Option for Buying Land or Property in Phuket
When buying a property, finding and doing due diligence on the property, signing the contract, and transferring ownership of the asset, which way to go when an option is possible? Buy land or buy shares in the Thai LLC? Go to the Land Department or go to the Business Department? We provide below the difference in cost and process between the two options.
Due to law requirements, both buy land or buy shares in a Thai LLC, must register with the state agency, and pay taxes and fees. It may be easier to understand the difference by the comparison below;
1-At The Land Department
The taxes to be paid depend on the quality of the seller, whether we are in the presence of a juristic person (company) or a natural person. Two amounts will be used: the Crown Property Office’s estimated price and the parties declared price.
1-1 Juristic Person
Transfer fee: 2% of the estimated price of the property
Business tax: 3.3% of the declared price or estimated price of the property (whichever is higher).
Withholding tax: 1% of the declared price or estimated price of the property (whichever is higher).
1-2 Natural Person
Transfer fee: 2% of the estimated price of the property
Stamp duty is 0.5% of the declared price. Only payable if possession lasted more than 5 years before the sale. Or
Business tax if possession is less than 5 years before the sale. 3.3% of the declared price or estimated price of the property (whichever is higher).
Withholding tax: This income tax is calculated at a progressive rate based on the declared price of the property.
Note that if the law designates which party has to pay the fees and taxes, the parties are free to split them as they want, and these costs are generally shared 50/50 between the parties.
2-At The Business Department
The solution to acquiring ownership, in this case, is to control the board of directors and attach the right to vote to the board of shareholders. The total won’t be more than 30.000 THB. After that, you will pay yearly accounting fees of around 25,000 THB.
Risk management or Due diligence shall be done on the company itself, and the risk is that even if a clause of liability is inserted into the contract for the previous director or shareholders as the seller, no one knows the future, and any debtor can sue the company, meaning you, to collect any remaining debt. You are in charge of using the liability clause to sue your seller.
Conclusion
That is an option when buying real estate in Phuket. Each solution has its benefits and risks, and the choice between Land transfer or share transfer should be made case by case. Above all, whether buying land or buying shares in the LLC, risk management before a deal is needed. If you are in need of a real estate lawyer to give you legal advice about options when buying real estate in Thailand or for more information, feel free to contact us at any time.
