How Dangerous Is It To Own Property With A Company?

[cournoyer]

It's difficult to find accurate information on the subject.

Sorry if we go back to the subject, but I would like to know if it's risky or not.

If I decide to setup a Thai limited company, what should I expect?

What should be the fees?

Any recommendation?

I prefer not leasing, as I might want to sell the property in the future.

[gusgorman]

The law is written to stop people setting up dummy companies in order to simply buy/own land. If you own a Thai company genuinely and it trades and thus you can show VAT and tax returns etc, then yes it is OK for you to own house and land. But the law was changed failry recently to discourage people from setting the company up simply to own the land. You may never get a problem, it may be hit and miss, but if they want to act on the letter of the law, you could get yourself into hot water unless as i say you can show a trading company, bnot just a dummy coroporation in effect.

[Schooner]

I own a house through a nominee (technically illegal) company. It was set up by a Thai lawyer and then "gone over" by my lawyer and no red flags. Then a few months later the government anounces that this process was out of control and had to stop. Needless to say I was worried.

Since then (March 2006) nothing more has happened and I understand that the land office is again processing nominee companies. There was never any discussion of what would happen to those who already had nominee companies and as I understand it the government wouldn't have the resources to tackle it even if they wanted. So, the short of it is that for the thousands like me who already have a company ownership nothing will happen. When I sell my villa all I have to do is sell the company and the land office never sees it. I looked at lease options but I think for people who already have a company it is a safer option.

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

[PhilHarries]

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

And there is the sword of Damocles. You never know when some hi-so is going to look around and see all these dam_ned foriegners owning property. He then whispers in the shell like of one of his chums in government and hey presto we have a crackdown on dodgy companies.

But as you say chances are nothing will happen but never forget it is not a cast iron guarantee. And if they do have a crackdown its not like you can run to the European Court of Human Rights or the UN is it? It is, as schooner says, technically illegal therefore you have no recourse legally and many people will say som nam naa or equivalent.

Good luck to all who have purchased property in this manner and I promise not to say som nam naa if it all goes belly up.

[Naam]

But the law was changed failry recently...

nothing was changed!

[cournoyer]

Thanks for your comments. I'm not sure if I understand the risks involved...

It looks like many foreigners are visiting this forum.

Many thanks Schooner to tell your story. Someone else?

Any of you know stories about people having problems with these companies?

Anyone lost a property? Anyone had the Thai government checking the company?

[Naam]

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

And there is the sword of Damocles. You never know when some hi-so is going to look around and see all these dam_ned foriegners owning property. He then whispers in the shell like of one of his chums in government and hey presto we have a crackdown on dodgy companies.

and then Phil? what will happen? some hi-so and his chums will take over those properties?

[alive555]

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

And there is the sword of Damocles. You never know when some hi-so is going to look around and see all these dam_ned foriegners owning property. He then whispers in the shell like of one of his chums in government and hey presto we have a crackdown on dodgy companies.

and then Phil? what will happen? some hi-so and his chums will take over those properties?

ive never ever heard of any farang ever been prosecuted for using thai co nominee structure. and there are hundreds of thousands of them. Id say if its for non commercial purposes ie home ownership the chance of getting into trouble are remote at present. of course the big advantage of thai owned co is ability to leverage your investment

[joskydive]

Thanks for your comments. I'm not sure if I understand the risks involved...

It looks like many foreigners are visiting this forum.

Many thanks Schooner to tell your story. Someone else?

Any of you know stories about people having problems with these companies?

Anyone lost a property? Anyone had the Thai government checking the company?

Hi, yes, I have a house in my company name. At that time it was quite easy to do because I could select who-ever I wanted as a Thai Shareholder of the company and no checks were made. I required 7 Thai's to cover the 51% ownership.

The law did change recently and now the Thai Shareholders are investigated to prove that they have sufficient finances to have bought the shares. i.e. they weren't just given them by the foreigner so he/she could open a company to buy a house or land.

In the last 2 years I have had 3 - 4 visits from the goverment to check that I have actually got a functioning company, I have actually got staff, I have actually got an office with a desk and chair in it and that I pay my tax and social security for my staff every month. 4 thai staff are required for every foreign work permit. When this is satisfied and I give them the address of my accountants they go away until they decide to pay the next surprise visit, and, it is a surprise visit.

It is my understanding now that the government is trying very hard to crack down on bogus companies so they are quite efficient when they are investigating the thai shareholders and for that reason it is getting very difficult to find them.

The price to open a company nowadays is probably anywhere from 40,000 - 60,000 baht and then you have to find financially fit thai's for the shareholder bit.

