Questions and Answers. First Choice Properties - Your best choice in global property listings.

	BUYING / SELLING COSTS

Price	Prices are quoted in Thai Baht on a square meter basis. At present a 20-30% deposit is negotiable and the remaining 80-70% is financed over a 12-24 month schedule. At present, there is no standard practice for amount of deposit or schedule of payments.

Solicitor’s Fees	Generally this is not a practiced service in Thailand. Negotiable: depending on the size and complexity of the transaction. Normally both the purchaser and the vendor pay their own solicitor’s fees with regard to a property sale when applicable.

Valuation Fees	For property transactions where financing is required, banks or mortgage lenders traditionally performed valuation reports based on their own criteria. A new regulation from the Bank of Thailand now requires a qualified surveyor to perform the valuation for financing equal or above 50 million. The purchaser normally bears the cost in relation to the preparation of a valuation report.

Agency/Brokerage Fees	There is not a standard fixed fee in Thailand. Valuation fee’s are normally charged based on the complexity and scope of services rendered. Fees and commissions are negotiable.

Land Search Fees	Typically this service does not exist. If however, a profitable introduction between a buyer and seller occurs, the introductory may obtain a commission of between 2-5%.

Land Registration Fees (Transfer Title Deed Fee)	All sale transactions are currently subject to a land registration fee (transfer fee) of 0.01% until the end of 2003.

Property Tax	Property tax is charged to the owner during the period of ownership. The rate is fixed at 12.5% of the annual rental revenue of the property. If a registered company holds property, it is liable to Corporation Tax

Stamp Duty	Stamp duty is 0.5% of assessed value until the end of 2002. This rate and the Transfer Fee rate are temporary measures to stimulate the property market. A Municipal Tax & Specific Business Tax have been reduced to 0.11% until the end of 2002.

Capital Gains Tax	This tax is treated as corporate tax and charged at 30%.

INVESTMENT ENVIRONMENT

A. Property Ownership

Tenure

Freehold and Leasehold are available. Freehold is allowed for Thai citizens with no restrictions, but is available for foreigners with limitations or requirements. Leasehold is available for Thai citizens and for foreigners with the same limitations for both.

Strata-title interest is not commonly practiced in Thailand but does exist as a form of ownership. It is used in regards to subdivisions of air space providing ownership on a floor-by-floor basis.

Foreign Ownership

This is available in three forms. Freehold of property by foreigners (individual investors) anywhere in the Kingdom requires Baht 40 million (currently about US $880,000) to be brought into Thailand. Provides the right for a foreigner to own up to 1 rai (0.25 acres) of land for a private residence only.

Foreigners may own 100% of a condominium unit within the province of Bangkok. A foreigner could also be a majority owner (but not 100%) of a condominium or strata title development provided it does not exceed 5 rai (1.25 acres.) This allowance has a five-year limit from its 1999 passage.

Leasehold ownership for foreigners as well as Thai’s is limited to 50 years with a 50-year renewal. Generally though the 30-year lease agreements are still in use.

Property Funds: The capitalization period for the previous property funds; Type I, II & III came to a close in September 2000. The Securities Exchange Commission of Thailand has issued a Type IV property fund. It allows foreigners the right to buy property, invest in property debt and corporate equity or debt. These funds will be available for a period of 2 years and will have 6 months from registration to become capitalized.

B. Taxation

Taxable Income

The principle direct taxes are corporate tax, personal tax, and property tax. The capital gains tax is treated as a corporate tax.

Profits Tax
(Corporate Tax)

The corporate tax is charged at 30% of net profit earned inside & outside the Kingdom for corporations registered in Thailand. Foreign companies registered outside and not residing in the Kingdom are subject to tax only on income derived from sources within Thailand.

Listed Companies

As part of a government economic stimulus package passed in late May 2001, corporate income tax has been reduced to 25% for listed companies for net profit less than Bt300 million over the next five years including new companies. 20% for companies listed on the Market for Alternative Investments for the next 5 years. Foundation & Association are subject to tax rates between 2-10% of gross business income.

Personal Income

Personal Income Tax is applied at a progressive rate ranging from 5% to 37%. The top most rate applies to incomes exceeding Baht 4 million.

