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Company in order to buy a house


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22 minutes ago, Artful Dodger said:

I was not clear why people are saying it is not legal for a Thai company to own a Thai property.

 

Is the reason just that they are assuming the company will be a sham then?

A Thai company formed in the correct manner, which operates a business, that employs the requisite number of Thai employees and generates an income from its business and has Thai shareholders who have invested their own funds into the company, can own property.

 

Companies set up for the specific purpose of owning a property/land which don't conform with the above are a sham and are illegal.

 

Many are saying that this has been done for years and the law has never cracked down hard on this, however they can and they probably will at some time, furthermore anyone can cause a problem for one of these sham companies or even fraudulently acquire the property (as has been the case) and the farang will have no comeback whatsoever.

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4 minutes ago, Artful Dodger said:

I just don't understand why the fact that all the company does is own a house makes it dodgy. There's nothing dodgy about an English company that just owns a house in England, and no need to make out that it is actually doing something else. It could be different here, for sure, but I am not seeing why it would be. I think it's correct that foreigners can't own freehold land in Thailand and can't have a majority shareholding in a Thai company, but there is no need to break either of those rules in order to set up and control a company that owns land.

 

If anyone knows where these rules are actually laid down in law, it might be worth looking at them. Maybe there's more to it than not being able to own freehold land or a majority shareholding.

You are not in England.Oh, perhaps you are...?

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Just now, xylophone said:

A Thai company formed in the correct manner, which operates a business, that employs the requisite number of Thai employees and generates an income from its business and has Thai shareholders who have invested their own funds into the company, can own property.

 

Companies set up for the specific purpose of owning a property/land which don't conform with the above are a sham and are illegal.

Well, if so better not to do it...  but I find what you say surprising and nobody has actually pointed to any law that bears it out. It's always dangerous to assume Thai law is the same as the law of western countries, but those are some big differences.

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8 minutes ago, Artful Dodger said:

No, I'm not... that's why I said it could be different here but I'm not seeing why it would be.

Well near everything is different in LOS to England...

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4 minutes ago, transam said:

Well near everything is different in LOS to England...

Fair enough. I think there is usually a reason for the differences, though, and I can't see one here. But it's speculation really so I will shut up.

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37 minutes ago, Artful Dodger said:

Fair enough. I think there is usually a reason for the differences, though, and I can't see one here. But it's speculation really so I will shut up.

The difference is that a foreigner can not own land in Thailand and a foreigner can not own more than 49% of a company in Thailand (US-Thailand Treaty of Amity being an exception), but a foreigner can own land and can own 100% of a company in Europe.

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5 hours ago, Artful Dodger said:

I just don't understand why the fact that all the company does is own a house makes it dodgy. There's nothing dodgy about an English company that just owns a house in England, and no need to make out that it is actually doing something else. It could be different here, for sure, but I am not seeing why it would be. I think it's correct that foreigners can't own freehold land in Thailand and can't have a majority shareholding in a Thai company, but there is no need to break either of those rules in order to set up and control a company that owns land.

 

If anyone knows where these rules are actually laid down in law, it might be worth looking at them. Maybe there's more to it than not being able to own freehold land or a majority shareholding.

Here's a link to the relevant law:

Thailand Land Code Act

 

As it says in the preamble, foreigners are only allowed to own land in Thailand pursuant to a treaty with a foreign country (there are no such treaties) or under section 96 bis which theoretically allows it when the foreigner invests 40 million Baht into the country but with so many restrictions (especially as to location) that it is not a practical option in reality.

 

Given that the law to all intents and purposes makes it illegal for a foreigner to own land, forming a "dummy' company (which is actually not a company as it does not conduct any business) with the sole purpose of allowing a foreigner to own land in defiance of the law, makes it equally illegal.

 

A property-related website summarizes it as follows:

 

Quote

Note that a Thai company formed as a front for foreign property ownership is illegal and leads to unlawful foreign ownership (because of its purpose and Thai nominee shareholding structure). A company that owns a real estate property must be a normal active company running a business and show business activity, hold yearly shareholding meetings, file yearly balance sheets and correct accounting, and as a partly foreign owned company must comply with foreign business laws. It cannot be a dormant property holding company merely holding land on behalf of the foreigner (that would be illegal).

