Poll On Land Ownership Route

[hroz]

I have a house purchased via the company route. I don't have a thai wife or g/f of any duration. I would appreciate any advice on what to do, ie: where to transfer the land title should it become necessary to change to 30 yr lease or usufruct.

[Arkady]

I have a house purchased via the company route. I don't have a thai wife or g/f of any duration. I would appreciate any advice on what to do, ie: where to transfer the land title should it become necessary to change to 30 yr lease or usufruct.

No one really knows how all this is going to play out and we will have a new government next year that will have to get around to looking at these issues, although it may not be a priority and, as politics are unpredictable, things could get better, worse or not change. However, I think the first thing for you to do would be to look at your company and see if it passes a basic health check because this could still cause you problems, even if you transfer the land out of it. You can approach Sunbelt for this or other law firms that have been advertising company health checks in the Bkk Post. Your company should have some sort of business operations, not just be a holding company for land or other assets as this is technically illegal even for wholly Thai owned companies. If you are a director who is authorized to sign for the company and registered as such with the Ministry of Commerce, you are supposed to have a work permit in the name of the company. To get one the company needs to be registered for VAT and file monthly VAT returns and to get it renewed in subsequent years the Labor Ministry will normally expect the company to be profitable and paying some tax. The company needs to produce annual audited accounts and file twice yearly corporate income tax returns. The auditor's report at the front of the accounts should NOT contain the sleazy Thai auditor's standard disclaimer to the effect that he was unable to verify any of the information contained in the accounts because the management refused to provide the documents (usually omitted from the English translation for farang customers). This disclaimer is a red flat invitation to the Revenue Dept to investigate you. To comply with the amendments to the FBA likely to become law before the end of this year, the company should not have any shares with preferential voting rights owned by foreigners. If this doesn't sound like a description of your company, you should take immediate steps to make it compliant, if you can. If this is impossible, your company is a high risk and you could get in trouble with the authorities, even without holding land. The Revenue Dept is the government dept most likely to uncover non-complaint companies because they have an ongoing examination role whereas the Ministry of Commerce and Lands Dept normally only react to requests for registrations. The Revenue Dept also has arbitrary powers to make tax assessments on the grounds that they refuse to believe that you have not been doing any business! Up till now the Revenue Dept has not cared about issues that are the purview of the Ministry of Commerce or the Lands Dept but who knows if they will be ordered to pass on information about suspicious companies in future. Anyway, if you are not in a position to make your company comply with the all of the above, it might be best to try to get the land out of it via a least bad solution and try to take steps to wind up the company. This topic is highly subjective and opinions vary but I hope this is of some help.

In your situation you don't have any easy way to transfer the land to a trusted Thai partner.

[hroz]

Thanks Arkady for the prompt and comprehensive response, I will ask my lawyer re: the health check but his response has been in the past " just wait ,we have time". After following the threads on company ownership of house/land and the modifications of the FBA to remove amnesty etc I'm not confident this is the best course.

It would seem the options are:

1. Sell it. ( bit hard in this climate)

2. Sell land to thai (who?) and leaseback ( 30+30+30) knowing the the extensions are unregistrable and that I cannot sell on the lease without the landholders consent.

3. As above with Usufruct . Would this be any more secure as regards safe tenure and future sale of the property?

I would prefer not to have the attentions of the Govt Depts you mentioned if possible.

[dsfbrit]

Thanks Arkady for the prompt and comprehensive response, I will ask my lawyer re: the health check but his response has been in the past " just wait ,we have time". After following the threads on company ownership of house/land and the modifications of the FBA to remove amnesty etc I'm not confident this is the best course.

It would seem the options are:

1. Sell it. ( bit hard in this climate)

2. Sell land to thai (who?) and leaseback ( 30+30+30) knowing the the extensions are unregistrable and that I cannot sell on the lease without the landholders consent.

3. As above with Usufruct . Would this be any more secure as regards safe tenure and future sale of the property?

I would prefer not to have the attentions of the Govt Depts you mentioned if possible.

