Finding A Great Home-Away-From-Home In Paradise
If you're an American looking to buy or own property in Thailand, there are some important things you need to know. First of all, it's important to note that U.S. citizens are not allowed to buy land in Thailand, but there are other options available.
One option for Americans is to apply for a long-term land lease of up to 30 years. This allows you to build structures on the land, but the land itself will still be owned by a Thai individual or entity. Additionally, Americans can buy condominiums from property developers, but there are some key differences between the Thai and U.S. condo markets to be aware of.
One major difference is that Thai law only allows foreigners to own up to 49% of a condo development. The total area of the condo units owned by foreigners cannot exceed 49% of the total area of all saleable condo units. This means that if you're buying secondhand from a Thai citizen, you'll want to check with the development's condo association office to make sure the building has not reached the foreign ownership quota.
Another important difference is that foreigners must pay for the condo with foreign currency, which must be transferred into Thailand and converted into Baht within Thailand. This means that Americans cannot finance their purchase with a mortgage. Additionally, a Foreign Exchange Transaction Form (FETF) must be filed for large foreign currency transactions.
It's also important to note that the list price of the condo may or may not include applicable taxes, which can be substantial. The Land Department collects several taxes when the deed is transferred. When you buy secondhand, the buyer usually pays all of the taxes, because it lowers the purchase price and thus the total taxes due. When you buy from the developer, the developer usually pays the Special Business Tax (SBT) and splits the rest of the taxes 50/50.
The Special Business Tax (SBT) is a 3.3% tax on the sales price if the seller has owned the property for less than 5 years. If the seller has owned the property for 5 years or more, a 0.5% Stamp Duty is owned instead of the SBT. The Transfer Duty is 2% of the value of the property assessed by the Land Department, which is usually lower than the sales price. The Withholding Tax is a prepayment of the seller's income taxes. If you buy a condo from a developer or a company, the Withholding Tax will be 1% of the assessed value or sales price, whichever is higher. When an individual sells a condo, the Withholding Tax is usually higher and calculated based on the assessed value and the duration of the seller's ownership. Although the tax is paid for the seller's income tax liability, the buyer usually pays.
When it comes to buying from a developer versus buying secondhand, there are advantages and disadvantages to both. One advantage of buying secondhand is that you know what you're getting, but it can often be more expensive than buying from a developer. Buying from a developer, on the other hand, maybe your only option if you're looking to buy a condo in a tourist destination such as Pattaya or Phuket, where condo developments rapidly reach their 49% foreign ownership limit.
If you do decide to buy from a developer, it's important to make sure you're buying from a reputable company (one with a strong track record of compliance with government regulations and getting the necessary permits). Development companies traded on a stock exchange are generally considered safe bets, while first-time developers can be riskier. First-time developers have less experience complying with government regulations and getting the required permits, and banks may be reluctant to finance their projects. If the project fails, you could lose your money.
In summary, while U.S. citizens cannot buy land in Thailand, they can purchase condos and apply for long-term land leases. It is important to understand the legal and financial considerations involved in purchasing property in Thailand, including foreign ownership limits, taxes, and buying from reputable developers. With the right research and guidance, buying property in Thailand can be a rewarding and worthwhile investment.
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