Two Ways to Own Property, Two Completely Different Outcomes
Imagine this: you have decided to invest in property in Thailand. You have found the perfect apartment. You are ready to pay. But then you hear two words: "FREEHOLD" and "LEASEHOLD".
And suddenly, everything becomes complicated.
Because in Thailand, unlike in your home country, there are two completely different ways to hold property. Each one has very different consequences for your money, taxes, and future.
Plus taxes. Annual taxes. Rental income tax. Profit tax. Taxes that nobody explains to beginners.
Let's break it down so you do not lose money because of what you did not know.
Thailand Has Only Two Main Ways to Hold Property: FREEHOLD and LEASEHOLD
There are only two main forms of property ownership in Thailand:
1. FREEHOLD: unconditional ownership
2. LEASEHOLD: the right to use a property for a defined period
It is like two different games with the same result, money coming into your account, but with different rules.
FREEHOLD: "You Fully Own the Property"
FREEHOLD means full and unconditional ownership of property.
What does this mean in practice?
Your name is on the ownership document, known as the chanote. You own the property permanently. You can sell it, rent it out, gift it, leave it as inheritance, and generally do whatever you want with it.
It is similar to owning an apartment in your home country. Full control. Full responsibility. Full freedom.
But there is one major limitation: in Thailand, foreigners cannot own land in freehold.
However, there are two exceptions:
FREEHOLD condo: you can own a condominium unit in freehold if it falls within the 49% foreign quota of the condominium's total sellable area
Company structure: you can hold property through a Thai company
Cost of FREEHOLD registration: registering freehold is more expensive than leasehold. This is because you pay more fees and taxes during the transfer of ownership.
Who FREEHOLD suits:
Investors who want full confidence that the property will belong to them permanently. People who do not want to worry about lease renewal. Those who plan to leave the property as inheritance.
LEASEHOLD: "You Lease the Property for 30 Years"
LEASEHOLD is the right to use a property for a specific period of time.
Usually this is 30 years, with the right to extend 2 more times for 30 years each, as stated in the purchase agreement.
But here is the important point: the first 30 years are protected by law. The landowner cannot simply take the property away from you halfway through the term. Your right to use it is guaranteed.
What does this mean in practice?
You sign a contract with the landowner. You pay, usually a relatively small amount per year. You register the contract at the Land Department. Then for 30 years you can live in the property, rent it out, and use it as agreed.
But what happens after 30 years?
The contract can include two additional 30-year renewal options. Total: 30 years + 30 years + 30 years = 90 years.
But this is not guaranteed by law. It is a contractual obligation between you and the landowner.
Cost of LEASEHOLD registration: registering leasehold is cheaper than registering freehold. Fees are approximately 1.1% of the property value.
Here is what is interesting: when buying LEASEHOLD, you are NOT required to provide an FET form or proof of source of funds.
This is the main difference from FREEHOLD. When you buy LEASEHOLD, you do not need to:
Prove where your money came from
Transfer money in foreign currency through official banking channels with documentation
Obtain an FET form certificate from the bank
What does this mean in practice?
With LEASEHOLD, you can bring funds through any official financial agent. This may include:
A transfer service, where money is transferred through financial intermediaries at a favorable exchange rate
Exchange offices that offer a better rate than banks
Even cryptocurrency, which can be converted into Thai baht through official platforms
At the same time, everything remains legal and official because this is a right of use, not full ownership. The law is less strict about documenting the source of funds for LEASEHOLD.
Important point: we help you choose an official financial agent that can offer the most favorable exchange rate. This means you may save a significant amount on conversion compared with a direct bank transfer, where banks often offer an unfavorable rate.
Who LEASEHOLD suits:
Investors who want to save money on registration and taxes. People who plan to hold the property for 30-50 years. Those who are comfortable working with leasehold and are not worried about renewal. People who want flexibility in funding methods and access to the most favorable currency exchange rates.
FREEHOLD vs LEASEHOLD: Quick Comparison
Reality: Most foreigners in Thailand buy property under LEASEHOLD because it is cheaper, simpler, and more accessible.
Can a Foreigner Convert LEASEHOLD into FREEHOLD?
Yes, in some cases.
If you bought resale property under LEASEHOLD and the condominium has available foreign quota, 49% for freehold, you can convert your property into FREEHOLD.
How does it work?
The request for foreign quota is made through the developer or the project's management company. They check whether free quota is available. If it is, you pay an additional fee and re-register the documents at the Land Department.
TAXES: FOUR TYPES, BUT TWO MATTER MOST
Thailand has four types of taxes for property owners:
One-time taxes when buying: paid once
One-time taxes when selling: paid once
Annual ownership tax: paid every year
Rental income tax: paid every year if you rent out the property
We are interested in items 3 and 4 because these are the ones that will affect you every year.
Rental Income Tax: The Most Important Tax for Investors
If you rent your property to tourists, you pay tax on the rental income.
