Last Chance To Transfer Property for 1%; New Rate 3% – 6.5%

Land office transfer fees are going up on everyone: Thais, foreigners, Thai companies, everyone.

“In most cities the district office of the Land Department where transactions like ownership, lease agreements and mortgage loan agreements on official titled deeds are recorded will no longer be subsidized by the government after March 26 causing fees to increase back to the rates in place for many years prior to the April, 2008 reduction,” she said in Thai.

A worker at the Banglamung Land Office, where all property in Pattaya City is registered stated that from Monday, March 8 to Friday, March 26 there is expected to be a dramatic increase of transactions at land offices nationwide to avoid much higher fees.

Now that the land transfers fees are only about one and a half percent until after Friday, March 26 it is a good time to reevaluate property ownership alternatives. After March 26, the Land Office fees to sell the property held in a company name will be six and a half percent of property value.

Anyone ready to complete a condo or land transaction should do so as early as possible, especially if held in a Thai company limited. Property transferred to an individual, not a company, will be charged 3% of property value after March 26.

"Foreigners are urged to take this opportunity to unwind inactive Thai companies owning property while transfer fees are at a much lower rate than they will be," said one Land Office official.

“This is to encourage foreigners to transfer properties out of Thai companies set up only to own property and do not conduct any business,” said Paisan Thunnok, Attorney-at-Law.

“With the new restrictions on foreign-managed or owned Thai companies, the risk of Thai nominee shareholders and the yearly and ongoing fees for closing balance sheets on Thai companies, many foreigners may want to consider transferring their property out of the company limited and into the name of a Thai and securing the property with a recorded mortgage and a 30 year lease agreement,” said Wanrapa Boonsu of PAPPA Co., Ltd. which specializes in these protected transaction.

“The Land Department no longer allows Thai companies with a foreigner as the Managing Director or as a shareholder to buy property, record a mortgage loan agreement or leases over three years. However, for now, these companies can still sell property with a foreign Managing Director or shareholder, but this will end soon and the foreigner will be required to have a valid work permit to conduct these transactions on behalf of the company. It is a very messy thing. It is a much better strategy to legally transfer the property into a Thai friend’s or relative’s name and secure use of the property and payment of the sales price of the property by contacting me at 038 301 050 or pappa@csloxinfo.com,” Wanrapa said.

Another reason to take advantage of the low transfer fees and move property from Thai companies’ not conducting business is the risk to Thai nominee shareholders. These people are listed on official company limited registrations, but have nothing to do with the company.

They are on the shareholder lists of Thai companies where the foreigner bought the property held by the company and no Thai made any investment and there is no business being transacted by the Thai company. These Thais frst came under scrutiny in October, 2006 following the military coup taking over the national government.

Under the military government, the databases for the District Land Offices under the Land Department and the Department of Business Development under the Department of Commercial Registration were merged for cross-referencing to identify Managing Directors or shareholders with non-Thai surnames in Thai companies which also own property.

Thais who have their names as shareholders or Managing Directors of companies used by foreigners only for the purpose to buy property would be designated as “Thai nominees” and are subject to prosecution for false statements since they really do not do any business in the company, never attend company meetings required by law and did not invest any money into the company which bought property.

Nothing much has happened to use the information the cross referencing of companies with land office records in the database yet, but if the government has it, they may use it to force the closing of Thai companies not operating any business and make the companies sell properties held as assets. If this happens, it is much better to sell the property now while the Land Office fee for a 10 million baht house is about 150,000 baht whereas after March 26 the land office fee will be about 650,000 baht.

Another reason to sell properties held in Thai company names and put them in a secured way into the name of a Thai person is the yearly, ongoing fees for closing balance sheets on Thai companies which averages 18,000 baht per year. Also, there is a problem with Thai companies that do not conduct any business yet flee a false tax return as advised by an accountant showing a profit for the company to avoid closure of the Thai company for inactivity.

Property in a Thai company can be sold to a Thai person and a loan agreement can be recorded at the Land Office against the title deed and a mortgage can be placed on the property to prohibit the sale of the property until the loan is paid. Additionally a lease agreement between the Thai and the foreigner can be signed.

Property transferred between individuals will be charged three percent fees if owned for more than two years by the current owner. If owned less than two years the fee is higher, between five and six and a half percent