Comanies And Buying Land

[RigPig]

OK I've just been reading a post which had some interesting points about land ownership , so I just wanted to run my "master plan" by everyone and get some feed back and maybe some advise about what to look out for , so here goes.....

I've been here for about 3 years now and hope (yes hope ) to eventually get a resident visa. I don't intend to work in desserts until I can't enjoy life but want a bit of security and have come up with a "master plan" . I am not as financial as some (2 failed marriages saw to that ) and at 50 figure this is my last crack at the cherry, so to speak.

I have a 49% interest in a 2M baht trading comany and at the moment my GF is the Thai director. This should enable me to get a 12 month non imm "B" visa, multiple entry (I think I am on my way to achieving this and have had it once but lost it because of bad advise and didn't get a re entry permit in Phuket instead of Bkk, TIT, oh well, done and done )

I believe that the 51% Thai shareholders have given their voting (proxy) rights to me (according to the solicitor who set this up)

I intend to use this company to have a small business that brings in enough to pay for the food and power etc, probably worked by the GF (potential wife). It will also own a company which will purchase some land and I will own the house on that land (when I build it). This should give me the option of being able to dispose of it should it become necessary and remove the funds aquired as a form of salary. I should have the right to live in the house as I will own the building and the land will be given to me to use as part of my "salary package" .

The company does pay tax (not much as we have traded - legitimatly - at a loss, had a go at a shop and it didn't work).

Now, is this a sound plan ? and what should I be careful about ? and what should I be weary of and be looking for in the company structure ? I have never met and do not know who the other (Thai) investers are in the company and that bit worries me. But the solicitor that set this up assured me this was the done thing.......(nagging feeling here ).

Am looking forward to the feed back and some interesting debating and comments.

Maybe a few of us can learn a bit here !!!

Cheers

RigPig

[RigPig]

Sorry about the spelling in the post title I missed that (should be companies obviously)

[PattayaParent]

It's well konwn that these 'nominee' companies set up by Farangs to own land are, at the best dodgy, but more accurately, illegal.

Edited June 26, 2008 by PattayaParent

[BL4u]

Did you just discover SMILEYS??? Your gf as the director and you shareholder. Good one. You don't have a 49% interest, only on paper *####. You should at least be director and preference shareholder. It's a joke; 'my solicitor'. The director controls the comp in Thailand.

[RigPig]

It's well konwn that these 'nominee' companies set up by Farangs to own land are, at the best dodgy, but more accurately, illegal.

PattayaParent

Hmmmm.....

This I understand (I think aboout the nominee thing) but what do I look for (in the company structure), how do I correct it. I DO NOT WANT AN ILLEGAL Company, and have done (what I consider with my limited knowledge) my best to avoid this.

I just want to live here, play the game and maybe earn a small income to pay the bills. When I kick the bucket she can have the lot, the kids (in Aus) will be taken care of via insurance and she will have earned and deserve it. However.....if she decides to split (as the 2 in Aus did), I still have a roof over my head and all the creature comforts of home !!! Thats the plan anyway.

The company isn't set up as just a land owning enterprise but is a "trading company" (2M Baht) and has had and will have a legitimate business running under it. I do know people that have companies set up to own land or a condo (where there has been more than the 49% sold) but these companies cannot trade as I understand it, they must be a holding company, I guess.

Hense my enquiries

BL4u

"Did you just discover SMILEYS??? Your gf as the director and you shareholder. Good one. You don't have a 49% interest, only on paper *####. You should at least be director and preference shareholder. It's a joke; 'my solicitor'. The director controls the comp in Thailand."

As for the GF I don't think she has any shares, I certainly didn't authorise it, do you think the solicitor has done something behind my back ? She (the solicitor) told me we need a Thai director, I believe (and maybe I am wrong) that I am still the managing director and make all the important decisions. To be honest I don't think the GF even understands what a director is, she just signed the paper work 'cause I asked her to.

"You don't have a 49% interest, only on paper *####."

How do you mean I don't have 49% interest ?

Why is 'my solicitor' a joke, I am not being fasicious, I have the feeling there are 'dodgy deals' happening under foot but I want to correct all of this, and, I may be wrong too, every time I ask a question she seems to have the right answers or at least plausible ones.

