Tag Archive: thailand

  1. Buying a House in Thailand – Handover Checklist

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    When the owner of residential property changes, the last step after the visit to the land office and the receipt of the money is crucial: the handover of the keys; after this, the previous owner moves out, and the buyer moves in. At this point, all documents are handed over, a joint tour of the house is made, and meter readings and defects are noted. It makes sense to draw up a protocol for the handover of possession so that the sale of the house does not have any repercussions. We have summarized what you should pay attention to in the house handover protocol.

    Summary of the most important things to remember in a handover:

    As with a condominium, a house is handed over at an agreed time after the purchase contract has been signed, usually only after the money has been received.

    The handover occurs under the agreed conditions, typically in a “bought as seen” condition.

    Before the keys are handed over, the buyer and seller tour the property together.

    Defects are noted in the handover protocol, including the “to do” list, who will take care of these, and by what date.

    It also lists all the previous owner’s documents to be handed over to the new owner.

    The handover protocol may also be referred to as the takeover protocol, as meter readings are recorded, and it is noted which inventory/furniture is being taken over.

    The buyer and seller sign the handover protocol, and witnesses present also sign if necessary.

    The goal of a handover protocol for a house or condominium is a smooth transition without legal disputes. It protects both sides: for example, the buyer can claim unlisted, missing, or required documents from the seller. If defects occur after the handover, which the seller neither concealed nor is responsible for, he does not have to pay for these to be resolved.

    What should be included in a house handover protocol?

    A good handover protocol checklist includes:

    1. Names and contact details of the parties
    2. Time of the inspection
    3. Property data (address, last renovation, service charges paid until)
    4. Meter readings (heating, electricity, water meters)
    5. Furniture/inventory per room
    6. Defects – including the basement, attic, garage, outdoor areas such as the garden, etc. Examples include a crack on a wall, a leaking roof, and faucets not working. A record is taken of who will remove the defects, by when, and at whose expense.
    1. Repairs that have already been ordered or are still being paid for by the previous owner.
    2. The number of keys from the mailbox to the tool shed.
    3. A list of the documents handed over. Of particular importance are:
    • Building description
    • Building plans, floor plans, sketches, and static calculations
    • Building insurance
    • Property tax assessment
    • Craftsmen’s invoices (especially relatively recent, larger ones)
    • Inspection records (especially fireplace inspections by the chimney sweep)
    • Operating manuals for building services/heating etc.
    • In the case of condominiums, the minutes of the last three owners’ meetings and the declaration of division should also be included.
    • Place, date, and signature of all who are present*.
      *Optional: If witnesses accompany you during the handover, name them in the handover protocol and have them sign.

    For more information about our real estate services please visit www.franklegaltax.com/services/real-estate/
    If you have any questions related to property transfers or real estate in Thailand, please contact [email protected]

  2. How To Legally Rent Out A Property in Thailand

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    As part of the steady economic recovery from the COVID-19 crisis, Thailand is gradually attracting tourists back into the country. Due to the increased number of visitors, short-term rentals through platforms such as Airbnb, including daily rentals, are in high demand, encouraging villa and condominium owners to set up short-term rentals by allowing tourists to stay in their properties. However, it is important to understand the legal implications of setting up short-term rentals in Thailand as a host.

    Below, we classify three different property scenarios:

    1. Condominium Units

    In most condominiums, daily rentals are usually prohibited as condominiums are not legally recognized as hotels under the law. As a result, condominium unit owners must check the rules and regulations of that particular condominium and the previous minutes from co-owner meetings before deciding to proceed with short-term rentals through Airbnb, booking.com, Agoda, or similar websites, as there may be certain restrictions.

    2. Landed Property

    Whereas for villas, short-term rentals are much more flexible as, in most cases, there are no rules and regulations applicable as in the case of condominiums. It must be noted that according to Article 1 of the Ministerial Regulation B.E. 2551 (2008), a hotel license is needed for villas or buildings with over four rooms and a capacity for over 20 guests. For most villas, this threshold for a hotel license is usually not met. Furthermore, Section 4 (2) of the Hotel Act B.E. 2547 states that the definition of “hotel” does not include accommodations established for the purpose of monthly rentals. As a result, if the villa qualifies as a hotel in terms of size and capacity, but the property is rented out monthly only, it will not be subject to the Hotel Act, which means that a hotel license or a notification of a non-hotel is not required.

