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Phuket Law: Avoiding property pitfalls

Phuket Law: Avoiding property pitfalls

PHUKET: As a general matter, real estate in Thailand can be an excellent investment. However, horror stories are not rare enough. But if you adhere to our “nine points”, such tragedy can be avoided. Here are our final key points to beware:

By Jerrold Kippen

Sunday 8 January 2017, 11:00AM

Building permits do not equal ownership

You may hear someone tell you that having their name in a building permit means they own that building… Hopefully, that mistaken person will not be you.

Although foreigners generally cannot own land in Thailand, they can own structures such as villas. In the past it was quite common for real-estate developments marketing to foreigners to sell them “ownership” of a villa by promising a building permit in their name. Whether or not this was for “tax planning purposes” (selling a building permit incurs no real estate transfer taxes for the seller) or not we can only speculate. What is certain is that buying a building permit gets you nothing. (For details, see here.)

Your name in the building permit means nothing more than you have government approval to build an approved structure, at a given location, during a given period of time. Although it is less common, we still find sellers, including developers, selling building permits.

When it comes to building permits, don’t be fooled.


Document the money you bring into Thailand correctly

When investing in real estate in Thailand it is very important that you document the transfers properly. This process begins when you are sending the money. So you should be sure to understand all the requirements before you send your first transfer.

You will need to obtain the proper relevant documentation of the transfer from the receiving bank in Thailand. What that documentation is will depend on the amount transferred and its purpose.

Once obtained these documents should be saved in a secure location. If you are a foreigner buying ownership of condominium unit in your own name, you will need these correctly detailed documents (for every purchase price transfer) to complete the purchase. And if and when you sell your condominium unit or villa, you will need them in order to send the money back out of Thailand.

Document your money transfers.


Pay your taxes

“If it goes without saying, don’t say it.” True, but in Thailand for some reason many people seem to think paying the correct taxes is not a serious issue.

They are wrong. If you do not pay your taxes, for example income taxes from rental that was (or that should have been earned as detailed above) your property or your company’s property can be seized and sold.


We have mentioned most of the relevant taxes above with links to our other articles detailing them. However, one we have not and that is the all too common decision to under-declare the sale price of real estate to the authorities at the time of purchase. Besides the fact at this is criminal tax fraud, it is also commercially stupid because whether the property is owned by a company or a real person, you will almost certainly incur far greater tax liability on resale that what you “save” if you agree to illicitly under-declare your purchase price… not to mention the tax authorities could go after you for the under-declaration (and, if necessary, your property) while you own your property.

Pay your taxes.


Use arbitration

Finally, no one entering any agreement or contract, including those investing in real estate, expects or wants the deal to go bad and end up in a dispute. The fact is that it does happen and probably more often than you think. If that happens to you, and particularly if you are a foreigner, you almost certainly will be far better off – EVEN IF YOU LOSE – settling your dispute by legally binding arbitration than doing so in a Thai court.

By “better off” we mean the process will be quicker, less costly, documents and proceedings can be in English and the decision will be enforceable worldwide. (For detailed explanations, click here, here, here, here and here.)

However, because binding arbitration requires the agreement of the parties, and because agreement about anything is unlikely once parties start to fight, you should be sure to include a well-drafted arbitration clause in you real estate investment contract(s).

Stay out of Thai Courts, use arbitration.


This is the final installment of the “Dos and don’ts of real estate in Thailand”. For the other articles in this series, see:

• Running the real estate gauntlet: The ‘Dos and Don’ts of real estate’ in Thailand (Click here.)

• Pitfalls of diligence and leases (Click here.)

• Home-ownership nominees – The naked truth (Click here.) 

DUENSING KIPPEN is an international law firm specialising in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com

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Kurt | 11 January 2017 - 13:48:47

All the 9 points mentioned in the red color list are very true.
It shows how foreigners can be taken for a ride by thai sales people. 
In the past with the help of land offices (I don't know or that is still happening now)

Point is when you are a foreigner, thai laws and acts become 'rubber laws and acts'.
It is all about taking advantage of you who can not read thai language, bu...

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