Tax Reductions
(Tax Depreciation)

A tax allowance for mortgage-interest payments has been increased from Bt50,000 to Bt100,000 equally divided over a two year period when the house is purchased in installments. If a house is purchased in cash, above a certain amount, a tax allowance of Bt200,000 can be applied divided over a two year period.

Net losses may be carried forward for up to 5 consecutive years. There is a depreciation allowance for permanent commercial buildings at 5% annually.

Property Tax

Temporary 100%.

Cost of acquiring depletion natural resources 5%.

Cost of acquiring lease rights (Indefinite) 10%, (Definite) 100%.

Other, excluding land & stock-in-trade- 20%.

Assessment of Land
Values for Tax Purposes

Payable by the landlord are the House and Land Taxes. Rental tax at 12.5% of annual rental received. Furniture leasing tax at 7% VAT (April 1999-2001) and Service Charge tax at 7% VAT (April 1999-2001.)

Rates are payable at a percentage of the rateable value which is the reasonable annual rental value of a property at a designated valuation reference date, currently January 1999. This percentage is determined by the Land Department. The current values are good until 2003 but the Land Department has acknowledged that a review of land values maybe necessary before 2004.

Objection of Rateable
Value

It may be possible to object to an assessed value but it is unlikely to result in any reassessment.

Appeal of Rateable
Value

None.

Distribution/Dividend
Tax

Dividends from holding companies & companies listed on the SET are exempt from tax, provided the shares are held three months prior to and after the receipt of dividends.

Inter-corporate dividends are exempt from tax on 50% of dividends received.

Interest payments on some foreign loans may be exempt from the lender’s tax.

Interest income of an individual is taxed at 15%.

Interest income for corporations is taxed at 1%.

Withholding Tax

In relation to freehold title there is a 1% withholding tax.

Stamp Duty

On Sale or Transfer of Property in THAILAND:
Amount or value	Stamp Duty
<
B 500,000	B 2,500
B 1,000,000	B 5,000
B 10,000,000	B 50,000
B 30,000,000	B 150,000
B 50,000,000	B 250,000
B 70,000,000	B 350,000
B 80,000,000	B 400,000
B 90,000,000	B 450,000
B100,000,000	B 500,000
B200,000,000	B 1,000,000
B300,000,000	B 1,500,000


	C. Legal Issues

Business Registration	All businesses in Thailand must obtain a Business Permit or license from the Department of Commercial Registration under the Ministry of Commerce prior to the commencement of the business. In practice however, businesses may begin operating while in process of registration. Business organizations may register in three types: Sole Proprietorships, Partnerships or Limited Companies.

Tenant Eviction	Contractual agreements govern tenant eviction and are generally subject to the service of a requisite notice of termination by the landlord on the tenant. (Requisite notices are not always included in the contracts.) Contracts are enforceable by law.

Foreclosure	Statutes and contractual rights govern foreclosure rights for mortgages and landlords. They are enforceable.

Legal Action Against Tenant	Yes, if the tenant is contractually obliged to use the property in a good and tenant-like manner.

Government Expropriation	Yes. Compensation varies depending on circumstances. There are procedures available for appeal.

Title Insurance	Not available in Thailand.

Property Tax	Property tax is charged to the owner during the period of ownership. The rate is fixed at 12.5% of the annual rental revenue of the property. If a registered company holds property, it is liable to Corporation Tax

	D. Social, Political & Economic Risks


	Source: Political & Economic Risk Consultancy Limited

KEY ISSUES FOR INVESTORS

A. Taxation

The principle direct taxes are profits tax, salaries tax, and property tax.

Corporate Income Tax is treated as capital gains tax is applied at a rate of 30% of net profits.

Property tax is levied at 12.5% of annual rental received.

Is 'Income' Taxable?

Personal income tax is levied on a progressive scale ranging from 5% to 37%.

Losses may be carried forward indefinitely for tax deduction.

How can income for
taxable purposes be
offset or reduced?

For capital expenditure incurred on the construction of industrial buildings and structures, an initial allowance of 20% of such capital expenditure can be made in the year of expenditure, with an additional allowance of 4% annually thereafter until the total expenditure is written off.

There is a depreciation allowance for commercial buildings at 4% annually.

Capital expenditure on refurbishment and redecoration of buildings and structures is amortised over 5 years, based on 20% annual straight-line depreciation.

