Company Set Up To Buy Land

[davethailand]

TRANSLATION OF NEW PROPERTY LAW FOR FOREIGNERS:

Edited May 30, 2006 by george

[monty]

Absolutely true.

Friend of mine did a transfer to a company with Foreign shareholders just fine on Thursday, and another went on Friday to be refused the transfer, unless all the shareholders could prove that they payed for acquiring the land as per the share holding structure.

The Thai shareholders also have to prove that they legally acquired the funds, mainly by showing tax-slips, or proof of taking out aloan (not from a Foreigner!!!)

This is definately very bad news for the real estate business, basically the only posibility left is buying in a Thai name and going the lease option...

[Gary A]

It's just a matter of time before they start looking at the already existing bogus companies. The guys who were turned down should consider themselves lucky. It will certainly throw a wrench in the works for the guys trying to sell their Thai company owned homes.

[Phil Conners]

Cheap housing, here we come

[digitele]

Absolutely true.

Friend of mine did a transfer to a company with Foreign shareholders just fine on Thursday, and another went on Friday to be refused the transfer, unless all the shareholders could prove that they payed for acquiring the land as per the share holding structure.

The Thai shareholders also have to prove that they legally acquired the funds, mainly by showing tax-slips, or proof of taking out aloan (not from a Foreigner!!!)

This is definately very bad news for the real estate business, basically the only posibility left is buying in a Thai name and going the lease option...

Right LEASE, own structure. Simple. The rest is BS

Question- What Real Estate Business?The Farang ScamCompaines that say you can do otherwise?

The ironic thing is there is advertising on this site that has " 167,000.00 USD "Dream House"

They are dreaming alright ! Sell the dream, nothing to do with facts.

[skippybangkok]

will get interesting. I was always of the oppinion that things would come to a head sooner or later.

[Nadia 2]

I've posted this a few months ago...

What does the Land Code say about alien ownership and what are the risks and concerns under the Land Code? The below is NOT about the alternative risks and concerns under the CCC and FBA and only a brief introduction.

1) Section 86; 'Aliens may acquire land by virtue of the provisions of a treaty giving the right to own immovable properties and subject to the provisions of this Code'. Since 1970, Thailand has no longer made any treaty with any country.

2) To circumvent the Foreign Business Act and the Land Code the landholding TLC is set up as Thai majority owned company. One problem that is skipped over is the fact that the TLC set up by the foreigner to purchase land can be deemed 'alien', even though the capital shares are held by a majority of Thai nationals. There are a several regulations related to how a juristic person is deemed to be 'alien' in Thailand, but where it comes down to is if the majority of the value of the capital (meaning share capital and assets of the company) was invested by the foreigner the company would be deemed to be foreign and therefore, under present law, not allowed to own land.

3) The current practice of the Land Department (it is only a practice and no rights can be concluded) is to look only at the shareholders proportion or capital shares held by foreigners when they register a land transfer, but this does not change the fact that within Thai law an alien has unlawfully acquired land and therefore shall, pursuant to section 94 of the Land Code, be forced (this could be enforced at any time) to dispose of the land (the government will have no consideration for foreigners who have breached the law - the whole set up is illegal and not only under the Land Code). Section 94 of the Land Code; 'All the land which an alien has acquired unlawfully or without permission shall be disposed of by such alien within the time limit prescribed by the Director-General......'

4) An alternative concern lies in section 96; 'When it appears that any person (including a juristic person) has acquired land as the owner in place of an alien or juristic person under the provisions of Section 97 and 98, the Director-General shall have the authority to dispose of such land and the provisions of Section 94 shall apply mutatis mutandis'. It is evident that the majority of these companies are set up to circumvent the law and the company's only purpose is the purchase of land in place of the alien.

5) Under the Civil and Commercial Code the whole set up is void – should this be challenged the Thai courts will without doubt uphold this argument - section 61 of the Land Code; 'When it appears that a title deed has been issued or rights and legal acts with regard to land have been recorded or documents of record have been communicated to any person mistakenly or unlawfully, the Director-General shall have the power to have the title deed or documents of record corrected or cancelled'.

