mrmagyar Posted March 8, 2023 Share Posted March 8, 2023 Getting into the weeds of the foreign land ownership conundrum here: Does anyone know if the following structure would be legally workable, and indeed if it's ever used in Thailand? Thai company is formed with the purpose of building and operating residential property for rent (100% Thai) - Company buys land with an interest only mortgage from a foreigner - Company leases land to foreigner (profit generating) - Lease payment covers mortgage interest == no taxable profit I have heard it said before that in this case, the leasee of the land couldn't also be an owner of the company. My thinking is that the mortgage itself prevents any potential issues over claims to the company's assets, as it's effectively indebted to the the foreign mortgagee to the full extent of its assets. (It provides an additional layer of security to the foreigner). In this scenario I would envisage that the company would then operate the property as a rental property (short or long term) and as such, the business is actively trading. 3 Link to comment Share on other sites More sharing options...
ubonr1971 Posted March 8, 2023 Share Posted March 8, 2023 And how do you think a thai bank is going to lend a company the money? Is the company in your wife or gf name? Link to comment Share on other sites More sharing options...
Popular Post papa al Posted March 8, 2023 Popular Post Share Posted March 8, 2023 Brillant plan. 6 Link to comment Share on other sites More sharing options...
proton Posted March 8, 2023 Share Posted March 8, 2023 It would not be yours, don't bother Link to comment Share on other sites More sharing options...
FritsSikkink Posted March 8, 2023 Share Posted March 8, 2023 You would be lending money which is not allowed as it is preserved for financial institutions. 1 Link to comment Share on other sites More sharing options...
Faltu Posted March 8, 2023 Share Posted March 8, 2023 Hmm. What a convoluted plan. Hope you succeed buddy in your endeavor. Link to comment Share on other sites More sharing options...
donx Posted March 8, 2023 Share Posted March 8, 2023 5 hours ago, mrmagyar said: Thai company is formed with the purpose of building and operating residential property for rent (100% Thai) - Company buys land with an interest only mortgage from a foreigner - Company leases land to foreigner (profit generating) - Lease payment covers mortgage interest == no taxable profit Are you suggesting that the foreigner providing the mortgage is also the foreigner leasing the land? Don't know if that would work as someone else stated the mortgage needs to come from a financial institution. Link to comment Share on other sites More sharing options...
les1 Posted March 9, 2023 Share Posted March 9, 2023 Good thinking, I had thought of this years ago but not by way of a Thai Company. If you have a Thai wife, girl friend or even a trustworthy Thai person get them to buy the land, you lend the money by way of mortgage (if permitted) build property in your name (if permitted) you are safe with your money. Hope it works for you you & I think alike outside of the box..good luck just check it out with a reputable lawyer. Link to comment Share on other sites More sharing options...
nigelforbes Posted March 9, 2023 Share Posted March 9, 2023 A Thai company that is formed solely for the purpose of owning land or a single house, is not legal. The Land Office is not stupid! Link to comment Share on other sites More sharing options...
mrmagyar Posted March 9, 2023 Author Share Posted March 9, 2023 9 hours ago, FritsSikkink said: You would be lending money which is not allowed as it is preserved for financial institutions. IV. Foreign Security Interests on Real Property in Thailand While a foreign person or juristic entity may not normally own land in Thailand, it may enjoy security interests on land as a mortgagee-creditor. Section 80 of the Land Code read together with Section 16 of the Financial Institutions Act, B.E. 2551 (2008) allows a foreign person or juristic entity to accept a mortgage without prior approval of the Fiscal Policy Office, Ministry of Finance, on the express condition that the Land Department is satisfied that the mortgage does not fall under the definition of credit foncier and associated business activities according to the Financial Institution Business Act, BE 2551 (2008). Similarly, Section 702 of the CCC and the Land Code does not distinguish between domestic or foreign mortgagees – both having equal rights. Should ownership of real property in Thailand vest with a foreign person or juristic entity, disposal of the property must occur within five years from the date of vesting, which period the Bank of Thailand may extend at its own discretion. https://www.lexology.com/library/detail.aspx?g=3625e95c-61c3-42a0-a2ea-58d57b3aefce Link to comment Share on other sites More sharing options...