This is why I started this thread, others are probably in the same position. You have to rely on your solicitors advise, and if it is no good, how do you know....ask questions. But I need informed and detailed answers, critisism is easy, and ignorance (in my case) can be a curse.

I don't think I am a complete idiot and I am not adverse to donating tea money to grease the wheels but at the end of th day it has to be right ! Things are done differently here and I (we) need to know the differences....

And as for the smileys.... Hmmm late night and alcohol, sorry, seemed like a good idea at the time.....

Maybe I am stupider than I thought but I have always believed there is no such thing as a dumb question, however sometimes the answers are not as clear as mud (try communicating with an Algerian that can't speak English...but thats another story), sorry boys (or girls) but if you could be more precise and give a bit more detail it would be gratefully appreciated.

Thanks for your time and look forward to any help

RigPig.

Edited June 27, 2008 by RigPig

[dsfbrit]

I 'own' a house and land through this approach.

My advice to you us do not do this.

Its illegal - plain and simple.

Unless you are very mentally tough, you will lose sleep over this.

There are many many ... many threads that have been posted on this forum since the declared 'crack-down' on this type of structure back in May 2006.

The crackdown and the changes to the Foreign Business Act (FBA) which have never come into force should be read about in depth.

Other threads you need to read relate to buying house and land via LEASE and USUFRUCT.

Do NOTHING until you fully understand all these topics.

Good luck, I have been learning about all this stuff for the last 2 years and am still not an expert. However, I can assure you the set-up you are considering is not a 'master plan' - its a mistake

As the 'sales' tax (not its true name, but it explains what it is)has been reduced for the next 12 months to nearly zero percent from 6 percent, I am considering moving 'my' house and land to my wife via a USUFRUCT.

If you must buy property in LOS then buy a condo in your own name in the 49 percent allocation allowed for foreigners.

Edited June 28, 2008 by dsfbrit

[JimmyGreaves]

I am considering moving 'my' house and land to my wife via a USUFRUCT.

Why do you have to move both house and land?

I would have thought if you wanted to close down the company then you are better protected by only giving the land to your wife on the transfer and having at least the house in your name. Then do the USUFRUCT.

I have a similar dilemna, have some land through the company route but want to build. However do not want to put the house in the company name and not sure the best way to go.

[dsfbrit]

I am considering moving 'my' house and land to my wife via a USUFRUCT.

Why do you have to move both house and land?

You are right of course, a sloppy reply on my part I am afraid. If I do the Usufruct (a big IF there), then I will of course make the most of all the favourable options suggested by Sunbelt. Mind you, to be honest, without the land the house is not of much use and the Usufruct is for my lifetime anyway. So, for practical purposes, the benefits of the land and house split dont really seem that great to me.

Still if I do this, then I will take Sunbelt's advice.

Good luck with the building - hope it turns out nice for you.

[dsfbrit]

I have a similar dilemna, have some land through the company route but want to build. However do not want to put the house in the company name and not sure the best way to go.

Just a thought and I am not fully 'up to date' on all this. By that I mean a few months ago I was on top of all this, but some of the details have faded from my brain!!!

However, I seem to recall you cannot have just the land in the company name and the house in your name (say), both land and house must be in the company name if you go that route.

Still, if have remembered that correctly, I expect you knew that anyway

[RigPig]

Hi Guys

Thanks for your input.

I "came across" this article which I understand and have posted (reposted) for others benefit. I still have a few (for me) unanswered questions.....

I have under lined the "relevant section".

The company I "own" is a trading company, has run (in the recent past) an income gaining (read loss) shop and will do again in the near future (hopefully without the loss part). It is not to solely "own" land its just that the vehicle is there, why not use it ?

What constitutes a "nominee" shareholder ?

I had planned to own the house on the land dsfbrit and didn't know that I couldn't if the company owns the land so thanks for that.

What if the company leases the land to me and has to compensate me (for my house) if the lease is ended in anyway ?

Anyway everyone says don't do it, but this is documented as an accepted way of controlling the rights to the property. So what exactly is the problem ?

If the company is legit and is trading where are the pitfalls. All of the posts I have read say don't do it but no one says why, I am confused

I can see how a company set up solely to own land would be illegal but this is not the case here. I want this company to provide an income even if it just pays the food and power bills I would be happy !

Thanks for your input

RigPig

So you want to own property in Thailand?