I know its harder for some people than others to wait and see, but really there are thousands of farang like us in our position. I have a Thai wife who I can put the house/ and land in their name if necessary - so am 'luckier' than you I guess .

I know you are looking at your options, but waiting until the FBA comes into law and what the possible legal options are at that point at least seems sensible.

Hey you have waited this long, its only another few months, then I am sure we will be discussing all the options like crazy on TV.

I have decided that IF at the end of the day I have to close down the company I would probably go the Usufruct option, as I agree with you that as 30 years is all you can register at the land office, then we need to assume after 30 years we have nowhere to live.

Although the 30 year lease has been successfully tested in the Supreme Court and the Usufruct has not - at least the Usufruct is for life.

If you close down the company and do the lease or Usufruct 'thing' then lets face it - it is very very unlikely you would ever be able to sell it. Even if you have all kinds of clauses written into the lease -its no longer yours, you are just a glorified tenant!

Its why I would rather keep the company in some form, restructure, even start trading almost anything rather than shut it down - I really believe at the end of the day there will be a legal way/ or acceptable loop-hole somewhere that can be sought.

Still we shall see wont we.

Good Luck with your investigations

Edited August 4, 2007 by dsfbrit

[Arkady]

Thanks Arkady for the prompt and comprehensive response, I will ask my lawyer re: the health check but his response has been in the past " just wait ,we have time". After following the threads on company ownership of house/land and the modifications of the FBA to remove amnesty etc I'm not confident this is the best course.

It would seem the options are:

1. Sell it. ( bit hard in this climate)

2. Sell land to thai (who?) and leaseback ( 30+30+30) knowing the the extensions are unregistrable and that I cannot sell on the lease without the landholders consent.

3. As above with Usufruct . Would this be any more secure as regards safe tenure and future sale of the property?

I would prefer not to have the attentions of the Govt Depts you mentioned if possible.

I know its harder for some people than others to wait and see, but really there are thousands of farang like us in our position. I have a Thai wife who I can put the house/ and land in their name if necessary - so am 'luckier' than you I guess .

I know you are looking at your options, but waiting until the FBA comes into law and what the possible legal options are at that point at least seems sensible.

Hey you have waited this long, its only another few months, then I am sure we will be discussing all the options like crazy on TV.

I have decided that IF at the end of the day I have to close down the company I would probably go the Usufruct option, as I agree with you that as 30 years is all you can register at the land office, then we need to assume after 30 years we have nowhere to live.

Although the 30 year lease has been successfully tested in the Supreme Court and the Usufruct has not - at least the Usufruct is for life.

If you close down the company and do the lease or Usufruct 'thing' then lets face it - it is very very unlikely you would ever be able to sell it. Even if you have all kinds of clauses written into the lease -its no longer yours, you are just a glorified tenant!

Its why I would rather keep the company in some form, restructure, even start trading almost anything rather than shut it down - I really believe at the end of the day there will be a legal way/ or acceptable loop-hole somewhere that can be sought.

Still we shall see wont we.

