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Property Issues

With the growth in the property market the Thai government over the last 5 years have stepped on cracking down on what they view as abuse of the property laws and also tax laws. The following are good examples on what they are cracking down on at present. Note that you should always take proper legal advice from an attorney in Thailand so as not to run afoul of the law.

Property development was never really big on the Islands in Thailand. These developments only really came to life over the past 10 years. A good example was the case of Phuket and Samui. The first property develops had been small houses for those who were retiring in Thailand and wished to buy a home. As the tourist boom came so did the demand for property and with it the sky rocking prices for land and property on these islands.

As you might know Thai law prohibits foreign entities from owning property. You may not as a foreigner own a condo unit where more than 49% of the condo ownership is foreign held.  Foreign nationals may also not own land in their names unless they invest millions in Thailand and get permission from the Minister of the Interior for 1 Rai of land. Many resort of proxies where a Thai company is registered at a Thai proxy will hold 51% and the foreigner 49%. Most expats tend to place the property in the name of their Thai wife with a usufruct over the property for protection. None the less the Thai government does crack the whip from time to time on the issue. It is estimated that at least 90% of the property in Samui is held in this fashion. Note that this also creates tax implications because as a director of the company owning the property the ‘rental income’ would be taxable as you are getting a benefit from the company by living in company property as a director. There is also a 12.5% tax on rental income in Thailand.

Property IssuesMore tax evasion which has been cracked down on was buying the property from “Company A “then transferring the property to its subsidiary “Company B” hence avoiding paying taxes. The Thai Tax Department has come down hard on those schemes as well.

The next problem had been the developers who refused to register the property development. Normally when there are 10 or more plots of land they need to apply for permission as a developer as there are rules to follow with property development in Thailand. These rules are to ensure that all the licences for the project have been secured and that the government can monitor the development. What they do is make the property parcels smaller so you have 10 plots on the right side of the road and 10 plots on the left side of the road. One developer but 2 projects too small for development registration. This is where the problems occur later as the bulk services such as water and drainage has not been properly calculated. This is another reason why due diligence reports are important.

The degrading of infrastructure and potable water become major issues as greed and short cuts has the government running around trying to bring order to the property market. Always take legal advice before buying any property in Thailand be this is Samui, Bangkok or Phuket.