* Note: the following is intend only to provide the reader with an overview of the issues that need to be considered when buying property (read "land") in Thailand; it is not intended to be a comprehensive guide, nor is it intended to constitute legal advice. In the event that you are contemplating buying property in Thailand, it is strongly recommended you seek the advice of a reputable lawyer in Thailand.

At some point or another, nearly every foreigner who makes the decision to live in Thailand long-term will consider whether or not to buy property here. However, unlike [likely] the case in their home country, a quick search of Google will show that purchasing property in Thailand is nothing if not fraught with risk. The following is intended as a brief Guide providing an overview of the issues at-hand for just such a group of foreigners.

Section 86 of the Land Code

In effect, Section 86 of the Land Code 1954 ("Land Code") places a general prohibition on foreigners owning land in Thailand by providing, inter alia, that:

"aliens may acquire land [in Thailand] by virtue of the provisions of a treat giving the right to own immovable properties* and subject to the provisions of this Code."

[* note: By virtue of Section 139 of the Civil and Commercial Code of Thailand ("CCC"), "immovable properties" denotes "land or things fixed to, or forming a body with, land"]

As, currently, there is no "provisions of a treaty" in place "giving [foreigners] the right to own immovable properties"; foreigners are generally not permitted to own land, unless (i) the provisions of the Land Code afford others; or (ii) other specific Thai law is in place which affords foreigners this right.

Having said that there is a general prohibition on foreigners owning land in Thailand, by virtue of the aforementioned Land Code and other specific Thai law in place, foreigners may acquire and own land in Thailand in any one or more of the following three (3) circumstances:

1 Section 96 bis of the Land Code

Enacted in 2002 by virtue of the Ministerial Regulations Governing Bases, Procedures and Conditions Respecting Acquirement of Land for Use as a Residence of Aliens (2002), Section 96 bis of the Land Code permits a foreigner to acquire and own land in Thailand, with the following conditions:

(a) the aggregate area of land purchased cannot be more than 1 Rai (equivalent to approximately 1,600 sq. meters)

( the foreigner must import into Thailand a sum of not less than Baht 40 million

© the Baht 40 million imported into Thailand must be invested in any one or more of the following investments for a period of not less than 5 years:

(i) government bonds, bonds issued by the Ministry of Finance which secure capital or interest, Bank of Thailand bonds, and/or bonds issued by Thai State Enterprises (as defined under the State Enterprises Act)

(ii) a property mutual fund or mutual fund for resolving the financial problems of financial institutions under the laws and regulations set out by the Stock Exchange of Thailand

(iii) the share capital of either a private or public company that has been afford investment promotion privileges

(iv) any investment declared an eligible investment by the Board of Investment

(d) permission must be sought, and be given, by the Minster of Interior.

Moreover, in addition to the above, it is important to note the following:

(i) the investment of Baht 40 million does not include the amount you will pay as the purchase price of the property, nor any repairs/upgrades you make to the property;

(ii) the property purchased must be used for your own, or your family’s, residential purposes

(iii) the property cannot be used in a manner deemed contrary to the good morals and local custom of the people of Thailand, e.g. you cannot use the property as a casino

(iv) if the Minster of Interior gives you his consent to purchase the property, you (or your family) must take up residence in the property within a period of 2 years from the date on which you register ownership of the land

If you fail to abide by any of these requirements, you will be required to sell the land within a period of not less than 180 days nor more than 1 year; failing which, the Director-General of the Department of Land has the power to sell the property on your behalf.

2 Section 93 of the Land Code

Section 93 of the Land Code permits foreigners to own land in Thailand in the event that they acquire the ownership of such land by virtue of being the lawful heir to an estate. Nevertheless,

(i) permission from the Minster of Interior to the ownership of the land needs to be sought and obtained

(ii) the aggregate area of land allowed to be owned cannot exceed that permitted by law; for example, 1 Rai for residential purposes; but it is possible to owner a large area if the land is commercially used, such as a farm – for the exact area currently allowed, reference needs to be made to the regulation issued

failing which, as is the case under Section 96 bis of the Land Code, you will be required to sell the land within a period of not less than 180 days nor more than 1 year; failing which, the Director-General of the Department of Land has the power to sell the property on your behalf.

