Closing Company & Retaining House & Land

[JimmyGreaves]

I setup a company 15 years ago when I first met my thai partner and bought land and built a house, the plans for the house were registered at the tessabahn in the company name, the company name is on the chanote. My thai partner, myself and another are shareholders (Used to be 7 shareholders originally). We also want to get married but were put off doing so because we are both shareholders and at one time we got information from a solicitor who told us that this was not a good idea as you are both company shareholders.

 

We have a 13 year old daughter and have been living happily together since. We want to dissolve the company and put the house in my partners name and make appropriate wills.

 

Can anyone advise how to proceed with this issue?

 

Many thanks

 

[Langsuan Man]

Got a couple of surprises for you, one's the lawyers never tell you when you set up the company

 

First step will be to go to the land office and transfer the land into your partners name, you will have to pay the transfer tax which is going to be determined by the land office using their secret sauce.  A lot depends upon how much the "company" valued the land when they purchased it, how much it has increased in value, etc.  The Company director can authorize the sale, no vote or other action required

 

Once the chanote is in you partners name then you can proceed with closing the company.  This is where it is a little tricky and you hope that you have a good lawyer at this point.  The cost for closing a company can range from 25 K to 50 K THB, just for the lawyer fees.  There is an automatic fee from the Department of Business Development of 18,000 THB, plus company tax must have been paid for that year, and the company must be "updated"  (annual filing) and finally the "company" is going to pay tax of the increased value of the property because of the house

 

Once again how the cost of the construction was reported by the "company" will determine how much "profit" the company made on the house, which will determine tax owed, to close the company down

 

There appears to be a certain amount of controversy on whether the company really has to be closed down officially.  It has to be closed since it no longer has any assets but the question is: will the DBD close it down automatically when it reports no longer having any assets ?

 

This is where the honesty and integrity of your lawyer comes in.  Is he going to tell you about this possible loop hole or take your money to close down the company ?  My lawyer and I are going to test this loop hole before we officially close the company

 

BTW, my only reason for doing this is for estate planning, lot's easier taking care of my girl now, than forcing her to deal with it when I die.  Be aware if you leave the property to your partner in your will , then only inheritance taxes kick in, and they are so low, they can be considered negligible.  And the company dies when the Director dies 

[scorecard]

1. Many accountants are well capable of doing the steps involved in closing the company at very reduced fees. Never use a lawyer for anything in Thailand.

 

2. Some property agents will work with you on this. From time to time agents have potential buyers for house and land etc., but the buyer wants to buy using a company set-up but they don't have the company already set up.

 

In cases like this all that's needed (if all parties agree) is to change the shareholders names at the Thai companies office which can be done on-line very simply and with small fees. And then the company continues with new shareholders but with you paying all the final taxes etc., up to the date of change of shareholders. 

 

But transferring ownership of the land and house you've mentioned to the individual name of your partner should be step 1. 

[LukKrueng]

9 hours ago, Langsuan Man said:

Got a couple of surprises for you, one's the lawyers never tell you when you set up the company

 

First step will be to go to the land office and transfer the land into your partners name, you will have to pay the transfer tax which is going to be determined by the land office using their secret sauce.  A lot depends upon how much the "company" valued the land when they purchased it, how much it has increased in value, etc.  The Company director can authorize the sale, no vote or other action required

 

....................

 

then only inheritance taxes kick in, and they are so low, they can be considered negligible.  And the company dies when the Director dies 

There is no secret sauce for determining the transfer fee. I know that in my district the land office issue a new valuation of land prices every 5 years. I am not sure the "every 5 years" is nation wide or if it is different period in different districts - however, the valuation is printed and anyone can have a look at it anytime they want. You can also go to the land office with a copy or the serial No. of the chanot and they will calculate for you the amount of the transfer fee on the spot. The transfer fee and tax payable at the land office has nothing to do with the price paid for the plot when it was bought not the difference between buy/sell prices.

