The Essential Steps to Follow When Buying Property in Phuket, Thailand
Phuket is a wonderful place to live, but if you choose to buy a property here, there are nuances which need to be understood in order to ensure that you get exactly the home you are looking for with a minimum of fuss.
Good Legal Representation
The first step when you are looking for real estate in Phuket is finding a good lawyer, and it is best to ensure you have the right legal representation before even starting your search for a property. Foreign property ownership is subject to Thai law, which in some cases restricts the type of residence you are able to buy.
If you don’t have the right lawyer, you could waste your time viewing properties that don’t give you the legal ownership guarantees you are looking for. And if you are flying to Thailand specifically to hunt down the perfect home, that is time you cannot afford to waste.
It is essential that your lawyer carries out the necessary due diligence on the property you are looking to buy.
The most important, and oft-overlooked, measure you can take is a title search on the property, to ensure you know exactly what you are buying. A title search confirms the current legal owner, and even traces the land ownership the whole way back to the original owner. It is also able to determine whether there are any loans, mortgages or liens on the property.
Thai Residential recommends that all buyers find a good lawyer to represent them, but for additional peace of mind, we have our own lawyers check out all the documents, offering you an added layer of protection.
Contact us to request our list of reputable lawyers for the area where you are looking to buy.
You can also read this article about obtaining sound legal advice when buying real estate in Phuket:
The Importance of Sound Legal Advice When Buying Property in Phuket
If you are not familiar with the term “due diligence” and would like to know more about what is it and why it is important, then you might find the following article helpful:
Understanding the Importance of Due Diligence and Exactly What Due Diligence is When Buying Real Estate in Phuket
Where Should You Buy Property in Phuket?
Phuket literally has everything.
It has an array of sandy beaches with crystal clear waters, tropical mountain ranges, plenty of stunning scenery, a vibrant yachting industry, Asia’s premier health and fitness destination, some great golf courses and amazing shopping experiences.
And that’s without considering all the other wonderful tourist attractions and things to do on and around the island.
The island of Phuket is unique in so much that it has something for everyone. And people also feel safe and comfortable living amongst the local population.
But each area has its own charms and attractions. So before deciding just exactly where you would like to live, be sure to read the following Phuket guide:
A Comprehensive Guide to the Best Locations to Buy Property in Phuket
What Types of Property Can You Buy in Thailand?
Freehold Condo ownership is fairly clear-cut and a great way for foreigners to own property in Thailand. Thai law states that a condominium can have up to a 49% foreign ownership quota, with the other 51% owned by Thai nationals.
You can read more about all the advantages of buying condominiums here:
The Benefits and Advantages of Owning a Freehold Condominium in Thailand
The condominium title gives you a “fractional interest”, together with the other owners, in part of the building. This includes the common property of the condominium complex such as the gymnasium, swimming pool, gardens, car park and the reception area.
The title of the condominium should state the floor space of the unit itself, but also the area of the common property and the percentage interest that the new owner holds. That fractional interest also represents the voting interest that the owner holds within the residents or owners association.
Many people choose to buy this form of Phuket property over any other because of the ownership status. The beauty of a freehold condominium for foreigners is that it can be fully and legally owned. Your ownership is permanent and in perpetuity until you decide to sell it to someone else. Another benefit of a Phuket freehold condominium is more favourable succession laws. If you die, you are able to pass the condominium to your heirs.
You can take a look at some of the condominiums for sale in Phuket here:
Condominiums For Sale in Phuket
Buying a Leasehold Apartment in Phuket
Unlike a freehold condominium where you have ownership of the unit in perpetuity, a leasehold apartment only allows ownership for 30 years, with the option to extend the leasehold for further 30 year periods.
Some leasehold apartment developments may seem attractive, especially if they are well maintained, but your length of ownership is limited, and leasehold apartments are usually the same price as those available as freehold. In addition, a lease contract is typically terminated upon the death of the lessee, and without a provision for a succession clause cannot be passed on to your heirs.
It is our opinion that you are best served looking for a freehold condominium, rather than a leasehold.
Buying Villas, Houses and Landed Property in Phuket
It is not possible for foreign nationals to own land on a freehold basis in Thailand, however, they may have rights of ownership over the building itself, assuring possession by virtue of the fact that the property occupies the land.