    3. “Non-Hotel” Notification

    If the condominium units or villas qualify as a non-hotel through daily rentals by having less than four rooms and for a capacity of 20 guests or less, a notification must be submitted to the local district office using the following documents:

    • Land title deed/unit title deed
    • House registration book of the villa/condominium unit
    • Villa building permit
    • Villa floor plan
    • Company affidavit and other relevant company documents (if a company is the villa owner)
    • ID card/passport of the owner/authorized director of the company

    It is important to note that the illegal operation of a hotel is subject to a jail sentence for up to one year or a fine of up to THB 20,000 and an additional fine of up to THB 10,000 a day throughout the period of violation, according to Section 59 of the Hotel Act.

    If you have any questions related to property in Thailand, please do not hesitate to contact us at [email protected]

  3. Applying for Thailand’s Long-Term Resident Visa (LTR): Requirements and Qualifications

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    The Thai government recently announced that they are making some changes to the Long-Term Resident Visa (“LTR”) requirements intending to attract more foreign residents to come to Thailand.

    Kindly note that although the Thai cabinet and the Board of Investment (BOI) approve of this new LTR visa, there still has not been any official announcement from the Immigration Department as yet. Therefore we are still awaiting final confirmation for the time being.

    This article will detail some of the currently discussed criteria and requirements for different application categories to live, work, and do business in the country. There are four categories of eligible persons:

    1. Wealthy global citizen

    The following is required to be eligible as a “Wealthy global citizen”:

    a. Personal Income of no less than $80,000 USD per year in the two years before applying for the visa.

    b. Directly invest in Thailand as an individual investor no less than $500,000 in at least one of the below items before applying for the visa:

    • Thai government bond issued by the Ministry of Finance with over five years of remaining maturity at the time of application.
    • Investment in a limited company or public company registered under Thai law, and investment in a venture capital company registered with the Securities and Exchange Commission (SEC), Thailand, excluding investment in the Stock Exchange of Thailand (SET).
    • Investment in real estate (condominiums)

    c. The net asset value should be no less than $1,000,000 at the time of application (excluding assets without proof of applicant’s ownership and assets without reliable market appraisal evidence such as artworks, amulets, cryptocurrencies, or memberships).

    d. Health insurance with coverage not less than $50,000 with a remaining maturity of no less than ten months at the time of application or valid social security benefits which insures for hospitalization and treatment in Thailand or a deposit not less than $100,000 in a bank account at least 12 months before completing the application.

    2. Wealthy Pensioner

    The following is required to be eligible as a “Wealthy pensioner”:

    a. 50 Years of age or older and receives a regular pension income of no less than $80,000 per year.

    b. In case personal income is less than $80,000 but no less than $40,000 per year, applicants must have an investment not less than $250,000 in any of the following categories:

    • Thai government bond issued by the Ministry of Finance with over five years of remaining maturity at the time of application
    • Investment in a limited company or public company registered under Thai law, and investment in a venture capital company registered with the Securities and Exchange Commission (SEC), Thailand, excluding investment in the Stock Exchange of Thailand (SET)
    • Investment in real estate (condominiums)

    c. Health insurance with no less than $50,000 coverage through the entire period of stay in Thailand or social security healthcare, which insurers hospitalization treatment in Thailand.

    3. Work-from-Thailand Professional

    The following is required to be eligible as “work from Thailand professional”:

    a. Before applying for the visa, personal income should be no less than $80,000 per year in the past two years leading up to the application. In case annual personal income is less than $80,000 but not less than $40,000 in the past two years, applicants must have a master’s degree (or above) and own intellectual property.

    b. Health insurance policy with no less than $50,000 coverage through the entire period of stay in Thailand or social security healthcare, which insures for hospitalization treatment in Thailand

    c. At least five years of working experience in the relevant field to the current employment

    d. The current employer must have one of the following types:

    • a public company listed on the stock exchange in any country, or
    • a private company that has been in operation for at least three years and has a total combined revenue of more than $150 million in the last three years.