 

As for the "company dies when the director dies" I am pretty sure that is not true. A company is a juristic person, meaning it has a life of its own. Share holders can change, directors can be changed - it has no effect on the "life" of the company

[JimmyGreaves]

12 hours ago, Langsuan Man said:

Got a couple of surprises for you, one's the lawyers never tell you when you set up the company

 

First step will be to go to the land office and transfer the land into your partners name, you will have to pay the transfer tax which is going to be determined by the land office using their secret sauce.  A lot depends upon how much the "company" valued the land when they purchased it, how much it has increased in value, etc.  The Company director can authorize the sale, no vote or other action required

Ok got a bit of a handle on this one as a friend had some land in a company and his wife was also a shareholder, she had to move out of being a shareholder and get a good friend to take her place as a shareholder, sell the land to his wife and then his wife moved back to being a shareholder and yes paid tax.

 

Thanks for the confirmation.

 

Quote

 

Once the chanote is in you partners name then you can proceed with closing the company.  This is where it is a little tricky and you hope that you have a good lawyer at this point.  The cost for closing a company can range from 25 K to 50 K THB, just for the lawyer fees.  There is an automatic fee from the Department of Business Development of 18,000 THB, plus company tax must have been paid for that year, and the company must be "updated"  (annual filing) and finally the "company" is going to pay tax of the increased value of the property because of the house

The closing down the company is my last issue and not important if it does not have claim to the land and house, getting the land and house away from the company is what I want to achieve. We paid for construction of the house to a builder and his crew by stage payments and I paid cash/transfer to them along the way. The house is registered at the tessabahn in the company name so unsure what this entails to get the house into my partners name and again if we should get married before all this takes place for protection. Any help on this one?

 

Quote

 

Once again how the cost of the construction was reported by the "company" will determine how much "profit" the company made on the house, which will determine tax owed, to close the company down

 

There appears to be a certain amount of controversy on whether the company really has to be closed down officially.  It has to be closed since it no longer has any assets but the question is: will the DBD close it down automatically when it reports no longer having any assets ?

 

This is where the honesty and integrity of your lawyer comes in.  Is he going to tell you about this possible loop hole or take your money to close down the company ?  My lawyer and I are going to test this loop hole before we officially close the company

 

BTW, my only reason for doing this is for estate planning, lot's easier taking care of my girl now, than forcing her to deal with it when I die.  Be aware if you leave the property to your partner in your will , then only inheritance taxes kick in, and they are so low, they can be considered negligible.  And the company dies when the Director dies 

 

Edited July 2, 2019 by jflundy
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[HHTel]

Years ago I set up a company which I later decided I didn't need.  My accountant told me at the time that as the company has no assets and is not trading, just to let the company die naturally.  That was about 18 years ago and there's never been any comeback.

[JimmyGreaves]

6 minutes ago, HHTel said:

Years ago I set up a company which I later decided I didn't need.  My accountant told me at the time that as the company has no assets and is not trading, just to let the company die naturally.  That was about 18 years ago and there's never been any comeback.

Thanks HHTel. I would like get the house and land away from the company and closing is not so important. If you had a company I thought you could sell it as new setting up fees are expensive.

[Ricebarnandrooms]

10 minutes ago, HHTel said:

Years ago I set up a company which I later decided I didn't need.  My accountant told me at the time that as the company has no assets and is not trading, just to let the company die naturally.  That was about 18 years ago and there's never been any comeback.

Similar to you, however you can put the company to sleep. You still need to submit audited accounts each year. It’s a small price to pay for the audit and let’s you wake up the company when or if things improve. 

Get your book keeper to notify the tax office. Don’t forget to still pay your social every month for medical. 

Have your will transfer your shares into your children’s name. 

[Ricebarnandrooms]

11 minutes ago, jflundy said:

Thanks HHTel. I would like get the house and land away from the company and closing is not so important. If you had a company I thought you could sell it as new setting up fees are expensive.

You can sell the company easily and all you need to do is transfer the shares to the new share holders. You decide the value of the shares. 

Having property in the company name is also helpful if a faramg wants to buy your house as selling the company, unincombored,  is a way they can do it. 