6) The whole land speculation is based only on a current practice (not on a Official Policy or Ministerial Announcement or the Law) and the LD could at any time and under present law take measures to correct the current illegal situation and prevent the use of TLCs by foreigners, which will also affect companies who have already registered land prior to the policy change.

7) The various local Land Offices should enforce section 74 of the Land Code; 'In recording rights and legal acts by the competent authority under Section 71, the competent authority shall have the power to interrogate the parties and summon persons concerned to give oral testimony or send relevant written evidence as may be necessary and then proceed as may be appropriate under the circumstances. If there is reason to believe the recording of such rights and legal acts is in evasion of the law or there is reason to believe the purchaser is purchasing on behalf of an alien, instructions shall be asked of the Minister whose word shall be final'. (no instruction issued yet)

Land purchase through TLC is like investing in a chain letter, it works as long as you are able to resell and the government does not start enforcing the law in the meantime. Thus, you must hope that the Land Department (maybe under a new government) does not start enforcing the law - and get around the fact that 1- the company is deemed to be alien under present law (section 94 LC), 2 - the company has not purchased land in place of an alien (section 96 LC), 3 - the company cannot be deemed void (section 69 LC and 150 CCC) and 4 - section 74 LC, the LD will not impose regulations requiring real estate transactions to undergo close scrutiny before registration in a Thai company's name is approved (thus making it impossible to resell the property in the future)….

And the above are ONLY risks under the Land Code....

[The Skipper]

.

Should these Company holders be reviewing their status?

Is there a better way to go?

O.K. Sunbelt Asia.

What's the scoop?

Edited May 30, 2006 by The Skipper

[stevieff]

My wife (thai) and I own land in Samui through a company. Not sure what we are going to do. I think we may try to transfer my shares to her brother and then sell the land to her mother, who can then lease back to us. Anyone's thoughts on that? On another note, I think this decision will have a profound effect on the real estate market. There are a number of potential farang buyers who simply will not go the lease route. Think of all the thai's in the construction industry who will be hurt by this, as well as real estate agents, building suppliers, etc. and also the lost local income from future farang homeowners. And what about property values? It's a proven fact that freehold property is worth more than leasehold property, at least on Samui. That's why the company vehicle was created in the first place. Anyway, I'll be consulting with my attorney this morning to find the best avenue.

[Mobi]

My wife (thai) and I own land in Samui through a company. Not sure what we are going to do. I think we may try to transfer my shares to her brother and then sell the land to her mother, who can then lease back to us. Anyone's thoughts on that? On another note, I think this decision will have a profound effect on the real estate market. There are a number of potential farang buyers who simply will not go the lease route. Think of all the thai's in the construction industry who will be hurt by this, as well as real estate agents, building suppliers, etc. and also the lost local income from future farang homeowners. And what about property values? It's a proven fact that freehold property is worth more than leasehold property, at least on Samui. That's why the company vehicle was created in the first place. Anyway, I'll be consulting with my attorney this morning to find the best avenue.

Let us know how you get on. I will not be too bothered provided I can transfer my shareholding to a Thai - preferably with a 30 year lease back, but even without it I won't be too bothered.

The big worry is if they start declaring all houses purchased through farang controlled companies as illegal. What will happen then?

Doesn't seem too likely though - that will depress the market even further and create chaos. But who knows?

[stevieff]

My wife (thai) and I own land in Samui through a company. Not sure what we are going to do. I think we may try to transfer my shares to her brother and then sell the land to her mother, who can then lease back to us. Anyone's thoughts on that? On another note, I think this decision will have a profound effect on the real estate market. There are a number of potential farang buyers who simply will not go the lease route. Think of all the thai's in the construction industry who will be hurt by this, as well as real estate agents, building suppliers, etc. and also the lost local income from future farang homeowners. And what about property values? It's a proven fact that freehold property is worth more than leasehold property, at least on Samui. That's why the company vehicle was created in the first place. Anyway, I'll be consulting with my attorney this morning to find the best avenue.