Good Luck with your investigations

I agree with this. As you say, usufruct as a means for foreigners to get longer than 30 year leases on land and the ability to sublet remains quite fuzzy. Some Land Offices won't register them as lifetime agreements and they could be challenged. Usufruct in the Thai context seems to have been intended to allow farmers to get lifetime usage of agricultural land. A decent Thai lawyer, if you can find one, should be consulted but my guess is that usufruct is still worth pursuing as a least bad option to maintaing company ownership. I think the worst case scenario would be that a usufruct agreement would be downgraded to a standard 30 year lease, if successfully challenged. Also agree that getting the company compliant is much better that trying to close it. Winding up a company takes about two years, incurs some costs and is quite likely to attract a Revenue Dept investigation to see if it is being closed down to try to evade back taxes. One option here for an inactive company might be to have a Thai as the authorized director to avoid having to apply for a work permit and register for VAT. That would reduce the accounting burden and level of scrutiny from the Revenue Dept considerably. Frankly you can even take the risk of continuing as authorized director (as is the case with most inactive cos) without applying for a WP and VAT registration, if you don't know any Thais you want to trust with that. This often depends on the location e.g. in Bkk I don't think govt depts ask to see foreign authorized director's WP but be aware this could suddenly change. The important thing is to get some kind of trading (or consulting) income going through the company asap, have one or two staff, make a small profit and pay a little tax. This gets you off the "inactive list" at the Rev Dept and Min of Commerce. Maybe you can ramp up to the WP stage later. For those with legally married Thai wives letting the missus have the Thai shares in an existing active company seems to me to be much better than selling to her and leasing back (the latter is devoid of any legal risk but you no longer own any stake in the property) and also avoids costs and tax in the restructure. I believe that, if the balloon were to go up they would go after these structures last of all. This is because it denies the civil liberities of Thais married to foreigners to conduct a family business thro a company like any other Thai person and could become a very emotional issue with women's rights campaingers who have recently won the battle to include rape by a husband as a crime. Thai governments have been gradually retreating from the most flagrant sexually discriminative legislation e.g. the Democrats were forced to amend the Land Act in 1999 to allow Thais married to foreigners to own land.

[dsfbrit]

Klikster: Sadly my wife's family does not have any money. The father frightens the life out of me - not so much in a physical sense, but my wife is very much in awe of him and is one of the reasons - in fact the main reason come to think of it - why I dont really want to put anything in my wife's name. Some time ago I put some money in a bank account in my wife's name as we were thinking of opening up (she was) a Karaoke bar. Sadly the dad got to hear of this and in no time at all he had 10 cows sitting in his field!!! I retrieved the rest of the money and vowed not to be so dumb again!!! The trouble is she was relieved that I said I would look after the money as she found it nearly impossible to say no to him!

I now control all the money and she has an allowance each month!!!

Arkady: I know every case is different, but if I lose control of the company by putting it in anyone else's name then its worse than a Lease or Usufruct in my particular case - and sadly for lots of other people I suspect. If the father heard my wife owned a company - never mind all the legal mumbo jumbo all he would hear is daughter-owns-company , so its best I protect her from herself!

Mind you if he hears daughter-owns-lease, I think the problem is the same???

I am just hoping this FBA can be steered through in some way.

The woman who owns the Language School I attend is currently having personal difficulties and is considering selling the school. That may even be an option and something I would enjoy owning and working in - and owning land through - certainly an option maybe - thoughts on this would be appreciated...

Edited August 4, 2007 by dsfbrit

[hroz]

Good advice, Dsfbrit and again Arkady, I will sit it out. Had to go down see the "TaniKwam" yesterday afternoon on another matter but raised this issue again. His response was he personally owned his own home in a company and his firm represented approximately three hundred companies much the same. He advised , as you said, keep all company details up date and be ready to act if and when, but also viewed the lease as the least preferred option. His firm has seven lawyers ( I think 4 Thais) who meet fortnightly to discuss this and other matters and will be in touch immediately something comes to light.

Hoping for the best, dreading the worst!

[Arkady]

Klikster: Sadly my wife's family does not have any money. The father frightens the life out of me - not so much in a physical sense, but my wife is very much in awe of him and is one of the reasons - in fact the main reason come to think of it - why I dont really want to put anything in my wife's name. Some time ago I put some money in a bank account in my wife's name as we were thinking of opening up (she was) a Karaoke bar. Sadly the dad got to hear of this and in no time at all he had 10 cows sitting in his field!!! I retrieved the rest of the money and vowed not to be so dumb again!!! The trouble is she was relieved that I said I would look after the money as she found it nearly impossible to say no to him!

I now control all the money and she has an allowance each month!!!

