What are the penalties for starting a Thai company purely for property ownership?

[Susco]

5 minutes ago, soi3eddie said:

20 hours ago, alianware said:

That could happen if you prepared your paper wrong since the first time.  Your partner or whoever have to signed the sell share holder document since first time before you even take her/his name to company. 

If you do it later, than that is your fault. 

His ex, the 45% shareholder signed company resignation papers (in case future was required) at time of company formation. She is however, well advised and rescinded her resignation and knows the predicament the foreigner is in with the legality of the nominee situation. He did try and avoid problems but it would appear that it's all gone wrong for him and now he will be left with virtually nothing and the "law" is not on his side.  

 

To let people sign an undated document is illegal. All those tricks the lawyers and accountants apply to have a property registered in a company so a foreigner "so called" can own it, work until it is challenged in a court of law.

 

I don't say government will crack down on all this illegal constructions, but if/when they make that decision, they will have a field day for months in a row

[Darksidedude]

Don't do it its technically illegal but tolerated, one day they might just say hey thats not yours as you dont own it be left with nothing.

 

I

[soi3eddie]

38 minutes ago, Susco said:

 

To let people sign an undated document is illegal. All those tricks the lawyers and accountants apply to have a property registered in a company so a foreigner "so called" can own it, work until it is challenged in a court of law.

 

I don't say government will crack down on all this illegal constructions, but if/when they make that decision, they will have a field day for months in a row

 

Exactly! Therefore it's advised to avoid forming a company for holding property if you are a foreigner. Either rent a house/land with all the legalities or buy a condo in own name with all legalities.

 

[LukKrueng]

2 hours ago, alianware said:

If you don't pay tax and have no company the law says that you are not allow to rent out. You must habe yearly balance sheet !  Ask your lawyer !

Anything regarding tax I ask my accountant, not a lawyer. But please send a link to a law specifically saying NON THAI ARE NOT ALLOWED TO RENT OUT PRIVATE PROPERTY

[LukKrueng]

8 hours ago, Pravda said:

 

Oh really? So you say? 

 

That's funny because having gone through a condo purchase myself recently a major developer (and a mean majorly major famous) was advertising price of a condo for 5 million, but foreign price was 7 million. 

 

Then I'd mention my Thai wife is taking a loan the price dropped back to 5 million. 

 

I have both line chats and email of this. 

Did you ask what was the extra 2m for? Can you post link to the advertisement?

 

Anyway, when buying second hand condo the status of the current owner has no affect on the price

[Pravda]

18 minutes ago, LukKrueng said:

Did you ask what was the extra 2m for? Can you post link to the advertisement?

 

Yes. The extra 2 million was because I was a foreigner. Simple. 

[ericthai]

On 11/5/2020 at 1:13 AM, alianware said:

Nothing is illegal. You set company so that you are able to rent it out to others and you pay tax for that. 

Foreigners who bought condo in his name are not allow to rent it out. Many farangs do it illegally. And don't pay tax for that. So if caught, you will be charged as tax invasion. So, in order to legally do that withouth no problem, you must set up a company. And pay yearly tax for that.

You're talking about something totally different.  The OP is asking about setting up a company to own land.

 

OP, As stated this is not really legal but done. Be aware things change, example back in the 90's immigration could care less if you overstayed,  early to mid 2000's this all changed and now overstay rules are very strictly enforced. Same with visas they were simple to get any type of visa even B. Now it's getting harder and harder to meet visa requirements.  If you really want to own, but a condo that you can own legally 100%.

[DrDave]

The only legal way for a foreigner owning 49% of a company to purchase land is to ensure and be able to prove the other 51% Thai shareholders contributed 51% of the purchase price. That is, they are real business partners, not nominee shareholders. If nominee shareholders are suspected, the Thai government has threatened to look into the personal finances of those shareholders to determine (a) if they personally contributed funds, and (b) where those funds came from. If the Thai shareholders can prove that the funds were their own, and did not originate from a foreigner, then there's nothing to worry about. These Thai shareholders would be your partners and for all intents and purposes own 51% of the company and property.

 

I don't personally know of any of these investigations, but I would be very hesitant to go this route should the government sentiment pendulum swing any further in the anti-foreigner direction.