Let us know how you get on. I will not be too bothered provided I can transfer my shareholding to a Thai - preferably with a 30 year lease back, but even without it I won't be too bothered.

The big worry is if they start declaring all houses purchased through farang controlled companies as illegal. What will happen then?

Doesn't seem too likely though - that will depress the market even further and create chaos. But who knows?

I think this government decision will create chaos anyway. Think of all the high-end villas in Phuket, Samui, and other places, not to mention resorts, hotels, etc. purchased thru companies now rendered useless, or at least essentially, since they are not re-saleable. Economically, it's an asinine decision by the government. Foreign capital is what drives Thailand, otherwise it would just be Cambodia or Myanmar. One things for sure, there will probably be a cottage-industry of thai nominees to take-over companies and lease back.

[Heng]

This is what happens when you trust your lawyer more than your spouse.

[Blue Unicorn]

I think Stevieff has summed it up perfectly...asinine decision by the government...couldn't have put it better myself. Absolutely correct. Typical of people who do not giving a second thought for the economy, the workforce or the stability of the nation as a whole. Also the loss in tax revenue......

Thailand is actually no different from many countries in the respect that it has laws that good lawyers make ways of getting round them to the benefit of the economy...its called business and any clever business person would be nowhere if he had not practiced that himself/herself. To accept the tax revenue for so long and to rely so much on foreign expenditure and then to disregard this and try to stop the flow of those much needed funds ..is in a nutshell....bloody stupid and asinine (I do like that word !!!). Foreign money has helped Thailand so much and propped it up on so many occassions. What with the political nonsense going on, Tsunami's, closing hours and other problems that have caused a huge dent in Thailand's economy.........now this.........and I was under the naieve belief you tried to help the economy when things were difficult..........I love this country as I am sure many of us do, but some times I do wonder why I bother to try and make a go of it here.........

[Prakanong2005]

Stevieff might have a point about the high end developments but resorts and hotels would not be affected as they are operating properly as a business and not just to own a single house which is what the law is about really.

As for the high end developments I once saw the ownership structure of one and with the Thai entity and offshore entity they owned more than 1 property and anyone buying a 1 million + USD house will more thn likely have had his lawyers lok into this and not Somchai the local lawyer or ken the ex-roofer now estate agent in Pattaya

[Phil Conners]

The condo market might actually gain from this as surely some money that might have gone into houses now is likely to go into condos instead ....

Edited May 30, 2006 by madsere

[Gary A]

Anyway you look at it it IS the law. The law has not changed. Anyone who bought property through a bogus company SHOULD have known the risks involved. There is enough good information right here just on Thai Visa to inform anyone who is/was serious about spending their money. This house of cards could collapse anytime a politician decides to cut off his nose to spite his face. The absolute best advice given here is to NOT spend more than you can afford to lose.

[Nadia 2]

Thailand is actually no different from many countries in the respect that it has laws that good lawyers make ways of getting round them to the benefit of the economy...its called business and any clever business person would be nowhere if he had not practiced that himself/herself.

There is no loophole or way around the foreign ownership laws, your lawyer/ foreign legal consultant knows this and believe me they (as most of the real estate agents) are not that stupid to own property via the company route… Yep, it is called business, though a dirty business, making a profit at the expense of misinformed foreigners who pay the price.

It is waiting for the Commercial Registration department to step in and making it difficult to keep your company in the first place..…

I do not agree that these landholding companies help the economy, as they hardly pay any taxes. It’s back to leasehold, the property market will cool down, nothing wrong with that, and foreigners wishing to own a house will build again on leasehold land.

[Gary A]

Another view of this is that the Thai government stands to make huge amounts of money from enforcing the law. There will be a big scramble to sell these houses to Thais so they can in turn lease it back to the farang. Land transfer taxes are not cheap and the land HAS to be transferred if the law is enforced. New businesses will be formed to make the transactions.

As madsere posted condos may well benefit also. Is it possible that the condominium developers are behind enforcing the existing laws? Looking at the HUGE new condominium complexes being built would make it likely that the law requiring those units to be 51 percent Thai owned will be changed also.

