The land of smiles
In a fascinating mixture of contradictions, between tradition and race to the future, relaxation and fun, sacredness and freedom, conquered by the beauty of the white sand beaches, but also the millennial history, the food, the shopping and this innate grace that the Thais have their deepest culture.
The Kingdom of Thailand located in Southeast Asia, between Laos, Cambodia, Burma, Malaysia, the Andaman Sea and the Gulf of Thailand, is a country of incomparable natural beauty: immaculate forests, l 'one of the most blue seas in the world, the silence of the temples, the historical and artistic value of the archaeological sites and the hospitality of the population make this wonderful country the destination par excellence both for investment and for holidays.
FOCUS ON THE REAL ESTATE MARKET IN THAILAND
Thailand has established itself as one of the most attractive real estate markets in the world. Its dynamic economy, its geographic location in the heart of Southeast Asia, its paradisiacal landscapes and its attractive tax system attracts more than 30 million tourists each year.
WHY INVEST IN THE KINGDOM OF SIAM?
A dream tourist destination, Thailand also presents tremendous real estate investment opportunities. Whether it is to spend a holiday "at home", prepare for your retirement or make a return on your investment with additional income, the advantages of investing in Thailand are manifold: a very attractive price-quality ratio, high-quality services, returns highly competitive, a wide choice of investments for all budgets and one of the most attractive tax systems in the world.
1. An attractive tax framework
Thailand has very advantageous property taxation:
No Housing Taxes . The equivalent of the French housing tax does not exist in Thailand. There is a local equivalent to the tax on household waste, but we are talking about small amounts (a few tens of euros per year).
Very low property tax (in main residence). Those worth 50 to 75 million baht will be taxed at 0.03%. For those worth 75 to 100 million baht, the annual rate will be 0.05%. Finally, if more than 100 million baht, the annual tax rate goes to 0.1%.
No inheritance tax (below 100 million baht). A law adopted in 2015 introduced inheritance tax on assets over 100 million baths (around 2.6 million euros), but these are very low compared to French rates (5 to 10%).
2. High rental yields
Thailand is considered to be one of the most attractive destinations for the rental property market with average yields of 7% per year, according to Global Property Guide which analyzes property markets worldwide.
Rental property in Thailand remains very attractive due to several factors:
- Low taxation on properties.
- Pro-owner property market.
- Quality properties with integrated management.
- Increase in demand for expatriates, retirees and vacationers.
- Growing economy with development in industry, services and tourism.
- The increase in the middle class and the change in lifestyles.
In Thailand, we can classify the rental market into four types:
- Long-term rental: rental contracts of 1 to 3 years.
- Short-term rental: contracts from 1 month to 11 months.
- Vacation Rental: for periods ranging from 1 week to 1 month
- Very long-term rental (lease): lease up to 30 years
Depending on the type of contract and the locations, rents vary. Thus, a holiday rental during the high season with an occupancy rate of 60% in a tourist destination can generate rental returns similar to a long-term rental in a large metropolitan area like Bangkok over the whole year.
3. A very good quality / price ratio of the real estate.
Buoyed by its dynamism, demand on the Thai real estate market continues to increase and its supply to evolve. Apartments, condominiums (with swimming pools, services and gyms) or villas, a wide range of attractive properties in terms of value for money are available, whether for sale or for rent. Prices naturally vary depending on the location and the type of property.
In addition, the Thai real estate industry has also incorporated high standards of construction and design, to the delight of investors.
4. A growing economy.
Attracting expatriates as well as senior citizens and investors, the country displays a growth rate significantly higher than most Western countries, and imposes itself as the 2nd economy in Southeast Asia.
Its status as a founding member of ASEAN and its strategic position in the heart of Asia provides it with economic stability, guaranteeing a profitable investment with great potential for development.
In addition, with a very attractive cost of living, a strong culture and a sense of hospitality, Thailand sees its tourist flow increase by 20% on average per year.
5. An exceptional living environment.
If Thailand came in 7th position in the ranking of the 20 best countries where life is good, it is good that the foreigners who live there feel good and wish to stay there.
- Dream weather all year round.
- Breathtaking landscapes.
- Low cost of living.
- A cosmopolitan and smiling population.
- Inexpensive transport.
- Delicious and varied food.
6. A sense of hospitality and respect.
Thailand is commonly called the “Land of Smiles”. With their innate sense of hospitality, Thai people are perfectly prepared to welcome foreign tourists. Impossible not to be surprised by their kindness, their smile and their good humor. Happiness every day!