 

Just before purchasing my home, the real estate broker facilitated the setup of a shell company with nominee shareholders to enable the purchase. I found that the nominee shareholders were mostly university students who were paid a couple thousand baht each for their signatures. In the end, I didn't use this company to purchase the land and house, but instead put the land in my wife's name, and the house in my name at the land office. For the two years that the company remained active, I had to pay 20k/year in accounting and annual filing fees and then about 10k or so to finally dissolve the company.

 

On a side note, I recall 10 or more years ago, an employee at one of the large brokerages in Phuket was caught attempting to steal a foreigner's home that was purchased with one of these nominee shareholder companies. I don't recall the details, but I believe it was the person who facilitated the company setup.

[KhaoYai]

On 11/5/2020 at 6:02 AM, xylophone said:

For a start you would have to be a 49% owner of the company only, so you don't actually own anything on your own right, with the other 51% being owned by a Thai person.

 

Thai law does specifically state that "nominee companies" and the like are illegal

Note that many land offices don't allow 49% of the shares to be in foreign hands if the company owns land - 39% is common. To be legal, the company must trade not just pay tax and should have a reason to own land. As I understand it from my lawyer, it is still possible to stay in control of the company through the type of shares issued and removal of the voting rights of other shareholders. You must also make sure that you are the only one who can sign documents, cheques etc. That was 5 years ago though, no idea if anything has changed on that front.

 

Yes, nominee companies were made illegal but in reality, they didn't really need that.  The issue of foreign 'ownership' is effectively dealt with in the Land Law.  Its been a while so I can't quote it verbatum but one clause states something like 'any attempt to circumvent the Land Laws may result in forfeiture' - a 'cover all' clause.

 

That is why a company must trade (and be set up correctly) - many don't and have 'got away' with it for years but if the proverbial hits the fan, they are at risk.  Given the potentially large sums involved, even at Thai prices, you need to consider if you can afford that risk. Its not difficult to set up a company that 'trades' - the problems lie with laziness and poor advice. Simply renting a property out would constitute 'trading'................... I'm sure the OP can work out the possibilities with that.

 

As for examples, I knew a German guy in Pattaya who 'owned' his house through a Thai Ltd Company - totally fake, set up by a Thai lawyer and just paid a little tax each year.  His wife got a little tired of his visits to the bar and him coming home in the early hours and decided to divorce him. Her dad was a Police Captain - I don't know the exact details but the last time I saw him he was in Bangkok preparing to return to Germany - he'd lost the house and no doubt a lot more.  No idea who ended up actually owning the house but from what he told me his wife was still living there.

 

To answer the OP - the penalties are forfeiture because you would be violating the circumvention clause.  The Thai Land Laws and the clause I mention are available online in English.

 

Note, my references to 'house' actually refer to the land. A house and the land it sits on are separate entities in Thailand. I use 'house' because things are different in the West where we don't separate the two - just a figure of speech. It is of course, possible in Thailand for a foreigner to own the bricks and mortar but not the land.

[Tapster]

Thank you for that most helpful information!!

????

[Delight]

On 11/5/2020 at 1:21 PM, soi3eddie said:

Even though the ex signed resignation documents on formation of the company, she is holding the German to ransom unless she gets to keep property or gets a significant payoff. Be warned about going company route.

 I would say be warned of giving your girlfriend 45%. Not that she has any real power -she just thinks that she has.

So the German holds 49% of the share allocation and (I assume)100% of the voting rights -then the house cannot be  transferred (to  a new Buyer ) without his authority.

If I were him I would seek legal authority to have the locks changed or some other legal device to have her removed.

In Thai law it may be that she has the right to stay-for certain her boyfriend does not.

Her 45% means nothing. Neither does his 49%.

It is the 100% voting rights that count.

 

 

 

 

Edited November 7, 2020 by Delight
added detail

[alianware]

19 hours ago, ericthai said:

You're talking about something totally different.  The OP is asking about setting up a company to own land.

 

OP, As stated this is not really legal but done. Be aware things change, example back in the 90's immigration could care less if you overstayed,  early to mid 2000's this all changed and now overstay rules are very strictly enforced. Same with visas they were simple to get any type of visa even B. Now it's getting harder and harder to meet visa requirements.  If you really want to own, but a condo that you can own legally 100%.

Nothing is illegal. There are plenty of investor who build bought land and build houses and building condo to sell it or to rent it. We are talkong about millions $$ they invested. 