Arkady: I know every case is different, but if I lose control of the company by putting it in anyone else's name then its worse than a Lease or Usufruct in my particular case - and sadly for lots of other people I suspect. If the father heard my wife owned a company - never mind all the legal mumbo jumbo all he would hear is daughter-owns-company , so its best I protect her from herself!

Mind you if he hears daughter-owns-lease, I think the problem is the same???

I am just hoping this FBA can be steered through in some way.

The woman who owns the Language School I attend is currently having personal difficulties and is considering selling the school. That may even be an option and something I would enjoy owning and working in - and owning land through - certainly an option maybe - thoughts on this would be appreciated...

Sorry to hear about your missus' family situation. Some Thai males can be absolute horrors. In that case it would be certainly be risky for her to be a significant shareholder and she shouldn't be an authorized director either. Re the school. May be worth further investigation but check the implications of using a company that needs a special licence as land ownership vehicle, unless it owns the land the school is on in this case. Schools need a licence for the Ministry of Education and are subject to regular inspections. Ideally your land owning company should receive as little attention from government depts as possible and the property should serve as the company's headquarters (and possibly a director's residence but remember to pay a reasonable amount of rent for this or the Rev Dep will come snooping around to see how much of the house is office and how much home). With the sole business being a language school which no doubt has an admin office in it it would be hard to argue the need for a separate office as head quarters. Another problem with language schools is the work permit problem for foreign teachers, which is a hassle in itself but can also attract unwelcome attentions from the Labor Ministry and the Immigration Bureau which is a part of the police.

[dsfbrit]

Sorry to hear about your missus' family situation. Some Thai males can be absolute horrors. In that case it would be certainly be risky for her to be a significant shareholder and she shouldn't be an authorized director either. Re the school. May be worth further investigation but check the implications of using a company that needs a special licence as land ownership vehicle, unless it owns the land the school is on in this case. Schools need a licence for the Ministry of Education and are subject to regular inspections. Ideally your land owning company should receive as little attention from government depts as possible and the property should serve as the company's headquarters (and possibly a director's residence but remember to pay a reasonable amount of rent for this or the Rev Dep will come snooping around to see how much of the house is office and how much home). With the sole business being a language school which no doubt has an admin office in it it would be hard to argue the need for a separate office as head quarters. Another problem with language schools is the work permit problem for foreign teachers, which is a hassle in itself but can also attract unwelcome attentions from the Labor Ministry and the Immigration Bureau which is a part of the police.

Thanks for the feedback - what a mess !

I wont be financially destroyed whatever happens with the FBA, I certainly feel for those that could be.

[Arkady]

Thanks for the feedback - what a mess !

I wont be financially destroyed whatever happens with the FBA, I certainly feel for those that could be.

Yes. It gets back to the crux of the FBA amendments. Successive Thai governemnts wanted a lot of foreign direct investment to help fuel economic growth but none had the ballz to scrap the antiquated FBA and draft a rational foreign investment code, even when China and Vietnam were doing exactly this in the 90s. So they just decided to look the other way with a nod and wink as the foreign investment poured in, happily leaving foreigners exposed when a nationalist government with no accountabililty to the electorate and no comprehension of economics or the relationship between cause and effect suddenly takes power. Meanwhile you read stories in the Bkk Post where Thai-Chinese businessmen are saying how wonderful it is was that the new investment code in Vietnam allowed them to give their useless Vietnamese jv partners the boot without comment on what this actually means for foreign investment in their own country. And Malaysia is eating the Thais lunch on selling retirement homes to retirees.

[CRUNCHER]

Where is Arkady's last post, the one dated today? Can't see it.

Edited October 16, 2009 by CRUNCHER

[JimmyGreaves]

Wow.

All through 2005-6 the company route and lease+relationship route added up to about 50/50. After the clamp down after Taksins balls up, seems that the lady is getting the land now via relationship route, very odd

Thai relationship means just buying without any legalities. usufruct should go under lease as it was not that popular in 2005-6

Edited October 17, 2009 by jflundy