It's also my understanding now that if a company is found to be bogus, it is closed and the assets,(house or land has to be sold), and everyone gets into trouble. But, that is only my understanding!!! If you still want to go down this path and protect yourself you should make a 30 year lease on this property which is registered at the land office and then, even if it is sold you can still remain there until your lease expires.

[alive555]

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

And there is the sword of Damocles. You never know when some hi-so is going to look around and see all these dam_ned foriegners owning property. He then whispers in the shell like of one of his chums in government and hey presto we have a crackdown on dodgy companies.

and then Phil? what will happen? some hi-so and his chums will take over those properties?

ive never ever heard of any farang ever been prosecuted for using thai co nominee structure. and there are hundreds of thousands of them. Id say if its for non commercial purposes ie home ownership the chance of getting into trouble are remote at present. of course the big advantage of thai owned co is ability to leverage your investment

oh yes fake goods , prostitution and corruption are also illegal in Thailand

[JimmyGreaves]

Thanks for your comments. I'm not sure if I understand the risks involved...

It looks like many foreigners are visiting this forum.

Many thanks Schooner to tell your story. Someone else?

Any of you know stories about people having problems with these companies?

Anyone lost a property? Anyone had the Thai government checking the company?

Hi, yes, I have a house in my company name. At that time it was quite easy to do because I could select who-ever I wanted as a Thai Shareholder of the company and no checks were made. I required 7 Thai's to cover the 51% ownership.

The law did change recently and now the Thai Shareholders are investigated to prove that they have sufficient finances to have bought the shares. i.e. they weren't just given them by the foreigner so he/she could open a company to buy a house or land.

In the last 2 years I have had 3 - 4 visits from the goverment to check that I have actually got a functioning company, I have actually got staff, I have actually got an office with a desk and chair in it and that I pay my tax and social security for my staff every month. 4 thai staff are required for every foreign work permit. When this is satisfied and I give them the address of my accountants they go away until they decide to pay the next surprise visit, and, it is a surprise visit.

It is my understanding now that the government is trying very hard to crack down on bogus companies so they are quite efficient when they are investigating the thai shareholders and for that reason it is getting very difficult to find them.

The price to open a company nowadays is probably anywhere from 40,000 - 60,000 baht and then you have to find financially fit thai's for the shareholder bit.

It's also my understanding now that if a company is found to be bogus, it is closed and the assets,(house or land has to be sold), and everyone gets into trouble. But, that is only my understanding!!! If you still want to go down this path and protect yourself you should make a 30 year lease on this property which is registered at the land office and then, even if it is sold you can still remain there until your lease expires.

Sounds to me that you only had visits because you are a trading company and they were more concerned about tax etc. I doubt that if you were not trading that you would have had any visits.

As others have said there has not been any documented cases of a company setup as non-trading to have their assets siezed or even given time to sell!

[Crash999]

In the last 2 years I have had 3 - 4 visits from the goverment to check that I have actually got a functioning company

My company was set up just before the announcement that the law was to be changed and all transfers to be investigated. Even so, the transfer took place a month later without any issue. In contrast to the above, in the two years I owned the company there was no inquiries or investigations at all.

[Schooner]

I feel a lot safer with the company arrangement than I would with the 30 year lease. There is currently some debate if even that is legal and as I understand it, it is not renewable which I think would make it harder to sell and then there is the whole inheritance issue.

A company can be transfered in 5 mins by changing the director. I imagine that there are thousands of nominee companies out there and I have no doubt that if anyone of them were being "looked at" we would all know.

Let's say that they did come after us. The remidy would be to make it legal in a reasonable time frame when we would all just change to whatever the latest money making Thai scheme would be.

TIT is Thailand and we have to live with a certain amount of uncertainty.

[joskydive]

Thanks for your comments. I'm not sure if I understand the risks involved...

It looks like many foreigners are visiting this forum.

Many thanks Schooner to tell your story. Someone else?

Any of you know stories about people having problems with these companies?

Anyone lost a property? Anyone had the Thai government checking the company?

Hi, yes, I have a house in my company name. At that time it was quite easy to do because I could select who-ever I wanted as a Thai Shareholder of the company and no checks were made. I required 7 Thai's to cover the 51% ownership.

The law did change recently and now the Thai Shareholders are investigated to prove that they have sufficient finances to have bought the shares. i.e. they weren't just given them by the foreigner so he/she could open a company to buy a house or land.

