Buying real estate in Thailand with crypto-currencies
Everywhere you look these days, you can’t fail to see or hear people talking about crypto-currencies, especially Bitcoin. Since its explosion onto the scene, Bitcoin has changed the way people are investing their money and has made cryptocurrencies a legitimate financial option. With the increasing number of people investing their money in Bitcoins and the Thai real estate market being severely affected by the Covid-19 pandemic, there are numerous opportunities for people to buy property in Thailand and also bet on the reopening of the country. Thailand recognises Bitcoin(BTC) as a legitimate currency (as well as several other crypos listed in the Royal Enactment on Digital Asset Businesses BE 2561 (REDA) such as Ethereum – ETH, Ripple – XRP and Stellar – XLM).
Thailand has now granted licenses for numerous crypto exchange brokers, such as Bitkub or Bitazza.
Those exchanges allow users to cash out crypto into Thai Baht and deposit these transactions directly to a Thai bank account.
So is it possible to use your crypto to buy a property in Thailand?
In theory the answer is yes, but in practice it will depend on the type of property and the structuring of the transaction.
The first thing you would need to establish is whether or not the seller will accept a payment in Bitcoin in the first place.
If they are not open to accepting an outright payment in Bitcoin, you might be able to convince them to open an account with Bitkub and transfer the required amount using a stable coin such as Tether (USDT) which the seller could then easily cash out directly in Thai Baht.
If the buyer is a foreigner, there are some limitations on the type of property they can own, this depends entirely on the type of property they are interested in purchasing.
Under Thai law, foreigners can buy and own condominium units, buildings and structures (such as villas), lease land or property but they CANNOT own land. The most common way for foreigners who wish to buy and own a villa is to set up a Thai company (which will own the land) and then build the property (the house or structure built on it can be 100% foreign-owned). An alternative option would be for the potential purchaser to enter into a long lease agreement.
Buying a condominium with bitcoin in Thailand
Under the Condominium Act, foreigners can buy and own a freehold condominium unit (100% foreign ownership). However, there are two main conditions that need to be satisfied before a foreigner can buy a condo in Thailand. The criteria is as follows:
- The ratio of condo units owned by foreigners in the building must not exceed 49% of the total amount of available units and;
- The funds being used to buy the unit are remitted from abroad.
In practice, the second requirement would prevent foreigners from buying a condominium using crypto-currencies.
One could argue that cryptos are in fact a foreign currency because under REDA, they are considered a legal currency. Crypto-currencies are also not physically in Thailand either, therefore, it could legitimately be deemed a foreign currency. However, when registering the transfer of ownership at the land office, the officers will request the FX form from the bank showing that the funds have been transferred from a bank abroad in foreign currency. Unfortunately, platforms such as Bitkub etc. can’t provide this kind of document.
Therefore, if you want to buy a condominium with your crypto-currency in Thailand you will be forced to cash out in FIAT* in a bank account abroad and then transfer the funds in Thailand.
Buying land or a villa with Bitcoin in Thailand
Under the Land Code, foreigners cannot own land, except in a very few specific exceptions. However, foreigners can take interests in land through a Thai company or with a long-term lease.
There are three scenarios available to foreigners who are interested in owning land. Firstly, purchasing the land through an existing Thai company. Secondly, purchasing the property directly from the owner through a newly registered Thai company. Thirdly, entering into a long-term lease agreement.
Property/land owned through a Company
This is the most popular option for foreigners who are looking to buy an existing villa in Koh Samui or Phuket for example. If the land is already owned by an existing company, you may simply buy that company outright. Technically this would be a share transfer transaction and not a real estate transaction. You will have to pay the seller/owner directly, so if the seller accepts crypto-currencies as a form of payment, you could complete the transaction directly using crypto-currencies.
If you want to buy some land which is not already owned by a company, you could create your own company first. The company you set up, must have 51% of the shares owned by a Thai national, the other 49% can be owned by a foreigner. If you set up a company following this criteria, this company can legally own land in Thailand (provided that the Thai shareholders are not nominees). This is the so-called 51/49 Thai company that has been used for years by foreigners to circumvent the restrictions on land ownership in Thailand.