The land may be purchased on a 30-year leasehold basis, but with a well drafted contract, buyers can also expect extensions to this lease. Villa developers generally understand that it is in their best interests to offer strategies which assist the purchaser in extending the initial leasehold period.
If the land owner or estate manager agrees, it is advisable for a “Purchase Option” to be written into the leasehold for a villa, which will enable the buyer to purchase the land at a later date if they wish. (This is normally written into the addendum of the lease.)
Where a landlord is an individual the lessee must exercise the purchase option within one year of the landlord’s death.
With this purchase option the leaseholder may, during the lease period, place the property in a spouse’s name. They may also want to place it in the name of another Thai national, then lease it back from them.
It is also wise to ensure that the lease itself may be cancelled and renewed for a new 30 year period for any new buyers, otherwise the value of the property will decrease as the end of the lease period gets closer. There will be a fee for doing this, but this may be borne by both the owner and the new buyer.
It is always possible that land ownership laws could change in Thailand in the year ahead. If that transpires, a relevant clause should be added to the lease contract to incorporate the changes if and when they happen. In this way, the leasehold buyer can then benefit from these changes should they occur.
You can take a look at some of the villas and houses for sale in Phuket here:
If you were thinking of setting up a Thai Company to purchase a house or a villa, then you may want to read this:
Owning Property, including Phuket Villas, through a Thai Company Limited. Is it Legal?
Buying Land in Phuket, Thailand
Foreigners are not allowed to own land under Thai law. The easiest way for a foreigner to own land in Thailand is through leasehold ownership.
If a foreigner enters into a purchase of land and property with Thai partners, they are not allowed to own any more than 49% of the shares of the Thai company used to buy the property. As long as the company continues to exist, the ownership remains in place in perpetuity.
However, it is imperative that the company must be established legitimately from a legal and compliance perspective. This means the Thai shareholders must be legitimate, and the company is required to adhere to the correct procedures, such as filing of balance sheets, etc.
You can read more about buying or leasing land in Thailand here:
Buying or Leasing Land in Thailand
Other Means of Buying Freehold Land in Phuket
Prescribed Investment and Board of Investment
Although it is widely known that it is illegal for foreigners to own land in Thailand, for wealthy individuals, some legal exceptions do apply.
Section 96 of the Land Code Act grants foreigners a path to ownership of up to 1,600 m2 (1 Rai) of land if they invest at least THB 40 million in bonds of either a State Enterprise, the Bank of Thailand, the Thai Government, or any bonds whereby the capital or interest are secured by the Ministry of Finance.
The Board of Investment (BOI) was established in 1997, and under the Investment Promotion Act it offers incentives to foreigners who wish to invest and promote a business in Thailand. This involves mainly tax privileges, and some exemptions on company ownership by foreigners, but it may also grant permission (called “promotion”) for land ownership.
While the company would be the actual owner of the land, under the BOI scheme a foreigner may control a Thai company (something which is not possible with a normal company). And if the foreigner has control the company, it means he/she also has control of the company’s assets, including the land.
These avenues to land ownership are obviously only available to people of means. If you are in the market for a luxury sea view condominium or pool villa, you may want to consider a Prescribed Investment. If you have a company looking to invest substantially in Thailand, you may want to look into the BOI scheme.
As the procedure for making an application for either is lengthy and complicated, it is best done through a competent Thai lawyer. Thai Residential can assist you in recommending a lawyer for this purpose.
You can read more about Investment Promotion and BOI here:
Foreign Freehold Land Ownership by Making a Prescribed Investment or Through the Board of Investment Scheme
Buying in Your Thai Spouse’s Name
Up until 1998, Thai women gave up their right to own land in their own country if they married a foreigner. That law was changed in 1998, however, it is still not possible for a foreign husband to co-own land in Thailand with his wife.
Today, if you buy land in Phuket in the name of a Thai spouse, the couple must make a joint declaration stating that the house was purchased with the Thai spouse’s personal funds. This inevitably means that the foreign spouse has no claim to the property.
It was once common for a Thai wife to own a plot of land in her name, then lease it to her husband for 30-years. If the husband then constructed a villa, he could own the “bricks and mortar” through a right of superficies. In this way, the husband could protect his right to live on the land, at least for the term of the lease, should the wife decide to sell the land.
