Form Thai Limited Company, buy land?

[Jlop]

There are two ways for a foreigner with no Thai spouse to get access to land to build a house. 1) lease the land. 2) Form a Thai Limited Company where the foreigner can have up to 49% of the shares, but supposedly all of the financial control. With leasing, it's definitely legal, but it gets tricky in terms of renewing the lease after the first 30 years, inheritance rights, and selling the house and lease. No matter what you put in the side contract with the lessor, things can still go south.

 

With Option 2, you might avoid some of the problems listed above, but you face business tax rate if you sell (3%+?), and you can't be sure your Thai partners will give you all of the profit if you sell. Plus, I've heard that the government is cracking down on this, and that the corporation must show actual business activity regularly. 

 

Getting to the point, I found some land I like. Good European guy I know over 2 months and find trustworthy is one of the owners,  and is willing to give favorable terms for leasing. He has experience in real estate and advises against option 2 after speaking with a prominent attorney. On the other hand, I found a Thai account accounting company that says they are still forming many foreign minority corporations, and that they are not having any issues with the government. He charges 30,000 baht to set establish a corporation. The three Thai shareholders would be part of his company. I found the guy from a Thai who sells real estate, and says she knows him 5 years, and he knows what he is doing. I plan to ask for references, but not sure where that will go.

 

My questions for this forum: (1) Recent experiences with option 1 or 2, and recommendations? 

(2) Any way to check for complaints against this company "Siam Accounting and Business Company Ltd." (Krabi)? Thank you!

 

 

[jmccarty]

Option 2 is not legal and often reported to be the next crack down and eviction or legal dealings govt vs people with these type of deals.

[NCC1701A]

20 hours ago, Jlop said:

He charges 30,000 baht to set establish a corporation. The three Thai shareholders would be part of his company.

 

[TheFishman1]

Don’t do it TIT

[allanos]

Under your option 2, where you state that a 49% shareholding can give complete financial control, this would appear to be an oxymoron in itself.  You go on to state, further, that you cannot be sure the 51% shareholders would give you all of the "profits" from a future sale.  This would appear to negate your proposition that 49% will allow for complete financial control, and supports my comment.

 

There is also the question which has not been aired, what if a future sale, especially under a fire sale, results in a loss?  There is a cliche that property is always a good investment, but this is far from the truth.  The truth is that it can be a bad investment, as no one can look into the future.  Will your 51% Thai partners pick up 51% of any losses?

[Arkady]

It used to be pretty easy to buy land through a Thai company. Until 2006 guidelines for land officers were to send any application where the company was owned more than, I think, 40% to the director general for investigation. There wasn't any attempt to do more than that and it was fine to raise the foreign shareholding back to 49% after the transfer.  But in 2006 that was replaced by a directive from the Interior Ministry to investigate any company that appeared to have any foreign involvement whatsoever, i.e. foreign shareholders of any amount, foreign directors, or even companies that give the appearances of possibly being fronts for foreigners to buy land. In fact any application to transfer a small piece of land or a single house to a company that has no business is suspicious because there is no reason that Thais would want to do that. Some purchases have been rejected because Thai nominees couldn't explain to the land office what the business of the company was or the reason for it purchasing a relatively expensive residential property with all its capital plus borrowings. Depending on the land office, it is theoretically possible to do this with a shell company that has no foreign shareholders or directors and change the structure later.  You might be allowed to live happily ever after in this house but you would also potentially be vulnerable to future crackdowns and investigations that are unpredictable.  In the event of a serious investigation, it would be hard to pass muster without a company that is engaged in a real business (renting the house to a foreign director doesn't count here) and has real Thai shareholders with enough wealth to have invested their own money in their shares.  With a shell company you have to take into account the hassle and expense of filing annual accounts and maintaining nominees.  Over a long period of time you can fall out with nominees or just lose contact with them. They can also get sick and die and pass on their shares to their statutory heirs.

