Thai company set up but never operated- large bill arrived

[Scouse123]

A couple of years ago before Covid we were well down the line to buying a resort place on Samui.

 

Due to whatever, it never materialized but on advice we had opened a company for the purchase and again on advice and for ease of the people handling the purchase, and these are lawyers, it was suggested we used our home address in Isaarn as registered office which we could transfer to Samui at a later day when the venture was up and running.

 

I also was left off the company completely as it was decided to add me later, due at that time to being some undercurrent when foreigners names appeared on companies, and the authorities were scrutizing them more. It all made sense and I wasn't and aren't concerned about that.

 

The deal fell through and Covid occurred.

 

The company never opened, never traded, never had in comings or outgoings and that's it.

 

A bill has landed on the mat for not filing accounts, late penalties,  etc 40K plus. Sure, when they haven't been informed these bills will arrive as I pointed out. They are not to know it isn't trading.

 

My other half has simply said not to even worry about it as the company never traded and has no assets and they cannot touch the house or ask monies from it as the house is in her name and there's a usufruct also in force. In the UK, A company would be struck off after a certain period and my other half says the same applies here and not to worry as they can't touch anything.

 

My name is on nothing, but if the stuff hits the fan I know where the bill will land and whose toes it will land on.

 

Is she right on this?

[CharlieH]

Moved to Business forum.

[WhiteBuffaloATM]

well if company not Closed it still typically needs to produce Annual Accounts for filing with local Tax Office.unless there is some formal waiver by law or from tax office for not trading/ no assets. Company Lawyer / Accountant appear remiss here.needs to be promptly settled not just ignored.

personally, wouldn’t be able to sleep at night with this hanging over my head…..and getting worse.

 

Looks like the non- filing / late Penalty Notice has been triggered after first year accounts now one year late. these might cost 35-50k to produce each year.

 

Be Careful. I held my first Property ( illegally it turned out) under Thai Company with Nominee Directors, created only for that purpose. When selling seven years later Company Tax Bill plus Closure  was 500k baht (independently verified). The rental payments received counted as Trading though. Another guy in same street got hit for 800k under same situation.

[Scouse123]

5 minutes ago, WhiteBuffaloATM said:

well if company not Closed it still typically needs to produce Annual Accounts for filing with local Tax Office.unless there is some formal waiver by law or from tax office for not trading/ no assets. Company Lawyer / Accountant appear remiss here.needs to be promptly settled not just ignored.

personally, wouldn’t be able to sleep at night with this hanging over my head…..and getting worse.

 

Looks like the non- filing / late Penalty Notice has been triggered after first year accounts now one year late. these might cost 35-50k to produce each year.

 

Be Careful. I held my first Property ( illegally it turned out) under Thai Company with Nominee Directors, created only for that purpose. When selling seven years later Company Tax Bill plus Closure  was 500k baht (independently verified). The rental payments received counted as Trading though. Another guy in same street got hit for 800k under same situation.

Hi ,

 

Thanks I appreciate what you say but she is right in the fact that the company owns nothing at all, no assets or anything.

 

Your company actually owned a property.The only thing this company has done is to be registered at our house, which worries me slightly.

 

I can legally walk away but I wouldn't but  as I said in my post, these things always revert back to who pays the bills.

[Kwasaki]

9 minutes ago, Scouse123 said:

I can legally walk away but I wouldn't but  as I said in my post, these things always revert back to who pays the bills. 

I would of thought your wife could notify the authority and tell them exactly what has happened.

 

My Mrs notified the local govt that she had stopped work in her little café I know not the same scale as yours but she would still get a tax bill if she didn't.

[WhiteBuffaloATM]

main point is Company is Not Closed. So considered Active by Tax Office who need to accept the no assets / no trading status by evidence. which still might make no difference. Doubt the Late Penalty Notice will be Cancelled though. 1st & 2nd year Accounts needed also so already the irrevokable costs so far are circa 100k. unless accountant has been negligent and will pay these costs.