The tax rate depends on your status:
If You Do NOT Live in Thailand for 180+ Days per Year
The tax is 15% of profit.
Example calculation:
Annual rental income: 700,000 baht (~20,000 USD)
15% tax: 105,000 baht
Your net income: 595,000 baht (~17,000 USD)
Important point: this 15% is withheld at source, meaning the management company or tourist deducts the money and sends it to the tax authority.
But this is not necessarily the final tax. If you file a full tax return, it may turn out that you owe less.
Why? Because 15% is a gross withholding tax, and after standard deductions are applied, the progressive rate may be lower.
If You Live in Thailand for 180+ Days per Year
Tax is calculated on a progressive scale from 5% to 35%.
This is a more complex calculation, but it is often more favorable than 15% if you have significant income.
Annual Ownership Tax: Among the Lowest in the World
Whether you rent out the property or not, you pay annual ownership tax.
This is called Land and Building Tax.
The rate depends on the appraised value of the property:
Up to 10 million baht: 0.02%
10-50 million baht: 0.03%
50-100 million baht: 0.05%
Over 100 million baht: 0.1%
Example calculation:
The property is appraised at 15 million baht:
First 10 million × 0.02% = 2,000 baht
Remaining 5 million × 0.03% = 1,500 baht
Total per year: 3,500 baht (~100 USD)
This is very low. It is one of the lowest property tax rates in the world.
This tax is paid once a year, usually before April.
Full Example: Calculation for a Typical Investor
Scenario: a foreign buyer purchases a leasehold condo in Phuket for 3 million baht and rents it out to tourists.
Purchase costs, paid once:
Registration fees: ~30,000 baht
Transfer tax: ~50,000-100,000 baht
Annual expenses, every year:
Ownership tax:
Appraised value: 3 million baht
Rate: 0.02%
Annual tax: 600 baht (~17 USD)
Rental income tax:
Annual income: 400,000 baht
15% tax as a non-resident: 60,000 baht
Net income: 340,000 baht
Total annually:
Tax payments: ~60,600 baht (~1,730 USD)
Income after taxes: ~340,000 baht (~9,700 USD)
Payback period: 3 million baht ÷ 340,000 baht = ~8.8 years
This is an approximate calculation, but you can see that the taxes are relatively low.
Important Points Nobody Tells You
1. FREEHOLD May Be More Expensive When Selling
If you own property under FREEHOLD and sell it, you pay profit tax. Under LEASEHOLD, the tax may be lower because leasehold prices are usually lower than freehold prices.
2. Make Sure the Property Management Company Pays Taxes
Many property management companies take responsibility for paying taxes. But always check whether they actually do it. Some "forget", and then the tax authority comes to you.
3. Non-Resident Foreigners May Receive a Tax Refund
If you file a full tax return instead of simply accepting the 15% withholding, you may receive a tax refund.
This happens because 15% is a gross withholding tax, and after standard deductions are applied, the progressive rate may be lower.
4. Documents, Documents, Documents
Keep everything: repair receipts, utility bills, contracts with tourists. These are deductions that reduce the taxable base.
Moment of Truth: Is It Still Profitable?
Now you know the difference between FREEHOLD and LEASEHOLD.
Now you know how much tax you will pay every year.
But here is the main question:Is it still profitable?
Yes.
Even with taxes, even with management costs, even with municipal payments, investment in Thai property remains attractive thanks to:
Low taxes: 0.02% ownership tax and 15% income tax if you are a non-resident
Deflation: expenses do not rise while profit grows
Tourist demand: tourists pay every month
The main thing is to choose correctly.
LEASEHOLD or FREEHOLD? It depends on your investment horizon and the level of peace of mind you want.
A condo in a tourist area or a villa on the outskirts? It depends on the income you need.
Which property management company to trust is the most important choice of all, because taxes are paid properly and money is received correctly only when the property is managed well.
How to Choose Correctly
1. Decide Between FREEHOLD and LEASEHOLD
If you are not sure, choose LEASEHOLD: it is cheaper and simpler
2. Decide Which Area
Tourist income vs. expat demand
We covered this in the previous long-read about Phuket areas
3. Calculate Taxes and Expenses
Annual ownership tax: low
Income tax: 15% for non-residents or progressive rates for residents
Management costs: vary
4. Consult a Tax Advisor
In Thailand, you can hire a specialist at a reasonable cost
They will show you the exact calculation for your situation
How to Get Started
Come to KOYA for a Consultation
Write to us and tell us whether you need FREEHOLD or LEASEHOLD, and which area you are considering. If you have not decided yet, that is normal: we will help.
Get a consultation: we will help you choose the ownership structure, explain the tax implications, and show you an exact calculation.
See real numbers: not theory, but figures for your specific case.
Choose a property: we will find a property that fits your budget and, most importantly, is profitable.
Connect to the KOYA platform, and we will make sure taxes are paid on time and everything is transparent, while the property generates profit.