 

Leasing the land for 30 years is perfectly legal but the rights of lessees are not particularly well protected in Thai law.  No lease of more than 30 years is legally valid for residential property, nor are options to renew. An option to renew can be litigated in the civil court, if the lessor and lessee are both still around, which could award damages for breach of contract but there is no way to enforce the option at the Land Department.  If the lessor sells the land or passes it on through inheritance, it may be hard to convince a court to recognise your rights as a tenant, since the new owner will not be a party to your lease agreement and can argue that he is not bound by it. 

 

If this a small project for fun money for a holiday home for occasional use that you don't expect to ever sell or pass on to anyone, I would use a 30 year lease. If it is serious money to you and will be your principle residence that you can't afford to lose, I would recommend not doing it. Just invest the capital in something that pays you an income at home or in Thailand and rent whatever ready built property you want in Thailand on short term leases.  That will also save you all the hassle and expense of maintenance.  If the landlord refuses to maintain the property, you can just move out.

 

 

 

 

[Pilotman]

This has been answered repeatedly on TV.  I would go to the other posts if you want to see that no two people agree on what to do, what not to do, what is legal and what is it not. You won't get any advice here worth a thing to you.  Best to get a reputable Bangkok based law firm and take their advice. Good luck with all the answers you are going to get telling you not to do it. 

[Millman]

I’ve had a Thai Company formation for a number of years and kept the accounts up to date without problems. I’m sure the authorities are keeping an eye on these arrangements and everything I’m seeing in the last few years believes me to think that, intrinsically, the Thai government doesn’t really want farangs here, apart from taking their money. Sorry to be so negative because I really love the life, the people and culture of true Thais.

My advice about setting up a Company is to make sure you know the nominees, make sure they have signed and notarised their documents that will help you, get a reputable lawyer and to keep the accounts up to date. Good luck with your venture and check potential tax on gains before you set out.

[baansgr]

5 hours ago, TheFishman1 said:

Don’t do it TIT

Exactly, why pay millions for land you never own.... You can rent the land for up-to 30 years registered on the Chanote. Considering  houses rent shorter term from 7k Upwards, rent for the land only  depending on size should only be a few thousand....what price is the guy asking for a lease.... Bet its a few million ? As for companies, you are reliant on Thais so anything  could and does go wrong. 

[Pilotman]

See OP, I told you that you wouldn't get any advice worth a damn.  You have already been told here, in just a few posts that it is:

 

A. Illegal

B Legal

C. Not possible

D. Possible.

E. Maybe illegal, maybe legal. 

 

My advice, if its worth anything to you, is to ignore all that you read here, go to a good law firm, not a shop in down town Udon, Ubon, Pattaya,  Chang Anywhere, or anyplace else outside Bangkok. and take their advice, or just don't do it.  

[khunPer]

On 2/28/2019 at 11:38 AM, Jlop said:

My questions for this forum: (1) Recent experiences with option 1 or 2, and recommendations? 

Moderator @Arkady gives you a very good explanation.

 

The Thai company limited-method is still used, but far more complex than before. I would consult an experienced real estate solicitor to obtain best updated information about using this model for proxy ownership of land.

 

Before 2006 you could use nominee shareholders – 7 shareholders in total were needed, and 51 % of the shares should be owned by Thais – but today the shareholders could be asked to show proof of funds, which limits the options for using nominees (often staff in a law firm or by an accountant). However now only 3 shareholders are needed, but if forming a 2 million baht company limited, which is often the norm, it could mean proof of 1,020,000 baht for one or two shareholders. Read more about "Anti Nominee Regulations".

 

Preferred shares are today used rather than proxy letters, i.e. you might for example have 49 % foreign share-ownership, and 51 % Thai share-ownership of which the 48 % are normal shares, whilst the 3 % are preferred shares without voting rights in return of a guaranteed annual dividend of for example 4 percent of the nominal share value.