For end-user ownership, an immediate 100% write-off is allowed for expenditure on plant and machinery specifically related to manufacturing, computer hardware, software and development costs.

Profits tax is charged at 30% for corporations and between 2%-10% for entities such as associations or foundations, which are generally used for non-profit organizations.

Another form of income tax is Thailand’s Property Tax' which is charged at a standard rate of 12.5% on rentals (net of rates). However, corporations pay profits tax on their rental income and are not subject to property tax.

Are distributions or
dividends taxed and
at what rate?

Dividends from holding companies & companies listed on the SET are exempt from tax, provided the shares are held three months prior to and after the receipt of dividends.

What other taxes are
levied on the partnership
or the owner of the asset?

Inter-corporate dividends are exempt from tax on 50% of dividends received.

Interest payments on some foreign loans may be exempt from the lender’s tax.

Interest income of an individual is taxed at 15%. Interest income for corporations is taxed at 1%.

Leasehold Title/Lease Registration Fee: 1% of total lease consideration.

Municipal Tax is 0.1% of lese registration fee.

All Property is subject to a 1% of annual declared in mortgage agreement (Max. Bht. 200,000.)

Loan Agreement Stamp 0.05% of mortgage registration fee.

Is there a stamp duty or
transfer taxes at the point
of sale or acquisition?

On Sale or Transfer of Property in THAILAND:
Amount or value	Stamp Duty
<
B 500,000	B 2,500
B 1,000,000	B 5,000
B 10,000,000	B 50,000
B 30,000,000	B 150,000
B 50,000,000	B 250,000
B 70,000,000	B 350,000
B 80,000,000	B 400,000
B 90,000,000	B 450,000
B100,000,000	B 500,000
B200,000,000	B 1,000,000
B300,000,000	B 1,500,000

Is there a withholding tax?

There is a 1% declared amounts withholding tax that applies to freehold title.

Are there any other
issues worth noting?

Thailand has Double Taxation Agreements with 32 countries.


	B. Law Enforcement

Can the landlord evict a tenant who has broken a lease covenant?	Yes, subject to such rights expressed in the lease and subject to the conditions attached to such rights.

Can the landlord evict a tenant whose lease has expired?	Yes, subject to service of the requisite notice of termination by the landlord on the tenant as required under standard contracts. Upheld in courts of law.

Are there foreclosure laws? Are they enforceable?	Foreclosure rights by mortgages and landlords are governed by statutes and contractual rights. They are enforceable.

Can the landlord sue the tenant for harming the property (e.g. environmental contamination)?	Yes, if the Tenant is contractually obliged to use the property in a good and tenant-like manner.

Can the government acquire the property (compulsory purchase or eminent domain)? What is the compensation?	Yes. Compensation varies depending on circumstances.

Can it be appealed?	There are no known procedures for appeal.

Is title insurance available?	No, title insurance is not available in Thailand at this time.

	C. Ownership Restrictions

Can a foreign owner acquire 100% ownership?	No.

Are domestic partners required?	Are domestic partners required? Yes, but only condominium purchases within the province of Bangkok. (See additional allowances under Investment Environment.) For freehold ownership other than those detailed under Investment Environment, all other property purchases require a Thai partner holding no less than 51%.

What is the maximum percentage a foreign owner can own?	100%. for condominium units. More than 49% for condominium developments but not 100%. Not more than 49% of any other type of property (besides a house or condominium) anywhere in the Kingdom. Property Funds with a minimum of 500 million baht will enable a foreigner to own 100% of property.

Can the foreign owner maintain financial control? (e.g. sell the asset)	Yes.

	D. Reporting

What are the key government / state / local authority reporting requirements? (e.g. partnership financial statements)	Any transaction must register/report to the Land Department and the Ministry of Finance.

	E. Consents

What consents, if any, are required for acquisition, ownership, conveyancing, selling, leasing etc.?	Any acquisition, ownership, selling, leasing must be reported to the Land Department. If the lease is longer than 3 years that must also be reported to the Land Department.

	F. Borrowing Restrictions

Are there any restrictions on borrowing or lending?	Home loan requires deposit to be paid and title deed copy to proceed with loan. In addition, documentation or proof of employment, salary for last 6 months and proof of residence. For a partnership these same rules apply with the addition of documentation of the 49/51% ownership.

For further information on any of our services please contact us and forward your query by email, thank you.