It appears that the land office will not currently register an agreement related to property signed between spouses. This includes superficies, long-term leases, usufructs, etc.
In fact, any agreement formalised during marriage can be nullified at any time by either spouse (or even up to 1 year after divorce).
As always, we recommend you consult a reputable lawyer if buying a property in Phuket through a Thai spouse.
You can read more on buying a house in your Thai spouses name here:
Buying Freehold Villas or Houses in the Name of a Thai Spouse
Land Taxes and Fees When Buying Property in Phuket
Aside from the legal fees charged by a lawyer, as in most other countries, there will be some type of government taxes or duties to pay, so you must be prepared for some additional fees when purchasing or selling a property. In Thailand, the taxes and fees will vary depending on the type of transaction and the length of time the seller has held the property in their name.
When buying :
- Transfer Fee – is usually paid by the buyer, although can be shared between the buyer and the seller. On new developments the developer is responsible for 50% of the transfer fee payable. This usually only applies to freehold land, rather than leasehold, and is based on appraised value. Transfer fee is 2%.
- Lease Registration Fee – only payable on leaseholds, this is usually shared by both parties. Lease registration fee is 1%.
- Withholding Tax – is payable by the seller of the property and may be viewed as a part of income tax. If the seller is an individual, the withholding tax is calculated on a progressive taxation basis, and is based on the appraised value of the property. Technically, the more profit you make on the sale, the higher the withholding tax should be, although the longer you have owned the property, the lower the appraised value, which means less tax you have to pay. Withholding taxes may be claimed back later when paying income tax. For companies, withholding tax is 1% of the official appraised value.
- Business Tax – is payable by the seller of the property and is applicable to both individuals and companies who hold the property for less than 5 years, however, individuals are exempt from this tax if the property was used as a principal place of residence. The Business tax is 3.3% (0.3% of this goes to the local authority) of the higher of either the appraised value or the registered sale value of the property. If you are exempt from this tax, then you’ll have to pay stamp duty.
- Stamp Duty – only payable by seller and only payable if exempt from business tax. Stamp duty is 0.5% of the registered value of the property.
Ongoing Running Costs/Taxes
- Maintenance/House and Land Tax – these taxes are normally collected locally, but only if the property is rented out. If it is your primary residence and you occupy it yourself or the property remains vacant for much of the year the tax does not need to be paid. House and Land tax runs at 12.5% of the assessed rental income per year. You may also need to consider paying a progressive scale income tax on rental income. Tax rates are low or non-existent for low rental income producers, but can be as high as 35% for rental income exceeding 4 million Thai Baht per annum.
- Local Development Tax – is a tax imposed on the possession of land, usually undeveloped. The rates are variable depending on the appraised value of the land area by local authorities. These taxes are, in many cases, also negligible.
Other Condominium Costs
- Sinking Fund – this is for new developments and is usually a one-off payment which contributes to the condominiums reserve funds. Its purpose is to have funds to fall back on in case of emergencies and other unforeseen circumstances.
- Service Charge/Maintenance fee – this is the owner’s share of the costs to maintain the condominium and keep it in good working order, as well as also covering management costs. It pays for the upkeep of the condominium such as the swimming pool, gardens, reception area, security etc. as well as paying for electricity in common areas. The share paid is based on the size of the unit.
The Purchase Procedures When Buying Your Dream Home or Investment Property
When you have finally found the Phuket home of your dreams and every question has been answered to your satisfaction, you’re ready to go ahead. The first thing you’ll have to do when you have made the decision to buy is to secure the property of your choice. That means paying a reservation deposit.
Placing a Reservation Deposit
When paying a deposit, you should make sure that your lawyer helps you, as it is imperative that your deposit be refundable should things not go according to plan. If both parties are willing to go through with the sale and purchase, there should be no hiccups, but the reservation agreement should clearly spell out the terms of the agreement between the two parties.
Buyers should allow time for a lawyer to check over the agreement to ensure that the deposit is returned to them should anything be found to be wrong with the property after conducting the necessary due-diligence.
You may like to read about what to watch out for when leaving a reservation deposit in our article here:
The Risks of Placing a Reservation Deposit When You Buy Phuket Real Estate
The amount of the reservation deposit varies from developer to developer, and might be either a fixed sum or a percentage of the sale price.
