Foreign ownership of land in Thailand is generally prohibited. Buildings and other structures located on the land could be owned by a foreigner with separate title registration. Moreover, a foreigner is allowed to directly own condominium units with an aggregate unit space of up to 49% of the total floor area of all units in a condominium building.
In addition, foreign-owned companies may be allowed to own land for their business if operated in an industrial estate zone and/or granted investment promotion by the Board of Investment.
Last modified 19 Jul 2023
Investment in real estate in Thailand by a foreign person does not constitute a permanent establishment ('PE') unless the real estate is used as a fixed place of business through which the foreign person operates its business wholly or partly in Thailand. However, income derived from the real estate eg rent or capital gain is subject to tax in Thailand regardless of whether the foreign person has a PE in Thailand or not.
There are various types of PE recognized by the Thai tax authority and, from a tax perspective, the PE may or may not have to be registered with the Ministry of Commerce.
A type of PE that would need to be registered with the Ministry of Commerce is a branch office of foreign company. The cost and time involved in setting up a branch depends on the size and complexity of the business which the branch will be carrying in Thailand.
Other types of PE, including branch offices, may be required to apply for a foreign business permit depending on business activities to be carried on in Thailand.
Last modified 19 Jul 2023
The most common form of corporate vehicle for investors to hold real estate assets in Thailand is a private limited company. Real Estate Investment Trusts ('REITs') and property funds registered with the Stock Exchange of Thailand ('SET') offer another vehicle for foreigners to invest in property in Thailand.
Last modified 19 Jul 2023
Under Thai law, a limited company is an artificial person with rights and obligations, distinct from those of its shareholders. A limited company must have at least 3 shareholders at all times, individuals or legal persons. A shareholder's liability is limited to any paid and unpaid amounts of the share capital of the company. All shares must be paid up to at least 25% of the share par value, whether by way of cash or property.
The Civil and Commercial Code of Thailand stipulates that only shares with a par value of THB 5 or above may be issued. The registered share capital may be increased at any time by special resolution of the shareholders. Companies are incorporated by the adoption of a Memorandum and Articles of Association, which must be registered with the Ministry of Commerce.
A property fund is publicly listed and traded on the Stock Exchange of Thailand (SET) and the 'units' are similar to shares in a company. There is no nationality restriction for investing in property funds. They are established with the objective of mobilizing public funds by issuing unit trusts and then investing the funds in real estate, residential projects or other property-liked securities allowed by law. A property fund focuses purely on investment in property that returns a regular income stream rather than purchasing and developing property for future sale by way of trade.
Property funds are classified into two types:
Nevertheless, both fund types are required to invest at least 75% of their net asset value (NAV) in real estate, or leasehold rights over real estate, which must be located in Thailand and, if under construction, must be at least 80% completed. Furthermore, after acquiring a property, the property fund must hold it for at least one year. The regulations concerning property funds do not, however, allow investment in dormant land.
Property funds are required by regulation to pay dividends at a minimum of 90% of the annual net profit to the unit holders.
REIT is an investment vehicle which is regulated under the Securities Exchange Commission (SEC) and Stock Exchange of Thailand (SET). REITs are not legal persons under Thai law and are distinguishable from Property Funds in that REITs can invest in any type of property that generates rental revenue (except for real property involving immoral or illegal businesses), including overseas property. The prospectus of the REIT will detail the types of property that the REIT may invest in; similarly, the name of the REIT will reflect these property types as well. Up to 35% of the total assets of the REIT may be leveraged, and, if the REIT has obtained an investment-grade credit rating, this is increased to 60%. Other characteristics of a REIT include the option to place its assets as collateral and for up to 10% of the total assets in the REIT to be comprised of projects still in development.
During the establishment of a REIT, there must be a trust settlor who will eventually become the REIT Manager. The REIT Manager is responsible for filing a public offering of trust units with the SEC. In addition, there will be an underwriter, appointed by the REIT, to distribute trust certificates to the general public and trust unit holders will become the REIT's beneficiaries. The public offering process is regulated by the SEC, and once this process is complete, the underwriter will transfer the capital raised from this process to a trustee approved by the SEC. The trustee's responsibilities include monitoring and supervising the performance of the REIT manager and paying out dividends to trust unit holders.
Last modified 19 Jul 2023
The limited company can be formed with a minimal registered capital starting from THB 15.