 

Business activity, other than leasing one landplot to one of the shareholders, seems to be a key point in the model. The company limited should preferably have other sources of income, and Thai employees with paid for social security, to avoid potential scrutiny. However, it seems like the authorities are mainly interested in larger projects and business, rather than small "private ownership" for longer term residence (not a guarantee that it cannot change in the future).

 

The 3.3 % so-called business tax should be of least concern – the business tax also apply for private owners depending of how long time a property has been owned before sale – your company shall furthermore pay 1 % tax of the sales price (or appraised price if higher), whilst a private owner pays a stamp duty, and withheld income tax based of length of ownership. Read more about "Real Property Transfer Taxes and Fees", or try examples yourself with a simple tax-calculator.

 

The benefit of using a company limited for real estate ownership is that when trading property, you might sell shares in a company limited, instead of transferring land to a new owner, so no transfer tax applies.

 

As a foreigner you can own a house via a combination of lease and superficies, but not the land under the house, which can also be used if leasing from "your own company". An experienced real estate solicitor might be able to form an agreement that could give you some level of protection.

????

[smotherb]

Bottom line seems to be, foreigners cannot own land in Thailand. So, why would you go into any agreement, which is illegal in its conception?  Option 2 is simply an attempt to subvert Thai law. 

 

The only possible reason I see to buy Thai land is if it can be in your Thai children's names.

 

 

 

 

[Henryford]

Good European guy, "trustworthy", is one of the "owners". I think not.

[Jlop]

10 hours ago, Henryford said:

Good European guy, "trustworthy", is one of the "owners". I think not.

I think it's actually his Thai wife that owns it.

[Jlop]

On 3/1/2019 at 7:41 PM, baansgr said:

Exactly, why pay millions for land you never own.... You can rent the land for up-to 30 years registered on the Chanote. Considering  houses rent shorter term from 7k Upwards, rent for the land only  depending on size should only be a few thousand....what price is the guy asking for a lease.... Bet its a few million ? As for companies, you are reliant on Thais so anything  could and does go wrong. 

Yep couple million per rai is almost becoming a bargain around gere

[Jlop]

On 3/1/2019 at 4:30 PM, Pilotman said:

This has been answered repeatedly on TV.  I would go to the other posts if you want to see that no two people agree on what to do, what not to do, what is legal and what is it not. You won't get any advice here worth a thing to you.  Best to get a reputable Bangkok based law firm and take their advice. Good luck with all the answers you are going to get telling you not to do it. 

 

10 hours ago, Henryford said:

Good European guy, "trustworthy", is one of the "owners". I think not.

I did look for prior posts on this topic, but could not find them.

[Jlop]

Thanks everyone, I guess when one opens a can of worms, they will wriggle in every direction. Based on a variety of sources, I am going to play it safe and lease the land. That is, if the land office ever decides they have gotten enough extracurricular payments from the landowners to release the new chanote for the recently surveyed and subdivided land.

[KhaoYai]

Option 1 is only legal if the company actually trades. Yes, hundreds, maybe thousands, simply pay a little tax each year to keep the company active but if investigated, its illegal.  It is 'circumvention of the Thai land laws' which is specifically cited as illegal in those laws - read them.

 

If you're company is a real one, trades, pays tax etc. etc. you have nothing to worry about other than a corrupt lawyer confirming your signature on a transfer document when somebody tries to sell the land out from under you. Happens a lot in Phuket I seem to remember ????.

[jackdd]

You said the land is currently owned by a foreigner. Does he also do this by using an illegal company structure?

In this case i would not lease it, because if they ever crack down on it and declare that what he did was illegal, it might result in the lease becoming declared void.

[Jlop]

3 hours ago, jackdd said:

You said the land is currently owned by a foreigner. Does he also do this by using an illegal company structure?

In this case i would not lease it, because if they ever crack down on it and declare that what he did was illegal, it might result in the lease becoming declared void.

Actually I just confirmed the Thai wife is owner, not a company. So leasing should be okay.