3 Foreign Company

The term ‘alien’, as used in Section 86 of the Land Code denotes both individuals and corporate entities. Nevertheless, there are certain circumstances under which a foreign company may be able to acquire ownership of land in Thailand. The two most outstanding examples of this are under:

(i) the Notification of the Board of the Industrial Estate Authority of Thailand No. 3/2535 (1992), issued under the Industrial Estate Authority Act of Thailand 1979

(ii) by virtue of Section 27 of the Investment Promotion Act 1977.

Even here though, the foreign company will have placed upon them severe eligibility requirements and will be forced to sell the property if they fail to maintain their eligible status.

What are my alternatives?

As you can no doubt see, being a foreign resident in Thailand is not all together conducive with owning property here. This is not to say, however, that you do not have alternative mechanism that you can make use of. The following are a few of the more common ones currently in place:

1 Thai Limited Company

The general prohibition in place under Section 86 of the Land Code relates to foreigners (the word actually used is "aliens", as is the common practice under Thai legislation – because the translation [in Thai] of the word "foreigner" normally denotes a Westerner, whereas "alien" is the broader term used for all non-Thais). In this regard, by virtue of Sections 97 and 98 of the Land Code, a "foreigner" is deemed to include:

(i) a private or public company with more than 49 per. cent. of its registered capital held by foreigners, or where more than half the shareholders of the company are foreigners (regardless of the capital held by them)

(ii) a limited partnership or registered ordinary partnership with more than 49 per. cent. of its registered capital held by foreigners, or where more than half the partners of the partnership are foreigners (regardless of the capital held by them)

(iii) associations or co-operatives where more than half the members are foreigners, or which has as its major objective to operate to the benefit, or substantially to the benefit, of foreigners’ interests

(iv) foundations (charitable organisations) that have as their major objective to operate to the benefit, or substantially to the benefit, of foreigners’ interests

(v) non-Thai nationals.

As a result of this restriction and definition, it is possible to own land in Thailand by means of a vehicle commonly known as "a Thai majority owned but foreign controlled company". In short, it is generally accepted corporate practice in Thailand that a company can be structured along a preference share structure whereby the majority in both capital and shares can be held by Thais, but where the controlling interest over the company’s management and affairs vests with foreigners.

However, before you can consider incorporating a Thai company to own the land on your behalf, you do need to consider the following issues very carefully:

(i) Under Section 150 of the CCC, an act is voided if its object is expressly prohibited by the laws of Thailand. As foreign ownership of land in Thailand is a general prohibition by means of default (i.e. there are no treaties in place which allow for foreign ownership of land), it is questionable whether or not this constitutes an express prohibition (which is the requirement under Section 150). That said, some academics do hold that the Thai company structure set out above is voidable under Section 150. The honest truth is, the jury is still out on this issue.

(ii) Under Section 1097 of the CCC, the formation of a limited company requires the participation of, at minimum, 7 shareholders. At least 4 of these need to be Thai. That said, Section 113 of the Land Code specifies that "any Thai who acquires land as an agent of a foreigner or juristic person under Sections 97 and 98 of the Land Code shall be punished with a fine not exceeding 20,000 Baht or an imprisonment not exceed 2 years, or both." As is the case with Section 150, a number of Thai academics hold that Thais holding shares in Thai companies incorporated for the purpose set out above are falling foul of Section 113 of the Land Code.

It is, however, generally accepted that if the company is a revenue generating company, as well as holding the land, then these problems are mitigated, but not all together eradicated. Moreover, although the shareholding limit under the definition set out in Sections 97 and 98 is 49 per. cent., it is generally accepted that prudent practice demand that the maximum foreign shareholding level be 39 per. cent., or less, in the company.

In the event that holding land in Thailand by means of a "a Thai majority owned but foreign controlled company" appeals to you, you should review the article on this subject for further issues you’ll need to consider.

2 Thai spouse/child

Prior to 2001, any Thai [female] national who married a foreigner automatically lost her right to own land in Thailand. A number of reasons for this Draconian law were advanced, but the truth of the matter can be located in Section 1470 of the CCC, which stipulates that all property acquired after a marriage, under Thai law, is the common property of the husband and wife (minus any pre-nuptial agreement). As foreigners were not allowed to own land in Thailand, to avoid them having a common interest in land, neither were their spouses (and, it is worth noting, the wording used is spouse; thus, in theory, the law applied equally to Thai husbands with foreign wives. But, as the Thai husband was not required to change his surname, whereas the wife was (under Thai law in place at that time), the authorities rarely knew he was married to a foreigner).

