30 Year Lease From Own Company Or Better From A Private Person

[OKF]

Hi @ all

I am very indecissive what to do. I really would like to 'sell' my companies land to a thai person so I can personally lease it (back) from him (I do not want to discuss about the guy being trustworthy or not). The reason is that the company structures are sort of illegal in terms of the spirit of the law. Whether my way would also implement a 'nominee structure' is in question as well of course.

The main reason to seriously consider it is that if I do a 30 year leasing agreement between (my) company and myself is that this is then the only income the company will have an the revenue dept. does not even receive taxes or only little due to the debts in the company I assume. So if he company does not do anything actively in the future that willl create problems, does it not?

Your views and experiances would be appreciated.

Thanks

[khunPer]

I have been thru the same considerations. I ended up with company lease, as "my company" also have some other activities and income.

My lawyers - I did consult more than one - advised me:

1) A company annual statement shall always end up with a little profit, so some tax has to be paid.

2) It may be a problem, if the company only hold one plot of land as activity. The gouverment mainly looks at larger projects, rather than the single "private owner". The question is, if the land investement and lease may be considered as a business or not?

3) If the land lease Agreement runs over more than 3 years, then it must be declared at the Land Department and a (small) tax paid, to be valid.

4) If the lease Agreement is made with a person, then declare also a loan at the Land Department - fx. the price or value of the land, evt. including construction/house - as the land then cannot be sold, before the loan has been paid fully and cancelled. This clause will be an extra security, that the registered owner cannot just sell "your land".

Running a company will always include some expences like accounting and annual statements. It is a question of (your) security, if it is worth spending the expences. Having a person (thai) imployed in the company and paying the Social Security, may make the company look like a business.

Selling the land from company to a person, will most probably also include tax and transfer fee at the Land Department and perhabs some profit taxation in the company.

[OKF]

Thanks for your answers.

I will have no business running. So the companies are not that good of anidea.

The cost involved to pass over to Thai person (incl. all txes) is totalling much, much less then just the bookkeeping cost.

Could you please explain that loan thing to me in more detail?

[Sunbelt Asia]

While you can sell your shares in your Thai company to a Thai person, the transition could be a risky period as the new owner may not agree to register the new lease.

If the lease is registered under the new owner, the company would have to declare the monthly rent as income and pay taxes on it. Since the purpose of a company is to do business and generate a profit the rent collected would have to be a reasonable amount to be accepted by the Land Department and the Revenue Department. If, over the course of a year, the company incurred more expenses than profit the company could claim the monthly tax back but it is normally held by the Revenue Department as a tax credit.

If you are the Director of the company yourself and try to lease the land to yourself, the Land Department would not allow this lease agreement as it would be considered a conflict of interest.

As a shareholder in the company, you may find the Land Department scrutinizing your company and again, not allowing the lease agreement.

[khunPer]

Thanks for your answers.

I will have no business running. So the companies are not that good of anidea.

The cost involved to pass over to Thai person (incl. all txes) is totalling much, much less then just the bookkeeping cost.

Could you please explain that loan thing to me in more detail?

In principle you may be able to use a standard loan form (the ones you can buy in fx. book- or paper shops) and have the loan declared by the Land Department on back of the land deed. It will work as a mortgate servitute. The land deed shall be of a high class, Chanote - perhaps also Nor Sor3 may be valid for a loan. I got the advise from my lawyers - I will recommend, that you consult your lawyer for further details.

[thaiwanderer]

OKF, what do your other shareholders think of the proposed sale and price?

Do you already have someone who wishes to buy the land and then let you use it to their exclusion?

What prices are you suggesting for the sale and then the 30 year lease?

[OKF]

OKF, what do your other shareholders think of the proposed sale and price?

-> I do not know but I do have/control the vast majority of votes and share anyhow via my holding

Do you already have someone who wishes to buy the land and then let you use it to their exclusion?

-> yes, a thai person, friend of mine

What prices are you suggesting for the sale and then the 30 year lease?

->I sell it for the price the company bought it for and I am planning to lease it out quite below that price

[thaiwanderer]

OKF, what do your other shareholders think of the proposed sale and price?

-> I do not know but I do have/control the vast majority of votes and share anyhow via my holding

Do you already have someone who wishes to buy the land and then let you use it to their exclusion?

-> yes, a thai person, friend of mine

What prices are you suggesting for the sale and then the 30 year lease?

->I sell it for the price the company bought it for and I am planning to lease it out quite below that price

You are Thai then, so why not just own the freehold in your own personal name.

Your Thai friend is willing to buy it with their own money and lease it to you at quite below that price - sounds like a good deal.

[OKF]

you know I am not Thai, so why do you get cynical? You also know how it works?

[thaiwanderer]

you know I am not Thai, so why do you get cynical? You also know how it works?

Because you continue to ask questions seeking clarity and certainty in relation to illegal structures.

There are risks and illegal acts in either.

As another poster carefully phrased it perhaps making changes will subject you to more scrutiny now.

[OKF]

I am trying to find a way out of illegallity. That is the reason for the question. And when it comes to the lease price I said 'planned' but thisis up to the lawyer to come up with some advice.

