How to invest in Thailand?

Source:
Courtesy of Law Solutions
Attorney & Legal Counsellors, Bangkok, Thailand

PURCHASE OF REAL ESTATE IN THAILAND

I. PURCHASE OF LAND

Foreigners are not permitted to simply and directly own land in Thailand. That said, land ownership can be acquired by a company in which a foreigner can become shareholder. Indeed, a Thai-registered private limited company in which the foreigner holds a minority stake has the right to land ownership. Officially, Thai citizens must own more than half of the registered capital and comprise more than half of the number of shareholders. Furthermore, the Land Department controls in practice the financial credibility of each shareholder in the company acquiring land.

In terms of business activity, a Thai Limited Company is the most flexible legal vehicle. It would need a minimum of 3 different shareholders at all times, but only one director who can be a foreigner. The minimum capital is what the registrar deems sufficient to carry out the planned business.

II. LONG-TERM LEASE OF LAND AND OWNERSHIP OF BUILDING

According to Thai civil and commercial law, it possible to lease a land for a term of 30 years. Such term can be renewed upon new mutual agreement between the owner and the lessee. Moreover, the right of lease can be transferred by sale or inheritance.

Furthermore, a Thai Company or individual is entitled to grant a Right of Superficies in favor of a foreigner, giving him the right to personally own all constructions situated on the land. By using this possibility, a foreigner can therefore be registered as the owner of a building without necessarily owning the land. The Right of Superficies can be also conceded for a period of 30 years and can be renewed for another term of the same duration.

III. PURCHASE OF CONDOMINIUM UNIT

As many foreigners may discover, buying a condominium in Thailand is an interesting alternative to the restriction on foreigners to own land directly. Indeed, regulations on the purchase of condominium units by foreigners are less constraining than those governing the purchase of land.

Foreigners can indeed purchase a condominium provided they fall into one of the following three categories: (1) foreigner permitted to have a permanent residence in the Kingdom under the law of immigration; (2) foreigner granted permission to enter into the Kingdom under the law on promotion of investment; (3) any foreigner who brings foreign currency into the Kingdom or withdraws the money from a non-resident Baht account or from a foreign currency account for the only purpose of purchasing the condominium.

The transfer of funds from abroad is the most common way for foreigners to purchase a condominium unit in Thailand. In this regard, the transfer of funds must be made exclusively in foreign currency (SGD for instance). Furthermore, it is strictly required to notify to the Bank that the purpose of such transfer is made for the purchase of a condominium unit.

According to the Condominium Act, a foreigner can also have ownership in a condominium unit in a proportion not higher than 49% of the total space of all units in that condominium, at the time the application for the condominium registration is being lodged.

It is also recommended to take precautious measures before acquiring any condominium unit in Thailand: A legal due diligence should be performed before handing over any money, particularly with regard to the title deeds or pending legal actions against the owner. It is also worthwhile to carefully review and in many cases negotiate the provisions of the sale contract and/or the service contract to the satisfaction of the purchaser.

UPDATE ON VISAS APPLICATION IN THAILAND

Since 25 November 2008, the Immigration Bureau has implemented several modifications in its visa application and renewal rules, which has offered more flexibility but still remains meanwhile confusing for the foreign citizens in their actual rights and obligation for a legitimate residency in Thailand. We have therefore summarized the requirements of what we emphasize as the 8 visa categories most commonly used by foreigners during their stay in Thailand:

Transit visa

Transit visa is automatically granted for a period of 30 days (exception of 90 days for citizens from Brazil, Argentina, Peru, Chile and South Korea) to foreigners from countries that have signed a bilateral Treaty on visa exemption with Thailand (currently 39 countries) upon arrival into the Kingdom. The recent amendment has cancelled the rule of maximum stay duration of 90 days within a total period of 6 months, whereas entering into Kingdom through the border of neighboring countries will be now granted of only 15 days per visit.

Working visa

A visa can be granted for working purpose for a renewable period of 1 year provided that the foreign applicant is 1) holding a Non-immigrant B visa and a work permit; 2) employed by a company with a registered capital fully paid-up of not less than 2 million Baht; 3) employed by a company that has submitted its financial statements at the end of its last fiscal year duly certified by an auditor showing a sound financial situation; 4) employed by a company that has a minimum quota of 4 Thai employees per foreign employee (exception of 1 Thai employee per foreign employee for representative offices, regional offices and trading branches). The applicant must also receive a consistent income, which may vary depending on its nationality (from 25,000 Baht per month for Burmese or Vietnamese to 50,000 Baht per month for Japanese or Australian).

Dependant visa

Dependant visa is granted to family members of a foreigner who has been permitted to stay in Thailand under another visa category. Permission is granted for a period of 1 year provided the dependant is 1) holding a Non-immigrant O visa; 2) having proof of its family relationship; 3) a spouse, a child of less than 20 years old living with the family or a parent of at least 50 years old.

Education visa

Students of educational institutions can be granted to a visa of 1 year upon the conditions that 1) he/she is holding a temporary visa (Non-ED visa); 2) he/she is studying in an educational institution which holds a license issued by the relevant authority (Ministry of Education); and 3) a supportive confirmation and request have been made by the concerned educational institution.

Guardian visa

Guardian visa is granted to family members of a foreigner who has been permitted to stay in Thailand for studying in an educational institution. Such permission is granted for a period of 1 year upon the conditions that 1) he/she is holding a Non-immigrant O visa; 2) he/she has proof of its family relationship; and 3) he/she has the amount deposited into a local bank account of not less than Baht 500,000 for the past 3 months. For the first year, the same amount must be deposited for at least 30 days before the submission date of the application.

