Owning Property On Koh Samui and Thailand

Please note that Zen Properties does not provide legal advice, so while this page is designed to be helpful in raising awareness of the issues that may be important to you, it is by nature not a complete discussion nor a substitute for legal advice. It may not cover important issues that affect you and, depending on your situation, you may wish to consult with a lawyer.

How can a foreigner purchase and own land or a House on Koh Samui and Thailand?

Generally speaking, foreigners may not own property in Thailand. A foreigner can own land through a Registered Lease or by setting up a Thai registered Company, which then purchases the land through the company. Both methods are safe if they are properly set up by legal professionals and this is the most important consideration that's needs emphasizing.
Freehold vs. Leasehold

Since a foreigner cannot own the land outright, registered leaseholds with appropriate extensions are the same equivalent to freehold. Registered Leaseholds are very safe, not complicated and very easy and simple to set up.

Control of Freehold

The land code of Thailand and the Foreign Business Act does not prohibit foreign control of a Thai majority owned company that owns any land in Thailand.

It is very important that there is a proper legal structure taken on-board to retain effective control over a Thai majority company. Seek professional help.

You could set up a Thai company in order to own the freehold land which you as an individual then in turn lease from the company.

You should be fully aware that there are legal responsibilities and tax liabilities when you own and run a Thai company.

Registered Lease:

Thai law allows for leases of up to 30 years according to the "Civil and Commercial Code" and options of up to 90 years. According to the "Act Governing Leasing of Immovable Property for Commercial and Industrial Purposes", leases of up to 50 years and options of up to 100 years are allowed. A lease of property may be transacted with anyone (Thai or foreign) or any corporate entity. The leases may be recorded against the title and thereby create a lien against the property which is a matter of public record. Leasehold is when a foreigner that's not comfortable with registering a Thai company but would like to obtain a piece of land for a certain period of time, can lease land with just his passport under certain terms and conditions, and officially register the lease at the respected Land Office. Leaseholds are safe and quite uncomplicated, this method is preferred by some due to its simplicity and especially as there is no requirement for a company set up.

Thai Registered Company - Free Hold Control:

The most popular form of corporate land ownership is the limited Liability Company (LLC). Thai corporate structures are very similar to western style corporate structures. Thai law allows for (LLC) once formed to be referred to, in Thai legal parlance, as Juristic Persons (legal entities). Juristic Persons which are owned by a Thai majority are considered, in terms of property ownership, to be a Thai person and therefore may own property in Thailand. Note that equitable ownership does not necessarily equate to actual control of the juristic Person.

Control of a Limited Liability company:

Thai law permits the issuing of classified or two-tiered stocks. So an LLC may issue "Ordinary Share," where the holder of one share is entitled to one vote, and Preferred Shares, where a shareholder must have 20 shares in order to obtain one vote. The Thai majority shares may be issued as "Preferred" and the foreign minority shares as "Ordinary". This allows the foreign minority shareholder to control the company.

How useful is a limited liability company for a foreigner who wishes to buy land or purchase property?

This is one of the most popular methods employed by foreign investors who want to buy land or purchase property in Thailand. Although Thai law generally requires Thai nationals to own a majority interest in a company in order to legally purchase land or property, various legal documents and procedures can be used to provide greater protection for foreign minority shareholders.

What are the steps for assembling a limited company?

The basic steps for registering a company are:

1. Register the name of the company with the Ministry of Commerce.

2. File a Memorandum of Association listing shareholders. (A minimum of 7 shareholders is required for a private limited company and 15 for a public limited company.)

3. Hold a statutory meeting.

4. Submit a company registration application with the Ministry of Commerce.

5. Obtain income tax ID card and number from the Revenue Department.

What is the registration application process like?

An application consisting of numerous documents must be submitted to the Commercial Registration Department of the Ministry of Commerce. Preliminary applications can be submitted via email. Once the Registrar agrees the application is complete and accurate the approved application can be printed, signed by partners and directors, and submitted to the Central Business Registration Section of the Commercial Registration Department. (The Thailand Ministry of Commerce requires many documents to be filed when registering a company. It should be noted that the bureaucratic process in Thailand is very thorough and requires a great deal of documentation.

How long does it take for company registration to be processed?

Processing times vary depending upon the type of business and the specific requirements necessary for each. In general, if no documents are returned and no additional documentation is required by the Ministry of Commerce the process can take as little as 17 days. Realistically however, the process involves coordinating the preparation of documents from at least seven shareholders, the company directors, and other individuals involved. Also the documents may not be submitted at one time, but have to be submitted in three stages. As a result, most company registrations take longer than 17 days.

What are the costs for setting up a business in Thailand?

The government fee for company registration is approximately 5,500 baht per one million baht of share capital. Under a new regulation, a foreign business is required to prove they can have a specific minimum amount of capital prior to approval. This can be done in several ways; by submitting a document evidencing a bank account containing the specified amount, or with a declaration from the company director that the capital has been collected from the shareholders, or with a declaration by the company director that the capital has been collected in cash and then providing the location of the capital.