    4. Highly-Skilled professional

    The following is required to be eligible as a “highly skilled professional”:

    a. Highly skilled professionals working in business in targeted industries in Thailand.

    b. Experts in targeted industries, working for a Thai government agency or a higher education institution, or a specialized training institution in Thailand

    c. Personal income of no less than $80,000 per year in the past two years

    d. In case annual personal income is below $80,000 but no less than $40,000 in the past two years, applicants must have a science and technology master’s degree or above or have particular highly-skilled expertise relevant to the job assignment in Thailand

    e. No minimum personal income for experts working for a Thai government agency or a state-owned higher education institution, or a state-owned specialized training institution in Thailand

    f. Heath insurance policy of no less than $50,000 coverage through the entire period of stay in Thailand or social security healthcare, which insures for hospitalization treatment in Thailand

    g. At least five years of working experience in the targeted industries except for applicants working for a Thai government agency or a state-owned higher education institution or a state-owned specialized training institution in Thailand or applicants with a doctorate

    For more information about our immigration or work permit services in Thailand, please visit www.franklegaltax.com/services/immigration-work-permits or contact us at [email protected]

  4. Thailand Launches New Flexible Plus Programme to Attract Wealthy Foreigners

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    The Tourism Authority of Thailand (TAT) recently released the new “Flexible Plus Programme” under the Thailand Privilege Card scheme. This programme is designed to attract high-income foreigners to stay and invest in Thailand by giving them a work permit and other privileges.

    The initiative offers valid cardmember privileges for at least ten years, and the minimum fee is one million baht. Under the programme, they offer three types of cards which are:

    1. Elite Ultimate Privilege (EUP)
    2. Elite Superiority Extension (ESE)
    3. Elite Privilege Access (EPA)

    Members of this program must invest at least USD one million within a year of the approval of their membership. It should be noted that the investment options must be from one of the following categories:

    1. Real estate
    2. Stock in the Stock Exchange of Thailand (SET)
    3. A Public Limited Company or Limited Company

    Moreover, this program also gives privileges to the cardholder by changing the type of visa from Privilege Entry (PE) to a Non-Immigrant (B). Including their spouse and children, the member can change their visa type to Non-Immigrant (B). The benefit of this is that a Non-Immigrant (B) visa allows cardholders to apply for a work permit lawfully.

    It should be noted that the program does not provide any benefits related to property ownership by foreigners.

    Any member who wishes to extend their “Flexible Plus Programme” must show evidence of investments made every year to the TAT. Otherwise, the status will only be valid for five years.

    Please let us know if you have any questions by contacting us at [email protected]

     

  5. Government Regulations for Rental Business

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    Due to the increasing popularity of condominiums and apartments in the city, which comes with several issues related to rental and utility bills; as a result, the Contract Committee of the Consumer Protection Board has issued a new notification, the Stipulation of Residential Property Leasing as a Contract-Controlled Business B.E. 2562 (2019) (the “Notification”), published on 31 October, 2019, this new Notification has canceled the earlier Notification the Stipulation of Residential Property Leasing as a Contract-Controlled Business Contract-Controlled Business B.E. 2561 (2018).

    Some of the key requirements under the new Notification are detailed as follows:

    • Residential property leasing business means a business that leases (or subleases) five units of property or more to individual lessees, for residential purposes, for a fee charged by the business operator, regardless of whether the units are in the same building or not. This includes all types of residential property that are leased for residential purposes, except for dormitories and hotels, which are regulated with different regulations.
    • Residential lease agreements must include a Thai version and certain information mandated by the Notification.
    • The business operator’s right to terminate the agreement must be written in red or black letters, or in bold or italics, and underlined, or emphasized in other ways that make such terms more pronounced than the other content of the agreement.

