Setting Up Business For Wife

[Aussietraveller]

Hi All,

I am looking for some advice from those with some business experience in Thailand.

Our Situation

My wife is Thai, I am Australian.

We live in Phuket.

I have several Business in Australia, which support us.

We would like to buy a house in Thailand, in my wifes name.

This is for us to live in and as an investment.

What we spend on rent would be virtually be the same as loan repayments.

I do not want to bring the capital from OZ for the whole thing, but would like to borrow as much as we can from a Thai bank, and pay the balance cash.

My wife does not work, and as such we cannot get a loan in Thailand.

The Plan

I would like to register a business (similar to being a sole trader) in my wifes name.

In theory, the purpose of the business would be sale of goods (could be clothing etc)

The business in practice would never operate.

All of the funds that we bring in month by month to live on would be put through this business.

Lets assume a turnover of 80K a month.

The business set up as a Sole proprietor can pay tax at a natural person tax rate.

There would be no need to keep records of expenditure, just income.

link to information source (information on Tax rates, business structure etc)

A standard tax deduction of 80% is available for a business structured in this way.

So the taxable income on what we bring into the country would be say, 16K a month less standard deductions.

This equates to 192K theoretical profit which would be taxable.

As the first 100K of income per annum is tax free, we would have an annual tax liability on 92K

At 10% tax on this, the maximum total annual tax bill would be 9200 Baht.

For the purposes of a bank loan, would they look at the turnover of the business(960K) for assessing how much they would lend, or would they look at the theoretical profit declared for tax purposes(196K)?

Any thoughts on the viability of the above would be appreciated.

[billaaa777]

This is called Bank Fraud in most parts of the world which is punishable with jail time.

[Khun Jean]

I was thinking along the same lines.

Only we will have a real trading business and feed it some extra money when necessary.

The only thing missing in your post is the timespan you are thinking about. We are going for around 2-3 years.

I think the longer and more consistent the business is, the easier it will be to get a mortgage.

Plus we (she) has some land available for collateral, and the mortgage will be at the most 50%.

[torrenova]

This is called Bank Fraud in most parts of the world which is punishable with jail time.

No it is not if handled carefully.

She sets up the company or sole trader or whatever. She sells a service to your Oz company and receives an allowance or whatever. Invoices are ok to go between. No physical products have to change hands. Simplest is as a business consultant investigating things in Thailand.

She gets paid a salary from the Thai business which in turn, after a minimum six months, gets her a mortgage.

Now the problems. VAT or GST in Oz. You would lose 7% (and 10% if it goes backup) once you hit 700k or thereabouts. You'd need her salary (not sure net or gross) to be 250-300% of the mortgage repayment. If going on the safe side and saying net, you'd need the following:

Purchase price 3,000,000

Deposit (50%) 1,500,000

Mortgage 1,500,000

Interest rate 7.5%

Term 10 years

Repayment would be 17,805 baht per month.

She would then need a net salary (being safe at 300% of net) of around 53,000 per month or 636,000 after tax so you'd have to turn over perhaps 800k.

Not improbable and not illegal as the job exists. the fact that you are paying far in excess of parket price in neither here nor there.

[Jersey_UK]

This is called Bank Fraud in most parts of the world which is punishable with jail time.

It's only called "Fraud" if you get caught

But seriously, theoretically it is arguably borderline - but in practice if yer paperwork is kept in order , and the payments are kept up then their will be no problem.......in most parts of the world. A bank would only be likely to revisit the original lending basis if you default and insufficient House equity is available and in practice if this is 5 weeks after the deal was made will be a bigger problem than oi it happened after 5 years - especially if in the interim the "business" folded (after all once you have the money and can keep paying the mortgage, why bother with the actual "Business"?).

This is one of my (many) plan B's

[billaaa777]

The business in practice would never operate.

No it is not if handled carefully.

Falsifying documents for the purpose of obtaining a bank loan is bank fraud under any and all circumstances. In his example he is planning on taking it a step further and creating a fictional company and attempting to show income from sales that don’t exist.

In your example you have the wife working for the husband in fictional position for a fictional company that would not exist if they were not attempting to obtain a bank loan. These are not “arm length transaction.”

Bank fraud rarely gets investigated until the loan is in default, at which time the documents submitted for the original loan are scrutinized in greater detail. Essentially any and all circumstances that you are attempting to justify for the purpose of obtaining a bank loan that are not actual and “arm length transactions” constitute bank fraud.

[torrenova]

A further example:

My UK company employs a Thai company on a consultancy basis as a political lobbyist with an end goal, some years down the path, of obtaining rights to mine for gold in North Thailand. Costs for my UK company are ongoing but there is no "benefit" until a contract is signed, if it ever is.

