Buying Phuket Property by investment: Villas, houses and landed property
Buying Phuket Property: Investment Promotion
We mentioned in a previous article the “extremely limited and exceptional circumstances” whereby a foreigner could legally acquire land or landed property in Thailand. This is that exception.
Under Section 96 of the Land Code Act, a foreigner may apply to own up to 1,600 m2 (1 Rai) of land if they make a Prescribed Investment of not less than THB 40 million in bonds of either the Thai Government, the Bank of Thailand, a State Enterprise, or bonds of which the Ministry of Finance secures the capital or interest. It is also possible to make the same application for land ownership if the THB 40 million is invested in the share capital of a juristic person who is granted investment promotion under the relevant investment promotion law.
The ownership granted to the foreigner is subject to the Prescribed Investment remaining in place for a continuous period of not less than five years from the date of registration of the Land ownership.
Section 96 offers a real and absolute path to ownership for anyone who can afford it. There are exquisite villas in Phuket which sell for as much as THB 400 million, and some of these are bought (or even leased) by foreigners. Any foreigner considering a property in this price range may be best served by investing THB 40 million into the Thai Government Bonds, then spending the balance on a villa.
The application for Investment Promotion is best done through a competent Thai lawyer, but for any foreigner who has the resources it is a legitimate route to freehold land ownership.
The Board of Investment
A similar path to ownership is through The Board of Investment (BOI). The BOI was established in 1997 to assist with, and provide incentives for, investment in Thailand. These are primarily tax privileges, and certain exemptions on foreign ownership of companies.
Although these incentives are also available to Thai nationals, foreigners who wish to invest and promote a business in Thailand are granted certain privileges, which may include permission to own land.
The relevant law supporting this program is the Investment Promotion Act, which may “grant promotion” to companies which are substantially beneficial to Thailand and its economy. In addition to the amount of capital invested, the criteria for qualification require a company to be economically and technologically sound, and not undertake any business which is harmful to the environment.
These are business incentives, so if the“promoted person” (which is the business, not the foreigner) dissolves the promoted activity or transfers it to another person, the incentives no longer apply. If the promoted person has acquired land, the land must be disposed of. If the company does not sell the land within 1 year, the Director General of the Land Department shall have the power to dispose of it under the Land Code.
While the company will be the “promoted person,” and therefore the owner of the land, the foreigner may control the Thai company under the BOI scheme. This foreign ownership of the company is not possible with a standard Thai Company Limited, and because the foreigner controls the company, they also control the assets of the company (including any land).
For a foreigner with the resources to take advantage of this program, it is another route to legal control of Thai landed property.
Buying in a Thai Spouse’s Name
Prior to 1998, a Thai woman who married a foreigner gave up her right to own land in Thailand. This restriction was removed, however, a foreign husband is not permitted to co-own the land with his wife. (Because it is the most common relationship dynamic, we will continue to use the example of a Thai wife and foreign husband, but it applies equally the other way around.)
When purchasing land in a Thai wife’s name today, a joint declaration must be made stating that the wife purchased the house with her own personal funds. Because the foreign husband has no claim on the property, it may therefore be mortgaged or sold without obtaining his consent.
It was once a common practice for the wife to be the legal owner of a plot of land, which she would lease to the husband on a 30-year basis. The husband would then pay to construct a villa, which he could own through a right of superficies. Even if the wife were to sell the land, the husband’s right to live on it would be protected for the duration of the lease.
But any agreement between a husband and a wife pertaining to property, which was formalised during marriage, may be voided by either the husband or wife at any time (or within 1 year of the dissolution of the marriage). At present, it appears as though the Land Office will not even register any agreements signed between husband and wife (i.e. long-term lease, superficies, usufruct, lifetime living rights).
A foreigner may inherit landed property from their Thai wife, but he may not assume permanent legal ownership. If the wife were to precede her husband in death, he could inherit the property as a statutory heir, but would not be permitted to register the land in his own name. Under present law, as a sole non-Thai beneficiary, he must dispose of the land to a Thai national within a reasonable period (typically not longer than 180 days).
A foreigner would also be permitted to act as the executor of his wife’s estate, which would allow him to rent out, dispose of, or manage the property in any way he sees fit. But unless a period of time is otherwise fixed by the testator, by a majority of the heirs, or by the Court, the executor of an estate must perform his duties and complete the distribution of assets, including the property, within 1 year.
As always, it is highly recommended that any foreigner consult a reputable lawyer when purchasing a property together with their Thai spouse.