 

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18 hours ago, a10ams said:

I bought a house using a company in Jan 2007. Had I taken the 'rent it' advice and rented the (exact same) house next door at 40k a month I would now have paid rent to the tune of 5.6m on a 6.2m house. So I'm 15 months away from break even point. Buy it if you're here for the long run.

You might  just as well be 15 months away from losing it.

The company thing has been done for many years, but it's also been a dubious (illegal) practice for many years.

I wouldn't risk it but if it works for you?

All it takes is for one official saying "hey this isn't right" and the house of cards tumbles.

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6 hours ago, Artful Dodger said:

I was not clear why people are saying it is not legal for a Thai company to own a Thai property.

 

Is the reason just that they are assuming the company will be a sham then?

The problem isn't that a Thai company owns Thai property. There's nothing wrong with that. 

 

The problem is that such a company must be owned (and therefore controlled) by Thais, meaning at least 51% of shares. This means that the foreign owner could if it was a legitimate company be outvoted when a business decision was to be made, for example selling or renting out the property to someone else. Law firms get around this by the Thai shareholders agreeing to give the foreigner a special class of voting shares, so only the foreigner can make business decisions. 

 

This in itself is a bit strange, as you have a company which is supposedly set up to invest in property that is letting a minority shareholder live there rent free and make all decisions. But it's not illegal if the shareholders were to willingly make such a decision.

 

The illegal part is the Thai shareholders aren't actually participating in the business, they aren't holding the shareholder meetings that are filed with the government each year, and are just there on paper to provide a Thai name. The lawyer knows all of this and facilities it, so they can get into trouble. The nominees and foreigner too, though they may be able to plead a level of ignorance. 

 

There's also a fair amount of risk involved and there have been some infamous cases of properties being sold out from under foreigners or loans taken out against the property without them knowing causing foreclosure. 

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THANKS everyone for replying.

Can anyone shed some light on how to and if I should do a 30 years lease?

what exactly does it means? should I do it? how should I do it? can you do it with a new property? or only used?

Thanks!

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On 8/24/2018 at 8:05 AM, Crash999 said:

Those people probably did it themselves and are saying that to reassure themselves. 

 

If you google you’ll find that the police just raided a law firm who was providing these sorts of companies to foreigners. 

 

It’s only a matter of time before the loophole is closed. Could be years or decades but do you really want to worry the whole time about potentially losing your property? 

 

The other option is long term lease of land which is legal. 

what exactly does it means? should I do it? how should I do it? can you do it with a new property? or only used?

(long term lease)

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10 minutes ago, alon95 said:

what exactly does it means? should I do it? how should I do it? can you do it with a new property? or only used?

(long term lease)

You can lease / rent land or a house for 30 years. Such a lease is registered at the Land office.

We don't know if it makes sense for you ?

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4 hours ago, alon95 said:

what exactly does it means? should I do it? how should I do it? can you do it with a new property? or only used?

(long term lease)

You can find more information here, both SamuiForSale and a number other Thai law sites gives very detailed explanations about your legal possibilities.

 

Both old and new property – "new" equals new buildings/constructions – can be leased for up to 30-years.

In short:

  • Any lease over 3-years shall be registered at the Land Office to be legal, unregistered lease over 3-years is void.
  • When register a lease, a tax (normally 1%) based on the total lease sum shall be paid.
  • If "new" you should lease the land, make a superficies agreement (which I mentioned in my earlier post) so any new building(s) can be owned by the lessee (you); and make sure building permission, drawings, constructions contracts, and bill are issued in your name only. You'll not receive any further documentation for ownership, so keep all documents safe.
  • Even you use a company-method to own land, you could often make a lease agreement, and a superficies for new constructions.
  • Old property – "old" meaning existing building(s) – cannot (to my knowledge) be placed under superficies, only if a building already is registered separate from the land.

I've recently seen a lease, or rather rental contract made, so it automatic renews for one year at time, until terminated by either party by given a specified time of notice. I'm not aware if it's a legal way to do things, but might be worth checking with your lawyer.

?

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17 hours ago, khunPer said:

You can find more information here, both SamuiForSale and a number other Thai law sites gives very detailed explanations about your legal possibilities.

 

Both old and new property – "new" equals new buildings/constructions – can be leased for up to 30-years.

