House in a company name with Thai nominees

[davejones]

The legal situation in Thailand is clear.

Foreigners are not allowed to buy land. All constructions with companies and nominees are illegal. That means that it is possible that you loose all your money. You will not only pay a small fine because it is illegal to buy land and a fine can not make it legal.

You can rent the house up to 30 years.

You can find a lot of information here at TV about this problem.

You can rent a house for 100 years i you want.

The only leagaly rent periode that are protected by law is 30 years and can be registered at land office. Any other agreement is soly between two parts. If i is the owner and rent to you on a 100 year contract i still can sell the land/house and the new owner is only responsible for the registered reminding 30 years.

I'm pretty sure you're referring to leasing, and not renting.

[davejones]

The legal situation in Thailand is clear.

Foreigners are not allowed to buy land. All constructions with companies and nominees are illegal. That means that it is possible that you loose all your money. You will not only pay a small fine because it is illegal to buy land and a fine can not make it legal.

You can rent the house up to 30 years.

You can find a lot of information here at TV about this problem.

You can rent a house for 100 years i you want.

The only leagaly rent periode that are protected by law is 30 years and can be registered at land office. Any other agreement is soly between two parts. If i is the owner and rent to you on a 100 year contract i still can sell the land/house and the new owner is only responsible for the registered reminding 30 years.

I'm pretty sure you're referring to leasing, not renting.

[lovetotravel]

Government spokesmen have stated many times that legal stratagems designed to evade the intention of the law are frowned upon, so if you go ahead you take on some risk.

You want to take on that risk then go ahead, but stop scrambling around and around for a zero-risk solution.

The government is highly unlikely to be going around confiscating and fining existing falang house 'owners', but what they could do is overnight stop any new property transfers with the same ownership structure. Now who are you going to sell the house to?

the poster before you has a wife and two children (obviously all three are Thai citizens).

-why would he sell the house?

-but should the need arise to sell who or what will stop him to dissolve a legal company and sell house and land?

The lawyer I use for our company said if anything goes wrong, we have a fair amount of time to either sell the asset in the company (i.e. house) or transfer it to a Thai citizen. If you are happily married to a Thai national, doesn't seem like much of a risk. And I've NEVER heard of anybody having to do this anyway.

[kyrre]

The legal situation in Thailand is clear.

Foreigners are not allowed to buy land. All constructions with companies and nominees are illegal. That means that it is possible that you loose all your money. You will not only pay a small fine because it is illegal to buy land and a fine can not make it legal.

You can rent the house up to 30 years.

You can find a lot of information here at TV about this problem.

You can rent a house for 100 years i you want.

The only leagaly rent periode that are protected by law is 30 years and can be registered at land office. Any other agreement is soly between two parts. If i is the owner and rent to you on a 100 year contract i still can sell the land/house and the new owner is only responsible for the registered reminding 30 years.

I'm pretty sure you're referring to leasing, not renting.

Is that almost the same. leasing give you protection for 30 years if done correctly, renting is a agreement where you normaly has easy exit out of. by selling, own use, renovating, etc... It gives you no protection.

[Naam]

The lawyer I use for our company said if anything goes wrong, we have a fair amount of time to either sell the asset in the company (i.e. house) or transfer it to a Thai citizen. If you are happily married to a Thai national, doesn't seem like much of a risk. And I've NEVER heard of anybody having to do this anyway.

you and i have never heard of any specific case but the "anti-house brigade" knows of thousands of cases with terrible results

[Naam]

Thanks for the insights, seems like the Thai company way is the way to go for me, too. I would use real shareholders and 49% of preferential shares. Anything goes wrong (yes, I trust the wife today (well, for 100% I trust only myself, and even that only sometimes subject to alcohol level in the blood, etc. :-), but what if she dies before me? I do trust her family less than 50%, unfortunately...), it can be sold and I would still get at least 49% (I suppose that a secret agreement can be arranged than I would get the full amount, too). So it is much better than nothing if bought in the wife's name.

forget about preferential shares and 49% shareholding for you until the deal with the land office is finalised. some land offices do not accept or frown on 49% for the foreigner and prefer that the foreigner owns a maximum of 29% of the shares.

after the procedure at the land office you are free to legally restructure the setup of your company in whatever way you want but of course within the 49% limit allowed by prevailing law.

note: preferential shares and "odd" voting rights in favour of the foreigner should also be avoided!

suggestion (not advice): allocate after company restructuring 50% of the shares to your two children and 1% to your wife which reduces the inheritance entitlements of your wife's family in case of her demise to peanuts or most probably nothing because your children are first in line to inherit your wife's shares.

