Phuket Villa Resales

Company ownership of property

Not all foreigners purchasing Phuket property buy off the plan. In many cases they may buy, for example, a villa that is already owned by another foreigner. But how did the previous foreigner manage to own a freehold property in view of the fact that foreigners can’t own land in Thailand?

Well… apart from being able to own a condominium freehold, or taking out a long term lease over the land portion of the property, it was probably owned by a Thai company in which the previous owner was a minority shareholder, where 51% of the share capital was owned by Thais.

In the current political climate, the best way to transfer ownership of such a property is simply to transfer ownership of the compny to the new owner, along with its associated financing and shares, rather than the buyer form a brand new company.

Risks to consider

Although the foreign seller of the property will save considerably on tax normally payable at 30% on the gain made from the sale, the new foreign owner is liable to capital gains tax based on the original purchase price of the property by the previous owner. In effect, if he sells the property in future, he’s laible for both his own capital gains tax and that of the person who sold it to him.

This is not a problem if the new owner once again sells his interest in the Thai company to yet another foreign purchaser.

Since the original owner is saving on taxes by selling a property in this manner, this should be recognized by the purchaser and reflected in the purchase price. In other words, there are solid grounds for negotiating a lower purchase price under these circumstance.

The new owner should obviously carry out due diligence with regard to the legal, financial and tax implications of buying a property in this way, as there are potential liablities that must be understood.

Leasehold

There is of course the leasehold option where the purchaser can mitigate the risk even more by taking out a 30 year registered lease over the property. This is an extra measure which can be taken to secure the rights of the purchaser in the long term and he will effectively be paying rent to himself.