Act of Thailand
Legal Services, Visa, Accounting
ALL THE THINGS A FOREIGN BUYER NEEDS TO KNOW PRIOR TO PURCHASE A CONDOMINIUM IN THAILAND IN QUESTIONS AND ANSWERS
1. What is a Condominium?
A condominium building is defined by the Condominium Act 1979 as “A building that can have its separate portions sold to individuals or groups for personal property ownership”. The area of a condominium building is divided in two distinct areas:
1.1 The Private Area which may include the Residential Area and the Commercial Area
(if any). The Private Residential Area consists of flat units that are represented by
condominium units’ title deeds which can be privately owned.
1.2 The Common Area is composed of the facilities, parking’s, utilities, and the land on which the condominium is built. The Common Area shall upon completion of the condominium project become the property of the Juristic Condominium Person.
1.3 Each unit of a condominium Private Area (residential or commercial) is represented by a condominium title deed and can be privately owned in freehold.
1.4 The owners of the Private Area Units shall in addition own a fractional percentage of the Juristic Person that owns the Common Area. The percentage of each owner shall be calculated according to the size of the unit owned Each owner of a condominium unit shall receive a percentage of ownership in the juristic person according to the size of his/her condominium unit.
2. Can a foreign buyer own a condominium freehold?
Yes, Thai laws do allow foreign buyers to own condominiums freehold.
3. Are they any limitations to foreign condominium ownership?
Yes there is one limitation. Because the Juristic Person of a condominium building also owns the land on which the condominium building is erected the ratio of foreign ownership into a condominium is limited to 49% of the total private area of any condominium building at any one time because foreigners cannot own land for residential use freehold in Thailand.
4. Should foreign buyers buy off plan?
Absolutely, especially if you want to purchase a unit in the 49% foreign quota of freehold therefore, prior to selecting a condominium, a foreign buyer shall first check with the Juristic Person what the current foreign ownership ratio is in said condominium. Generally pose fewer problems in Bangkok that in beach resorts where there are often more foreign buyers than there are units available for foreign buyers.
5. What conditions does a foreign buyer need to fulfill to be eligible to purchase a condominium?
To be eligible to purchase a condominium the only legal requirement are that you must be able:
5.1 To enter Thailand legally and
5.2 To prove that the funds used to purchase the condominium were remitted from overseas in foreign currency. Without such proof, the Land Department will not permit the transfer of ownership of a condominium to a foreign buyer.
Foreigners who have resident permits (Blue Resident Book) are exempted from the obligation to remit foreign currency from overseas and are allowed to purchase in THB
6. What rules should you follow when transferring foreign currency from overseas?
The foreign currency must be:
6.1 Of an amount at least equivalent to the purchasing price of the condominium and
6.2 Remitted from overseas and
6.3 Brought into Thailand and
6.4 Exchanged in Thailand and must either
(i) Come from a bank account in the name of the foreign buyer; or
(ii) Be transferred to a bank account in Thailand in the name of the foreign buyer.
7. What mentions must figure on the wire transfer form?
Please request your bank to add on the wire transfer form reserved for mentions the following details:
7.1 The mention that the transfer is done “as payment due on the purchase price of condominium Unit No  in the  condominium”. The number of the unit and the name of the condominium are not mandatory but recommended and
7.2 If you purchase in co-ownership with a foreign spouse and that the money is not sent from a joint account in both spouses name the mention that the transfer is also made on “behalf of name and first name of the spouse”. Here again this mention is not mandatory but recommended.
8. Do you have to transfer the full purchase price of your condominium in foreign currency in the event you purchase it in
co-ownership with a Thai person?
8.1. No, if you purchase in co-ownership with a Thai person (for example a Thai spouse) and if the condominium unit title deed is to be transferred and registered to both co- owners (i.e. the name of the foreign and Thai co-owners are both registered on the condominium title back as co-owner) then you only need only to remit half of the purchase price of the condominium in foreign currency.
8.2 The other half of the condominium price can be paid in Thai Baht because it is the consideration of the Thai buyer for the purchase of the Thai share of co-ownership. Note that the Thai co-owner could apply for a loan with a Thai Bank to finance the payment of his share of the condominium unit purchase price but in this case the bank will want in this case that the mortgage apply on the whole condominium.
9. How do you prove that you have transferred and remitted foreign currency from overseas?
9.1 If you transfer the foreign currency directly on the bank account of the developer the developer will request its bank to issue a Foreign Currency Exchange Certificate for each transfer you have done to the developer.