A REIT in Thailand must have a minimum capital of THB 500 million.
Last modified 19 Jul 2023
The government fees payable for registration of the Memorandum of Association is THB 500.
The government fees payable for incorporation of limited company is THB 5,000. The government fees payable for the issuance of the certificate of incorporation is THB 100.
The application fee set by the Securities Exchange Commission (SEC) and Stock Exchange of Thailand (SET) is THB 200,000 (and will be increased to THB 300,000 for an application which will be submitted from 1 January 2020 onwards) and THB 100,000, respectively. The filing fee for the SEC is 0.01% of all REIT units offered for sale. The initial listing fee for SET listing varies depending on the paid-up capital with a minimum fee of THB 100,000 rising to a maximum fee of THB 3 million. The annual fee is between THB 50,000 and 3 million.
Last modified 19 Jul 2023
The time frame for incorporation of a Thai limited company is approximately 3 days from the date of making a reservation of the company's name with the Ministry of Commerce.
Property funds authorized by the SEC are operative once the establishment and management of the fund has been approved, investors have subscribed the units by the minimum aggregate amount (an IPO will need to be carried out within 1 year as from obtaining SEC approval), and the property fund has been registered with both SEC and the SET. The overall process can take up to one to two years depending on the type and complexity of the fund.
Similar to property funds, the establishment of REITs must be permitted by the SEC. The timescale for authorization depends on the application documents; however, the SEC must complete approval of establishment of REIT within 45 days after the date that the application has been lodged. The trust units must be offered to the potential purchasers within 6 months after the date of the approval. The capital raised must be transferred by an underwriter to the trustee within 15 days after the closing date of the IPO. All trust units must be listed in the Stock Exchange of Thailand within 45 days after the closing date of IPO.
Last modified 19 Jul 2023
The Civil and Commercial Code of Thailand provides comprehensive regulations on the rights and obligations of the company, its directors and its shareholders.
Property funds are required to comply with the Securities and Exchange Act and the Securities and Exchange Commission regulations.
Similar to property funds, the fiduciary duty and duty of care under the Securities and Exchange Act and the Securities and Exchange Commission regulations are applicable to the REIT manager and the trustee.
Last modified 19 Jul 2023
Corporate and accounting compliance costs for a limited company and a property fund will vary depending on the extent and number of the real estate assets held and the complexity of the company and fund structures.
Last modified 19 Jul 2023
A gain derived from a sale of real estate assets is required to be included with other taxable income and subject to corporate income tax at the rate of 30% in a given year. Conversely, a loss resulting from the sale can be used to offset any other taxable income in the given tax period.
SBT at the rate of 3.3% (including municipal tax) applies on the greater of the sales price or the most current appraised value on record by the Department of Land ('DOL'). The SBT must be paid at relevant land office upon the registration of the real estate assets.
A seller of real estate assets who is a legal person will be subject to withholding tax at the rate of 1% of the sales price or the most current appraised value on record at the DOL, whichever is greater.
The sale/ transfer of real estate assets is subject to a transfer fee at a rate of 2.0% of the official appraisal value of the DOL. The transfer fee will be collected by the DOL.
The sale of real estate assets is subject to 0.5% stamp duty on the sales price of the land or the most current appraised value on record with the DOL, whichever is greater. The stamp duty will be exempt if the SBT has been paid on the sale of the real estate assets.
Property funds are exempt from corporate income tax, specific business tax, and stamp duty. The transfer fee is reduced to 0.01% of the DOL's official appraisal value.
REITs are not regarded as taxable entities. Dividends distributed by the trustee will be subject to withholding tax at the rate of 10% when paid out to the unit holders of the trust. Income derived by the trustee from the REIT, apart from its fee and other benefits from its service, will be exempt from corporate income tax.
Last modified 19 Jul 2023
Are foreigners allowed to invest by directly purchasing a commercial real estate asset?
Foreign ownership of land in Thailand is generally prohibited. Buildings and other structures located on the land could be owned by a foreigner with separate title registration. Moreover, a foreigner is allowed to directly own condominium units with an aggregate unit space of up to 49% of the total floor area of all units in a condominium building.
In addition, foreign-owned companies may be allowed to own land for their business if operated in an industrial estate zone and/or granted investment promotion by the Board of Investment.
Last modified 19 Jul 2023