Buying the property/land directly from the owner though a newly registered Thai company
This option will be much more difficult as this involves dealing with a lot of bureaucracy, such as the land office and taxes etc. Also, if you are purchasing the property/land through a company, there will also be various corporate and accounting issues to consider.
When you purchase land, the transfer of ownership will have to be registered at the land office. The land office will require that the sale amount needs to be specified in FIAT (the seller and the buyer would use a specific agreement for this purpose). The land office will also require the transfer fees, Special Business Tax, Stamp duties and Withholding taxes to be paid in THB only.
If the buyer is the company (which will be the case if you are a foreigner), the amount required to buy the property will have to appear in the company’s balance sheet. As of today, crypto-currencies cannot be used as registered capital. Another issue is that the accounting process for crypto-currencies is still not clear due to the lack of published guidelines and real cases. We would highly recommend potential buyers to buy the property through an existing company as specified above.
A long-term lease (up to a maximum of 30 years) is a popular option for foreigners to gain an interest in some land due to its simplicity. Under Thai law, a leasehold allows possession and use of the land for successive terms of not more than 30 years (up to 50 years for industrial or commercial purposes under certain circumstances). Once registered at the land office (registration of the lease is mandatory if the lease period is 3 years or more), the lease becomes a lien upon the title deed (if the land is sold to a new buyer, the lessee keeps his right to use the land until the term of the lease ends).
Should the owner of the land be open to it, the lessor can pay the lessee in crypto for the rental price.
The long-term lease will have to be registered at the land office, the rental amount would have to be specified in FIAT (the lessor and the lessee would need to use a specific agreement for this purpose) and the lease registration fee will be paid in THB.
It should be noted that the renewal of the lease after the term is not automatic and may be hazardous if the original lessor who signed the renewal lease agreement is not here 30 years later to process the registration of a new lease with the land office. In case of death of the original lessor or sale of the land, the contractual option to renew the lease may not be enforceable against the heirs or the new landlord. This is the reason why one must be careful with the 90 years lease structure (30+30+30) that is often marketed by some promoters while it is in reality a 30 years lease with 2 options to renew for 30 years each.
To cope with the renewal issue, it is possible to use a legal entity as a lessor (the company is unlikely to pass away) and a set of legal documents to securize the renewal of the lease for successive terms. Such schemes can be complex and must carefully analyse but when properly set up they allow long-term foreign use and possession of land.
Owning Land through a Thai Limited Company Versus Leasehold
A Thai company is an efficient vehicle to hold property over time over a leasehold provided that the Thai shareholders are not nominees but this comes with additional costs. The key differences are highlighted below:
|Foreign ownership||Up to 49% on the land100% foreign ownerships on buildings||No ownership but full rights on land until the end of the lease (30 years maximum)|
|Resale||Transfer shares and change director of the company||Difficult to resell|
|Main risks||In case of nominee, penalties and obligations to restructure the company||Renewal for one or more successive terms of 30 years is not automatic and may be problematic|
|Timeline||2 to 3 weeks||1 week|
|Mostly used for||Holding the land for resale|
Own a property and ensure transfer to your heirs
|Project with quick revenue (such as hotel on seaside where land is really expensive to buy freehold)|
|Setup cost||From THB 40,000||From THB 50,000|
As we can see, crypto-currencies can be used to buy a property in Thailand in certain situations, namely purchasing land through an existing company or agreeing a long-term leasehold. If you have to convert your crypto into FIAT to buy a condominium or simply because the owner will not accept it, you will have to register with a crypto exchange, pass the KYC and be able to prove the source of your funds. Failure to do this could result in having your funds frozen when transferring them into FIAT. It is highly recommended to collect all the required documents needed beforehand and to contact the related bank before any transfer in order to anticipate any issue that may arise. Our experts in financial law and real estate are on hand to assist you and ensure a smooth transaction.
For more information on our Real Estate practice in Thailand, please visit https://www.belaws.com/thailand/real-estate/
*A FIAT currency is a Government-backed legal tender such as USD, EUR or THB