mrmagyar Posted March 9, 2023 Author Share Posted March 9, 2023 39 minutes ago, nigelforbes said: A Thai company that is formed solely for the purpose of owning land or a single house, is not legal. The Land Office is not stupid! The company would operate the property as a commercial endeavour, like a guesthouse/hotel. Link to comment Share on other sites More sharing options...
mrmagyar Posted March 9, 2023 Author Share Posted March 9, 2023 13 hours ago, ubonr1971 said: And how do you think a thai bank is going to lend a company the money? Is the company in your wife or gf name? Did you read the post? Link to comment Share on other sites More sharing options...
nigelforbes Posted March 9, 2023 Share Posted March 9, 2023 1 minute ago, mrmagyar said: The company would operate the property as a commercial endeavour, like a guesthouse/hotel. Cool! You have a number of potential hurdles which may or may not be insurmountable. The first is registering the company in such a way as to avoid it's purpose or existence being your ultimate ownership of the land. The second is producing adequate annual returns that support and confirm the stated objective. The third potential obstacle is the Land Office who have far more extensive powers than most might imagine. They will need to be satisfied that the company is not a vehicle for your ownership objectives and having seen them at work in this area, they are not easily satisfied. I would also point out that, with all due respect to you, greater minds have tried to circumvent the land ownership law and failed. 1 1 Link to comment Share on other sites More sharing options...
Seeall Posted March 9, 2023 Share Posted March 9, 2023 keep the info comming, thanks all.. Link to comment Share on other sites More sharing options...
khunPer Posted March 9, 2023 Share Posted March 9, 2023 19 hours ago, mrmagyar said: In this scenario I would envisage that the company would then operate the property as a rental property (short or long term) and as such, the business is actively trading Your main problem is that a shell company owning a plot of land rented out to a foreigner, without any other activities in the company, is suspicious; actually illegal. You need other activities in the company to make your suggestion work. When you have other activities – with preferable some Thais employed also – you can be shareholder, director (i.e. member of the board), and lease a plot of land owned by the company. There should be some payback included in the mortgage running over an agreed number of years, it should also be at market interest, not to make it look suspicious; a company limited is a business. 1 Link to comment Share on other sites More sharing options...
mrmagyar Posted March 9, 2023 Author Share Posted March 9, 2023 5 hours ago, nigelforbes said: Cool! You have a number of potential hurdles which may or may not be insurmountable. The first is registering the company in such a way as to avoid it's purpose or existence being your ultimate ownership of the land. The second is producing adequate annual returns that support and confirm the stated objective. The third potential obstacle is the Land Office who have far more extensive powers than most might imagine. They will need to be satisfied that the company is not a vehicle for your ownership objectives and having seen them at work in this area, they are not easily satisfied. I would also point out that, with all due respect to you, greater minds have tried to circumvent the land ownership law and failed. Thanks Nigel. That's a useful and informative post and I'd agree on all 3 obstacles raised. I think these are the same challenges faced by any 'company' model for land ownership. The only real difference i'm trying to factor in here is the loan from a foreigner/foreign entity to the Thai trading company. The thinking being that the loan removes any real 'value' from the company itself, and therefore any incentive for malpractice on behalf of lawyers or indeed the Thai shareholders. Link to comment Share on other sites More sharing options...
mrmagyar Posted March 9, 2023 Author Share Posted March 9, 2023 1 hour ago, khunPer said: Your main problem is that a shell company owning a plot of land rented out to a foreigner, without any other activities in the company, is suspicious; actually illegal. You need other activities in the company to make your suggestion work. When you have other activities – with preferable some Thais employed also – you can be shareholder, director (i.e. member of the board), and lease a plot of land owned by the company. There should be some payback included in the mortgage running over an agreed number of years, it should also be at market interest, not to make it look suspicious; a company limited is a business. Thanks @khunPer, your posts are always very constructive and informative. 1 Link to comment Share on other sites More sharing options...
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