    • Invoices for the rental fee, public utility fee rates and service fee rates must be sent to the lessee at least three days prior to their due dates, and the lessee will have the opportunity to inspect the information on the invoices relating to the payments.
    • Details of the physical condition of the property and its contents, inspected and acknowledged by the lessee, must be attached to the lease agreement.
    • Show a calculation method of utility rates such as electricity bills, water bills, telephone bills.
    • The security deposit must be immediately returned to the lessee at the end of the agreement unless the business operator must investigate any damage to ascertain whether or not it is the responsibility of the lessee. If the lessee is found not to have caused such damage, the security deposit must be returned within seven days from the end of the agreement and the business operator retaking possession of the property. The business operator is also responsible for any expenses incurred in returning the security deposit to the lessee. 
    • In case the agreement has a fixed duration, the lessee has the right to terminate the agreement before expiration, provided the lessee has leased the property for no less than half of the period specified in the agreement by providing at least 30 days advance written notice to the business operator, and must not be in default in respect to paying the rental fee or other expenses.
    • The business operator can only terminate the agreement if the written notice has been given to the lessee to rectify the breach within 30 days of receipt and the lessee fails to do so. However, only 7 days advance notice is required if the cause of termination results from actions of the lessee that affect the livelihood of other lessees. No advance notice is required if the lessee does not comply with the law and the regulations relating to public order and good morals.

    Under the new Notification, clauses that have the following effects shall be invalid.

    • Waiving or restricting the liability of a business operator for breach of contract or wrongful acts.
    • Requiring advance rental fees equivalent to more than 3 months of the monthly rent and security deposit combined.
    • Entitling the business operator to change the rental fees, public utility fees, service fees, or any other expenses before the end of the agreement.
    • Any provision that allows the business operator to seize the security deposit or advance rental payment without any fault on the part of the lessee
    • Any term that allows the business operator, or its representative, to inspect the building or property without prior notice, unless an emergency situation exists that could cause damage or have an impact on the business operator or other lessees if the business operator does not conduct such an emergency inspection
    • Any provision for electricity and water supply fees is higher than the rates set by the appropriate authorities.
    • Any term allowing the business operator to prohibit or obstruct the lessee’s access to the property in order to take or remove the lessee’s possessions without exercising the right to legally terminate the agreement.
    • Any term that allows the business operator to request any charge or expense in exchange for renewing the lease.
    • Any term permitting the business operator to terminate the lease agreement without the lessee causing a material breach of the lease agreement;
    • Any provision that holds the lessee accountable for losses resulting from normal wear and tear of the property’s contents and equipment.
    • Any term that holds the lessee liable for damage to the property, contents, and equipment that occurred due to circumstances beyond the lessee’s control, such as force majeure.
    • Any term that holds the lessee responsible for problems in the property, contents, and equipment that occurred as a result of normal wear and tear.

    Conclusion:

    The rental company has grown exponentially in recent years, and the consumer protection council has noticed a growing problem. As a result, a new notification has been issued to bring the legislation up to date. The major difference between this new notification and the previous version is the right of the lessee to terminate the contract and specifics related to the advance rental payment.

    Feel free to contact us at [email protected] if you have any questions about the above information.

  6. FRANK Legal & Tax listed on Lexology

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    We are pleased to share that we are now listed on Lexology, one of the leading sites for international legal updates, analysis, and insights. At FRANK Legal & Tax, we strive to ensure that you can connect with us through various quality legal channels. Explore our hub here: https://www.lexology.com/contributors/frank-legal-and-tax

    If you have any questions about partnerships, please do not hesitate to contact us at [email protected] or call us at +66 (0)2 117 9131 or 2.

  7. Changing a Last Will with a Codicil

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    A codicil, or addendum, is a legal document that changes certain provisions of a will but leaves all other provisions unchanged. You can change, update or even revoke your will completely at any time as long as you are mentally competent. This article will look at some scenarios of when you could make a codicil or consider a completely new will.

    When does a codicil make sense?

    There are no written rules for when a codicil is required instead of a completely new will. Common sense dictates that it is best only for small changes, which are unlikely to be contested.

    The consensus is that a codicil is sufficient if you want to make minor changes, such as adding or deleting certain bequests, changing who should serve as your personal representative, or updating the name of a beneficiary or your representative due to their marriage or divorce.