[robblok]

29 minutes ago, Scouse123 said:

Hi ,

 

Thanks I appreciate what you say but she is right in the fact that the company owns nothing at all, no assets or anything.

 

Your company actually owned a property.The only thing this company has done is to be registered at our house, which worries me slightly.

 

I can legally walk away but I wouldn't but  as I said in my post, these things always revert back to who pays the bills.

It is not important if the company owns something or not done something or not. The moment you set up a company its active. If you don't close it properly (i think this is the problem) and you dont file taxes then fines will come and also estimates of what you owe. That is probably the bill. Best is to let an accountant file what needs be filed and close the company. 

 

I think the shareholders are responsible for the company. So i would worry a bit. if i were you. I had the a company that was not closed properly (fault of accountant) and i got fines and bill from the tax office. In the end i went to an other accountant who filed what needed and closed the company. Now its done. 

 

Just check out if the company is properly closed.

[Etaoin Shrdlu]

Directors of Thai companies can be held personally liable for their actions or omissions. This can include criminal liability. Some revenue statutes probably carry criminal penalties for non-compliance, so it would make sense to get the books in order and close the company properly.

[timendres]

Ask the government folks to come to your house to discuss. Be polite, explain the circumstance, negotiate a lower payment. Get a receipt.

[Scouse123]

Well, Thanks for the input.

 

She is now on to it, better late than even later I suppose, and contacting the local tax office to get advice and seek a lower payment. I am away this Monday so she can sort it out.

 

We cannot be the only people in this position, there must be hundreds hit the wall or like ours, never got off the ground with the Covid factor and other things.

 

If its a fine and reasonable it will be paid and close the company.

 

If it's a silly figure I will ask them to justify it,  if they don't, especially when the company has never traded, then they will get 500 baht a month payable over as long as possible till it is cleared, I don't care which.

 

It is the accountant's fault and then by default it becomes our fault, as they certainly won't pay the late filing penalties.

 

I was certainly never aware that there could be any criminal repercussions. As far as I knew, it is civil.

[Kerryd]

Every active company has to file an annual "balance sheet" as well as renew the company registration. Usually this is done by which ever firm set up the company for you. Assuming they know how to get a hold of you of course.
Twice a year my lawyers contact me to let me know which bill is due. The amount they charge depends on the firm. Doesn't matter if the company has no assets or does no business.

Closing a company can be a major pain in the "assets".
I just so happen to have the list of things my law office says needs to be done to close a company with no assets.
Meeting Report
Company Update
Company Closure
Final Balance sheet.

Assuming no assets, about 46,000 baht all told, depending on who does it for you (different places charge different rates).

If there's property to be transferred (say a house/condo into the wife's name for example) add another 10,000 for the transfer (and another 10,000 for a legal lease so you don't end up getting kicked out and homeless the next day).
Plus taxes and fees for "selling" the house to the spouse, more fees if there's no "cheque" showing that someone paid (whatever amount) for the property.

Basically, for a property valued around 1.2 million, I was told I'd be looking at about 166,000 baht to "sell" the house, do all the paperwork and then close the company. (The land office determines what the property value is and that's what the tax is based on, regardless of how much you actually sell it for, even if it's just a "paper" transaction.)

[thailand49]

Call the lawyers who setup the company or get a new one!

[NightSky]

It sound like your company was dormant although I’m sure you need to file something to this effect to let the authorities know about it. 
 

I once had a Thai company what a  mare it was to manage on my own. A good accountant solved the problems but it was still administration heavy with regular operating costs. 
 

good luck hope you get it sorted. 

[XJPSX]

You have to pay it and close your company. No way out.

You can pay an accountant to contest and you will likely have it reduced but then you have to roll the dice and see if it’s worth paying the accountant.

Not communicating with the tax office is here is not accepted as an excuse.

They WILL apply penalties if you don’t address it.

