Tax liability

[SidJames]

I'm buying 2 rai of land to build a home.

It's on 1 chanoot in a company name & was bought 10/11 years ago for 400K & I'm buying that chanoot now at 3M

I was just going to set up a company & buy the company that owns this land (it has no other assets).

What other costs am I looking at & are there any future tax liabilities if I sell on in the future?

Is there a better or more efficient way of doing this?

I'm getting mixed answers for my lawyer

SJ

[SidJames]

bump

[cheeryble]

Why not just buy the existing company?

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[SidJames]

I've been advised to set up a new company & buy the land from the company that is selling so that I don't inherit any gains in value that the existing company would now be liable for & so potentially have a tax liability.

One of my issues is that fact that if you ask 2 lawyers the same question then you often get 3 different answers

[cheeryble]

I've been advised to set up a new company & buy the land from the company that is selling so that I don't inherit any gains in value that the existing company would now be liable for & so potentially have a tax liability.

One of my issues is that fact that if you ask 2 lawyers the same question then you often get 3 different answers

Why not buy the company subtracting the tax liability?

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[SidJames]

Then I have the liability.

I want a simple clean transaction.

[cheeryble]

Then I have the liability.

I want a simple clean transaction.

Fair enough.

To answer your first question i believe in future you can be liable for capital gains tax.

This may be normally ameliorated by the misdeclaration of prices so ubiquitous in these parts.

[SidJames]

My lawyer is suggesting the same but the seller is unsure as to whether he should go along with this approach.

I think I should insist.

[SDM0712]

To set up a company for the sole purpose of owning land/property is not technically legal. Also since at least 51% of the company must be in Thai hands you may need nominee shareholders, which is also technically illegal. Having said all of that I have never known a case where the company has been challenged and I know many people that own/control property and land in this way.

The best way is to change the directors of the existing company that owns the land to you and yours, that's the way it's normally done, so you are not buying the existing company, it is just substituting directors. There is a bit of a spotlight at the moment on new company formations also.

Lawyers in Thailand are not quite the same as you may have been used to at home.

Do a search this subject it has been flogged to death on this forum.

SDM

Edited March 30, 2014 by SDM0712

[cheeryble]

My circumstances may be different I wouldn't go the company route and in fact I asked for no security on a recent land purchase, but if I did I would take my best two or three Thais for directors WHO ARE COMPLETELY DISCONNECTED, not a group suggested by some law firm or all part of your family or anything like that. If they are good friends who knows what might get hatched, if not acquainted one might hope othat if one suggested malfeance to the other the approached one might tell you as he doesn't know the other person.

But then I have several Thai friends who have historically been totally trustworthy, you may or may not.

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[SidJames]

To set up a company for the sole purpose of owning land/property is not technically legal. Also since at least 51% of the company must be in Thai hands you may need nominee shareholders, which is also technically illegal. Having said all of that I have never known a case where the company has been challenged and I know many people that own/control property and land in this way.

The best way is to change the directors of the existing company that owns the land to you and yours, that's the way it's normally done, so you are not buying the existing company, it is just substituting directors. There is a bit of a spotlight at the moment on new company formations also.

Lawyers in Thailand are not quite the same as you may have been used to at home.

Do a search this subject it has been flogged to death on this forum.

SDM

I have searched & the sheer volume of comment gives no clarity at all.

If I just change directors then I will inherit the tax liabilty that will be attached to the uplift in price (value) of the land from it's original purchase to now.

I what to avoid this.

[SDM0712]

To set up a company for the sole purpose of owning land/property is not technically legal. Also since at least 51% of the company must be in Thai hands you may need nominee shareholders, which is also technically illegal. Having said all of that I have never known a case where the company has been challenged and I know many people that own/control property and land in this way.

The best way is to change the directors of the existing company that owns the land to you and yours, that's the way it's normally done, so you are not buying the existing company, it is just substituting directors. There is a bit of a spotlight at the moment on new company formations also.

Lawyers in Thailand are not quite the same as you may have been used to at home.

Do a search this subject it has been flogged to death on this forum.

SDM

I have searched & the sheer volume of comment gives no clarity at all.

If I just change directors then I will inherit the tax liabilty that will be attached to the uplift in price (value) of the land from it's original purchase to now.

I what to avoid this.

Hi Sid

The reason there is little clarity on the various threads is that the Forum has so many “experts” with differing opinions.

I am in this business and deal with this kind of thing every day.

What I have said is factually correct, although as with many things in Thailand, the Law is not enforced as much as it might be somewhere else.

I deal with many people that have set up brand new companies in order to use them as an “ownership” structure and as far as I know none have had any problem at all. The reason that different lawyers are given you different opinions is it depends on their contacts and confidence of whether the rules on company ownership can be ignored for their client, i.e. you. But if it all goes wrong it will be your problem and not theirs.

A new company is hard to set up for this purpose now because there is a spotlight on foreign ownership of businesses, an old company has already been set up and is very unlikely to be looked at, particularly one of this kind of age.

In terms of the tax liability I would assess it and knock it off what you pay the seller.

SDM

[cheeryble]

Actually if rather than a land transfer ever happening it is just a repeated transfer of the company owning the land presumably transfer fees or capital gains tax may be avoided in perpetuity.........?

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Edited March 31, 2014 by cheeryble

[SDM0712]

Actually if rather than a land transfer ever happening it is just a repeated transfer of the company owning the land presumably transfer fees or capital gains tax may be avoided in perpetuity.........?

Quite so, until the land is actually sold no profit is actually realized. Also the "changing of Director" route to alter control of a company is favored in this kind of instance since it is done without involving the Land Department so financially it is very efficient.

SDM