You are allow to buy house as company name and rent it out or invest it to sell someday.

This ia absolut legal !!!

If you have no experience investing money ib Thailand don't make any false statement.

[ericthai]

28 minutes ago, alianware said:

Nothing is illegal. There are plenty of investor who build bought land and build houses and building condo to sell it or to rent it. We are talkong about millions $$ they invested. 

You are allow to buy house as company name and rent it out or invest it to sell someday.

This ia absolut legal !!!

If you have no experience investing money ib Thailand don't make any false statement.

You're talking about a business, that is different. OP is talking about a person opening a company to purely own the land for their own use, not running a business. To do this they use a nominee shareholder and that is illegal.     

[Captain Monday]

On 11/6/2020 at 6:53 AM, LukKrueng said:

Anything regarding tax I ask my accountant, not a lawyer. But please send a link to a law specifically saying NON THAI ARE NOT ALLOWED TO RENT OUT PRIVATE PROPERTY

You don't need to yell. It's called working illegally. A foreign estate agent can. Most owners don't have a work permit. They can get income from a rental property. They must report income for taxation purposes. 

What they cannott do is show properties, hand out keys, meet prospective clients and do other work.

The only way to do it legally for most foreign owners is to make a contract with a real estate agent and pay them a commission of course, very simple. 

[LukKrueng]

7 hours ago, Captain Monday said:

You don't need to yell. It's called working illegally. A foreign estate agent can. Most owners don't have a work permit. They can get income from a rental property. They must report income for taxation purposes. 

What they cannott do is show properties, hand out keys, meet prospective clients and do other work.

The only way to do it legally for most foreign owners is to make a contract with a real estate agent and pay them a commission of course, very simple. 

What are you taking about? Working as an agent? That's got nothing to do with the issue here. 

If you own a condo under your own name - can you rent it out or not? I say can. No law against that. 

[Captain Monday]

1 hour ago, LukKrueng said:

What are you taking about? Working as an agent? That's got nothing to do with the issue here. 

If you own a condo under your own name - can you rent it out or not? I say can. No law against that. 

Please read what I wrote carefully. You can receive rental income for a property you own

An alien can't do the work that process entails unless the alien has a work permit.

[LukKrueng]

6 hours ago, Captain Monday said:

Please read what I wrote carefully. You can receive rental income for a property you own

An alien can't do the work that process entails unless the alien has a work permit.

Please read carefully what i wrote as well. I responded to someone who wrote foreigners are not allowed to rent out their property. Nothing about the work process. And you don't need a work permit to place an ad in the classifieds, nor to show potential renters the property. 

[KhaoYai]

A lot of arguing going on here as usual - especially on this topic.

 

Its plain and simple. A foreigner can have shares and a directorship in a Thai company - quite a complicated procedure involved in setting that up (if the company is going to be legal). But - if it can be shown that the company was set up, as the OP says 'purely for property ownership', its illegal because its a method that circumvents the Thai Land Law. The penalities are forfeiture and probably a fine.

 

I have no doubt that there will be people reading this thread that 'own' their property that way - having been told by a lawyer that its fine, just pay a little income tax each year and all will be well.  Those people will probably never have a problem unless the Thai authorities are alerted and decide to investigate the company.  The OP needs to decide if he is prepared to take that risk.

 

A real Thai Ltd company with foreign shareholding and/or directorships can both own and rent out property quite legally providing that company is set up correctly, is trading and operates within the law.  The issue of who shows a prospective tenant around a property etc. is nothing to do with the OP's question, that is an employment law matter.

[Tapster]

Having now reached page 6 of this thread, I am very grateful to everyone who has posted, and who remembered my original question.

 

I believe that everything has been said that can be said on this topic, but please don't let me stop you from expanding on it.

The core problem associated with a company, involving Thai nominee directors, is simple: it is illegal.

 

Maybe, some time ago, it was considered a loophole. Maybe, even now, you can get away with it. However, as it stands, your investment is unlikely to grow and you might lose it completely, as well as landing yourself in a lot of legal trouble, in a country that you may not understand fully. This will be very expensive, if not crippling.

The 'company' route to owning Thai property/land is now clearly discredited. Don't do it, kids, unless you can afford to lose your investment. 

[CharlieH]

Topic is now CLOSED.