7. Quality infrastructure.
A country that has modernized over the past few years:
- The main cities and seaside resorts benefit from airports, shopping centers, golf courses, schools and universities, offering optimal living comfort.
- Major investment plans, foremost among which is the development of transport networks with the arrival of high-speed trains.
- Thailand also has excellent hospitals across the country, and has extremely competitive rates, while providing quality medicine and quick access to care. Thus, the land of smiles has become a leading destination for medical tourism worldwide.
For all these reasons, Thailand has today become an essential destination which attracts more and more foreign investors looking for opportunities to diversify and make their heritage prosper. Besides the economic aspect, the second economy of Southeast Asia is recognized for its quality of life, and the hospitality of its inhabitants. Enough to combine performance and quality of life!
DEPENDING ON YOUR OBJECTIVES WHICH CAN BE:
- Generate additional income with a rental investment: take advantage of the growth in the real estate market and rental demand by targeting rental yields of 5% to 10% depending on the destination and the type of property which is accompanied by very low taxation and therefore very advantageous.
- Build an estate with the purchase of a primary or secondary residence. Take advantage of the country's development, major infrastructure projects, the dynamism of its middle class and the quality of life. If you are expatriate in Asia, bank borrowing solutions exist and could be an additional lever for your investment.
- Diversify your investments in another currency by investing in a growing country with strong economic potential while reducing your tax burden.
HOW TO INVEST IN REAL ESTATE IN THAILAND?The different investment possibilities :
Property rights in Thailand
In Thailand, if you want to acquire real estate, there are several things to consider. Depending on the type of property you want to acquire, the applicable law and property rights will not be the same.
Do you want to buy an apartment?The condominium act, Foreign quota and Thaï quota
In 1979, Thailand adopted a law, the Condominium Act B.E. 2522, governing the vertical condominium system. It clearly defines the acquisition procedures as well as the status of the co-ownership ("Common Property"), distinct from the individual ownership of the apartment ("Personal Property")
In 1992, after an amendment to this law, foreigners of any nationality could finally buy apartments in condominiums in their own name, allowing them to be fully owners of real estate. Indeed, you can buy in a condominium in full ownership, you will be the owner of the apartment and co-owner of the common areas.
The law still imposes a restriction: on the total surface of the commercialized surfaces, not more than 49% cannot be sold / transferred to foreigners. This is called the "Foreign quota". The remaining 51% represents the "Thai quota". Thai law therefore requires above all that buildings sold in full ownership to foreigners be shared with Thais.
To finalize the acquisition, the buyer must comply with these two conditions:
- Transfer all the funds covering the purchase from abroad and in foreign currencies.
- The issuer or recipient of transfers (amount covering the purchase of the property) must be the future owner.
- The purchase can be done in own name, in full ownership, you pay the purchase price, the transfer costs, the working capital and the administration and maintenance charges. The amount will depend on the surface of the property. The property is registered at the land department and a title deed will be given to the owner.
You can either use your property to live in it, or rent it. You can dispose of it as you see fit and you can resell it as you see fit.
Do you want to buy a house or a villa?
Regarding houses and villas, in most cases, foreigners are not allowed to buy land on their behalf. However, they are allowed to own the property built on this land (building permit in your name), and rent the land for a renewable period of 30 years (leasehold). This is called leashold. It is a 100% legal process, this right is registered in the cadastre, so you have the usufruct for the entire period provided for in the contract and under the conditions mentioned in the contract.
In this case, you must register your lease with the Land Department. This procedure is compulsory for all leases over 3 years. The document must be written in Thai. It is also advisable to provide for a renewal clause after 30 years.
It is also common in certain regions for the land to be owned by a company under Thai law where the foreigner is a minority in terms of share, but has operational control (signature) which can then issue a very long-term lease.
Depending on the amount of investment, more or less complex arrangements can be applied. Generally, well-established law firms have good knowledge.
Exceptional case: Foreigners having invested and maintained an investment of 40 million THB (1million euros) in Thailand for 5 years, can receive an authorization from the Board of Investment, to buy a land within the limit of 1 rai (1600 m ) in their own name, for purely residential use.
In the context of the purchase of an apartment:
Ensure that the share of foreigners in the residence does not already exceed 49%
Keep the bank documents well, which will allow you to transfer the apartment and easily repatriate funds abroad for resale.
Have his name and that of his parents translated into Thai by a professional translator.
In the context of the acquisition of a house:
As part of a very long-term lease (contract in Thai and English)
Provide for the clauses: renewal, inheritance, resale with in particular who will pay the taxes at the time of the sale, renewal… ..