[Naam]

And i dont think you have to go to court to sell if both guardian parents of both children are signing for the children. As we had to do to give them the shares in the first place.

Giving to children is not a problem.

Selling their assets is a problem, and you won't be selling until they are both 20 years old.

says who?

[regedit]

forget about preferential shares and 49% shareholding for you until the deal with the land office is finalised. some land offices do not accept or frown on 49% for the foreigner and prefer that the foreigner owns a maximum of 29% of the shares.

after the procedure at the land office you are free to legally restructure the setup of your company in whatever way you want but of course within the 49% limit allowed by prevailing law.

Nice approach. I guess the the sale of the shares from Thai to foreigner (to get to 49% foreign owned) shouldn't trigger any tax issues if it is done very soon after the initial purchase of the property (ie. no increase in value of the company).

[falang07]

I suppose the Thai shareholders will have to pay tax on the profit gained from selling of their shares.

[jpeg]

The legal situation in Thailand is clear.

Foreigners are not allowed to buy land. All constructions with companies and nominees are illegal. That means that it is possible that you loose all your money. You will not only pay a small fine because it is illegal to buy land and a fine can not make it legal.

You can rent the house up to 30 years.

You can find a lot of information here at TV about this problem.

And government sequestration will turn Phuket into a wasteland.

[CRUNCHER]

99% of people who go down this route do so with no problems at all.

There is, however, risk. Make no mistake the use of Thai nominees to enale a foreigner to own land is illegal. It breaches the Land Code and The Foreign Business Act. Shareholders die. You can fall out with people you thought were honest (inluding the wife). The Thai Government sometime has crackdowns in a knee jerk reaction to some scandle.

The question to ask yourself is "what if". What if any of these things happen? Can I deal with it or can I stand the loss incurred?

Get proper advice and understand the risks. Each individual has to asses the risk according to his circumstances and make his own decision. Don't listen to the extremes on either side of the fence.

Personally I would not take the risk, but I do not criticize those who do.

[Naam]

forget about preferential shares and 49% shareholding for you until the deal with the land office is finalised. some land offices do not accept or frown on 49% for the foreigner and prefer that the foreigner owns a maximum of 29% of the shares.

after the procedure at the land office you are free to legally restructure the setup of your company in whatever way you want but of course within the 49% limit allowed by prevailing law.

Nice approach. I guess the the sale of the shares from Thai to foreigner (to get to 49% foreign owned) shouldn't trigger any tax issues if it is done very soon after the initial purchase of the property (ie. no increase in value of the company).

there is no sale involved, just a transfer of shares without denominating any value. but that is nothing but window dressing. in case of a "disagreement" with the majority Thai shareholder(s) 49%, even with preferential voting rights, are not more worth than 1% plus a lukewarm fart.

that's Thai reality and foreigners living or doing business in Thailand have to accept Thai reality whether they like it or not. exceptions, e.g. multinational corporations with a variety of clout, only prove the rule.

[jbrain]

And i dont think you have to go to court to sell if both guardian parents of both children are signing for the children. As we had to do to give them the shares in the first place.

Giving to children is not a problem.

Selling their assets is a problem, and you won't be selling until they are both 20 years old.

says who?

There was a post from Mario2008, just recently in a thread that concerned putting real estate in the childrens name, and where Mario2008 wrote that the court which decides over these issues almost never gives permission to the guardian to sell something that is in the minors names.

Edited August 17, 2013 by jbrain

[manarak]

99% of people who go down this route do so with no problems at all.

There is, however, risk. Make no mistake the use of Thai nominees to enale a foreigner to own land is illegal. It breaches the Land Code and The Foreign Business Act. Shareholders die. You can fall out with people you thought were honest (inluding the wife). The Thai Government sometime has crackdowns in a knee jerk reaction to some scandle.

The question to ask yourself is "what if". What if any of these things happen? Can I deal with it or can I stand the loss incurred?