The govt is clawing back what it can now. 
In Thailand you have to pay forecasted tax and this would be deemed an acceptable amount ( by the tax office) based on no reporting.

 

[kingstonkid]

I was sort of in the same boat.  The word I got from my lawyer was pay the late fee and close the business or get my name off of it.

 

Under Thai law and Canadian is the same if you have a registered business then you much pay taxes and submit a tax return (Acounting)  

 

Your company may not have made any money but that does not matter there are thousands in this country that have made money and donot report it therefore they go after everyone.

 

It is actually reasonable

 

 

.

 

[crazykopite]

Your company is still active as you never closed it down therefore you have to ensure that you submit a balance sheet every year which it appears you failed to do hence the 40,000 baht bill on top of this you will have to submit accounts for the end of this year . I suggest you don’t ignore it as you are living in Thailand if you were overseas that would be different . I am surprised your accountant if you have one failed to contact you ,it’s a case of bite the bullet and pay up . To close down a company is expensive maybe you should try recoup some of your money by selling it that would be the cheaper option however you have to clear any debts one being the 40,000 bht 

 

Edited October 30, 2021 by crazykopite

[Almer]

If it is like the Uk, the company is deemed open and therefor receives a late filing  penalty, and the second year will be closing in fast, go and explain, use Covid as an excuse and hope, please do not ignore it will not go away I am sure if that.

[robblok]

2 hours ago, kingstonkid said:

I was sort of in the same boat.  The word I got from my lawyer was pay the late fee and close the business or get my name off of it.

 

Under Thai law and Canadian is the same if you have a registered business then you much pay taxes and submit a tax return (Acounting)  

 

Your company may not have made any money but that does not matter there are thousands in this country that have made money and donot report it therefore they go after everyone.

 

It is actually reasonable

 

 

.

 

Its the same world wide, of course they go after companies who havent filed taxes. If people don't file then the tax office can't collect nor can it check. So filing of a tax statement is really important for the government. So like in all countries they fine people and estimate profits if nothing is filed. 

 

The normal response is then to file the taxes (because they estimate high). Once taxes are filed then a tax office can check them or not.

 

If there was no obligation to file taxes then those companies who did not make a profit have it easy (good) however how to differentiate between those who just forgot and those who have done nothing. That is the reason why taxes always have to be filed even if its zero (for companies).

 

Of course its reasonable to file taxes if you open a company you know you will have too (or you have been misinformed)

 

I am pleased to see that you understand the reason behind it many do not. But you got it. NICE.

[scorecard]

12 hours ago, Kerryd said:

Every active company has to file an annual "balance sheet" as well as renew the company registration. Usually this is done by which ever firm set up the company for you. Assuming they know how to get a hold of you of course.
Twice a year my lawyers contact me to let me know which bill is due. The amount they charge depends on the firm. Doesn't matter if the company has no assets or does no business.

Closing a company can be a major pain in the "assets".
I just so happen to have the list of things my law office says needs to be done to close a company with no assets.
Meeting Report
Company Update
Company Closure
Final Balance sheet.

Assuming no assets, about 46,000 baht all told, depending on who does it for you (different places charge different rates).

If there's property to be transferred (say a house/condo into the wife's name for example) add another 10,000 for the transfer (and another 10,000 for a legal lease so you don't end up getting kicked out and homeless the next day).
Plus taxes and fees for "selling" the house to the spouse, more fees if there's no "cheque" showing that someone paid (whatever amount) for the property.

Basically, for a property valued around 1.2 million, I was told I'd be looking at about 166,000 baht to "sell" the house, do all the paperwork and then close the company. (The land office determines what the property value is and that's what the tax is based on, regardless of how much you actually sell it for, even if it's just a "paper" transaction.)

A longshot:

 

As already well stated closing a Thai company requires many steps and is costly.

 

On the other hand what's possible is to sell/transfer the company name etc., to someone who wants a registered Thai company set up.

