Owning Land Through A Company

[sinkorswim]

I have just purchased land through a company which I had a lawyer set up with me having 38% and Thai's 62%.

I do have full share control and power of attourney over the company.

My question is simple what will the running costs be for the company each year. I will not be using the company for trading but do want it to be as legitimate as possible.

My lawyer has told me 20000baht per year but I want this confirmed as they tried to DOUBLE my bill half way through the process so I will no longer be using them.

I have also been told 12000baht per year but that was from a "barstool" lawyer

I am living in Chiang Mai so if anyone knows of a good tax lawyer/accountant then I would grately appreciate it.

regards

Edited November 12, 2005 by sinkorswim

[sinkorswim]

anyone?

[monty]

There's two caveats with buying a house/land through a company.

The first is that your 62% Thai shareholders actually have to be able to prove they put up 62% of the capital in the company.

If not they might be considered illegal nominees, used to circomvent Foreign land ownership laws, by the Thai courts and as such all the company might be declared void (and illegal) resulting in you possibly losing your house.

The second is that slowly the Tax offices nation wide are trying to weed out "sleeping" company's. This means company's that don't do any actual trading and just pay the minimal tax to stay alive. (this would be the yearly 12000 Baht "barstool lawyer" company!)

A good lawyer should provide you with acceptable share holders (meaning people who in case of problems can show the financial means to invest in your company), and he should have set up your company in a way it is actually trading, with the house/land included as part of the business plan of the company (e.g. the company was set up to buy real estate to be rented out later to generate income)

This situation will cost more the the 12000 Baht/year mentioned earlier, the actual cost will depend on how valuable the house, and how good of an accountant you have.

Ballpark for a small / medium house would be between 15000 and 25000 Baht/year

If the company is in the actual trading company category, the risk with the nominee shareholders will be almost non existant. If your company is of the sleeping kind, you might get investigated by the tax office sometime, and then the penniless nominee shareholders might come to their attention!

Edited November 13, 2005 by monty

[Dragonman]

The first is that your 62% Thai shareholders actually have to be able to prove they put up 62% of the capital in the company.

If not they might be considered illegal nominees, used to circomvent Foreign land ownership laws, by the Thai courts and as such all the company might be declared void  (and illegal) resulting in you possibly losing your house.

<{POST_SNAPBACK}>

The illegal ownership of a property has gone to the thai supreme court on more than one occasion. You will lose your home but you will be able to keep the proceeds of the sale.

[Sumitr Man]

There's two caveats with buying a house/land through a company.

The first is that your 62% Thai shareholders actually have to be able to prove they put up 62% of the capital in the company.

Anyone who knows me well will vouch for the fact that I do not hold with the company structure - I believe it contravenes Section 150 of the CCC and, thus, can be deemed invalid at any time. But, that is my opinion, and other have their own.

The above, frankly, is clearly wrong. There is nothing against Thai law with having a shareholder loan structure. Indeed, if the above were to be carried through, a lot of businesses in Thailand would be looking over their shoulders.

If not they might be considered illegal nominees, used to circomvent Foreign land ownership laws, by the Thai courts and as such all the company might be declared void (and illegal) resulting in you possibly losing your house.

It is time people woke up and realized that nominee structures were used in a lot more businesses that acquisition of land. The fact is that it is a risk. Excuses me, not a risk, but a huge risk. But, then again, so is owning 26% of an insurance company. Analysis the risk and determine if it is of value to you

The second is that slowly the Tax offices nation wide are trying to weed out "sleeping" company's. This means company's that don't do any actual trading and just pay the minimal tax to stay alive. (this would be the yearly 12000 Baht "barstool lawyer" company!)

Two-prong attack here. Under the MoC rules, you can default on [accounting] returns for 4 years. But, you are right, as it likes to be known, the Large Tax Office (sounds overweight – doesn’t it), has certainly got its act together over the last 24 months and will continue to do so – it is certainly a risk.

A good lawyer should provide you with acceptable share holders (meaning people who in case of problems can show the financial means to invest in your company), and he should have set up your company in a way it is actually trading, with the house/land included as part of the business plan of the company (e.g. the company was set up to buy real estate to be rented out later to generate income)

Sorry, on this point you are 100% wrong.