[thaiwanderer]

I am trying to find a way out of illegallity. That is the reason for the question. And when it comes to the lease price I said 'planned' but thisis up to the lawyer to come up with some advice.

Really? From your posts in this thread I would say it's pretty clear you are actually looking for a way to make it less illegal, less likely to arose suspiscions or less obvious - but still offending the general prohibition on you owning land and utilising nominees.

If you are truly looking for a way out of the illegality then the easy answer is to sell the entire company to genuine investors or a thai individual. What they do with it then (lease to you or not) should be entirely up to them (since not acting as your nominees).

Alternatively stay put in current structure or shift to the alternative you suggested. There are positives and negatives to both although its not an equal assessment as you are already in a structure - shifting it might involve some scrutiny which you appear to want to avoid.

[bmore99]

I never understand why people go into these 'company-constructions', when it is possible to get the usefruct of the property.

Perfectly legal, cheap, easy and keeps you safe during your life-time.

[OKF]

I do not get why it involves some scrunity?

A usefruct does only make sense if you are married to a thai from what I understand.

[Sunbelt Asia]

You do not need to be married to a Thai in order to obtain a usufruct. However, if you are not married to the Thai landowner then the usufruct would be registered with a 1.5% tax of the value of the property.

A usufruct grants the user a lifetime use of the property, even allowing the usufructary the right to lease the property that would remain legal even after his death. You can also add others to the usufruct, such as your children and then the usufruct would extend to their lifetime. With a usufruct agreement you are registered on the title deed. The property cannot be mortgaged without termination of the usufruct. Should the property be sold or transferred without the de-register (termination) of the usufruct, the new owner must honour the existence and validity of this usufruct. You can obtain a yellow house registration with a usufruct and your usufruct is registered on the title deed.

Sunbelt Asia has drafted 100's of usufructs for our clients.

http://www.sunbeltlegaladvisors.com

[InterestedObserver]

I do not get why it involves some scrunity?

A usefruct does only make sense if you are married to a thai from what I understand.

You are wrong! Being married to the landowner only complicates the process of obtaining land rights for oneself.

[OKF]

from what I understand 30 year lease and superficies is the right way to do it, what does the usefruct do?

[InterestedObserver]

from what I understand 30 year lease and superficies is the right way to do it, what does the usefruct do?

1. Usufruct secures the right to possession, use and enjoyment of the land.

2. Superficies secures the right to own (occupy) the buildings, structures or plantations.

Both of the above are classified as land rights, whereas a lease is a business contract.

Edited March 2, 2011 by InterestedObserver

[bmore99]

from what I understand 30 year lease and superficies is the right way to do it, what does the usefruct do?

1. Usufruct secures the right to possession, use and enjoyment of the land.

2. Superficies secures the right to own (occupy) the buildings, structures or plantations.

Both of the above are classified as land rights, whereas a lease is a business contract.

The usefruct will cover the buildings on the land as well. And there is no limit on the size of the land.

see http://www.isaanlawyers.com/en/property/usufruct-agreement-in-thailand.html for explanation of usefruct

Edited March 3, 2011 by bmore99

[InterestedObserver]

from what I understand 30 year lease and superficies is the right way to do it, what does the usefruct do?

1. Usufruct secures the right to possession, use and enjoyment of the land.

2. Superficies secures the right to own (occupy) the buildings, structures or plantations.

Both of the above are classified as land rights, whereas a lease is a business contract.

The usefruct will cover the buildings on the land as well. And there is no limit on the size of the land.

see http://www.isaanlawy...n-thailand.html for explanation of usefruct

From the Civil and Commercial Code. The superficies is the stronger real right when dealing specifically with house ownership.

Section 1410. The owner of a piece of land may create a right of superficies in favour of another person by giving him the right to own, upon or under the land, buildings, structures or plantations.

Section 1417. An immovable property may be subjected to a usufruct by virtue of which the usufructuary is entitled to the possession, use and enjoyment of the property.

Edited March 3, 2011 by InterestedObserver

[OKF]

Thank you, I understood it that way that the Superfecies is better and also I think you cannot register both.

[bmore99]

Thank you, I understood it that way that the Superfecies is better and also I think you cannot register both.

Downpart of the superficies is the lease of the land, if I understand correctly there are limitations to the lease.

Downpart of the usefruct is that everything is lost when you die.

Which one is best, I think, depends on one's situation.

But both are completly legal, cheap and a lot easier/better than the so called "company-construction" or any other legal way (which is the topic of this thread).

[ricklev]

"A usufruct grants the user a lifetime use of the property, even allowing the usufructary the right to lease the property that would remain legal even after his death."

Sunbelt, I have never understood how a lease granted by the holder of a usufruct could last after his death beyond 3 years.

All leases over three years must be registered by the holder of the chanote, isn't that so? Even if the owner of the land agrees to a lease with a third party, the land office isn't going to allow both a usufruct and lease on the chanote.

And for a lease less than three years, where is the privity of contract between the owner of the property and the lessee?

Could you clear this up for me....

Thanks!

Edited March 4, 2011 by ricklev