    When does a new will make sense?

    Consider making a new will if the changes you want to make are substantial, such as adding your new spouse as a beneficiary after a marriage. It is also a good idea in the case of other significant changes, such as:

    codicil
    • Excluding a beneficiary;
    • Getting divorced;
    • Adding a newborn baby;
    • Changing distributions from family members to charity, or vice versa.

     It is also important to clarify that your original will is revoked. Either destroy it, along with any copies that may exist or write “REVOKED” on each page with your initials or signature.

    How to consolidate multiple codicils

    What if you have made a series of three or four simple codicils over the years and now want to make another small change? Consider consolidating all your changes into a new will. It will prove helpful to the administrator of your estate, who will then have a single document to hand, rather than having to piece together the provisions of four or five separate documents.

    It may also help the court recognize your will as valid because a new will spell out your final wishes instead of a conglomeration of provisions that may make your intentions seem unclear.

    Note that a probate judge could declare your entire will invalid if the intentions appear uncertain, or they could decide to disregard some or all of your numerous codicils because the overall picture of your last wishes is confusing.

    If a judge decides that your will is invalid, the result would be the same as if you died without leaving a will at all. Your estate would go to your next of kin under statutory provisions based on how closely related you are, even if this is not what you would have wanted. Your estate could go to the son or daughter from whom you have been estranged for years. In the absence of heirs, your assets could go to the state, even though you had intended them to go to charity.

    Another concern is that the codicil could be separated from the will.

    How to be sure that your codicil is legally valid

    The codicil must be prepared under the relevant legal requirements, and the same formalities as for your original will must be followed. In Thailand, this means that two witnesses must be present and sign.

    If you have any questions related to this matter, please do not hesitate to contact us at [email protected]

  8. DBD Certification: Verification System and Trustmarks

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    This article discusses the different types of verification marks of the Department of Business Development (“DBD”). It will look at the requirements for each verification mark and the purpose of the verification system.

    In line with current economic trends, e-commerce has become an important part of our lives, yet most e-commerce websites lack credibility in customers’ eyes. To address this problem, DBD established a verification system named “Trustmark Thai”. Trustmark Thai is a system for issuing a certification mark that helps e-commerce businesses gain credibility and customer trust.

    It is noteworthy that the Trustmark Thai verification system is unrelated to the trademark registration system; furthermore, the verification system under the scheme should be distinguished from marketing and sales licenses.

    1. Verification System Overview

      DBD Registered” Trustmark


      The DBD registered certification mark is a certification that an e-commerce business can gain by registering with the DBD

       DBD Verified” Trustmark

      In e-commerce, the “DBD Verified” trustmark should inspire confidence. It is issued to e-commerce operators to boost their credibility, by showing that the website has passed the DBD’s e-commerce business quality standards assessment.

    2. DBD Verification System

    “Silver Verified” Trustmark

    The “Silver Verified” trustmark is issued to juristic persons who pass DBD qualifications as below:

    • Registered the business with DBD
    • Consecutively submitted financial statements.

    “Gold Verified” Mark

    Representing an excellent level, the DBD Verified Gold mark is available to juristic persons who meet the below DBD qualifications:

    • Registered the business with DBD for at least one year
    • Consecutively submitted financial statements for at least one year
    • Pass the following e-commerce quality standards
      • Disclosure
      • Fairtrade/service terms
      • Website Security
      • Privacy
      • Dispute resolution
      •  

    “Platinum Verified” Mark

    Representing outstanding level, DBD Verified Platinum Trustmark is available to juristic persons that pass DBD qualifications as below:

    • Registered the business with DBD for at least two years
    • Consecutively submitting financial statements for at least two years
    • Pass the following e-commerce quality standards
      • Disclosure
      • Fairtrade/service terms
      • Website Security
      • Privacy
      • Dispute resolution
    • The website has been awarded the gold level mark for two consecutive years.

    After registration with the DBD, it will issue a letter of authorization to use the verification mark and verification code on the website, which will be valid for one year and must be renewed every year.