Ignore all of my above comments: NEVER, NEVER. NEVER, trust a shareholding structure where you lawyer is a shareholder, or company signatory. Why the [insert very bad word] do you think Taksin put it in the name of his driver. You put anything in the name of 62% shareholding, and I’ll show you a way to beat the system.

Worthless, info…?

[sinkorswim]

thanks for the replies. but from what everyone has said a sleeping company cannot be used for the purpose of owning land!!

If this is the case what is the best way to do it. I did previously have the land in a Thai persons name and leased it from them for 30 years however we fell out and I realised that in 30 years I could lose the lot. (I know a long way of but I am only young so hope I live another 30 years)

Should I have a accountant show that the company is trading at a small profit each year or is there another route I can take.

I am starting to wish I had never bothered with the purchase but we live and learn.

thanks in advance.

[Sumitr Man]

^ I'm at a loss... you leased the land and now want to buy it?

[sinkorswim]

sorry i should explain properly.

I leased the land from my exgirlfriend but before we got the chanote we split up. There is a huge backlog getting chanotes as the rules have changed (so I have been told by the land office) It may not turn up for another 1 year. Now I could not do anything with the land without the chanote so my hands where tied.

The only thing I could do was to get her to sign a power of attourny giving me the right to sell the land otherwise when the chanote was ready she could just get it and not give it to me. so I have set up a company and sold the land to the company. (on lawyers advice) I now have papers from the land office stating that my company owns the land so I can proceed to build the house until my chanote arrives in the future.

Now I thought that this would be fine and have been told that as long as the company is under 40% owned by a falang then it should not get looked at to closely.

But from what you have said this is rubbish. I have done lots of research and thought this would be fine but now am wondering what can I do. Should I just leave everything as is until I recieve the chanote or is it too risky.

your advice is always appreciated.

[Dragonman]

sorry i should explain properly.

I leased the land from my exgirlfriend but before we got the chanote we split up. There is a huge backlog getting chanotes as the rules have changed (so I have been told by the land office) It may not turn up for another 1 year. Now I could not do anything with the land without the chanote so my hands where tied.

The only thing I could do was to get her to sign a power of attourny giving me the right to sell the land otherwise when the chanote was ready she could just get it and not give it to me. so I have set up a company and sold the land to the company. (on lawyers advice) I now have papers from the land office stating that my company owns the land so I can proceed to build the house until my chanote arrives in the future.

Now I thought that this would be fine and have been told that as long as the company is under 40% owned by a falang then it should not get looked at to closely.

But from what you have said this is rubbish. I have done lots of research and thought this would be fine but now am wondering what can I do. Should I just leave everything as is until I recieve the chanote or is it too risky.

your advice is always appreciated.

<{POST_SNAPBACK}>

[/quote

Under what title does your Company currently own the land if you do not have a channott? Your girlfriend seems to have been generous handing the land effectively over to you. Presumably your lawyer has a letter saying she will make no future claims.

I, like Sumitr Man, do not like the Company set up per se. However I don't think anyone can really advise on what the future will hold in Thailand. Other than renting, or buying a condo there are risks involved.

[sinkorswim]

I do not have a chanote as the land was purchased from a person the owned 8 Rai of land and I purchased 1 rai. The company name has been put onto the original chanote stating that it owns 1 rai and the land office has been out to measure the land and place the goverment markers separating the land.

I am now waiting for a new chanote to be made up so that I have my own and not a shared one with the original owner, but the land office has told me that there is no time limit on how long it can take to recieve a new chanote as all the rules have been changed between the Forestry office and Land office so there is a huge backlog as all paperwork has to be checked before issuing new documents.

I had to do something as I can not start to build without and documentation to show that "I" owned the land so I had to sell the land to myself so I could start to build a house.

Also believe me when I tell you my girlfriend was anything but good to me to hand over the land, she was just going to let it sit there for 30years knowing I could not build on the land without the chanote just to be "nice". It took a lot of delicate and not so delicate negotiations to get back MY land which I paid for!

I nearly just walked away from it and purchased a new property already built.