Once the deposit is paid, you have secured the unit/property you want. At this stage, you will be required to provide the seller with a copy of your passport.
Once you have done this, your lawyer will request a copy of the land title deed, and commence the necessary due diligence. If it is a resale property there may be some other documents your lawyer requests from the seller, for example the “house book” or tabien baan.
After the developer or the sellers lawyer has had sufficient time, usually only a day or two, they will present you with a sale and purchase agreement. This will confirm all the details of your purchase, and also confirm the payment schedule.
A schedule of payments is common practice if the property is still under construction, but some developers may offer this as a matter of course.
For new developments the sale and purchase agreement will also outline the taxes and other payments due, such as a furniture package, freehold upgrade costs, and transfer fees/registration costs.
Additional expenses (which may apply to condominiums and sometimes even villa estates) such as the sinking fund and maintenance fee will also be included in the agreement.
The sale and purchase agreement will confirm the reservation deposit you have already paid, and this will be deducted from the total amount due.
As mentioned above, transfer fees and taxes are usually shared equally between the buyer and seller, but this is not always the case. Again, it is important to have a lawyer to guide you through this in case you are being treated unfairly.
Transferring Money into Thailand For Buying Real Estate
Once your lawyer has checked everything and gives you the thumbs up, the next step should be ensuring that you bring the money into the country correctly. If you don’t, you may find it hard to take the money out again at a later date, should you decide you want to sell the property and/or leave Thailand.
If you bring more than US$50,000 into Thailand to purchase a condominium, you must request a Foreign Exchange Transaction Form (FETF) from your bank and obtain a Foreign Exchange Transaction Form Certificate.
If you are a non-resident of Thailand and wish to buy a condominium, the 1991 Condominium Act states that you have to transfer the funds to pay for the condominium from overseas.
It is therefore necessary for you to be able to prove that the full purchase price was transferred into the Kingdom from abroad, and the FETF certificate must be presented to the Land Department for you register the condominium in your name.
The instruction on the bank transaction form should also state that the payment is for the sole purpose of purchasing a condominium. If you find that the only way to do this is to pay directly to the developer, then the developer must collect the FETF forms on your behalf.
Taking the money out of Thailand at a later date is relatively straight forward if you have all the supporting documents. This is especially important if you have borrowed money from a financial institution, or have an overseas mortgage on the property because you will need to send the money abroad to settle the loan amount upon selling the property.
For any purchase of a property that is not a freehold condominium, you must still keep all the bank transfer documents so that it is easy and trouble free taking monies out of the country again when you decide to sell.
Make sure you get an “Inward Transfer Advice” or “Credit Advice” from the bank. You must keep all these documents as they are extremely important.
Preparing for the Telegraphic Transfer (TT)
When you are transferring money into Thailand for your purchase, please bear in mind it must be for an amount not less than the price of the unit you are purchasing.
Furthermore, it is essential that the beneficiary name you put on the bank instruction is identical to the name on the sale and purchase agreement.
It is extremely important that this name be on the instruction, but equally important are the details of what the transfer is for. It must state that the funds are for a condominium purchase and name the condominium/ development that you are buying.
When making a transfer, make sure you have all the following details:
- Beneficiary name:
- Bank name
- Bank account number
- Bank Branch and address
- SWIFT CODE
- Purpose of transfer (for a condominium this must state: purchase of a condominium at the name of the development i.e. Beautiful Condo Resort in Thailand)
Include all the buyers names on the TT (it is also worth including your beneficiaries names too. Please see our article on: What you need to know if you are inheriting a Phuket condo or wish to plan for succession
The receiving bank will then issue the FETF which will contain all the following information:
- The amount transferred to Thailand in foreign currency
- The amount converted into Thai Baht
- The name of the individual who sent the money
- The name of the receiver
- The purpose of the transfer i.e. condominium purchase
It is also worth noting that the funds may be received by the Thai bank from an overseas account that does not belong to the buyer.
As long as the buyers name is on the instruction and the purpose of the instruction is clearly stated as for buying a condominium, this will be accepted by the Land Department.
Do I Need to Open a Bank Account in Thailand if I Buy a Phuket Property?