How much start-up capital is required?

Capital required is dependent on the needs of the business. Statutory minimum capital is very little. Statutory minimum capital requirements are five baht per share. In general the lowest capitalization normally generally seen is 100,000 baht. However, a majority foreign owned company (or a company sponsoring a foreigner's work permit) requires a minimum of 2,000,000 baht capital. When determining the practical amount of capital necessary for starting a business all costs need to be considered: leases for office and warehouse space, utility and housing costs, staff salaries, etc.

Does owning a registered business in Thailand as either a shareholder or director entitle a foreigner to stay and work in Thailand?

No. A foreigner who is a shareholder or director of a limited company in Thailand must still apply for a non-immigrant visa and a work permit to be allowed to stay and work in Thailand.

Does owning a registered business in Thailand as either a shareholder or director entitle a foreigner to stay and work in Thailand?

No. A foreigner who is a shareholder or director of a limited company in Thailand must still apply for a non-immigrant visa and a work permit to be allowed to stay and work in Thailand.

Is a Visa as well as a Work Permit necessary?

Yes. All foreign employees are required to have a work permit that specifies the location of their employment and the period of time they are allowed to work. An applicant must have a non-immigrant visa or a residence permit prior to applying for a work permit. A non-immigrant visa can be obtained from a Thai consulate or embassy outside of Thailand by providing the following documents: the new company's registration certificates, the duly certified company stamp, proof of a lease on a business premises, and a letter from the company confirming employment. (From a consulate or embassy in a western country all of this paperwork may not be necessary. However, after the attacks of 9/11 many consulates have begun to more strictly follow official rules. Furthermore, small, start-up companies may be required to provide more documents than larger, well established businesses that may only need to provide a letter of employment.)

How do you get a Work Permit?

After receiving a non-immigrant visa a foreigner can apply for a work visa from a consulate or embassy outside of Thailand or from within Thailand. If applying from outside of Thailand then the application may be submitted from abroad, but the applicant must appear at the Department of Labor to sign the work permit. Within Thailand a foreigner can get an extension of his non-immigrant visa and can apply for a work permit with the Department of Labor after the company is properly registered.

Mortgages:

It is now possible for foreign non-residents to obtain bank finance when purchasing a freehold property in Thailand. We have listed below the terms and conditions for obtaining a mortgage and Zen Properties are happy to assist you through the application process.

• Loan Amount up to 70% of the purchase price

• Maximum loan amount - S$1,000,000 or equivalent amount

• Minimum loan amount - S$100,000 or equivalent amount

Please note: Withdrawal amount shall be the lowest of:

1. amount as per approved limit

2. up to 70% of purchase price of property, when converted at the banks exchange rate prevailing upon withdrawal

3. 70% of the appraised value upon completion by the banks appointed value.

Security:

• Legal mortgage of property to be financed

• Pledge of Borrower's shares (if borrower is a corporation)

• Personal Guarantee

Length of Loan:

• Maximum 10 years

Currency

• The loan shall be denominated in SGD, USD or any other currency acceptable to the bank

Interest Rate (subject to changes at the Bank's discretion) - Loan in SGD - Bangkok Bank's prime lending rate per annum (currently 6%). Loan in USD - US prime + 0.5% per annum (currently 6.75%+0.5 = 7.25%)

Repayment 

• Repayment of principal and interest is by monthly installment and to commence one month from date of disbursement of loan.

Withdrawal

• The loan shall be withdrawn only upon payment by the borrower of the difference between the purchase price and the loan amount, subject to completion of loan documents and fulfillment of the conditions precedent.

Prepayment

• Prepayment of the loan allowed subject to payment of 1.5% flat on the loan amount to be prepaid.

Processing Fee

• Processing fee of S$5,000 or equivalent amount is payable upon acceptance of the banks letter and S$2,000 or equivalent amount shall be refunded upon withdrawal of the loan

Expenses

• All expenses such as legal/mortgage costs, valuation fee and fire insurance premium etc shall be payable by the borrower.

Documents Required

1. Completed Mortgage Loan Application Form

2. Copy of identification card (front & back)/passport

3. Signed copy of Sales & Purchase Agreement

4. Employer’s letter addressed to the Bangkok Bank Public Co Ltd (Singapore) confirming position, years of service and remuneration.

5. Bank's reference letter addressed to the Bangkok Bank Public Co Ltd (Singapore) confirming banking relationship, conduct/type of account and size of loan/deposit with the bank.

6. The last 6 months bank statements

7. The last 2 years Income Tax Return.

8. The last 2 years Balance Sheet & Profit & Loss Statements (for self-employed borrower)

9. Credit Bureau Report from country of residence

10. Others upon request

Please note: Approval of loan subject to evaluation of applicant's financial standing and repayment ability.

Real Estate Koh Samui Thailand