Get proper advice and understand the risks. Each individual has to asses the risk according to his circumstances and make his own decision. Don't listen to the extremes on either side of the fence.

Personally I would not take the risk, but I do not criticize those who do.

Good post, except on the illegality.

As far as I know, 100% of people had no problems going the nominee route.

The nominee route certainly circumvents Land Code but still isn't illegal by the letter of Thai Law, and as far as I know, there is no known court case where a farang lost his nominee-owned property.

So I'd say it's "illegal in theory" or "illegal by the spirit of the Law".

Thai officials sometimes get irritated by land grab by foreigners - but these aren't the same land grabbers as we imagine. It's not the farang owning 1 to 10 rai through his nominees.

The land grabbers own hundreds and thousands of rai through nominees and use the land for farming or development, they are mostly Chinese, Korean, Indian, Singaporean and Japanese.

I consider ownership by nominee much less risky than ownership by Thai wife, for obvious reasons.

Edited August 17, 2013 by manarak

[jbrain]

99% of people who go down this route do so with no problems at all.

There is, however, risk. Make no mistake the use of Thai nominees to enale a foreigner to own land is illegal. It breaches the Land Code and The Foreign Business Act. Shareholders die. You can fall out with people you thought were honest (inluding the wife). The Thai Government sometime has crackdowns in a knee jerk reaction to some scandle.

The question to ask yourself is "what if". What if any of these things happen? Can I deal with it or can I stand the loss incurred?

Get proper advice and understand the risks. Each individual has to asses the risk according to his circumstances and make his own decision. Don't listen to the extremes on either side of the fence.

Personally I would not take the risk, but I do not criticize those who do.

Good post, except on the illegality.

As far as I know, 100% of people had no problems going the nominee route.

The nominee route certainly circumvents Land Code but still isn't illegal by the letter of Thai Law, and as far as I know, there is no known court case where a farang lost his nominee-owned property.

So I'd say it's "illegal in theory" or "illegal by the spirit of the Law".

Thai officials sometimes get irritated by land grab by foreigners - but these aren't the same land grabbers as we imagine. It's not the farang owning 1 to 10 rai through his nominees.

The land grabbers own hundreds and thousands of rai through nominees and use the land for farming or development, they are mostly Chinese, Korean, Indian, Singaporean and Japanese.

I consider ownership by nominee much less risky than ownership by Thai wife, for obvious reasons.

I know of thousands of people who every day get away with driving a bike without helmet, but that doesn't make it legal.

My understanding is that :

1: A company that owns real estate can only have 39% foreign ownership, there where a company that doesn't owns any real estate can have 49% foreign ownership.

2: In Thailand a company that is set up with sole purpose of owning real estate, and has no other activities, is not legal. I know that the accountant will "create" some spendings and income when he files the balance sheet, but that still doesn't make it legal as it is easily proven to be fake in case of a lawsuit .

Edited August 17, 2013 by jbrain

[manarak]

99% of people who go down this route do so with no problems at all.

There is, however, risk. Make no mistake the use of Thai nominees to enale a foreigner to own land is illegal. It breaches the Land Code and The Foreign Business Act. Shareholders die. You can fall out with people you thought were honest (inluding the wife). The Thai Government sometime has crackdowns in a knee jerk reaction to some scandle.

The question to ask yourself is "what if". What if any of these things happen? Can I deal with it or can I stand the loss incurred?

Get proper advice and understand the risks. Each individual has to asses the risk according to his circumstances and make his own decision. Don't listen to the extremes on either side of the fence.

Personally I would not take the risk, but I do not criticize those who do.

Good post, except on the illegality.

As far as I know, 100% of people had no problems going the nominee route.

The nominee route certainly circumvents Land Code but still isn't illegal by the letter of Thai Law, and as far as I know, there is no known court case where a farang lost his nominee-owned property.

So I'd say it's "illegal in theory" or "illegal by the spirit of the Law".

Thai officials sometimes get irritated by land grab by foreigners - but these aren't the same land grabbers as we imagine. It's not the farang owning 1 to 10 rai through his nominees.

The land grabbers own hundreds and thousands of rai through nominees and use the land for farming or development, they are mostly Chinese, Korean, Indian, Singaporean and Japanese.

I consider ownership by nominee much less risky than ownership by Thai wife, for obvious reasons.