In the last 2 years I have had 3 - 4 visits from the goverment to check that I have actually got a functioning company, I have actually got staff, I have actually got an office with a desk and chair in it and that I pay my tax and social security for my staff every month. 4 thai staff are required for every foreign work permit. When this is satisfied and I give them the address of my accountants they go away until they decide to pay the next surprise visit, and, it is a surprise visit.

It is my understanding now that the government is trying very hard to crack down on bogus companies so they are quite efficient when they are investigating the thai shareholders and for that reason it is getting very difficult to find them.

The price to open a company nowadays is probably anywhere from 40,000 - 60,000 baht and then you have to find financially fit thai's for the shareholder bit.

It's also my understanding now that if a company is found to be bogus, it is closed and the assets,(house or land has to be sold), and everyone gets into trouble. But, that is only my understanding!!! If you still want to go down this path and protect yourself you should make a 30 year lease on this property which is registered at the land office and then, even if it is sold you can still remain there until your lease expires.

Sounds to me that you only had visits because you are a trading company and they were more concerned about tax etc. I doubt that if you were not trading that you would have had any visits.

As others have said there has not been any documented cases of a company setup as non-trading to have their assets siezed or even given time to sell!

In actual fact, when my Lawyer asked them why my company had been selected for investigation, they answered that it was on the list of 50,000 companies that had been selected because they looked like they weren't trading. I don't require an office to do the job I do but I need one to follow the law of Thailand.

Also, if you want to see cases of assets siezed check the houses for auction. You can't go to these auctions as a foreigner, by the way. At no time will you find government officials giving you time to sell, it just doesn't happen here.

[sweetchariot]

The law has not changed yet, but there is alot of discussion about the FBA, which would entail the nominees to hold 51% of the voting rights, as well as the shares, which will be a big shake up for nominee company owners.

Also from July you will only need 3 shareholders rather than 7 - is this making it simpler for the MD of the company, or for the authorities if and when they decide to crack down on these illegal companies?

Personally for me it would be a no-no, but this is Thailand, and I am sure with the right amount of manouvering coupled with the sufficient amount of cash, you will always be able to comply with the law of the day.

As for the previous muppet quoting 40-60k for a company formation, you've been had mate.

[GuestHouse]

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

And there is the sword of Damocles. You never know when some hi-so is going to look around and see all these dam_ned foriegners owning property. He then whispers in the shell like of one of his chums in government and hey presto we have a crackdown on dodgy companies.

and then Phil? what will happen? some hi-so and his chums will take over those properties?

I can't see a wide spread take over of properties owned by foreigners - but being outside of the law does leave one vulnerable to any Thai who takes a liking to your property of plot of land.

Far more of a risk I think is the Thai government realizing that all these properties are already registered in the Company Tax system and hence open to 'milking'. - Why they have not got onto this idea yet is beyond me.

[joskydive]

The law has not changed yet, but there is alot of discussion about the FBA, which would entail the nominees to hold 51% of the voting rights, as well as the shares, which will be a big shake up for nominee company owners.

Also from July you will only need 3 shareholders rather than 7 - is this making it simpler for the MD of the company, or for the authorities if and when they decide to crack down on these illegal companies?

Personally for me it would be a no-no, but this is Thailand, and I am sure with the right amount of manouvering coupled with the sufficient amount of cash, you will always be able to comply with the law of the day.

As for the previous muppet quoting 40-60k for a company formation, you've been had mate.

Thanks! My Company has been operational for the last 5 years and, no, I didn't pay 40 -60K for my company formation then, but, they are quoting those sort of figures now. I'm also not a mate. I'm female.

[johnnyk]

As far as the 3 shareholders thing goes, it simply means you can set up a new company with a minimum of 3 shareholders.

If you are already in the tent with 7 its biz as usual, no need to change anything.

My company got its chanote in January with no trouble, it took an hour (and 3K baht to facilitate things) which I passed over lunch in the cafe adjoining the land office. My little company does biz, files tax returns and there is a computer and an office chair in the house.

Remember, no matter what happens everything is negotiable in LoS.

Edited April 22, 2008 by johnnyk

[PhilHarries]

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

And there is the sword of Damocles. You never know when some hi-so is going to look around and see all these dam_ned foriegners owning property. He then whispers in the shell like of one of his chums in government and hey presto we have a crackdown on dodgy companies.

and then Phil? what will happen? some hi-so and his chums will take over those properties?

I can't see a wide spread take over of properties owned by foreigners - but being outside of the law does leave one vulnerable to any Thai who takes a liking to your property of plot of land.