In short:

  • Any lease over 3-years shall be registered at the Land Office to be legal, unregistered lease over 3-years is void.
  • When register a lease, a tax (normally 1%) based on the total lease sum shall be paid.
  • If "new" you should lease the land, make a superficies agreement (which I mentioned in my earlier post) so any new building(s) can be owned by the lessee (you); and make sure building permission, drawings, constructions contracts, and bill are issued in your name only. You'll not receive any further documentation for ownership, so keep all documents safe.
  • Even you use a company-method to own land, you could often make a lease agreement, and a superficies for new constructions.
  • Old property – "old" meaning existing building(s) – cannot (to my knowledge) be placed under superficies, only if a building already is registered separate from the land.

I've recently seen a lease, or rather rental contract made, so it automatic renews for one year at time, until terminated by either party by given a specified time of notice. I'm not aware if it's a legal way to do things, but might be worth checking with your lawyer.

?

how much would I pay for a 30 years lease? all in advance or each month/year?

what happens after 30 years to the land? ofc if I didn't paid the whole amount it doesn't really matter I guess.

A real estate company such as pruksa, will know how to do this lease thing? I am planning on a house that cost around 3MB.

Any info you could say would be very helpful. 

Thanks!

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6 minutes ago, alon95 said:

how much would I pay for a 30 years lease? all in advance or each month/year? 

Depends on what you agree with the owner

 

7 minutes ago, alon95 said:

what happens after 30 years to the land? ofc if I didn't paid the whole amount it doesn't really matter I guess.

Nothing happens with the land, after 30 years your lease just finishes. If the owner agrees you could make a new contract with him

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14 minutes ago, alon95 said:

what happens after 30 years to the land?

the Thai owner's grandchildren come swarming onto the land screaming "we own now! Farang go home! You can not step foot on this land any more. Thank you for building us a nice house!"

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On 8/24/2018 at 10:14 AM, BestB said:

Company does not do balance sheets or returns and your house becomes states property , as easy as that

BestB possesses a wealth of no idea but presents his naïve assumptions drawn out of thin air.

 

for what it's worth... cost to keep a company afloat (flat tax, balance sheet and annual returns) is 12-15,000 Baht. why would anyone who went the company route be stupid enough to save this peanuts amount by not filing returns?

 

yawn... :coffee1:

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27 minutes ago, NCC1701A said:
45 minutes ago, alon95 said:

what happens after 30 years to the land?

the Thai owner's grandchildren come swarming onto the land screaming "we own now! Farang go home! You can not step foot on this land any more. Thank you for building us a nice house!"

not if you have either a usufruct or superficies entered in the chanote. look both up before adding more irrelevant comments.

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1 hour ago, alon95 said:

how much would I pay for a 30 years lease? all in advance or each month/year?

what happens after 30 years to the land? ofc if I didn't paid the whole amount it doesn't really matter I guess.

A real estate company such as pruksa, will know how to do this lease thing? I am planning on a house that cost around 3MB.

Any info you could say would be very helpful. 

Thanks!

"how much would I pay for a 30 years lease?..."

Depending of the lease agreement with the lessor, however often the full land office tax for 30-years are due when registering the agreement.

In Western countries you count 8% to 12% annually for making it worth investing in property, might not be that different from Thailand – leasing land I've seen from anything from a few percent, or less, for farmland, to over 10 percent for business purpose land, depending on location – so in theory you can pay for the land three fold.

 

"what happens after 30 years..."

The land reverts to the owners use. If you use the Co. Ltd. way, "your" company can grant you a new lease. A superfices, for a new house construction, might be covered with some compensation, for handling the property over to the owner of the land under the house.

 

"A real estate company..."

I dont know "pruksa". What do you mean with by "real estate company", are they property sales agent? Or are they offering you a house within a project?

If it's a house offered inside a project, the maintenance fees are important to look at, as well as the whole project set-up. Some folks has lost a lot (everything) when the project goes under...?

?

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13 hours ago, Naam said:

look both up before adding more irrelevant comments.

He was having a laugh, no more...……………...sense of humour failure perhaps Naam!

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18 hours ago, khunPer said:

"how much would I pay for a 30 years lease?..."

Depending of the lease agreement with the lessor, however often the full land office tax for 30-years are due when registering the agreement.

In Western countries you count 8% to 12% annually for making it worth investing in property, might not be that different from Thailand – leasing land I've seen from anything from a few percent, or less, for farmland, to over 10 percent for business purpose land, depending on location – so in theory you can pay for the land three fold.