Following the publication of the Notification of the Ministry of Interior re Application for the Acquisition of Land by Thai National Who Has or Used to Have Alien Spouse and Juvenile Child of Alien Who Has Thai Nationality (published on 4 October 2001) this prohibition was lifted and Thai spouses of foreign nationals are now allowed to own land provided that the foreign spouse confirms in writing that all of the money used to purchase the land belongs to the Thai national spouse and that the foreign spouse has no claim over this money or the property as a common property of the marriage. As a result, foreigners married to Thais, or with half-Thai children, can use them as a vehicle to own land, provided that they accept they have no interest or claim over the land. Nevertheless, as mentioned above, under Section 93 of the Land Code, they can be named as heirs under a lawful will.

3 Own the house, but not the land

The general restriction in place under Section 86 of the Land Code relates to foreign ownership of land, there is nothing stopping you, as a foreigner, from owning a house. However, how practical would it be to own land, if you did not own the land? To answer that, you need to consider the following:

(a) Lease: Under Title IV (Hire of Property): Chapter 1 of the CCC it is possible for a foreigner to lease land in Thailand; subject to two qualifications:

(i) if the lease agreement is for more than 3 years, then the lease needs to be made in writing and registered at the Land Office (Section 538; and

(ii) if the duration of the lease exceeds 30 years, the period will be reduced to 30 – which period may be renewed, but not for a period in excess of 30 years from the time of renewal (Section 540).

Thus, subject to the above restrictions, you can enter into a lease agreement with the land owner, and thereafter build and own the house on the land.

In the event that holding land in Thailand by means of a "lease arrangement" appeals to you, you should review the article on this subject for further issues you’ll need to consider.

( Habitation: under Sections 1402 – 1409 of the CCC, a person inhabiting land has certain rights to that land, notwithstanding the fact they may not own the land. Thai law also has the concept of ‘adverse possession’, where you can acquire ownership of land if you inhabit it for a sufficiently long enough period without the express objection of the land owner; but this does not apply to foreign nationals.

© Usufruct: currently a hot topic, usufruct allows the possessor of the land to posses and enjoy the land and to manage the land. Questions have been raised, however, whether foreigners making use of this structure is the acceptable manner in which its use was intended. We can only wait and see what the outcome will be.

(d) Easement: it is possible for a Thai national (indeed Thai law itself) to provide a foreign national with an easement over the land – such as a right of access / right of way. The degree to the amount of area that an easement of such nature can be granted (i.e. 2 Rai?) is the debating point.

4 Become a Thai national/citizen

If you still want to own land in Thailand, and none of the above mechanisms works for you, then you are going to need to consider becoming a Thai citizen. In such an event, under Section of Thailand’s Nationality Act B.E. 2508 (1965), as amended by Act B.E. 2535 (1992) Nos. 2 & 3, a foreigner can apply to become a Thai national if they possess the following qualifications:

(a) become sui juris in accordance with Thai law and under the law under which the applicant has nationality;

( has good behaviour;

© is regularly employed;

(d) has been domiciled in Thailand for a period of not less than 10 years;

(e) has knowledge and skill of Thai language sufficient to meet the requirements prescribed by the regulations under the act.

Conclusion

Although property ownership in Thailand can be problematic, it is not impossible. You will however need three essential requirements: (1) an ability to think outside of the box to construct a mechanism that best suits your needs; (2) plenty of patience; and (3) enough cash not to worry about the money you just invested in the Thai property. It is the last of these you should keep in the forefront of your mind: never invest in Thai property more than you are willing to walk away from.

© Copyright ownership of this article belongs to William Jarvis. You are free to copy this article at liberty and you are also free to quote from this article in full. In either case you are asked, as a matter of courtesy, to make reference to the author as being just that. To this end, while not being particularly fussy, the author views the act of ‘passing off’ as being a particularly repugnant act done by those too stupid to work things out for themselves. Please respect my views on that – it’s not asking a lot!

[donx]

RigPig,

That article is old and is currently being discussed by others including the author in THIS thread.

Read through that whole thread and you will get some answers.