Now if an employee, director or proprietor of that Thai company seeks to use their income to obtain a mortgage on a property in Thailand, there is no connection with the UK company. Companies are seperate legal entities.

The UK company offsets the costs of dealing with the Thai company against its other income during the period whilst the Thai company does whatever it does apart from working for that UK company.

The fact that some people may have shareholdings in both companies is not unusual. The UK company forming a subsidiary in Thailand could open up the UK company to losses sustained in Thailand whilst a stand alone company would succeed or fall on its own merit.

In the OP's case, it could be set up in such a way as to make it impossible that the Thai company was not acting under the terms of the contract in trying to open business for the Australia company in Thailand. That such a contract does or does not lead to physical business is immaterial. Contrast that if you will of an Australian company paying a Thai market research firm to investigate potential markets. The research is done, it is invoiced and paid for but whether that data is used is solely a decision for the Australian company.

If the OP was just paying her cash and pretending it was a job could be illegal but not if that income was her income for services rendered as a market researcher for instance. Without a company she would be self employed but the income would be very real.

With the very important caveat that the OP is not looking to obtain a 100% mortgage, merely around 50%, then the lender would, in most other countries, lend on the basis of non status, satisfied that the 1st charge covering the whole property would enable it to reclaim the outstanding balance of the loan should the borrower default. If Thailand does non status mortgages, then that would be the way to go forward as there are significant cost savings.

A final point, if the Thai lady pays tax on a salary of over 40k per month, she would be able to have her husband join her without visa restrictions on the basis of sufficient family income. A side benefit but a significant one for those under retirement age.

[Aussietraveller]

Thanks for the thoughts.

I certainly was not setting out to commit bank fraud.

The intent is to buy a house here without having to use our capital to buy it. That is why we a are looking to get a loan.

We own land in Thailand, and that would no doubt be used as security by the bank.

We would be paying a cash deposit of 50%, so the bank is anything but exposed.

The intent is to pay the thing off quickly, not default on the loan.

Once the business was set up her in the wifes name, we could certainly draw up a contract for services between my Australian Company and this one.

There would be a guaranteed monthly payment to the Thai business.

The contract could be for any services, even just to be available for consultation as required, and be paid a monthly fee.

This would be similar tot he suggestion by Torrenova.

The business in Thailand would not be fictional, whether it traded or not.

It would be registered and pay tax.

It would keep accounts of income received as required by Thai Tax law.

Many of us face challenges with business and Visa's due to Thai laws.

I am simply trying to think laterally, and look at how i can make it work for me, and maybe others.

[fletchsmile]

Have you tried asking a few of the banks if they will accept you guaranteeing the loan. If you have a work permit, income etc, should be able to find.

If not, try UOB Singapore or BKK Bank Singapore. They lend in USD, SGD, JPY. Think BKK Bank have eased off in doing this, but UOB are still advertising. They're a bit above market rates you'd expect, and fees are slightly higher.

Given you're income for paying the loan is in FCY, might not be a bad idea in some ways to borrow in FCY. Problem with a THB loan to some extent is your income is in FCY. Depends whether you want your loan to rise and fall in line with your property asset in terms of FX rates, or keep in line with your source of income.

[Chang_paarp]

If you had more than one customer, there would be less of a problem. (just)

Got any mates in a similar position?

[Aussietraveller]

I do not have a work permit.

All of my business is in Australia.

That is why we are looking at this as an option.

All of the banks we have spoken to so far will only consider Thai income, when we apply for a loan.

Overseas assets do not count.

I will also be talking to Sunbelt on this next time i am in Bangkok, and hope to sit down with an accountant in Phuket to discuss this soon.

Anyone know of a decent(english speaking) accountant in Phuket?

[Taboard]

Aussie Traveller

My experience of applying for a mortgage with wife owning company is that the bank asks for certified accounts for last 3 years. If you your wife is applying as an employee of a company then you, as her husband, have to guarantee the loan which as a foreigner can be difficult - at least that was the case at Kasikorn but most of the banks have tightened up their restrictions over last year.

[Edonista]

Hi All,

I am looking for some advice from those with some business experience in Thailand.

Our Situation

My wife is Thai, I am Australian.

We live in Phuket.

I have several Business in Australia, which support us.

We would like to buy a house in Thailand, in my wifes name.

This is for us to live in and as an investment.

What we spend on rent would be virtually be the same as loan repayments.