Marriage visa

Marriage visa is granted to the spouse of a Thai citizen for a renewable period of 1 year provided the applicant is 1) holding a Non-immigrant O visa; 2) having proof of its marital relationship; and 3) having an average monthly income of at least 40,000 Baht or the amount deposited into a local bank account of not less than 400,000 Baht for the past 2 months before the submission date of the application.

Investment visa

Such type of visa is granted for a renewable period of 1 year to foreigners who have invested at least 10 million Baht into the Kingdom upon the conditions that 1) the applicant is holding a Non-immigrant visa; 2) the applicant has proof of money transfer to Thailand of not less than 10 million baht for the purposes of i) purchase of Condominium Unit(s); or ii) lease of Condominium Unit(s) for not less than 3 years; or iii) investment into a fixed deposit account with a Thai bank; or iv) purchase of government or state enterprise bonds; or combination of i) to iv).

Retirement visa

A visa is granted to foreigners who stay in the Kingdom for retirement purpose: Such permission is granted for a renewable period of 1 year provided the applicant is 1) holding a Non-immigrant O visa; 2) at least 50 years old; and 3) having proof of a pension of not less than 65,000 Baht per month or the amount deposited into a local bank account of not less than 800,000 Baht for the past 3 months before the submission date of the application. For the first year, the same amount must be deposited for at least 60 days before the submitted date of the application.

Upon visa application, the applicant can be subject to an inspection by the immigration (especially in case of working or marriage visas). The applicant must submit its application to the relevant immigration office of its working or residential area (depending on the type of visa). The applicant is also required to pay a fee of 1,900 Baht upon each visa application or renewal, 1,000 Baht for a single re-entry permit and 3,800 Baht for a multiple re-entry permit.

LIMITED COMPANY

Legal Constraint on Activities

As you may be aware, the main body of law governing the commercial activities of foreigners in Thailand is the “Foreign Business Act” (“FBA”). This Act restricts foreign activity in different sectors of the Thai economy and to different degrees. The FBA does not allow businesses deemed “Alien” from engaging in activities specified in the law.

Under the FBA a business is deemed “Alien” if:

(i) The entity is incorporated elsewhere than in Thailand (i.e. a foreign mother company), or

(ii) A foreign individual or a foreign juristic person holds the majority of the registered capital of a Thai incorporated company.

If the type of activity operated in Thailand is a controlled activity under FBA, the entity established in Thailand needs to work around and/or within the requirements of the FBA, or utilize one of the ways in which the effect of the FBA may be avoided.

Limited Company

In terms of business activity, a Limited Company is the most flexible vehicle as it can undertake any business activities. It would need a minimum of 3 different shareholders at all times, but only one director who can be a foreigner.

The minimum capital is what the registrar deems sufficient to carry out the planned business. Setting up a company takes a minimum of 2 weeks.

If the type of activity you are operating is a controlled activity under the FBA, among the three (or more) shareholders, at least one Thai business partner must hold 51% of the number of shares.

Tax considerations

Companies pay tax at the rate of 30% on net profit after expenses. Corporate tax incentives apply concerning companies with a registered capital not exceeding 5 million Baht, the rate being reduced to 15 % on net profit between 150.000-1.000.000 Baht, 25 % on net profit between 1.000.001-3.000.000 Baht, and 30 % on net profit beyond 3.000.000 Baht. Moreover, companies pay Withholding tax at the rate of 10% on dividends paid.

Work Permit and immigration

In order for a foreigner to be employed in Thailand, both the employer and the foreigner need to qualify. In the Limited Company scenario, minimum capital of THB 2 million per foreigner and 4 Thai employees per foreigner would be needed.

REPRESENTATIVE OFFICE

Representative Office (“RO”) provides the activities of service to the parent company, head office abroad only for:

Seeking and finding for purchasing sources of goods or services;
Inspect and control the quality of the goods bought or hired by the parent company;
Giving advice in various fields concerning the distribution of the parent company products to its distributors and/or agents or to the consumers;
Publish and supply information to the local market regarding new products or services of the parent company;
Report to the parent company business movements and trends in the area.

Please note that subject to the approval of the administration, a RO can be authorized to handle one or more activities among the scope of work as mentioned above.

A Foreign Business License (“FBL”) must be obtained from the Ministry of Commerce. No income may be generated and billing cannot originate from the RO. All operating expenses must be covered by inward remittances from the parent company’s Head office.

The RO does not require paid up capital per se but is subject to audit requirements. There is no tax issue as no incomes are received by the RO for the services rendered. Nevertheless, activity reports and tax forms would be required on a yearly basis.

Government Fee for RO

Filing the Application: 2,000 THB

License Issuance: 5 THB for each 1,000 THB of registered capital, but not less than 20,000 THB and not more than 250,000 THB. A fraction of 1,000 THB shall be regards as 1,000 THB (this fee will be calculated from the registered capital of the head office.)

The application for RO shall be approved within 60 days as from the date of officially filing the application (provided the application file is complete). Then, it will take about 15 days for issuing the RO license.

The Representative Office is granted of a maximum of 2 work permits, a quota of 1 Thai employee per foreigner would be furthermore needed.

Disclaimer: Information and data as of November 2010, not binding and likely to be modified without prior notice. Please see a licensed and certified professional and seek legal counseling should you wish to invest in Thailand.