[IssanMichael]

I and my Thai wife closed a company down a couple of years ago, the accountant did it all so no need for a lawyer, it cost from memory 18K Baht. I found out later that the company could be sold so in hindsight i would have gone that route.

 

I attach a couple of will forms that i have used Eng. & Thai. The Thai will is only good for use in Thailand and the same with the English will.

13_Last_Will_and_Testament.pdf T13_Last_Will_and_Agreement.pdf

[JimmyGreaves]

Much appreciated Michael.

Edited July 2, 2019 by jflundy

[JimmyGreaves]

Thanks for all the responses.

 

I think I have a handle on getting the land into my partners name. 

• One question on this would it be beneficial to be married before this transaction?

 

Getting the house out of the company is something I'm unsure of as the tessabahn has it listed under a company and we pay about 15K a year in tax whereas if its in a thais name the tax is hardly nothing. The reason it is listed under a company is the plans were submitted to them under the land ownership company as they would not put it in an individuals name I asked for mine.

 

The house was built outside the company with me paying cash/transfers to a builder and his gang (Not a building company). (The builder has now passed)

 

Any ideas?

 

 

 

[khunPer]

14 hours ago, Langsuan Man said:

And the company dies when the Director dies 

That is not true, a company limited is a separate juristic person, owned by the shareholders.

[scorecard]

2 hours ago, jflundy said:

Thanks HHTel. I would like get the house and land away from the company and closing is not so important. If you had a company I thought you could sell it as new setting up fees are expensive.

You can, the actual process is simple and on line, you change the name(s) of the shareholders.

[scorecard]

38 minutes ago, IssanMichael said:

I and my Thai wife closed a company down a couple of years ago, the accountant did it all so no need for a lawyer, it cost from memory 18K Baht. I found out later that the company could be sold so in hindsight i would have gone that route.

 

I attach a couple of will forms that i have used Eng. & Thai. The Thai will is only good for use in Thailand and the same with the English will.

13_Last_Will_and_Testament.pdf 29.35 kB · 2 downloads T13_Last_Will_and_Agreement.pdf 40.72 kB · 2 downloads

 Selling the company is an option and that really means changing the shareholders names.

 

But it's also true that some people would hesitate to buy an existing company because:

- Maybe old taxes or fees or loan repayments or outstanding whatever has not paid therefore the new owner becomes responsible for these debts. 

 

 

[khunPer]

23 hours ago, jflundy said:

Can anyone advise how to proceed with this issue?

The company limited would sell the property to your partner, i.e. you'll need to transfer the deed at the Land Office. When doing that taxes and fees shall be paid; normally seller pays taxes, whilst buyer pays transfer fees.

 

You can check the appraised value for the property at the Land Office. If the appraised value is higher than the sales price, the appraised value will be used; however if the sales price is higher – the Land Office might wish to see documentation of the sales agreement – the sales price will be used. The company is due 3.3 percent business tax at the Land Office, and eventual withholding tax. You can find more information about tax and a calculator here.

 

In theory it's the company limited that sells the property. If the house build on the land has been build in the name of the company limited – what name is on architect drawings, building permission, and Blue House Book? – then the value of the house is part of the property. The payment from buyer shall in principle be transferred to the company limited, preferable into the company limited's bank account. If the house is stated as personal property, i.e. only land has been leased from the company, the house might be sold, or transferred only, separately from the land, and the money kept outside the company accounts and books.

 

When dissolving (closing) the company remaining value after eventual company taxation shall be paid to the shareholders. You will need professionel advice about how to this the best way for minimal taxation, if any – or if there are some "smart tricks" – in principle keeping the payment for property outside the company, and company and shareholder eventual taxation, is not the intention of the Law.

 

Unfortunately I cannot tell you exactly what might happen, or what might be the best method here. You should have an experienced account do a calculation for you about the costs, and the consequences, before you make any decisions about transferring land out of a company limited.

????

 

[khunPer]

9 minutes ago, scorecard said:

 Selling the company is an option and that really means changing the shareholders names.

 

But it's also true that some people would hesitate to buy an existing company because:

- Maybe old taxes or fees or loan repayments or outstanding whatever has not paid therefore the new owner becomes responsible for these debts.