    3. Conclusion

    The DBD created five different trustmarks, each with its own set of requirements. The trustmarks serve the purpose of establishing credibility for the e-commerce industry. The DBD created three tiers of verified

    Trustmarks to help customers decide which business is trustworthy. Furthermore, it should be noted that in order to operate an e-commerce business in Thailand, a sales and marketing license is still mandatory, such as a direct sales license.

    Feel free to contact us at [email protected] if you have any questions about the above information.

  9. The “Khai Fah”– Updates Regarding the Sale with Right of Redemption in Thailand

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    Thai law provides a means of real security and an alternative to the mortgage, the so-called Sale with Right of Redemption (Thai: “Khai Fah”). It is governed by Sections 491 ff. of the Thai Civil and Commercial Code (“CCC”), and it involves a conditional transfer of ownership that can be redeemed under certain circumstances.

    Recently, the legal provisions related to the Khai Fah have been revised under a new law called the Protecting Citizens when Entering to Khai Fah Agreement of the land for Agricultural or Residential Act (the “Act”). This is to control the Khai Fah Agreement for the land for agricultural and residential use, and to protect the seller, who usually has limited power in contract negotiations with the buyer.

    Even if the ownership of the property sold passes to the buyer upon registration of Khai Fah, Section 12 of the Act states that “the seller has the right to possess, make use and benefit from the property sold for the purpose of agriculture or residence until the redemption has expired, without remunerating the buyer. Meanwhile, the seller shall take care of the property sold as a person of ordinary prudence would take care of his/her own property.” This means that the Khai Fah seller (that is, the borrower under the loan) may utilize the property during the Khai Fah period. The buyer or new owner may neither sell nor use the house for himself.

    Section 10 of the Act provides that “the duration of the Khai Fah period of the land for agricultural and residential use shall not be less than one year or exceed ten years. Notwithstanding, the seller is entitled to redeem the Khai Fah at any time before the duration.

    Khai Fah

    Section 18 of the Act provides that “in case the seller cannot exercise the right of redemption with the buyer by a cause not attributable to the seller, he/she is entitled to make the agreed repayment and redeem the property sold to either the land office or deposit office within 30 days from the due date of redemption.”

    The Khai Fah is a particular legal structure in the Thai legal system. Usually, the Khai Fah is set up in connection with a loan arrangement. The redemption takes place upon repayment of the loan. Characteristic of the Khai Fah is that a period of time is registered in which the borrower/seller has the opportunity to pay back the loan. If he does not succeed in raising funds for the repayment in time, he automatically loses the property to the lender/buyer. After the expiration of the Khai Fah period the ownership of the property cannot be redeemed anymore, the ownership remains with the lender/buyer unconditionally, and the ownership transfer automatically becomes final.

    This is in contrast to the mortgage, which is not tied to a registered time period. The mortgage remains registered until it is redeemed, i.e. when the loan is paid back or until it is enforced by the lender. Certainly, there will be a time period for repayment stipulated in the loan agreement. But if such period expires, the lender still has to go through lengthy enforcement procedures, i.e. go to court, public auction, etc. In particular, given the rather slow court procedures in Thailand, this is much more burdensome and costly.

    A Khai Fah for land or a condominium unit is registered on the title deed of that property. Such registration includes the names of seller and buyer and the date and duration of the Khai Fah.

    In addition, a detailed contract between the seller and the buyer will be prepared to detail the terms of the loan and the right to redeem. 

    The duration of the Khai Fah period is limited to ten years in the case of immovable property.

    If during the Khai Fah period, the borrower/seller uses the right to make the agreed repayment and redeem the property, he can pay the land department directly, i.e. the local officer in charge. Alternatively, he can pay to a “deposit office” according to Section 492 CCC. The land officer will then immediately void the previous ownership transfer to the lender/buyer without the requirement for his consent. Only after the redemption has been registered, the land officer will notify the lender/buyer.

    Unless otherwise agreed by the borrower/seller and lender/buyer, the price of redemption shall be equal to the sale price.