Far more of a risk I think is the Thai government realizing that all these properties are already registered in the Company Tax system and hence open to 'milking'. - Why they have not got onto this idea yet is beyond me.

That is the crunch. What they do is irrelevant, because you are outside the law they can write their own rules. I don't see anybody taking over individual properties unless they are well up in the high value bracket. But if your property is in an area where land values are skyrocketting or someone needs the land for a particular developement your ar5e is out the window with no pants on.

I admit the risk is, at present, small but it is there. The fact that laws can change cannot be taken to read that the change will apply retrospectively nor can it be taken that they will change for the better (from a farang property ownership standpoint).

[Naam]

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

And there is the sword of Damocles. You never know when some hi-so is going to look around and see all these dam_ned foriegners owning property. He then whispers in the shell like of one of his chums in government and hey presto we have a crackdown on dodgy companies.

and then Phil? what will happen? some hi-so and his chums will take over those properties?

I can't see a wide spread take over of properties owned by foreigners - but being outside of the law does leave one vulnerable to any Thai who takes a liking to your property of plot of land.

Far more of a risk I think is the Thai government realizing that all these properties are already registered in the Company Tax system and hence open to 'milking'. - Why they have not got onto this idea yet is beyond me.

that is on my mind too. but what can one expect from tax authorities which -when you approach them and offer to pay a fair amount of income tax- tell you "pay tax you? no can do!"

[Naam]

But if your property is in an area where land values are skyrocketting or someone needs the land for a particular developement your ar5e is out the window with no pants on.

you are mixing up two types of property. one is LAND and the other one is the BUILDING. Thailand has courts and i don't believe that you can be expropriated easily owning a building in your name legally.

[Gary A]

I too would have rather purchased a house, but I had no desire to form a bogus company. I settled on a condo in my name and I sleep well at night without paying an accountant and having to file tax returns. Perhaps the law will never be enforced. Do you want to take a chance? I don't. By the way, I do have a house and land and as long as my wife puts up with me, all is fine. I trust her further than I trust the Thai government. At least if I have to walk away from it, there will be no legal problems.

[mark lamai]

correct me if i am wrong, i am no expert, but,

the "changes" or is it enforcement of existing law,

now say that the shareholders cannot assign their voting rights to another director,

thus the "nominee' thing where the farang 49% shareholder can control the vote (51% or more) is now not allowed.

if so, you (mr. 49%) are at the mercy of the other directors who can get together with their 51% and vote to do anything legal,

like sell your house!!

[PhilHarries]

But if your property is in an area where land values are skyrocketting or someone needs the land for a particular developement your ar5e is out the window with no pants on.

you are mixing up two types of property. one is LAND and the other one is the BUILDING. Thailand has courts and i don't believe that you can be expropriated easily owning a building in your name legally.

But what if the BUILDING you own legally is built on LAND you own illegally? Okay they can't kick you out of your building but they could tell you take your building off the land. I guess your company could lease you, personally, the land (and building) but even then if it were proved the company was not an operating entity in the eyes of the law it would get messy.

Truth is AFAIK no such case has ever gone to court so nobody knows exactly what would happen. However we do know one thing that will happen, lawyers will get rich(er).

[beginner]

Here is a summary of Drew Noyes talk to the PCEC some time ago.

The two years grace period to comply with the law expires October 2008. What will happen then? Maybe very little or maybe lots of legal activity.

To answer the original question 'How dangerous is it to own property with a company?'. The answer seems to be that no one really knows. But you can't fall over a cliff edge if you never walk along the cliff. You can't have your house confiscated on a legal technicality if you don't buy one using legal subterfuges. A first principal of law is that you may not do by indirect means what you are unable tro do by direct means. In other words a acheme to get round the law is bound to be struck down if challenged in court.

We ended the year 2007 with the 2nd largest attendance in our Club’s history - 130 people.

Gary Hacker introduced our former Chairman and fellow member, Drew Noyes, to give us information on property ownership when it is held in the name of a Thai Company Limited and things you can do to comply with the pending amendments to the Foreign Business Act (FBA). Drew started his talk by saying don’t be afraid to own a home in Thailand. It is still possible to have and occupy a home in Thailand. The key is to structure it a way that protects the Expat’s investment, but still comply with the FBA and Land ownership laws.