I know of thousands of people who every day get away with driving a bike without helmet, but that doesn't make it legal.

My understanding is that :

1: A company that owns real estate can only have 39% foreign ownership, there where a company that doesn't owns any real estate can have 49% foreign ownership.

2: In Thailand a company that is set up with sole purpose of owning real estate, and has no other activities, is not legal. I know that the accountant will "create" some spendings and income when he files the balance sheet, but that still doesn't make it legal as it is easily proven to be fake in case of a lawsuit .

It's more complex than that:

- The 39% apply to companies doing business in real estate, not mere ownership.

- The current laws do not specify share type (standard, preference shares, etc.), making section 96 of the Land code difficult to apply to companies with nominees.

As it was explained to me, the use of a nominee without a company to hold land is illegal under section 96, but the current Law was not written taking into account the complexities of business Law, which in effect allows companies to circumvent section 96.

As far as I know, there still hasn't been a single court case where a foreigner was depossessed of own residential land - although that can change any moment and the Law can be re-written any moment as well.

Edited August 17, 2013 by manarak

[umbanda]

Just lease the land for 90 years in your name and build on it with an option to transfer the lease anytime.....

[jbrain]

Just lease the land for 90 years in your name and build on it with an option to transfer the lease anytime.....

There are no 90 year leases in Thailand. 30 years is the legal limit.

[khunPer]

Thanks for the insights, seems like the Thai company way is the way to go for me, too. I would use real shareholders and 49% of preferential shares. Anything goes wrong (yes, I trust the wife today (well, for 100% I trust only myself, and even that only sometimes subject to alcohol level in the blood, etc. :-), but what if she dies before me? I do trust her family less than 50%, unfortunately...), it can be sold and I would still get at least 49% (I suppose that a secret agreement can be arranged than I would get the full amount, too). So it is much better than nothing if bought in the wife's name.

If you go the company way, it may be best if the foreigner own 39% only when buying land and register it at the Land Department.

You can make a split (later) of 49% foreign shareholder(s), 49% to “trusted Thais” (like wife or children) and 2% (small amount in money) to nominees or some Thai friends, who will not vote against you (may give you written proxy and signed Agreement for transfer of shares). Of your (foreign) 49% some of the shares may be preferred, so you control more than 50% of the votes.

It is best, when a company with foreign shareholder(s) owing land, that the company also has some other activities, so the company is not a shade for foreign land holding. May be some kind of smaller business, just some income from another activity.

Owing land with the company set-up has some expenses, compared to owing land via wife or GF with usufruct contract or leasing agreement, as you will need to pay accountant, auditor and some company tax every year. The company shall have a lease income from the land (i.e. you lease the land on a transferable agreement from the company on a 30 year contract, with servitude at Land Department and tax paid) to pay the expenses. The lease contract may give you some extra protection for 30 years. You can make another 30-year option (only one option, there are no so-called 90-year lease in Thailand) in the contract, which will not be registered at the Land Department, but will still be a legal Agreement, which may be valid at Court (my lawyer informed me, some years ago, when I bought land).

If land is sold, the company will (probably) make a profit and pay company tax (20-30% minus some deductions), after the taxation rules at time of selling land. There is tax (believe 15%) on dividend and there may be some tax (think 15%) on profit of shares, when sold (your accountant will know all this). In some areas the Land Department may have a lower value registered for the land, than the actual price, and that lower value may be used in official documents. If done so, you will pay the difference, but that amount will not be included in the company books. When land is sold, it may again be transferred at a lower Land Department value (if they have not change policy and upgraded the prices) and the difference between the book value and the actual selling price, will be paid outside the company. That has been commonly used before, especially when sold to foreigners (or wealthy Thais), and the difference may be transferred to an offshore account. May also be a question of where the land is – up at Isaan some Land Departments wish to see a Company Meeting Report including the agreed land price or a sales contract; whilst in “tourist areas” the land price seems to rise faster, than the Land Depart has on record – may be used more often, when talking about big money like at Phuket or Samui. However, I do not know “how legal” the method is.

If you build a house on the land, you can own the house (but not the land), and the selling price of the house (on leased land) is not included in the land price.

In general, always check with a lawyer, who is used to do that kind of set-up for foreigners, as rules and preferred methods often change. The expenses for a good lawyer at first may be the best money you ever paid.