    Regarding official registration fees and taxes, the following cases need to be distinguished:

    1. The transfer fees and taxes for the initial ownership transfer (the “sale”) from borrower/seller to lender/buyer are according to general rules, i.e. the same amounts as for a standard ownership transfer.
    2. If the Khai Fah is not redeemed, i.e. the Khai Fah period expires without redemption, the borrower/seller will be obligated to pay additional income tax for the property during the Khai Fah period. It is payable as a part of the income tax for the year in which the Khai Fah expired.
    3. In case of the redemption of the Khai Fah, i.e. the transfer back to the borrower/seller, no transfer fees and no specific business tax apply. However, withholding tax applies in the same amount as for a standard ownership transfer. The withholding tax is a prepayment of income tax, collected by the land office at the time of the transfer registration. The lender/buyer is obligated to pay this tax; the borrower/seller, however, is entitled to withhold and deduct the amount from the repayment to the lender/buyer.

    Conclusion:

    The Khai Fah as a form of encumbrance is an excellent means for a lender to secure a loan in Thailand, and in certain cases, it can be a good alternative to registering a mortgage. The advantage is the very efficient enforcement, which is also viable for a private lender. A standard enforcement procedure, including a public auction, is completely circumvented, and an “automatic” final ownership takes effect upon the expiration of the Khai Fah period. For the borrower/seller in the Khai Fah arrangement, it is however important to note the rather high fees and taxes and to be aware of the drastic consequences of expiration of the Khai Fah period.

    If you have any questions regarding the above, feel free to contact us at [email protected] or call us at +66 (0)2 117 9131-2.

  10. Taxation For Foreign Investors

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    This contribution aims to provide a high-level overview of the taxes that could apply to foreign investors in Thailand.

    The Thailand Revenue Code is the main body of law that codifies procedures regarding tax assessment and the collection of the various taxes in Thailand. Taxes are mostly collected under a self-assessment system, whereby taxpayers are responsible for correctly filing their tax returns and for paying taxes.

    Thailand has entered into numerous Double Taxation Agreements (“DTAs”) with other countries.

    The most important taxes that apply to foreign investors in Thailand are corporate income tax and personal income tax. However, there are other taxes and contributions to keep in mind, such as value-added tax, specific business tax, stamp duty, certain municipal taxes and social security payments.

    Taxation for foreign investors

    1.Taxation of Individuals

    Regardless of whether an individual is a Thai resident or not, if income is derived from employment or business conducted in Thailand, such a person is subject to Thai personal income tax. Furthermore, if an individual stays in Thailand for at least 180 days in any calendar year, he/she is considered a Thai tax resident. As a tax resident, if foreign-sourced income is brought into Thailand in the same year that it is earned, such income will be subject to Thai tax. There are certain deductions of allowances and expenses available, including standard allowances such as personal allowance, allowances for life insurance premiums, provident or pension funds, interest payments, and donations. Depending on the government’s policy each year, there may be other possibilities for tax allowances besides the standard allowances.

    2. Taxation of Corporations

    Companies and partnerships incorporated in Thailand, or foreign companies with a permanent establishment in Thailand, and a foreign company that derives income from Thailand are subject to Thai corporate income tax.

    If the company is incorporated under Thai law, its worldwide income is taxable in Thailand. Whereas, a company that is established under foreign law but conducts business in Thailand will be taxed only on the income generated in Thailand. The general corporate income tax rate is currently set at a flat rate of 20 percent of the net profits, but certain reductions are in place for SMEs. Before calculating the net profit, expenses incurred to acquire profits or from conducting business in Thailand are deductible expenses.

    Value-added tax, a consumption tax on goods and services, applies to all retailers, manufacturers, wholesalers, service providers, and producers. The VAT rate is currently 7 percent. VAT is inclusive of municipal tax. It must be noted that small businesses with annual gross sales of less than 1.8 million are exempted from VAT.

    Furthermore, employers and employees must contribute 5 percent of the employee’s monthly compensation for social security until the legal monthly threshold of 750 THB is met. This obligation applies to companies incorporated in Thailand at the company registry of the Ministry of Commerce.

    Feel free to contact us if you have any questions.

    FRANK Legal & Tax