The need for opening a bank account really depends on the type of property that you wish to purchase and individual circumstances.
In many cases, it may not be necessary. For example, you won’t need an FETF if you buy a leasehold, or when you purchase a condominium directly from the developer, occasionally the developer may assist with all the paperwork, which includes obtaining the FETF. As mentioned, this is necessary for registering your condo at the Land Department.
Some lawyers may also be able to offer this service. However, if you decide to use a lawyer for the transfer, they will usually charge you for this. Opening an account is not that difficult and Thai Residential representatives can help you with this at no charge.
It is worth pointing out that if you are looking at renting out your Phuket property, it is best to have a bank account to have your income paid into. If your bank account comes with a visa debit card, you’ll be able to utilise ATM withdrawals wherever you are in the world.
Please also bear in mind that it is highly unlikely that you will find a bank to open an account for you unless you have already made a property purchase. This is because you will require the original sale and purchase agreement and the reservation fee payment receipt.
The documents required will always vary from bank to bank, but generally speaking they will require the below:
- Your original passport
- Your immigration departure card slip
- The original signed and stamped Sales and Purchase Agreement
- The original receipt for the paid reservation fee
A Visit to the Phuket Land Department
If you buy a property in Phuket, you may need to make a trip to the Land Department. On new developments, most developers will be able to obtain the Chanote title deed on your behalf.
But for a resale, you (or a chosen representative with the necessary Power of Attorney), will have to accompany the seller and respective legal representatives to the Land Department for registering the new condominium in your name.
The documents and items you will require at the Land Department are:
- The passport of every owner purchasing the unit, including immigration slip/visa stamp
- If you are also putting the property in a spouse’s name, a marriage certificate is required. This may need to be translated, however this is not necessary if you are from an English speaking country.
- On a resale property especially, a letter is required from the Condominium Juristic Person (CJP) confirming that the foreign quota proportions for the condominium resort remain below the legally allowed 49% allocation for foreigners.
- The CJP must also confirm, in the form of a letter, that all maintenance fees and utility bills relating to the unit being sold are paid and up to date. The sale cannot go ahead without this confirmation.
- The correct FETF form is required to show that the purchase is allowed under the Condominium Act because the funds were transferred into Thailand from overseas for said purpose.
- You will be required to have a bankers draft prepared for the balance owing on the unit purchased. (On new developments this is not always the case.)
- Enough cash to cover the taxes and government fees
Normally, your lawyer will handle all the arrangements at the land department and it is usually a painless experience. He will work with the seller and the officials at the Land Department and you can just sit back and relax.
Once everything has been done, you can hand over the bankers draft you have brought with you. Once this has been verified as legitimate, the Land Department Officer will provide a sales and purchase form which must be signed by you and the seller.
That’s when you will have to pay all the taxes and fees due. Your lawyer should have contacted the Land Department prior to your arrival to find out the cost of the government fees and taxes payable, and how much of that is your share.
These monies are due on the day you visit the Land Department when ownership is transferred to you from the seller. These are usually paid in cash so you must make sure you have sufficient cash with you on the day.
Your copy of the title deed will then be given to you with your name on it, rather than the sellers’ name.
As mentioned above, this whole exercise should be relatively painless. Only on exceptionally busy days will there likely be any major delays.
Once it is all done you can leave as the proud owner of a new Phuket property.
Moving In To Your New Phuket Home
You can pretty much move in when you like, but it is also worth pointing out that you still have to transfer the utilities such as electric and water into your name
This is actually the responsibility and duty of the seller, which makes sense because until they do so, they are still liable for the bills until they make the changes.
Once done, you can enjoy your stay in paradise or start to profit from Phuket’s lucrative rental market.
Here are some related articles on buying property in Phuket:
Reasons to Invest in Phuket Property for New and Experienced Investors
5 Essential Tips for Buying Property in Thailand
An Overview on Phuket Property Prices
Owning a Freehold Condominium through an Offshore Company
Converting Thai Land Measurements to Metric/Imperial
China’s Spending Spree on Phuket Real Estate
Foreign Freehold Land Ownership by Making a Prescribed Investment or Through the Board of Investment Scheme
Buying Freehold Villas or Houses in the Name of a Thai Spouse