9.2 If you transfer the foreign currency on your personal account in Thailand or on the account of your lawyer you or your lawyer will have to apply for the Foreign
Currency Exchange Certificate on your behalf. It is careful to do it upon each transfer than wait to do it at the last minute.
9.3 Nowadays there is no minimum amount applicable anymore. Most Thai banks will issue the Foreign Exchange Certificate for any amount (including small monthly installments of 500 or 1000 Euro).
9.4 The banks will need in general two days to issue the Foreign Currency Exchange Certificate. Banks may charge a fee for this service. Around 200 THB. If you have send the money directly to the developer or through a lawyer, the developer or the lawyer will take care of the formalities for you. If you have sent the money first on your bank account then you will have to handle this formality yourself.
9.5 Do not worry if you lose a certificate you can always ask the bank to re-issue a duplicate providing that you still have the reference of the transaction. If the transfer was done more than two years ago some banks will not issue the certificate anymore others will. It will take around 10 days and the bank might ask you a surcharge for the service.
10. What you should absolutely not do when transferring foreign currency?
The things you must absolutely not do when transferring your money are as follows:
10.1 Do not exchange your foreign currency against Thai Baht on the International market because you would not qualify to purchase a condominium freehold.
10.2 If you transfer directly to the account of the developer in Thailand or through the account of a lawyer do not send the money from an account which is not under your name (company account, pension fund, and trust fund and so on…). Your name must absolutely appear at one end of the transaction or the other.
11. How do your purchase your condominium if you are married?
If you are married you have two options when purchasing the condominium.
11.1 Firstly you may whishes to purchase the condominium in co-ownership with your wife. You can do it even if the name of your wife was not originally in the sale purchase agreement executed with the developer as long as you decide upon this matter before the registration of the transfer at the Land Department.
11.2 In the case when both spouses are foreigner the foreign currency for the purchase of the condominium does not necessarily need to be transferred from a joint account under both spouse names. But if you transfer from your own personal account please request your bank to add in the mention that the transfer is made on behalf of yourself and your spouse (it is not mandatory but it is recommended).
11.3 In order to register the condominium under both names please produces a certified copy of your married certificate and a certified translation of this certificate if in another language than English (please see below the list of documents needed to register a condominium transaction)
Note that you are married you need to declare your status to the developer or your lawyer or the government official at the time of the purchase. To forget to give this information prior to the registration of the transaction at the land department in order to avoid the formalities mentioned under 11.1 or 11.2 above is not a good idea because failure to disclose information is deemed a lie to a government official which is a criminal offence.
12. May you purchase a condominium through an offshore company?
Yes absolutely in addition they are benefits to such mode of purchase.
12.1 The first advantage of purchasing your condominium freehold through an offshore company is in case of resale to another foreign buyer who is not a tax resident in Thailand. In this case you might chose either to sale the condominium unit or instead to transfer your company to your buyer. In this last case the transaction shall consist of the sale of the shares of a foreign company to a foreign buyer. If both the Seller and the Buyer are not tax residents of Thailand there the transaction shall happen offshore and the resulting profits shall not be taxable in Thailand and if you chose your offshore jurisdiction carefully shall not be taxable overseas as well.
12.2 The second advantage is that it makes your succession easier to manage (please see below).
12.3 The third advantage is if you whishes to purchase several condominium units and rent them out (please see below No 14)
13. May your purchase a condominium through a Thai company?
You could but you must be made aware that since the enforcement of the Amended Condominium Act a person who owns a condominium unit in place of a foreigner, regardless of whether the foreigner is entitled to own a condominium unit or not, faces imprisonment of not more than 2 years, or a maximum fine of not more than 20,000 Baht, or both imprisonment and fine.
14. Are they drawbacks if I purchase my condominium unit through a company?
A foreign investor purchasing a condominium through the use of a company (whether a foreign company or a Thai company) should be aware of the following drawback.