[manarak]

If land is sold, the company will (probably) make a profit and pay company tax (20-30% minus some deductions), after the taxation rules at time of selling land. There is tax (believe 15%) on dividend and there may be some tax (think 15%) on profit of shares, when sold (your accountant will know all this). In some areas the Land Department may have a lower value registered for the land, than the actual price, and that lower value may be used in official documents. If done so, you will pay the difference, but that amount will not be included in the company books. When land is sold, it may again be transferred at a lower Land Department value (if they have not change policy and upgraded the prices) and the difference between the book value and the actual selling price, will be paid outside the company. That has been commonly used before, especially when sold to foreigners (or wealthy Thais), and the difference may be transferred to an offshore account. May also be a question of where the land is – up at Isaan some Land Departments wish to see a Company Meeting Report including the agreed land price or a sales contract; whilst in “tourist areas” the land price seems to rise faster, than the Land Depart has on record – may be used more often, when talking about big money like at Phuket or Samui. However, I do not know “how legal” the method is

A far simpler method than go through the land office hoops when selling the land is to simply sell the company holding the land. No land office formalities are required.

[khunPer]

A far simpler method than go through the land office hoops when selling the land is to simply sell the company holding the land. No land office formalities are required.

Yes, you are right, that is a possibility and sometime used when selling between/to foreigners – will be depending of buyer (Thai or foreigner) and location of the land. But you may still be taxed for some capital gain profit (?) and what about the other 51% shareholders?

[Naam]

A far simpler method than go through the land office hoops when selling the land is to simply sell the company holding the land. No land office formalities are required.

why spoiling with simple facts all interesting tales about all kind of hurdles, e.g. judges who refuse that assets of minors are sold, greedy in-laws, etc.?

[falang07]

OK, so to sum it up, if I do not plan selling the house in the future (which I do not, even though still not a big issue), it should be pretty safe and easy if bought in a company name.

[AnotherOneAmerican]

OK, so to sum it up, if I do not plan selling the house in the future (which I do not, even though still not a big issue), it should be pretty safe and easy if bought in a company name.

Buy it in the children's names with you as the manager.

Then there is no problem, and you can live there until both kids are at least 20.

[manarak]

OK, so to sum it up, if I do not plan selling the house in the future (which I do not, even though still not a big issue), it should be pretty safe and easy if bought in a company name.

It's much easier to sell it in company name.

[Naam]

OK, so to sum it up, if I do not plan selling the house in the future (which I do not, even though still not a big issue), it should be pretty safe and easy if bought in a company name.

Buy it in the children's names with you as the manager.

Then there is no problem, and you can live there until both kids are at least 20.

i talked to my lawyer yesterday. she told me there's no such thing like a court and/or judge involved when company shares are transferred from one person (whether minor or adult) to another. the court/judge applies only in cases where property was bought in the name of a child or children and their names are mentioned in the chanote. the latter is not the case if a company owns the land.

but it is mandatory that the transfer of any shares which are in the name of a minor are signed by the person who is the legal guardian of the minor(s).

caveat: i'm not a lawyer and i'm not giving legal advice. what i do is passing on information received from credible sources.

[Naam]

OK, so to sum it up, if I do not plan selling the house in the future (which I do not, even though still not a big issue), it should be pretty safe and easy if bought in a company name.

It's much easier to sell it in company name.

not easy if the buyer is a Thai citizen except if the price is "right" and warrants the cost of dissolving the company and getting rid of any liabilities.

[jpinx]

Whatever fancy footwork you use to dance around the issue, just remember that circumventing the law is also illegal here afaict.

[manarak]

Whatever fancy footwork you use to dance around the issue, just remember that circumventing the law is also illegal here afaict.

can you please elaborate and refer us to actual litigation?

[manarak]

OK, so to sum it up, if I do not plan selling the house in the future (which I do not, even though still not a big issue), it should be pretty safe and easy if bought in a company name.

It's much easier to sell it in company name.

not easy if the buyer is a Thai citizen except if the price is "right" and warrants the cost of dissolving the company and getting rid of any liabilities.

if the company is well-kept, such costs are negligible and there shouldn't be any liabilities.

Anyway, nothing prevents the company from selling the land to the new owner instead of selling the whole company.

so by going the company route, one has both options available.