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REITs in Thailand : Understanding the Investment Landscape
03/06/2024
Real estate investment has long been a popular and lucrative avenue for investors worldwide. In Thailand, the government has recognized the importance of the real estate sector and as a result, implemented a series of tax exemption measures to encourage real estate investment through Real Estate Investment Trusts (REITs).
In this blog post we will explore the key provisions of REITs in Thailand.
Key points
- REITs allow investors to earn rental income and property appreciation without acquiring real estate.
- Thai REITs must pay 90% of profits as dividends and list at least 15% of shares.
- REITs provide a tax-efficient structure, with exemption from corporate income tax until December 31st 2024.
- Establishing a REIT involves creating a property fund, raising capital via IPO, and getting SEC approval.
What is a REIT in Thailand (real estate investment)?
A REIT or Real Estate Investment Trust is a type of investment in Thailand that allows investors to earn income from real estate assets without having to directly buy, manage or finance properties themselves. Some key points about REITs in Thailand:
- REITs are companies that own and manage income-generating real estate such as offices, hotels, hospitals, warehouses, residences etc. Their shares trade on Thailand’s stock exchange.
- They are required to pay out at least 90% of net profits as dividends to shareholders annually. This provides investors regular income similar to rentals.
- Thai REITs must have at least 125 million THB in capital and minimum 75 million shares to list. At least 15% of shares must be floated to the public.
- Investors can earn through collected rents and capital appreciation as property values rise over time. Diversification across projects & locations lowers risk.
- REITs provide easy access, liquidity, transparency and regulatory oversight on real estate investments compared to directly investing.
What are the Key Features of REITs in Thailand?
REITs in Thailand offer several attractive features for investors. Firstly, they provide a flexible and tax-efficient investment structure. REITs are exempt from corporate income tax, provided that they distribute at least 90% of their taxable income to shareholders. This feature makes REITs an appealing investment option for those seeking regular income streams from real estate assets.
Secondly, REITs allow investors to access a diversified portfolio of real estate assets. By combining funds from multiple investors, REITs can acquire a variety of properties, including commercial buildings, residential properties, and even infrastructure projects. This diversification helps spread any risks and allows investors to invest in different sectors of the real estate market.
Furthermore, REITs offer liquidity to investors. Unlike direct ownership of real estate, which can be illiquid and require significant resources to buy or sell, REIT units can be easily bought or sold on the stock exchange. This liquidity provides investors with the flexibility to adjust their real estate investment portfolios according to market conditions or individual investment strategies.
How do you Establish a REIT in Thailand?
Establishing a REIT in Thailand involves several key steps. Firstly, starting a REIT requires the creation of a property fund. This property fund must comply with the regulations set by the SEC and must have a minimum initial investment of THB 500 million.
Once the property fund has been established, it can apply for an initial public offering (IPO) to raise additional capital. The IPO process involves listing the REIT on the Stock Exchange of Thailand (SET) and offering units to the public. The proceeds from the IPO will be used to acquire real estate assets, which will form the underlying portfolio of the REIT.
After the IPO, the property fund will be converted into a REIT. This conversion allows the property fund to take advantage of the tax benefits and regulatory framework created for REITs in Thailand. The conversion process requires the approval of the SEC and is subject to compliance with various requirements, including the distribution of at least 90% of taxable income to shareholders.
What are the Benefits of Investing in REITs in Thailand?
Investing in REITs in Thailand offers several benefits for both individual and institutional investors.
Firstly, REITs provide an opportunity for investors to participate in the real estate market without the need for substantial capital. By investing in REIT units, investors gain exposure to a diversified portfolio of real estate assets while enjoying the benefits of professional management and regular income distributions.
Secondly, REITs offer liquidity and flexibility. Unlike direct ownership of real estate, which can be challenging to sell any assets, REIT units can be traded on the stock exchange. This provides investors with the ability to adjust their real estate investment portfolios according to their wishes.
Thirdly, REITs offer the potential for attractive returns. Through rental income from leased properties and capital appreciation of real estate assets, REITs can generate consistent returns for investors. Additionally, the tax benefits provided to REITs in Thailand enhance the net returns for investors.
What Tax Benefits are Available to REITs?
In order to stimulate the real estate industry, the Thai Government has introduced tax exemptions designed to incentivize real estate investment by encouraging the investment of REITs.
Income Tax Exemption for Property Fund Unit Holders
An income tax exemption for unit holders of property funds applies to income derived from the conversion of property fund investment units into trust certificates, which occurs when property funds are converted into REITs. Unit holders will be exempt from income tax on the income generated during the period until the 31st of December 2024.
VAT, Specific Business Tax, and Stamp Duty Exemptions
In addition to income tax exemption, the Royal Decree provides significant exemptions to property funds concerning Value Added Tax (VAT), Specific Business Tax, and Stamp Duty. These exemptions apply to the value of income tax base attributed to instrument actions arising from the transfer or creation of real rights or rights in property. Property funds are exempted from these taxes when the value originates from the conversion of property funds into REITs. This exemption is again available until the 31st of December 2024.
How Long are the Tax Exemption Measures Available for?
The tax exemptions are available for transactions taking place until the 31st of December 2024.
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Frequently asked questions
What is a REIT in Thailand?
A REIT or Real Estate Investment Trust is a type of investment in Thailand that allows investors to earn income from real estate assets without having to directly buy, manage or finance properties themselves. Investors can earn through collected rents and capital appreciation as property values rise over time. Diversification across projects & locations lowers risk. REITs provide easy access, liquidity, transparency and regulatory oversight on real estate investments compared to directly investing.
What are the key features of REITs in Thailand?
- Tax-efficient investment structure: REITs are exempt from corporate income tax, provided that they distribute at least 90% of their taxable income to shareholders.
- Diversified portfolio: REITs allow investors to access a diversified portfolio of real estate assets, including commercial buildings, residential properties, and even infrastructure projects.
- Liquidity: REIT units can be easily bought or sold on the stock exchange, unlike direct ownership of real estate.
How do you establish a REIT in Thailand?
Establishing a REIT in Thailand involves several steps:
- Create a property fund: This property fund must comply with the regulations set by the SEC and must have a minimum initial investment of THB 500 million.
- Apply for an IPO: The property fund can apply for an initial public offering (IPO) to raise additional capital.
- Convert the property fund into a REIT: After the IPO, the property fund will be converted into a REIT. This conversion allows the property fund to take advantage of the tax benefits and regulatory framework created for REITs in Thailand.
What are the benefits of investing in REITs in Thailand?
- Participation in the real estate market without substantial capital: By investing in REIT units, investors gain exposure to a diversified portfolio of real estate assets while enjoying the benefits of professional management and regular income distributions. REITs in Thailand : Understanding the Investment Landscape
- Liquidity and flexibility: REIT units can be traded on the stock exchange, providing investors with the ability to adjust their real estate investment portfolios according to their wishes. REITs in Thailand : Understanding the Investment Landscape
- Potential for attractive returns: Through rental income from leased properties and capital appreciation of real estate assets, REITs can generate consistent returns for investors. Additionally, the tax benefits provided to REITs in Thailand enhance the net returns for investors. REITs in Thailand : Understanding the Investment Landscape
How long are the tax exemption measures available for?
The tax exemptions are available for transactions taking place until the 31st of December 2024.
What are REITs in Thailand and how are they different from REITs in other countries?
REITs in Thailand are unique compared to other countries. They are set up as trusts, not corporations, and don’t own properties directly. Instead, a trustee holds the properties on behalf of the REIT. This structure is based on the Trust for Transactions in Capital Market Act (2007).
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