14.1 The company will have to pay every year the House & Land tax (12.5% based either on the condominium unit yearly assessed leased value or the actual yearly leased value if your rent it out) even if you do not rent out your condominium unit out or even if the director or shareholder of the company live in the unit rent free because a company does not “live” in the condominium. The only Hand & House tax exemption applies to the individual owner who uses the condominium as principal residence. (Please See more on this subject in part III)
15. May a foreigner purchase several condominiums units?
Yes a foreign citizen can legally purchase as many condominium units as he whishes or can afford to purchase. But the problem will be to rent out the units out:
15.1 Under the Foreign Business Act renting multiple condominium units is considered a service business (landlord services) controlled under FBA list 3. In other words it is a service business that cannot be exercised by a foreigner without first applying for a Foreign Business License to provide landlord services. Now, the catch is that the Business Department does not for the time being grant to foreign investors a business licenses for landlord services because this activity does not bring any technological transfer.
15.2 This restriction does not apply if you only own one condominium unit. You may rent it out when it is vacant because renting out one condominium unit is not a business.
15.3 If you contemplate to purchase several units to rent them out you might consider purchasing each unit through a different offshore company. You will save taxes when reselling your units if you resale them to foreign non-tax residents (please see 12.1 above) and you avoid the problem mentioned above under 14.1.
16. Can I resale my condominium unit before to transfer?
Yes you can but you must be aware of two pitfalls:
16.1 All developers charge administrative fees in case a buyer whishes to assign the condominium sale and purchase agreement to a third party prior to registration of the transfer of the condominium. In general the fees charged by developers are between 100,000 THB to 200,000 THB.
16.2 If you purchase with the intent to resale before transfer be careful, because if you are not able to transfer to any third party before completion of the condominium then the developer will summon you to transfer the property. If you fail to present yourself and to transfer the unit the developer might be entitled to keep any amount of money you have already paid.
17. What is a sinking fund and what are the management fees?
17.1 The sinking fund is a reserve fund that shall be maintained by the Juristic Person for use only for special maintenance and/or replacement of the common area.
17.2 The maintenance fees are the monthly fees that each owner of a private unit shall pay to the juristic person in order to assure the day to day operation of common area.
17.3 The developer will remit the payment you make upon transfer of your unit for the sinking fund the first year maintenance fees to the Juristic Person on your behalf.
18. May a developer terminate the agreement of a buyer which is late with his payment?
18.1 Yes the developer may terminate your agreement if you are late with the payment of at least 3 monthly installments or if you fail to answer the developer summon to appear at the land department to transfer your condominium unit. Of course termination is subjected to proper notice.
18.2 Generally in case of termination for default of payment the contract might allow the developer to keep the money paid by the buyer until the termination of the agreement. Further damages might be applicable
19. May the buyer terminate the agreement if the developer is late with the construction of the condominium?
19.1 Yes but you must be aware that most developer agreement provide for the possibility of an extension period which duration may be between 6 month to 1 year depending of the size of the project.
19.2 This extension period is not a breach of contract and does not allow the buyer to claim damages or terminate the agreement. Some developers’ agreements provide that the developer must notify the buyer to claim the extension period but other contract do not.
19.3 If the developer delay beyond the extension period then the buyer is entitled to chose either:
(i) To receive a damage penalty. Generally at 1.25% of the purchase price per month with a maximum that is generally of 10% of the unit purchase price. Conditions might be different depending of the developer.
(ii) To terminate the agreement upon sending a notice letter and offering the developer an option to cure the breach (generally 60 days). In this case the developer shall refund all payments made by the developer plus interest. Interest rates may vary depending of the developer. Date when the interests start to run may vary from one developer to the other.
20. What are the government fees or taxes applicable upon the transfer of a condominium?
The taxes below are the taxes that are payable at the land department upon transfer of a condominium.
20.1 Specific Business Tax (“SBT”) (Calculated on the base of the actual Sale Price) It is a tax that is collected from income generated by specific businesses as specified in the Revenue Code. This includes the sale of immovable property (land, condominium, or houses). The SBT only apply to the transfer of immovable properties that are done within the first 5 years of ownership. Beyond 5 years it does not apply. Normal SBT rate is 3% or 3.3% if local taxes are included.
20.2 Withholding Tax: (Calculated on the base of the actual Sale Price). It represent a prepayment of the income tax of the developer or of the seller (in case of resale)to be paid at the time of the transfer
20.3 Government fees: (Calculated on the base of the government assessed price) It is the tax due upon transfer of immovable properties. Government fees are normally 2% of the government appraisal price.
20.4 When you purchase from a developer the developer will generally absorb the cost of the Special Business Tax and of the Withholding Tax. The Government fees will be normally shared 50%/50%. When you purchase from an individual the seller will want the buyer to absorb the cost of all taxes
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|24 January 2017 - 07:59 www.kasikornbank.com|