Why Buying a Property in Phuket?
Foreign buyers looking forward to invest in real estate in Thailand tend to consider Phuket as a very attractive province to buy a property, be it in order to relocate or to spend their retirement. Why is Phuket actually the most popular region in Thailand as far as foreign investments are concerned? Here are the main reasons that make Phuket one of the most attractive locations in Thailand to buy a property:
- Phuket is Thailand’s wealthiest province and leader of Thailand’s tourism industry thanks to its unique beauty including prime beaches, superb and warm turquoise waters, first-class hotels & resorts, world-class spas, international golf courses, luxury yacht marinas, gastronomic restaurants in Thai and foreign cuisines, and excellent shopping venues.
- Phuket’s infrastructures are highly developed. With an international airport, international schools, and several international standard hospitals, Phuket enjoys modern and highly developed infrastructures.
- Phuket’s economy is very strong and as such, was one of the only places in Asia not to be affected by the late 1990s’ Asian economic crisis. Phuket is currently witnessing a phenomenal growth as the Government’s programs have favoured residential and commercial expansion.
- Phuket has one of the fastest growing real estate market in the world with a rising number of luxury projects involving internationally-renowned architects and property developers.
- Phuket properties enjoy high rental returns thanks to the continuous growth of the number of holidaymakers visiting the island every year, making Phuket one of the most popular holiday destination in South-East Asia and in the World.
- Phuket is the ideal tropical retreat that combines the low cost of living, the friendliness and hospitality of the Thai people, an extremely refined cuisine, palm fringed white sandy beaches and all-year-round tropical climate. These magical circumstances make Phuket a very popular choice for people looking to holiday, retire, or conduct business.
Mortgages in Thailand for Foreigners
There are 2 banking institutions that provide mortgage bonds to foreigners, provided in either Japanese Yen, Euro or US Dollar, and concluded in their Singapore branch. They are Bangkok Bank and United Overseas Bank (UOB).
Property Ownership Rights & Land Titles
Foreign investors interested in buying a property in Phuket must be aware that Thai national laws forbid foreigners to own land. Therefore, our company provides with professional legal advices so that our buyers are perfectly aware of the legal aspects of a real estate transaction in Phuket. We have developed a reputation for honesty and integrity when it comes to legal advices and work together with the most reputable lawyers in Phuket. In order to help you become familiar with Thai estate law, we invite you to continue reading.
Property Freehold Ownership
Foreigners can own in their name a few types of properties in Thailand, such as a unit in a condominium or a building distinct from the land on which it is built. In the case of a condominium, foreigners can own a maximum of 49% of the total unit space. The buyer must ask a letter of guarantee signed by the condominium juristic person which must be submitted to the Land Department upon transfer of ownership.
There are several land titles in Thailand, but foreigners should be aware that when buying a land in Phuket, they should only consider lands that come with Chanote, Nor Sor 3 or Nor Sor 3 Gor titles, for other titles might not give the right to build on the land. These titles can be sold or leased. The best and recommended way to buy land in Thailand is using the first option stated here, Chanote title.
- Chanote or Nor Sor 4: this type of title grants the holder of this title the full rights over the land. This freehold title deed is issued by the Phuket Provincial Land Office using GPS to plot and survey the boundaries of the land.
- Nor Sor 3 Gor: a land “awaiting” a full title deed (Chanote) is granted the Nor Sor 3 Gor document. The land is measured and so it has boundaries, yet, it is less accurately surveyed compared to a Chanote title. The lands covered by a Nor Sor 3 Gor title may be sold, transferred, or mortgaged in the same manned than a land with a Chanote title. Holders of a Nor Sor 3 Gor title may file a petition to the Land Department in Phuket to request a change to a Chanote title.
- Nor Sor 3: the only different between this land title and the Nor Sor 3 Gor is that the land with a Nor Sor 3 title has yet to be measured by the Land Department. The holder of this title may request the verification of the land’s boundaries to switch to a Nor Sor 3 Gor title, then subsequently apply for a freehold title deed (Chanote).
