- Yes indeed, foreigners can certainly invest in the Thai property market. Buying a condominium in Thailand as a foreigner is the easiest and most straightforward method to invest in real estate. Due to the 1979 Thailand Condominium Act, foreigners can own condominiums anywhere in Thailand 100% outright, as long as the building has not already sold its 49% foreign quota. Each condominium in Thailand when registering with the land department designates 49% of its units for sale for potential purchase by a non-Thai buyer. This way at least 51% of the building always remains in the hands of local Thai people, however individual units that make up the other 49% can be sold to foreigners outright. Therefore it is legal for a non-Thai, non-resident foreigner to own 100% of a freehold condominium in Thailand. And in fact 17% of condominiums owned in Bangkok are owned by foreign investors.
- Unlike condominiums, which of course are covered by the Thailand Condominium Act of 1979, townhouses and detached houses are ‘landed', meaning that they essentially contain an area of Thai land underneath them or around them. Hence as per law, it is not possible for foreigners to own Thai land. However, then an expat wishing to buy a townhouse or detached house has two options.
- As per RBI, Effective 1 June 2015, Under the Liberalised Remittance Scheme, (hereinafter referred to as the Scheme/LRS) resident individuals (including minors) are allowed to remit up to USD 250,000 per financial year (April-March) for any permitted current or capital account transactions or a combination of both, which includes purchase of immovable property.
- Thailand or any other country is a foreign land to us but is a local country to their residents, so the risks pertaining to any purchase, business or profession applicable to them will apply to all nationalities. Having said that, Thailand has a very robust Real Estate Act called Thailand Condominium Act, 1979 which governs transactions and legalities for all transactions in the condominium space. Similar Land Acts exists which govern land deals, which to a large extent safeguard investors interests. Apart from that, the Consumer Protection Act also gives a high level of security and cover against fraud & other undesirable outcomes to doing business in Thailand.
- Thailand, along with Philippines & Indonesia form the top three destinations for investments into residential property, yields being in the range of 7-9% on assured basis (if under a rental programme) or above 10% if managed locally. There is huge gap between the number of tourist arrivals into Thailand every year and the number of hotel rooms being added during the same period. In Phuket itself, the ratio is 1,000,000 : 1000 making it 1 room being added for every 1000 tourists. Take away the 1-3 stars and one is left with lesser than 200 new rooms added every year. This gives an opportunity for global hotel brands to get developers to build as per their specifications and lease out the same for 15-20 years at a go. Investors can gain from good initial price, extensive capital appreciation & regular rental income through an agreement leading to gross IRRs over 23% pa.
- There is a withholding tax upto 15% on rentals earned on residential properties (including hotel managed condos), which the developer deposits on the investors behalf. Usually the trend of WHT is between 3-5% against which a tax challan is provided, which may be used to claim retro-tax credit while fining taxes in the investors country (due to DTAA benefits, if applicable), With India, Thailand has DTAA arrangements to help avoid duplicate payment of taxes.
- No, as per RBI notifications, any income earned out of real estate investments made out of the LRS remittance, may not be repatriated back into India and may be invested further.
- No, if the investor is a taxpayer in Thailand then the gains are added to his income as part of regular tax. However, in the case of foreigners & expats, there is a separate formula which calculates the gain & tax payable on basis of government assessable valuation, irrespective of the value of the sale. It is advisable to pay this tax to avoid any tax related penalties in the future.
- Inheritance tax is levied at different rates, depending on the relationship between the heir and the deceased testator.
Inheritance tax is levied at a flat rate of 5% if the heir is a direct ascendant or descendant of the deceased. Inheritance of the spouse is exempt from inheritance tax. Inheritance tax is levied at a flat rate of 10% for all other heirs.
But properties which are acquired as a gift or inheritance are subject to capital gains tax and are assessed separately. Capital gains tax is imposed at the standard income tax rates. If the property was acquired as a gift or by inheritance, 50% of the proceeds (selling price or market value) are deductible as expenses. The balance or 50% of the proceeds will be divided by the number of years the property was held, whereby the outcome is taxed at the appropriate tax rate. The resulting average tax liability will then be multiplied by the number of years the property was held to arrive at the final tax liability.