I know people say to rent but in my case I am 32 so plan on living here for a long time (rest of life, however long) and to rent a nice place would cost 360,000baht per year. so after 10 years I could have built a fantastic house and it would be all paid for.

So now you know the full story. What now?

I know I have to wait for the chanote to arrive but when it does should I pass the land on to a Thai and then lease it from them for 30 years or just wait and see what happens.

I was led to belive that the company route was standard practice for falangs in thailand I know of many people that have done the same thing for many years with no problems.

thanks for your help

[Dragonman]

I'd stick to your present position now, especially if you like the situation of the land purchased. At least you are aware of problems which may arise and you can get clarification with whatever decent lawyer you employ that he is also aware of pitfalls and can keep on the ball with the Company accounts. At least, as I have said, you will get financial compensation if the purchase is declared illegal for some reason.

[phuketdon]

go see the consulate from your country and ask them about attorney's and get a consultation. i am currently doing the same in phuket and have 3 pieces of real estate worth alot of money, and am using a US attorney based down in Phuket as he knows the system fairly well. you need solid shareholders as mentioned above who preferably have legitimate businesses. hope things work out for the both of us, also, if your from the US they have some different laws that apparently apply.

[Sumitr Man]

^don't want to rain on your parade mate, but as far as land ownership is concerned, no they [uS nationals/companies] don't (have different laws that apparently apply).

SM

Edited November 15, 2005 by Sumitr Man

[Sumitr Man]

I was led to belive that the company route was standard practice for falangs in thailand I know of many people that have done the same thing for many years with no problems.

thanks for your help

<{POST_SNAPBACK}>

The company route is standard practice for hundreds, if not thousands, of foreigners in Thailand. You just need to be aware, if your company is not trading, and your return accounts each year show nothing, it could (not saying it would) bring to the attention the fact that it is a front company.

Now, if you could do some trading through the company, even minimal trading of a couple hundred thousand baht a year, you would be in a lot better position.

[Digger]

I was led to belive that the company route was standard practice for falangs in thailand I know of many people that have done the same thing for many years with no problems.

thanks for your help

<{POST_SNAPBACK}>

The company route is standard practice for hundreds, if not thousands, of foreigners in Thailand. You just need to be aware, if your company is not trading, and your return accounts each year show nothing, it could (not saying it would) bring to the attention the fact that it is a front company.

Now, if you could do some trading through the company, even minimal trading of a couple hundred thousand baht a year, you would be in a lot better position.

<{POST_SNAPBACK}>

The only people who are likely to raise any issue are the tax/revenue office where the accounts are filed. If they get suspicious and want/need to get more revenue in to meet some kind of targets set by central government, guess who they are going to go after? I have been tax investigated here in Thailand for a company which I controlled using the same system you describe. The company was renting out a property and the accounts showed the full income + full expenses. Tax was paid on the rental element as per the law and the company actually made a small loss in the year it was investigated as quite legally the company did make a loss due to depreciation of its primary asset which was the building. Tax office was totally satisfied and very surprised that the company had even declared a rental income, let alone at the amount stated in the contract which we voluntarily showed them.

Incidentally they really have no interest in the structure of the company as that will already have been approved by the relevant dept when the company was set up. The dept that accepted the company in the first place are hardly likely to then to re-investigate anything, given they have already approved it, unless the revenue office get onto them and say, what the h**l is going on with this company - they are not paying any tax or submitting filed accounts. That in itself requires major activity on their respective parts and somehow I do not see them being bothered unless somebody higher up kicks ass and demands action.

[johnnyk]

I

Incidentally they really have no interest in the structure of the company as that will already have been approved by the relevant dept when the company was set up. The dept that accepted the company in the first place are hardly likely to then to re-investigate anything, given they have already approved it, unless the revenue office get onto them and say, what the h**l is going on with this company - they are not paying any tax or submitting filed accounts. That in itself requires major activity on their respective parts and somehow I do not see them being bothered unless somebody higher up kicks ass and demands action.

<{POST_SNAPBACK}>

This is a very good point. I worked at different times in government and one thing about big bureaucracies is that they don't communicate well, if at all, with each other. Witness the many gov't snafus in western countries resulting from right hand not talking to the left hand.

Translate that over to a Thai bureaucracy and I think you can get a picture.

