1. Can a foreigner obtain 100% interest for a land lease in Thailand?

Yes. A foreigner can obtain 100% interest for a land lease in Thailand. Unlike direct land ownership, the law allows foreigners to obtain long-term land leases.

2. Do I have to register the land lease at the Land Department?

Leases up to three years need not be registered but registration at the Land Department is mandatory for leases that are three years or more.

3. What is the maximum lease term available?

The maximum lease term available is 30 years, with an option to renew for an additional 30 years. Each lease renewal that is agreed upon with the landowner must be registered at the local land office. For each new registration, taxes will be levied.

4. Why is land leasing favoured by foreigners who wish to own property in Thailand?

There are numerous obstacles faced by foreigners who wish to buy land or purchase property in Thailand. To avoid these obstacles, many foreigners choose to acquire land on a 30-year leasehold with an option for extension. This is the simplest and most straightforward way for foreigners to acquire property in Thailand. In addition, a lease stays valid even in the event that the property or the land is sold.

5. What are the advantages of having a land lease over purchasing land with a company?

A foreigner’s lease rights are formally recognized by the Thai law. The land lease is executed and registered only once, after which very little legal maintenance is required. In comparison, a limited company has several shareholders who may have interests that are different from yours, and this could translate into potential risks for you and your objectives. Also, a company requires regulatory compliances such as yearly balance sheets to be filed with the Tax Department.

 

Lease and Freehold laws in Thailand

Ownership of land in Thailand is governed by the land code BE 2497 (1954), the Civil and Commercial Code, Land Reform for Agriculture Act BE 2518 (1975) and the regulations set forth by the ministry of the Interior.

Although the Thai law stipulates that a foreigner may not own land in Thailand in his name, he has the right of ownership of buildings only. If a foreigner wishes to purchase land in Thailand to build a property, he has 2 options.

1. The land is purchased on a 30-year leasehold with an option to extend the lease for further 30 year periods. Possession of the land is assured by virtue of the fact that property occupies the land. The lesser cannot seize the property upon expiration of the lease, as the property is separate from the land.

In order to be enforceable, any lease for a period longer than three years must be registered at the land department, which involves payment of a registration fee and stamp duty based on a percentage of the rental fee for the whole lease term. The original registered lease remains in the force and effect even if the property is sold. Both parties can contractually agree to renewals, but this right cannot be registered at the Land Department.

 

2. If a foreigner is going to operate a business in Thailand than he may purchase the freehold of the land through his Thai Limited company. The land will be owned by the Thai Company, not by the individual.

Limited Liability Company – this form of purchasing property is the most popular with foreign investors as articles of association can be varied to allow greater protection for foreign minority shareholders where majority Thai ownership is required under the Alien Business Law.

Thai law requires that 51% of the shares be held by Thai juristic persons, however, any company with more than 40% foreign interest that purchases land will be investigated by the Central Land Office in Bangkok (under section 74 of the Land Code) to ensure that the company has not been organised in attempt to circumvent the prohibition against foreign ownership of land.

This results in ownership of the company being limited at 39% (only if buying land), but with the recommended changes of the Articles of Association, the foreigner can be the only director of the company, and the only person of the company who can commit or bind the company in any contractual dealings (buy sell land and house), effectively giving the minority shareholders control over the company.