Ideally, sign several contracts (long-term lease for the land, construction contract for the building, management contract as part of a condominium).
Have the contracts checked by a Thai lawyer who will ensure that the English / Thai translation complies with and respects the legal framework.
Avoid signing very long-term leases with natural persons.
Difference between freehold and leasehold
The "Leasehold" consists in renting the apartment or the land for a maximum duration of 30 years, renewable according to the terms defined in the contract, usually twice, which amounts to benefiting from a rental right of 90 years . The first 30-year lease is registered with the Land Department, equivalent to the cadastre. It is a real and protected right which cannot be challenged without the signature of both parties.
The good "Leasehold" contracts contain clauses allowing the "Tenant" to assign or resell his right.
The Freehold is comparable to the purchase of an apartment in France, therefore full ownership with the provision of the total enjoyment of the property and the possibility of renting or reselling the property. The difference is that the transfer of ownership is not done through a notary, but directly to the Land Office in the presence of the seller and the buyer (or their legal representative).
A "freehold" purchase amounts to benefiting from a title of ownership without restriction, in its name, incontestable.
The only drawback we can find would therefore be the obligation for the buyer to prove that the apartment is bought in foreign currency. You must therefore keep the necessary proof of transfer (or exchange), and the specific bank documents.
THE ASSOCIATED COSTS, What to know ?
AGENCY FEES: Seller side only
In Thailand agency fees are systematically paid by the seller, and are therefore included in the sale price.
First thing to remember when talking about the costs related to a real estate transaction in Thailand: there is no notary and therefore no notary fees.
The registrations are made directly to the "Land Department" (Department of Lands, equivalent to the French cadastre), in the presence of both parties, and / or their representative (possibility of giving power of attorney to lawyers or a third person).
TRANSFER AND REGISTRATION FEES
The Land Department of Thailand (Cadastre) collects 2% of the estimated value of all transfers of land and goods. This tax is paid on the date of transfer of ownership and is shared between the buyer and the seller. Registration fees vary according to the type of property, its duration of acquisition but they generally represent between 2.5% and 6% of the amount of the transaction.
It is a 0.5% tax which is levied by the Land Department, on the value or the purchase price, whichever is greater. This tax is not applied if the professional tax is applicable (see below) and it is generally paid by the seller.
PROFESSIONAL TAX (SBT)
The seller usually has to pay this 3.3% tax, which is levied on businesses and owners who have been registered in possession of property for less than five years.
"On average count 7% to 8%, of the value of the property to be shared between buyer and seller"
The total amount varies depending on:
- the duration of acquisition
- the capital gain
The average rate found is between 7% and 8% of the value of the property, and in practice these costs are shared between the buyer and the seller.
INCOME TAX (“Withholding Tax”)
This progressive tax is calculated according to a complex formula which includes:
- the value of the property
- the period of detention of the property
- personal tax rate
It usually takes between 1 and 3%.
Buyers can expect to pay between 30,000 and 80,000 baht to complete their purchase. This covers three services: verifying the title deed, drafting the contract and completing the transfer to the Land Department.
TAXATION OF RENTAL INCOME
If you are a tax resident in Thailand:
Rental income tax is determined according to your personal tax schedule.
Progressive scale from 0 to 35% on declared income.
Example: you receive a rent of 25,000 THB per month. You will have to pay, if these are your only income: 15,000 THB per year. Knowing that up to 150,000 THB there is no tax and that on the upper bracket (150,000 to 500,000 THB), the tax is 10%. * If you rent your property to a Thai company, the company will have to deduct from the rental certain "Withholding Tax", you will pay the supplement according to your tax scale.
- 5% on the rental of goods
- 3% on the provision of services
If you are not a tax resident and wish to transfer the rents collected abroad:
You will have to pay a 15% tax (Withholding tax). If the country where you are a tax resident has a collective agreement with Thailand, you can use it as a tax credit.
Financing of a real estate purchase in Thailand
It is generally not possible for a foreigner to access a bank credit for the acquisition of a property in Thailand: the bank of the country of origin will not accept (or very rarely) grant a credit on a well located abroad; and Thai banks do not lend to foreigners who are not permanent residents.
The cadastre in Thailand
The Land Department is the official state department, which is the equivalent of the cadastre in France. The title deeds are issued by the latter as well as the registration of very long-term leases for the land of the houses.
HOW DOES A TRANSACTION TAKE PLACE?
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