My guess is that if one Thai gov't outfit has okayed something then the other will leave it alone. Besides, its not in Thai culture, IMO, to question someone else's decision as they don't know who might have approved it and loss of face could result which is serious business.

I think if you set up by the rules and do what's needed, even minimally, you're pretty well ok. The one thing that seems to pee off gov't functionaries everywhere is when people act as though the functionaries are stupid. It may be true but don't rub it in, just keep smiling.

[stevehaigh]

personally, I wouldn't start building until you have a chanoht in your hand with your co. name on it. the house will likely cost 2 to 3 times the cost of the land and you really don;t want to loose that.

if you MUST build and live on the land in the near term, look into a house design that can be dismantled and moved easily.

[sinkorswim]

I am going to wait until I have the chanote but I need to fill the land first as it has to settle for 6 month too 1 year before I can build anyway.

Cheers for the advice.

Still dont know what the running costs per year are though can anyone shed any light on this?

Also recomendations for a good tax lawyer/accountant in chiang mai would be appreciated.

[allexx]

12000-15000Baht/year.Well,that's what I pay,trading 3-400k/year.

[Morden]

As I understand it, a company with a foreign minority shareholder may own up to 1 rai subject to the conditions already mentioned. Additionally, the company must invest something like the equivalent of £400,000 in approved Thai investments for up to five years. I have see the regulations in English but didn't keep track of where they were because it looked like a non-starter. I know that property developers, keen for the foreign £ OR $, will encourage us to set up non-trading companies but I don't expect that they will rush to Farang's aid when the government comes knocking on the door.

The best advice that I have had is to spend in LOS only what you are prepared to lose. Land cannot be bought by a foreigner and a lease, in practical terms, is not safe enough to protect the lessee who has rashly built a house on the land.

[Dragonman]

As I understand it, a company with a foreign minority shareholder may own up to 1 rai subject to the conditions already mentioned. Additionally, the company must invest something like the equivalent of £400,000 in approved Thai investments for up to five years. I have see the regulations in English but didn't keep track of where they were because it looked like a non-starter. I know that property developers, keen for the foreign £ OR $, will encourage us to set up non-trading companies but I don't expect that they will rush to Farang's aid when the government comes knocking on the door.

The best advice that I have had is to spend in LOS only what you are prepared to lose. Land cannot be bought by a foreigner and a lease, in practical terms, is not safe enough to protect the lessee who has rashly built a house on the land.

<{POST_SNAPBACK}>

Why do you think the leasehold route is not safe? Legal grounds or that the freeholder will send the boys around?

[Morden]

Why do you think the leasehold route is not safe? Legal grounds or that the freeholder will send the boys around?

<{POST_SNAPBACK}>

The latter mainly. Even if the law takes much notice of a foreigner and his contract, he would ultimately have to rely on the goodwill of the freeholder. Perhaps in most cases there would not be a problem but I wouldn't risk money on a land lease and build a house on the land unless I was willing to lose it all.

[astral]

I have just purchased land through a company which I had a lawyer set up with me having 38% and Thai's 62%.

I do have full share control and power of attourney over the company.

You should be the designated Managing Director and have signed and undated

letters of resignation for all the other directors

My question is simple what will the running costs be for the company each year. I will not be using the company for trading but do want it to be as legitimate as possible.

You will need a rental agreement for the land to show that you are trading within

the company. Without this you will be shut down.

My lawyer has told me 20000baht per year but I want this confirmed as they tried to DOUBLE my bill half way through the process   so I will no longer be using them.

I have also been told 12000baht per year but that was from a "barstool" lawyer

I am living in Chiang Mai so if anyone knows of a good tax lawyer/accountant then I would grately appreciate it.

My company costs me 17,000 a year for all expenses, including annual report and tax return.

I am in Pattaya so cannot help you with the lawyer.

regards

<{POST_SNAPBACK}>

[silk123]

Is there some company in thailand that makes prefab houses, ones that can be moved.

I see them wooden houses on display nearby and the gf said they ask something like 250k for them. This is hua hin so may be jacked up.

I see that foil insulation like in supermarket roofs selling in tesco at about 80baht a square metre in rolls.