Property Ownership

[piet pompies]

I went through the legalities of ownership with a company or lease. What about having a Thai Company with a small foreign share, eg. 20% which then puts one and the lawyer who sets it up safely below the 39% scrutiny limit, and then having a lease, 30+30 from this company to oneself.

Does the company have to file an anuual tax return if the lease payment is a onetime deal?

[Martin_F]

You do not need to be a Thai to lease land in Thailand. The restriction is on actual land ownership - and generally that includes the building thereon.

Please can you explain the situation a little more as I'm not sure what you want to do.

[Sumitr Man]

Does the company have to file an anuual tax return if the lease payment is a onetime deal?

A very simple answer here is - "yes". Assuming the company is registered with the Ministry of Commerce, you'll need to file all the usual documentation annually.

One comment - you talk about paying the "rent" upfront. I assume here you mean for the 60 years, not 30. If that is the case, you'll need to talk to an accountant as "your" company will have a problem amortizing the income/expenses. As I understand the situation, the Revenue Department is likely to accept income amortization over the initial 30 years only, but expenses will need to be as and when they are incurred, i.e. over 60 years. Effectively this means in years 31-60 you will have no income but expenses (hence loss), whilst in years 01-30 you'll have an imbalance of profit to loss. This area has had me confused on more than one occasion. Also the Revenue Department appears not to have applied consistent rules here. So I strongly suggest you check this out.

One other thing, asides from having the shareholding structure you mention (which is sensible), try to make sure that the capitalization of your company and the value of the land are NOT the same. Without mentioning any specific instances, it would seem that more and more these days this is something being looked at, i.e.

Company capital = Bt 3mn

Value of house (company assets) = Bt 3mn

QED - dodgy company...

Try to make the capital of the company for more than the value of the house, even if it is unpaid capital (subject to a call option).

SM

[piet pompies]

Thank you both for the info. For Martin F: some years ago( 2) I had a long consultation with Johnson Stokes and Master in BKK on how to own land. They then told be to avoid any company which has foreign ownership of more than 39% as this will come under scrutiny. They advised two companies, one which owns land of 39% foriegn ownership and this company is then controlled by a second company with 49/51%. This however makes for significant annual fees and a lot of shareholders. There is also the issue of a lawfirm "aiding and abetting" a foreigner to own land. ( This is where Elite Card came unstuck!)

I did not want the seller to retain ownership and then lease to me, and there are not that many Thais that I know well enough to ask to hold on my behalf. So I though of a possible simple way and this would be to have some control over the ownership( perhaps not absolute) and definite control over the lease which is registered.

BUT I know zero about the tax implications in Thailand and want to keep things as simple as possible without thousands of papers to file. Value of the house is around 12M Baht.

Any ideas which make sense would be welcome.

[Sumitr Man]

There are a number of ways you can do this. Have you considered spliting the deal, so the holding company owns the land and leases it to you, but you own the structure [house] on the land? That's perfectly legal.

Also, if you want to retain some control over the company, I would suggest you structure it in such a way as you [NOTE you not the company] provide each of the other subscribing shareholders a loan with which to pay for their shares [NOTE - the loan needs to be evidenced in writing]. You then take a pledge over the shares as security. Under Thai law the pledgor needs to provide the pledgee with the actual document being pledged - so they would then need to give you the share certificates, which you keep in a safe place. Whilst it is true that a pledge can be cancelled at any time by means of fulfiling the underlying obligation (i.e. paying off the debt), at least this way you have forewarning that something is going on - because they have to pay off your shareholder loan in order to cancel the pledge.

Downside, interest - what to do with it. Some have structured the interest on the shareholder loan to be equal to any dividend payment expect to be due - but that was in the case of actual trading companies.

Downside- death. What happens if one of the shareholders dies? How do you gain control over that shareholder's share(s)? Simple answer is you have to automatically call in the loan as soon as you hear of their death and then immediately enforce the security. Under Thai enforcement of security laws you'll need to auction the shares at a public auction. However, if you're clever enough you can arrange it so that only one person attends that public auction [not you though, because you don't want to purchase any more shares] - and it would still constitute a public auction. But, you'll be seen as a complete sh1t taking advantage of the death of a person...

Other than that, there is no real "easy" way to buy prpoerty here - short of buying a condo.