[stevieff]

Stevieff might have a point about the high end developments but resorts and hotels would not be affected as they are operating properly as a business and not just to own a single house which is what the law is about really.

As for the high end developments I once saw the ownership structure of one and with the Thai entity and offshore entity they owned more than 1 property and anyone buying a 1 million + USD house will more thn likely have had his lawyers lok into this and not Somchai the local lawyer or ken the ex-roofer now estate agent in Pattaya

I agree with you to an extent, but what is the difference, say, between a company owning a small freehold hotel renting out rooms for a profit, paying taxes,etc and a company owning a rental house making a profit, paying taxes, etc.? Nothing really, as both are engaged in trade,both make a profit and both pay taxes. The size of the business is irrelevant. The fact is, all of these companies own land, and according to many commenters here, that is illegal, regardless of the business enterprise, for which I will not argue with, because it is a circumvention of the law. All I'm saying is it will be a black day for the Thai economy if this law is enforced. I saw a poll on this website that said 23 percent of all land transsaction were performed thru companies. I spoke with 3 prominent real estate agencies in Samui this morning and all 3 said over 85 percent of their transsactions in the last 2 years were done thru companies. I'm talking thousands of transsactions here. Think about it.

[GuestHouse]

O.K. Sunbelt Asia.

What's the scoop?

It's a fare question!

[Blue Unicorn]

Thailand is actually no different from many countries in the respect that it has laws that good lawyers make ways of getting round them to the benefit of the economy...its called business and any clever business person would be nowhere if he had not practiced that himself/herself.

There is no loophole or way around the foreign ownership laws, your lawyer/ foreign legal consultant knows this and believe me they (as most of the real estate agents) are not that stupid to own property via the company route… Yep, it is called business, though a dirty business, making a profit at the expense of misinformed foreigners who pay the price.

It is waiting for the Commercial Registration department to step in and making it difficult to keep your company in the first place..…

I do not agree that these landholding companies help the economy, as they hardly pay any taxes. It’s back to leasehold, the property market will cool down, nothing wrong with that, and foreigners wishing to own a house will build again on leasehold land.

Sorry...but you are wrong. To buy land in Thailand most people seek legal advice. The law is such that allows this enterprise to exist, so it is hardly breaking any laws. Secondly the reale estate agents and property business in Thailand is what has pushed the economy and helped it flourish. Billions...yes billions of foreign money has poured into Thailand in the form of property business which has helped both the economy and tax money. Every company set up has to pay tax. Maybe some of the developers use off shore accounts but that is the same all over the globe and if you think any different in the UK or the States, you are sadly mistaken. Most of our politicans have of shore accounts. Any respectable and clever businessman does so. And they employ thousands of people and do pay some tax in the given country. They minimiliase it, yes but that is the intelliegnt thing to do. Its called business ! Yes some of the development income is condo's but alot is housing. From it the Thai's have gained a great deal and so have people buying. Many beautiful homes good people have bought, at the fraction of the cost of what people can get the same for back home. They have got their dream homeand good luck to them. If there is something wrong with that....don't ever go into business because you will not get on very well. Good luck to all the developers and anyone who has bought a house in Thailand that way. I hope it works out for you all of you, as it would be a terrrible blight on the economy if it does not and add even more negative responses from industry wishing to invest in Thailand.....wake up...look at the big picture. please !!!!

[GuestHouse]

wake up...look at the big picture. please !!!!

The OP has posted evidence that the government policy is changing. The laws prohibitting the foreign ownership of land through front companies are being applied.

That's the big picture.

Incidentaly, I confirm I do not work in or derirve an income from property companies in Thailand.

Perhaps we should all declare such interests when posting on these topics.

Edited May 30, 2006 by GuestHouse

[stevieff]

Thailand is actually no different from many countries in the respect that it has laws that good lawyers make ways of getting round them to the benefit of the economy...its called business and any clever business person would be nowhere if he had not practiced that himself/herself.