 

When we sold our family house the agent said he would ask the lawyer he worked with a see if she could find a foreigners who wanted a company registration by buying an existing registration.

 

Very luckily she found someone very quickly, the shares etc., were transferred within a few hours online (very not expensive) and we/they signed off the required forms. All done. All legal.

 

I had heard of this happening before with the company name/registration being sold at substantial amounts (several hundreds of thousands of Baht) but I asked for no payment at all, just glad to get my name off the share etc., documents. 

 

But of course this all depends on finding a foreigner who wants to buy/take over a Thai company registration. Nowadays I guess not so easy to find but who knows.

 

Perhaps put all of this to your lawyer with a message (to the lawyer):

- You find a buyer for the company name.

- Buyer pays all share etc., transfer costs (not expensive).

- You ensure/provide documentation/written guarantee that the share etc., transfers have been completed.

- You give lawyer an immediate bonus payment of xxxxxBaht.

- Relax.

Edited October 30, 2021 by scorecard

[LukKrueng]

23 hours ago, Scouse123 said:

Hi ,

 

Thanks I appreciate what you say but she is right in the fact that the company owns nothing at all, no assets or anything.

 

Your company actually owned a property.The only thing this company has done is to be registered at our house, which worries me slightly.

 

I can legally walk away but I wouldn't but  as I said in my post, these things always revert back to who pays the bills.

Whether a company does business or not, it still has to file tax records. Being a limited company, you must have a registered capital that debts can be collected from. The registered shareholders must have a proof that they have payed for their shares, and if they cannot provide that proof, they are liable for that amount. A company doesn't get closed automatically by the government for no activity. The directors have to close it officially. 

Many years ago I kept such a company alive (no business done, but reports made as due), and when I decided I don't need/ want it any longer, I had my accountant officially close it. 

[khunPer]

On 10/29/2021 at 6:37 AM, Scouse123 said:

The company never opened, never traded, never had in comings or outgoings and that's it.

 

A bill has landed on the mat for not filing accounts, late penalties,  etc 40K plus. Sure, when they haven't been informed these bills will arrive as I pointed out. They are not to know it isn't trading.

 

My other half has simply said not to even worry about it as the company never traded and has no assets and they cannot touch the house or ask monies from it as the house is in her name and there's a usufruct also in force. In the UK, A company would be struck off after a certain period and my other half says the same applies here and not to worry as they can't touch anything.

As other posters have mentioned it, is your company limited active as long as it's not closed; i.e. audited annual statements need to be produced together with annual tax reports.

 

Whoever is registered as director is liable.

 

Shareholders are liable for their registered capital only - i.e. limited to not more than the registered shareholder capital - however, in case that a shareholder has not paid the registered capitol for his/her shares, the shareholder is in principle personal liable for up to the limited amount (i.e. the definition of "company limited").

 

If I was in your situation, I would have any missing annual tax-statements made as soon as possible, pay any fines, and formally close the company if I was not going to use it.

 

In my modest opinion, keep your records clean in case you at a later point wish to engage with business in Thailand...????

[Scouse123]

We are on with it now and my other half is going to see and meet them and blame the accountant, Covid19 and anything else she can think of.

 

She will then hopefully negotiate a settlement, and I will have to pay and close it.

 

IMO They cannot be ridiculous with penalties when they know the company has never traded as one set of tax returns submitted previously shows.

 

As I said, there must be an awful lot of businesses in dire straits especially those involved in entertainment and hospitality. They also should be reasonable and understanding in these difficult times of late.

 

I do agree that silence or ducking away is not the answer nor is putting things in drawers and thinking they will go away.

 

We will see.

[mokwit]

On 10/29/2021 at 11:37 AM, Scouse123 said:

Is she right on this?

No. they'll chase you to the ends of the earth. Apparently there is a long winded procedure for shutting down a company to the satisfaction of the authorities. Someone told me it actually gets handed over to the Police to collect - but that may be actual unpaid tax.