I do not want to bring the capital from OZ for the whole thing, but would like to borrow as much as we can from a Thai bank, and pay the balance cash.

My wife does not work, and as such we cannot get a loan in Thailand.

The Plan

I would like to register a business (similar to being a sole trader) in my wifes name.

In theory, the purpose of the business would be sale of goods (could be clothing etc)

The business in practice would never operate.

All of the funds that we bring in month by month to live on would be put through this business.

Lets assume a turnover of 80K a month.

The business set up as a Sole proprietor can pay tax at a natural person tax rate.

There would be no need to keep records of expenditure, just income.

link to information source (information on Tax rates, business structure etc)

A standard tax deduction of 80% is available for a business structured in this way.

So the taxable income on what we bring into the country would be say, 16K a month less standard deductions.

This equates to 192K theoretical profit which would be taxable.

As the first 100K of income per annum is tax free, we would have an annual tax liability on 92K

At 10% tax on this, the maximum total annual tax bill would be 9200 Baht.

For the purposes of a bank loan, would they look at the turnover of the business(960K) for assessing how much they would lend, or would they look at the theoretical profit declared for tax purposes(196K)?

Any thoughts on the viability of the above would be appreciated.

Really, I can't make this stuff up.

To avoid moving funds from Australia to Thailand, you would declare a fake income to get a bank loan, ending up to pay taxes, legal fees and interests ?

Btw the bank would of course look at the 196k of taxable profit, not to the 960K of turnover. Since when can turnover be considered income ? To make turnover you must pay your suppliers, and that money is of course not available to fund the mortgage payments.

But what sort of business do you run in Australia that you are so unaware of basic accounting ?

[Jokerpoint]

Hi All,

I am looking for some advice from those with some business experience in Thailand.

Our Situation

My wife is Thai, I am Australian.

We live in Phuket.

I have several Business in Australia, which support us.

We would like to buy a house in Thailand, in my wifes name.

This is for us to live in and as an investment.

What we spend on rent would be virtually be the same as loan repayments.

I do not want to bring the capital from OZ for the whole thing, but would like to borrow as much as we can from a Thai bank, and pay the balance cash.

My wife does not work, and as such we cannot get a loan in Thailand.

The Plan

I would like to register a business (similar to being a sole trader) in my wifes name.

In theory, the purpose of the business would be sale of goods (could be clothing etc)

The business in practice would never operate.

All of the funds that we bring in month by month to live on would be put through this business.

Lets assume a turnover of 80K a month.

The business set up as a Sole proprietor can pay tax at a natural person tax rate.

There would be no need to keep records of expenditure, just income.

link to information source (information on Tax rates, business structure etc)

A standard tax deduction of 80% is available for a business structured in this way.

So the taxable income on what we bring into the country would be say, 16K a month less standard deductions.

This equates to 192K theoretical profit which would be taxable.

As the first 100K of income per annum is tax free, we would have an annual tax liability on 92K

At 10% tax on this, the maximum total annual tax bill would be 9200 Baht.

For the purposes of a bank loan, would they look at the turnover of the business(960K) for assessing how much they would lend, or would they look at the theoretical profit declared for tax purposes(196K)?

Any thoughts on the viability of the above would be appreciated.

Really, I can't make this stuff up.

To avoid moving funds from Australia to Thailand, you would declare a fake income to get a bank loan, ending up to pay taxes, legal fees and interests ?

Btw the bank would of course look at the 196k of taxable profit, not to the 960K of turnover. Since when can turnover be considered income ? To make turnover you must pay your suppliers, and that money is of course not available to fund the mortgage payments.

But what sort of business do you run in Australia that you are so unaware of basic accounting ?

Maybe you should learn about the Thai banks and how they calculate these thing before you start to judge anyone. Again, this is Thailand!

[taxin]

Aussietraveller, im looking at this myself at the moment, although im in different circumstances than yourself. Im not married but I do have a Thai company.

What I have recently been told (by a Thai developer) is that a bank will not touch you unless your company has at least 2 years of trading, luckily my Thai company has been Trading 3 years. Im also told that its NOT net profit but more based on turnover, which I find a little odd but then again understandable Thai mentality. Your combined salaries will get taken into account more than the actual profit of the company.

I think you have a good chance of a 50% mortgage without the need to establish a company in Thailand. Land & house in Phuket will grant upto 50% to foreigners who have a Thai spouse and a business outside of Thailand, might be worth popping over and seeing them. When I get some time I will be going over there myself.

As for English speaking accountants in Phuket forget it, been there tried that & failed everytime ! Its like asking for a Thai speaking Accountant in Australia !

Any further info you get let me know on here.