There is no loophole or way around the foreign ownership laws, your lawyer/ foreign legal consultant knows this and believe me they (as most of the real estate agents) are not that stupid to own property via the company route… Yep, it is called business, though a dirty business, making a profit at the expense of misinformed foreigners who pay the price.

It is waiting for the Commercial Registration department to step in and making it difficult to keep your company in the first place..…

I do not agree that these landholding companies help the economy, as they hardly pay any taxes. It’s back to leasehold, the property market will cool down, nothing wrong with that, and foreigners wishing to own a house will build again on leasehold land.

I believe you're mistaken about that. The market will not simple cool down, it will depress. When thousands upon thousands of people lose value, market perception will then be to dump. It's the same in stocks, real estate, whatever. As far as your point about landholding companies not helping local economies, you're simply mistaken, a farang that owns a 60 million baht villa in Phuket thru a company probably drops about 2 million baht annually into the local economy. Why would he stay in Thailand, when he can go to Costa Rica or someplace that actually allows freehold property?

[Sulaphat]

The letter posted by the OP mentions complaints. The letter also seems to be specifically addressed to the Banglamung branch of the Chonburi Land Department office.

Does anyone know whether this is a one-off letter in response to a particular complaint or an across-the-board change in procedure directed to all offices of the Land Department?

[Jomtien]

As madsere posted condos may well benefit also. Is it possible that the condominium developers are behind enforcing the existing laws? Looking at the HUGE new condominium complexes being built would make it likely that the law requiring those units to be 51 percent Thai owned will be changed also.

Towards 100% foreign ownership? or 0% foreign ownership....

Think that the condo market will get a dip too, as the company setup to buy one of those 51% Thai allocated units, has also the problem that the nominee shareholders commonly cant prove where their 'share' came from. I know its a complete different playing field, but i think ppl will get more concerned opening a shell company for the sole purpose of buying property.

Just hope the amount farrang deaths marked as 'suicides' will not raise the comming years.

Peter

[splitlid]

The letter posted by the OP mentions complaints. The letter also seems to be specifically addressed to the Banglamung branch of the Chonburi Land Department office.

Does anyone know whether this is a one-off letter in response to a particular complaint or an across-the-board change in procedure directed to all offices of the Land Department?

definately happening here in hua hin.

[Sunbelt Asia]

O.K. Sunbelt Asia.

What's the scoop?

It's a fare question!

If you were speculating then

Sell Land and Houses in Pattaya, Hua Hun, Koh Samui and Phuket / Short Property stocks

and in

Three months

Buy Condos in Bangkok.

If you could do that, it would be the best arbitrage. However as the real estate market is illiquid. The question is “Sell Land and Houses to who? "

Similar to the silver market in 1980 when the Comex amended the rules. No new buyers and the market crashed. It had no where else to go.

Where are the new buyers going to come from, if a person wanted to sell now??? At a much lower level than where the prices are now.

As a disclaimer, my cross to bear is I’ve felt all my life that property was overvalued and was a bad investment. One of my personal mistakes was feeling this way, while my friends made millions easy. My wife is different; she loves property but she also feels this is very bad for real estate in Thailand at this time.

www.lawyer.th.com

[GuestHouse]

The fact of the matter is, these rules have always existed, perhaps not always been applied but nevertheless they've been there for all to read.

The existance of those rules was always/will always raise the risks with respect to investing in Thai property.

So it all boils down to the old standard piece of advice.

"Do not invest more money in Thailand than you can afford to loose".

Meanwhile there is no denying, that companies and individuals glossed over this detail in their eagerness to sell risky investments in propoerty to people who perhaps might not have understood the full implications of the laws.

Keep that in mind the next time we hear news of great deals and professional services.

[bquick]

I feel sick and don't want talk just to say other foreigners beware of losing your money with this twisting mess of outdated laws. The land office said all land offices are refusing part foreign owned companies with a mess of conflicted reasons. Anyway plenty of countries in the world that work.

[xbusman]

NEVER EVER PUT MORE MONEY IN THAILAND THAN YOU ARE WILLING AND ABLE TO WALK AWAY FROM.