[lkn]

On 10/29/2021 at 6:37 AM, Scouse123 said:

My other half has simply said not to even worry about it as the company never traded and has no assets

Most has already been said, and I see you are already on it, but just to add that when you close a company, the government normally has to issue a certificate showing that all taxes and fees have been paid, so if you allow the company to build up debt to the government (i.e. fines and late fees), it will just be more expensive to eventually close the company. Whether or not they can go after the shareholder, I do not know, but having an open company with lots of debt could complicate things in the future.

[paddypower]

On 10/29/2021 at 12:55 PM, robblok said:

It is not important if the company owns something or not done something or not. The moment you set up a company its active. If you don't close it properly (i think this is the problem) and you dont file taxes then fines will come and also estimates of what you owe. That is probably the bill. Best is to let an accountant file what needs be filed and close the company. 

 

I think the shareholders are responsible for the company. So i would worry a bit. if i were you. I had the a company that was not closed properly (fault of accountant) and i got fines and bill from the tax office. In the end i went to an other accountant who filed what needed and closed the company. Now its done. 

 

Just check out if the company is properly closed.

I'm not sure if the OP is saying his wife is a director and or a shareholder. If she is neither, I think that she is not responsible for the non-filings. That is based on my experience where our property investment group was supposed to use a management company, which was set up by the developer, but was left inactive for approx. 10 years. It never filed any reports. Since none of us were connected with it, I instructed the lawyers to do nothing. 5 years later, there has been no blow-back.

Edited November 3, 2021 by paddypower
incomplete post

[robblok]

16 minutes ago, paddypower said:

I'm not sure if the OP is saying his wife is a director and or a shareholder. If she is neither, I think that she is not responsible for the non-filings. That is based on my experience where our property investment group was supposed to use a management company, which was set up by the developer, but was left inactive for approx. 10 years. It never filed any reports. Since none of us were connected with it, I instructed the lawyers to do nothing. 5 years later, there has been no blow-back.

The big question is is the wife a shareholder, and if so she is responsible. The remarks of the wife they can't touch us only applies if she is not a shareholder or director.  If she is either they can touch her as not filing can be seen as breaking of the law and making a person responsible even in their private assets (that is how it is in my country).

 

If you own a limited and you follow all the rules they can't touch you but if you break them (not filing is breaking them) you can be held liable through your personal money.

 

In your case its totally different as you say there is no connection with it. Though I would say if your a share holder you can be held liable. I am not sure how the company was set up in your case. But if you had shares it might have become a problem for you.

[paddypower]

On 11/3/2021 at 10:22 AM, robblok said:

The big question is is the wife a shareholder, and if so she is responsible. The remarks of the wife they can't touch us only applies if she is not a shareholder or director.  If she is either they can touch her as not filing can be seen as breaking of the law and making a person responsible even in their private assets (that is how it is in my country).

 

If you own a limited and you follow all the rules they can't touch you but if you break them (not filing is breaking them) you can be held liable through your personal money.

 

In your case its totally different as you say there is no connection with it. Though I would say if your a share holder you can be held liable. I am not sure how the company was set up in your case. But if you had shares it might have become a problem for you.

agreed, 100%. in my case the developer and his lawyers were the shareholders and directors. Incidentally that is how they illegally sold the land site on which our apartments sat.

[Scouse123]

Update.

 

We made a couple of trips to the city and a couple of meetings with the accountant explaining our position but that we wanted to pay and close the company properly and have agreed terms with the authorities.

 

They are aware due to many factors, including Covid for certain delays in responding, the company never opened nor traded and we have paid the total of 12,000 baht for the accountants work and to close down the company which is now being done in full agreement with the local authorities.

 

So, done properly and nowhere near, ( after plenty of negotiation ) the amounts of money I had feared it might be.

 

The accountant says he wants a couple of boxes of beer on top of his fee as well, which he can have with pleasure!