Drew explained that as a result of the Asian financial crisis of 1997, the FBA was created for the purpose of encouraging foreign investors to create businesses that would employ Thai citizens. Thais could then learn from the technology and business practices brought in by the investors. The FBA allowed foreigners to own up to 49% of the shares in a Company Limited. The foreigner was expected to get a work permit to be the managing director and was required to employ at least 4 Thais. Although the companies were expected to have employees, be operating a business, and paying taxes, no Government agency or official was checking on this. Further, when the company acquired land, the Land Office did not require any documentation to show compliance with the FBA. As a result, to get around the law that foreigners could not, as a general rule, own land in Thailand, it did not take the lawyers long to start creating companies with their Thai employees becoming nominee share holders to own the required 51%. The companies were then used to purchase homes. Although the Land Act has criminal penalties for Thai citizens acting as nominees for foreigners purchasing land, who was checking?

Well, about 3 years ago, Drew said he was in the Land office where there was a big commotion among the staff. It seems that Thai ministries were joining the computer age – integrating data bases from various ministries, which would allow a them to check on compliance with the FBA. As a result of this abuse of the FBA, the proposed amendments to the FBA were drafted. As drafted, companies would have 2 years to conform to the FBA as amended.

Drew said that if a foreigner had purchased property with a Thai company formed through use of nominees, there were ways to ensure compliance with the FBA and the Land Act. One method would be to have the company actually operate a business no matter how rudimentary, employ the required number of Thais, and ensure that all taxes (employment and income) are up to date. If this is not feasible, then a Thai could be made the managing director of the company, with safeguards put in place through a lease and mortgage arrangement to ensure continued possession and use of the property. Alternatively, the company could sell the property to a Thai with similar safeguards. In Thailand, a foreigner can own the structure in their own name, but not the land. Also, a foreigner can own a leasehold interest on land and can own a mortgage for money loaned to buy land.

Drew pointed out that a foreigner can loan money to a Thai person or company for the purpose of purchasing property and hold a mortgage on the property, which prevents sale of the property unless the mortgage and interest is paid. The foreigner can then lease the property for 30 years with an option for another 20 years (if the option is greater than 20 years, the lease would not be valid). The lease and the mortgage must be registered at the Land Office and this is usually done simultaneously with the Thai purchasing the property and obtaining the title deed. If there is a mortgage, the foreigner, as the mortgage holder, usually retains physical custody of the original land title document. He also strongly recommends that the foreigner get a “power of attorney” from the Thai land owner authorizing the foreigner to act in their name to sell the property (would have to be to another Thai or a Thai company) in order to satisfy the repayment of their loan (mortgage). In the case of the lease, Drew mentioned that it should include a “right of assumption” in its provisions so that, if needed, the foreigner could transfer the lease to another party. He also recommended that the foreigner have a Thai will with provisions on who would inherit the lease and/or mortgage.

Drew concluded his talk and answered general questions from the audience.

Edited April 23, 2008 by beginner

[cournoyer]

Many thanks for all your messages.

Beginner: I read some of your posts and you look like you are in the business, property or something similar. That is exactly the advice that I am afraid to receive: people that have interests in selling... TIT = not sure if you can trust people that are looking for your money.

I've seen some excellent websites and I am grateful to all information I can found about leases, companies, usufruct, loan, mortgage and others.

[mikethevigoman]

Like many things in Thailand there are laws and then there is selective enforcement of those laws.

And there is the sword of Damocles. You never know when some hi-so is going to look around and see all these dam_ned foriegners owning property. He then whispers in the shell like of one of his chums in government and hey presto we have a crackdown on dodgy companies.

and then Phil? what will happen? some hi-so and his chums will take over those properties?

ive never ever heard of any farang ever been prosecuted for using thai co nominee structure. and there are hundreds of thousands of them. Id say if its for non commercial purposes ie home ownership the chance of getting into trouble are remote at present. of course the big advantage of thai owned co is ability to leverage your investment

The same reason you havent heard of a prostitue or copy cd vendor being prosecuted, .the "fine " was paid before the court procedings,. it dosent mean it dosent exist,.

[JimmyGreaves]

In actual fact, when my Lawyer asked them why my company had been selected for investigation, they answered that it was on the list of 50,000 companies that had been selected because they looked like they weren't trading. I don't require an office to do the job I do but I need one to follow the law of Thailand.

Also, if you want to see cases of assets siezed check the houses for auction. You can't go to these auctions as a foreigner, by the way. At no time will you find government officials giving you time to sell, it just doesn't happen here.

JACKANORY Madame!

Edited April 24, 2008 by jflundy

[thaibkk]

why in this day and age, 21st century, we farang can still not buy legally land where Thais if they have the money, can buy land almost anywhere in the world (except in those communist countries)

my wife owned a house and land in my home country ... no problem

but i guess nothing will change soon for us, for the better that is

[tiger50]

buy a condo and sleep easy