 

"what happens after 30 years..."

The land reverts to the owners use. If you use the Co. Ltd. way, "your" company can grant you a new lease. A superfices, for a new house construction, might be covered with some compensation, for handling the property over to the owner of the land under the house.

 

"A real estate company..."

I dont know "pruksa". What do you mean with by "real estate company", are they property sales agent? Or are they offering you a house within a project?

If it's a house offered inside a project, the maintenance fees are important to look at, as well as the whole project set-up. Some folks has lost a lot (everything) when the project goes under...?

?

https://www.pruksa.com/en/
Can I lease from a company that built a small village of couple hundred houses?

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7 hours ago, xylophone said:
21 hours ago, Naam said:

look both up before adding more irrelevant comments.

He was having a laugh, no more...……………...sense of humour failure perhaps Naam!

a relevant emoji would have made that clear.

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8 hours ago, alon95 said:

https://www.pruksa.com/en/
Can I lease from a company that built a small village of couple hundred houses?

You should ask Pruksa about that, and also about their maintenance costs in the individual projects, and how the project is/will be managed...?

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  • 2 months later...
On 8/25/2018 at 7:16 PM, duanebigsby said:

You might  just as well be 15 months away from losing it.

The company thing has been done for many years, but it's also been a dubious (illegal) practice for many years.

I wouldn't risk it but if it works for you?

All it takes is for one official saying "hey this isn't right" and the house of cards tumbles.

Transfer the property to my Thai wife takes care of the above. 

Apart from the obvious reason of not putting the house in her name from the outset in 2006, I chose to go down the company route for a second reason. I raided my pension to buy the house. The cheque took forever to cash, ie mid Sept 06 to early Jan 07. We were very close to not having the funds in Thailand for the payment deadline. There was a chance I would have needed to borrow money along the lines of a bridging loan in the UK. I wouldn't have been able to do this if the house was in somebody else's name (ie new wife). As it turned out we squeezed in by a couple of days. 

Twelve happy years down the road it makes sense to dodge any potential bullets and get the property in the wife's name to avoid any future clampdowns.

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On 8/25/2018 at 9:21 AM, jackdd said:

40k rent is too much for a 6.2m property in Thailand, the rent should be somewhere in the region of 30k.

If you had invested the same money in property in your home country, had rented it out, and used this rental income to rent a house in Thailand you would have spent the same money, had the same value, but would have a property which is 100% yours. Or you could have bought a condo in Thailand with this money, rent this out, use the money to rent a house.

It was 35k at the outset in 2006 and 45k latterly. I used 40k as an average over the years.

I have a property in the UK that has increased eight or nine fold since buying it in 1986.

I live in Hua Hin where available rental properties hugely outnumbers the renters.

 

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On 8/27/2018 at 8:26 PM, Naam said:

for what it's worth... cost to keep a company afloat (flat tax, balance sheet and annual returns) is 12-15,000 Baht. why would anyone who went the company route be stupid enough to save this peanuts amount by not filing returns?

It is not unheard of for accountants/lawyers to charge farang owners for doing the annual returns but not to actually do them. I personally know two people in Pattaya who were stung this way, and they received demands for taxes and fines going back 10 years or more. The accountants had vanished, along with much of the company paperwork.

Professionalism in Thailand can leave a lot to be desired.

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29 minutes ago, KittenKong said:

It is not unheard of for accountants/lawyers to charge farang owners for doing the annual returns but not to actually do them. I personally know two people in Pattaya who were stung this way, and they received demands for taxes and fines going back 10 years or more. The accountants had vanished, along with much of the company paperwork.

Professionalism in Thailand can leave a lot to be desired.

Similar story here when friend tried to sell his house, only to find that the lump sum he gave the accountant first up covered nothing at all.

 

He now owes the acct 300,000 baht to "settle his accounts"...……...not everything is at it seems here.

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8 hours ago, KittenKong said:

It is not unheard of for accountants/lawyers to charge farang owners for doing the annual returns but not to actually do them. I personally know two people in Pattaya who were stung this way, and they received demands for taxes and fines going back 10 years or more. The accountants had vanished, along with much of the company paperwork.

Professionalism in Thailand can leave a lot to be desired.

if the Farangs were stupid enough not to ask every year for the "tax return settled" documents i can only say "som na na".

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