The last title, Sor Gor 1 (or Possessory Right), is least recommended as the land has never been substantiated by the Land Department.
Although Thai law specifies that foreigners cannot own land in Thailand, there are alternative possibilities to buying a land in Thailand.
There are three ways for a foreigner to buy a land in Thailand:
- Thai Limited Companies: the most secure way for a foreigner to own a land in Thailand is to set up a Thai company, hence controlled by the foreign buyer. This company can legally own the land. This solution also makes it easier to sell the land for the seller would then transfer the company ownership to the buyer. Note that the Foreign Business Act prohibits the use of nominee Thai shareholders (who own no less than 51% of the shares in the company), and that the Thai government may investigate the origin of the funds used by the Thai shareholders.
- Long-term leaseholds: registered leaseholds are quite secure as the land is leased for a period of 30 years, renewable 2 times, making the lease valid during a total period of 90 years. As the foreigner becomes the legal owner of the buildings that occupy the land, the lessor cannot take control of the property before the expiration of the lease. Note that foreigners interested in leaseholds should request the services of a good lawyer who will look over the paperwork.
- Matrimonial property: a foreigner married to a Thai citizen can buy land in Thailand, however there are important limitations as the land will be in the Thai spouse’s name.
Phuket Property Taxes & Fees
It is important for buyers to know exactly what will be the payable taxes & fees upon transfer of property. In Thailand, there are 4 potential taxes & fees to be paid depending on the details on the transaction. These costs are calculated relative to the government’s “Tax Assessment Value” of the property, which is usually well below the market value.
- Government Fee for Transfer: the transfer fee is based on the value of the property and is shared equally between the buyer and the seller (note that this needs to be agreed by both parties). It equals 2% of the building or land selling price.
- Specific Business Tax (SBT): the SBT represents 3.3% of the appraised value / contracted price (whichever is highest) and is due by sellers who have owned the property for less than 5 years. The SBT applies to both individuals and companies.
- Stamp Duty: stamp duty is due only in the case where SBT is not applicable. It represents 0.5% of the appraised value / contracted price (whichever is highest), or 0.1% in the case of a leasehold transfer. This tax is due by the seller.
- Lease Registration Fee: this fee is calculated from the total rent applicable over the lease term (0.1%) and is usually shared between the lessor and lessee (note that this needs to be agreed by both parties).
- Withholding tax (WHT): the WHT is due by the seller. If the seller is a registered Thai company, the WHT represents 1% of the appraised value / contracted price (whichever is highest). If the seller is an individual, the tax rate vary from 5% to 37% of the appraised value / contracted price (whichever is highest) and is calculated in accordance with 3 different methods depending on the location of the property and the mode of acquisition of the property. Two methods are for inherited properties and properties acquired by gifts. The 3rd method is for purchased properties (including properties purchased by a foreigner) and the WHT can be calculated by stages as follows:First, minus the appraised value or contracted price of the property, whichever is highest, with the deduction in accordance with the following sliding scale:
Property Ownership Duration Deduction 1 year 92% of the appraised value/contracted price 2 years 84% of the appraised value/contracted price 3 years 77% of the appraised value/contracted price 4 years 71% of the appraised value/contracted price 5 years 65% of the appraised value/contracted price 6 years 60% of the appraised value/contracted price 7 years 55% of the appraised value/contracted price 8 years or more 50% of the appraised value/contracted price
After minus the relevant deduction, divide the result by the number of holding years to obtain the “Yearly Income”. Then calculate the “Yearly Income Tax” in accordance with the following table:
Yearly Income Yearly Income Tax Rate No more than 100,000 Thai Bahts 5% Between 100,001 – 500,000 Thai Bahts 10% Between 500,001 – 1,000,000 Thai Bahts 20% Between 1,000,001 – 4,000,000 Thai Bahts 30% More than 4,000,000 Thai Bahts 37%
The amount of the Withholding Tax (WHT) should be the amount of the “Yearly Income Tax” multiplied by the years during which the seller owned the property (note: 4 years and 1 day of ownership will be counted as 5 years).