U.S. Citizen Buying Property in Thailand
Can Americans buy property in Thailand?
While U.S. citizens are prohibited from buying land in Thailand, they can, however, apply for long term land leases of up to 30 years and build structures upon the land. They can also buy condominiums from property developers. Buying land through a Thai dummy corporation is illegal, although you may hear of other people doing it.
If you are thinking about buying a condominium, or condo, you should be aware of some major differences in the Thai and the U.S. condo market.
- Thai law only allows foreigners to own 49% of a condo development.
The total area of the condo units owned by foreigners cannot exceed 49% of the total area of all saleable condo units. If you are buying secondhand from a Thai citizen, check-in the development’s condo association office to make sure the building has not reached the foreign ownership quota.
- Foreigners must pay for the condo with foreign currency.
The foreign currency must be transferred into Thailand and converted into Baht within Thailand, so foreigners cannot finance their purchase with a mortgage. A Foreign Exchange Transaction Form (FETF) must be filed for large foreign currency transactions.
- The condo’s list price may or may not include applicable taxes, which can be substantial.
The Land Department collects several taxes when the deed is transferred. When you buy secondhand, the buyer usually pays all of the taxes, because it lowers the purchase price and thus the total taxes due. When you buy from the developer, the developer usually pays the Special Business Tax (SBT) and splits the rest of the taxes 50/50.
The Special Business Tax (SBT) is a 3.3% tax on the sales price if the seller has owned the property for less than 5 years. If the seller has owned the property for 5 years or more, a 0.5% Stamp Duty is owned instead of the SBT.
The Transfer Duty is 2% of the value of the property assessed by the Land Department, which is usually lower than the sales price.
The Withholding Tax is a prepayment of the seller’s income taxes. If you buy a condo from a developer or a company, the Withholding Tax will be 1% of the assessed value or sales price, whichever is higher. When an individual sells a condo, the Withholding Tax is usually higher and calculated based on the assessed value and the duration of the seller’s ownership. Although the tax is paid for the seller’s income tax liability, the buyer usually pays.
- Both buying from a developer and buying secondhand have advantages and disadvantages.
The greatest advantage of buying second hand is the fact that you know what you’re getting. But buying a unit secondhand is often more expensive than buying from a developer.
When you buy from a developer, there is no guarantee that your condo will reach the demo unit’s quality standard. But buying from a developer may be your only option if you are looking to buy a condo in a tourist destination such as Pattaya or Phuket, where condo developments rapidly reach their 49% foreign ownership limit.
If you buy from a developer, it is important to make sure that you buy from the right developer. Development companies traded on a stock exchange are a safe bet. Buying form a first-time-developer is riskier. First-time-developers have less experience complying with government regulations and getting the required permits. Banks are reluctant to finance their projects, and construction may stop if the developer can’t pre-sell enough units to pay the bills. If the project fails, you may lose your money.
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Siam Legal is an international law firm with experienced lawyers, attorneys, and solicitors both in Thailand law and international law. This Thailand law firm offers comprehensive legal services in Thailand to both local and foreign clients for Litigation such as civil & criminal cases, labor disputes, commercial cases, divorce, adoption, extradition, fraud, and drug cases. Other legal expertise of the law firm varied in cases involving corporate law such as company registration & Thailand BOI, family law, property law, and private investigation.