Airbnb revealed last August that the number of accommodation searches on the platform had increased by 180% compared to the same period last year (between January and March). This may seem surprising since the legality of such rentals, especially in condominiums, is not certain.
A 2018 court ruling in Hua Hin declared that renting out a unit for less than 30 days without having a Hotel License violated the Hotel Act and was therefore illegal. For several months after that, many people were arrested and fined for listing their condominium units on AirBnB.
Following this court decision, there has been much discussion about the legality of AirBnB rentals in condominiums in Thailand. The fact that different regulations apply and that the courts and authorities have not clarified all the legal implications regarding this activity leaves some doubts. In fact, AirBnB is increasingly used by travelers in Thailand and the law is rarely enforced by the state authorities. We can legitimately ask ourselves in which cases exactly is renting a condominium illegal in Thailand?
The Thai Civil and Commercial Code (CCC) provides some basic provisions for this activity. Section 1336 of the CCC provides that “Within the limits of law, the owner of property has the right to use and dispose of it and acquire its fruits”. On the other hand, section 1360 states that “Each co-owner is entitled to use the property in so far as such use is not incompatible with the rights of the other co-owners”. Each owner may use his or her property freely, as long as it does not violate the rights of the other owners and does not disturb them.
With respect to AirBnB rentals, some condominium owners may feel that the frequent arrival of AirBnB tenants negatively affects their quality of life and tranquility. This may lead them to file a complaint against the owner and if the authorities look into the rental, they could then impose penalties for non-compliance with the Hotel Act and the Condominium Act. These laws impose certain limits on the use of their condominium by each owner.
The Condominium Act
Section 17/1 paragraph 2 of the Act provides that “No person shall be permitted to engage in any trade transactions in the condominium except it is a trade transaction in the area of the condominium designated in accordance with paragraph one”. According to Section 65, any person who violates this provision is liable to a fine of up to THB 50,000 and an additional fine not exceeding THB 5,000 per day for the duration of the violation.
With regard to a regular AirBnB activity, it is clear that it can be qualified as "trade transactions" and that an apartment is not a space that can be designated as a business. Therefore, any owner renting out his or her apartment in a condominium could face the penalties set forth in the text. In addition, if the landlord who rents out his apartment is a foreigner, this constitutes a violation of the Foreign Business Act.
The Hotel Act
The Hotel Act defines what a hotel is. Places considered as such will fall under the law and will have to comply with its requirements. Section 4 provides that ““hotel” means an accommodation established for business purposes of providing temporary accommodation service for travelers or any other person in exchange for compensation, but not includes:
1- an accommodation established for providing temporary accommodation service carried out by a government agency, State enterprise, public organization, or other State agency, or for charitable or educational purposes, but not on profit or income sharing basis;
2- an accommodation established for the purpose of providing accommodation service for monthly paid service charge or upward only;
3- any other accommodation prescribed in the Ministerial Regulation"
If the accommodation is considered a hotel, Section 15 stipulates that every person operating such a business must obtain a license issued by the Registrar in accordance with the rules and procedures prescribed by the Minister. According to Section 59, any person who violates the preceding Section is liable to imprisonment for up to 1 year and a fine of up to THB 20,000 or both, and an additional fine of up to THB 10,000 per day for the duration of the violation.
The exemption in Section 4 is good news for all condominium owners, as it means they can rent out their units on a month-to-month basis without having to worry about a Hotel License. However, the Hotel Act will still apply to condominium owners who rent by the night or week through AirBnB.
In addition, a Ministerial Regulation (2005) has added certain accommodations that are not considered hotels under the Hotel Act. These include any residential premises open to the public for rental not exceeding 4 rooms on all floors in total, whether in a single building or several buildings, and with a total service capacity not exceeding 20 guests. This raised the question of whether "residential premises" refers to each condominium unit or to the entire condominium. Eventually, this issue was clarified and the exemption applies only to houses and villas and condominiums are not eligible.
Applying for a Hotel License
If some condominium owners want to play it safe and rent freely on a nightly or weekly basis, they can ask the juristic person to apply for a Hotel License for the entire condominium. However, the requirements for obtaining a Hotel License are considerable.
The condominium will need to have a qualified hotel manager, comply with the Building Control Act, and have a Building Permit and a Use Certificate indicating that the building can be used as a hotel. If this is not stated, they can be modified, but the building must meet fire and other safety requirements for hotels, which are more stringent than for condominiums.
Taxes on rental income
Rental income is subject to personal income tax (PIT) under the Revenue Code. Rental income will be taxed with all other personal income according to the progressive scale (0 to 35%). However, the tax is calculated only on a base of 70% of the annual rental income.
Rental income is also subject to House and Land tax which is at 12.5% of the annual rental income. This tax must be paid in February of each year in a single payment or in 3 installments. To reduce this tax it is possible to divide the total rent into rental for the property and rental for furniture and/or services. In fact, no taxes are levied on rental income from furniture and services.
Any rental income earned in Thailand but paid abroad is subject to a 15% withholding tax (unless a tax treaty provides otherwise). The withholding tax deducted from rents can then be used as a tax credit to offset the tax payable on the PIT return.
Legal recourse against co-owners renting out their apartment
If some co-owners rent out their condominium unit and this interferes with the rights of the other co-owners, the other co-owners can file a civil suit. The affected co-owner will have to prove that the rental activity is causing him/her undue disturbance and damage.
An upset neighbor could also bring to the attention of the appropriate authorities a violation of the Hotel Act.
Similarly, if the Condominium Regulations stipulate that the rental of apartments is prohibited, a complaint could be filed on the grounds of a violation of these bylaws.
On the other hand, if you do not wish to have rentals (nightly, weekly or even monthly) in your condominium, you can request that this provision be clearly written into the Condominium Regulations before taking any legal action. If this provision is already in place but not enforced, you must ask the management and the juristic person of the condominium to enforce it.
As of 2018, AirBnB has been ruled by the Hua Hin Court as illegal in Thailand if you rent out your condominium unit for less than 30 consecutive days, unless you have a Hotel License. If you do not wish to be subject to the Hotel Act, you will have to offer your apartment for rent only for stays longer than 30 days. However, this is theoretical because in reality, the application of the laws depends totally on the juristic person committee and condominium management teams.