No reason to buy an empty company limited, compared the risk and the small costs to open a clean virgin company limited.

[khunPer]

41 minutes ago, jflundy said:

Thanks for all the responses.

 

I think I have a handle on getting the land into my partners name. 

• One question on this would it be beneficial to be married before this transaction?

 

Getting the house out of the company is something I'm unsure of as the tessabahn has it listed under a company and we pay about 15K a year in tax whereas if its in a thais name the tax is hardly nothing. The reason it is listed under a company is the plans were submitted to them under the land ownership company as they would not put it in an individuals name I asked for mine.

 

The house was built outside the company with me paying cash/transfers to a builder and his gang (Not a building company). (The builder has now passed)

 

Any ideas?

If you are married before your partner, now wife, buy the property, it will be common property and shared 50/50 in case of divorce. If bought before marriage, it will be your wife's property only in case of divorce.

 

15k baht a year might be cheaper than transferring the property out of a company limited, and close it. You really need an experienced accountant to do calculations for you, before you make any decisions.

 

When the company limited is taxed for the building, then it sounds like the house belongs to the company, i.e. is registered by tessa ban as company property when issuing building permission. If the money paid for the construction has not been stated as a loan in the company's books, all payment for the house belongs in principle to the company.

[jimn]

I had to pay 10,000 to close the company and 183,000 tax to the land office to transfer the house to my wife. It would have been more but my agent knew the land office official.

Edited July 2, 2019 by jimn

[JimmyGreaves]

2 hours ago, khunPer said:

If you are married before your partner, now wife, buy the property, it will be common property and shared 50/50 in case of divorce. If bought before marriage, it will be your wife's property only in case of divorce.

Excellent will do this before transfer.

2 hours ago, khunPer said:

15k baht a year might be cheaper than transferring the property out of a company limited, and close it. You really need an experienced accountant to do calculations for you, before you make any decisions.

 

When the company limited is taxed for the building, then it sounds like the house belongs to the company, i.e. is registered by tessa ban as company property when issuing building permission. If the money paid for the construction has not been stated as a loan in the company's books, all payment for the house belongs in principle to the company.

Yes looks like the house sitting on the land is ending up being the problem.  The tessabahn could be taxing the land as company land, however I know that if you have a swimming pool then they yearly tax more. I just need to figure out where the house lies within this conundrum ???? Many thanks for your invaluable input. 

[JimmyGreaves]

1 hour ago, jimn said:

I had to pay 10,000 to close the company and 183,000 tax to the land office to transfer the house to my wife. It would have been more but my agent knew the land office official.

 

You mean transfer the land and house? Who owned the house or did this not come into the equation if you are in the country?

 

Also Jim when did you do this? Years ago?

Edited July 2, 2019 by jflundy

[DaRoadrunner]

How about transferring it to your daughter? Presumably she is a Thai citizen and so can own it without a company.

 

Instead of closing, the company could be declared dormant, thus avoiding taxes and final audit.

 

I would go with an accountant in preference to a lawyer wherever possible.

[jimn]

22 hours ago, jflundy said:

 

You mean transfer the land and house? Who owned the house or did this not come into the equation if you are in the country?

 

Also Jim when did you do this? Years ago?

Sorry I should have been clearer. When I bought the house that we still live in with my Thai wife I originally bought the house/land via a Thai company that cost 20k baht to set up. This was in Feb 2014. 

I did so because my marriage was in the early stages and wanted to be sure of her.

The share structure in the company was 49% myself, 40% my wife and 11% a close rich Thai friend. By 2017 I was sure and I was getting angry about the once a year having to pay 12k for the accounts. Also I was getting letters demanding I prove it was an active company. At this stage I decided to close the company and transfer the land to my wife. I was however noted on the channote/title etc that originally I provided the funds and had a financial interest in the land. Not in my wildest dreams did I realise that it would be so expensive to transfer the land to my own wife. The land office was Pattaya. In fact they wanted to charge more than 183,000 but the agent who knew the lady in the land office smoothed it through as she knew her.

Hope this helps.