Setup Thai company for property purchase, and ongoing annul costs

[Mysterion]

Hello all,

 

A non-thai friend of mine wants to buy a thai-freehold house for 5million baht.

 

As he is a foreigner, he plans to setup a Thai company solely to conduct the property purchase.

 

What are the approximate setup costs, and ongoing annual costs, that he should expect to pay for the Thai company arrangment?

 

thanks for your help!

[trogers]

Should be asking his Thai shareholders, as this would be a Thai company...

[Mysterion]

I am not following you.

 

Is there not a standard price range for these popular property purchase setups?

[xylophone]

It is illegal for a foreigner to set up a Thai company for the specific purpose of owning property (land) here. He can own the house but not the land.

 

The exception being where the buyer has invested a large sum of money ( 40 m baht??).

[Mysterion]

2 hours ago, xylophone said:

It is illegal for a foreigner to set up a Thai company for the specific purpose of owning property (land) here. He can own the house but not the land.

 

The exception being where the buyer has invested a large sum of money ( 40 m baht??).

 

Lets reframe the question.

 

What is the usual company setup cost and ongoing costs of for a company that simply owns a piece of land with a house on it?

[trogers]

19 minutes ago, Mysterion said:

 

Lets reframe the question.

 

What is the usual company setup cost and ongoing costs of for a company that simply owns a piece of land with a house on it?

Not usual to set up a company just to own a piece of land with a house on it. The usual practice is to personally own it.

[Mysterion]

7 minutes ago, trogers said:

Not usual to set up a company just to own a piece of land with a house on it. The usual practice is to personally own it.

 

My friend told me that he has seen many houses for sale via various agents.

 

The agents have told him that many of the thai freehold houses are owned by thai companies. Apparently the agents say a thai  company  is a very popular way to structure a house/land purchase for many investors for various reasons.

 

 

[xylophone]

5 minutes ago, Mysterion said:

 

My friend told me that he has seen many houses for sale via various agents.

 

The agents have told him that many of the thai freehold houses are owned by thai companies. Apparently the agents say a thai  company  is a very popular way to structure a house/land purchase for many investors for various reasons.

 

 

Agents may say that but again it is illegal for a foreigner to set up a company for the sole purpose of owning land. Many threads on this so have a look at them.

[trogers]

9 minutes ago, Mysterion said:

 

My friend told me that he has seen many houses for sale via various agents.

 

The agents have told him that many of the thai freehold houses are owned by thai companies. Apparently the agents say a thai  company  is a very popular way to structure a house/land purchase for many investors for various reasons.

 

 

Agents and their associates will do anything, even when illegal, to earn commissions and fees.

 

But the foreign buyer is the one holding the baby at the end of the day, while the agents are long gone to sabai sabai on their earnings.

[Pilotman]

Its not illegal to have a company own a house and land where a foreigner is a minority shareholder. 

[MrJ]

about 20k (+ maybe small fees for share holder signature) set up the company and about 12-15k running costs a year - have done it and still doing it without any issues as then thousand expats doing it as well................

[trogers]

2 hours ago, Pilotman said:

Its not illegal to have a company own a house and land where a foreigner is a minority shareholder. 

It would be an interesting exercise to check and see how many of these majority Thai shareholders have their names in the recent govt register of the poor...

[swissie]

It has been said here before, but I think it has to be said one more time:

This concept was only a fuzzy "loophole" within the Thai legislation, that was discovered and exploited by Thai-Lawyers.
It worked nicely for decades, because nobody cared.

Times have changed. The current government has "discovered" this loophole, with the firm intention to plug this "loophole".
In case of any "legal-dispute" concerning such an illegal set-up, a Farang investor may be charged with the "intent of circumventing Thai-Laws", punishable by fine, and/or imprisonement.

Reputable Thai-Law Firms will not set-up any such constructs anymore.

Those that still do, are strictly "commission-orientated". If any (legal) heat should emerge in the future, concerning those "loophole-constructs", those "legal-firms" strictly operate according to:

ELVIS HAS LEFT THE BUILDING. Leaving the foreighn investor as the last target to apply Thai-Law.

A good number of Farang investors are not aware of the fact "that times are a changing in Thailand". And not for their benefit.

Farangs, having set-up such a "construct" 20 years ago, may not be affected by this, counting on something that in the west is called "Grandfathering-Rights". Not sure, if such a concept would find approval within the Thai-Legal system.
Impossible to predict, since the interpretation of the "Thai-Legal-System" varies from Amphoe to Amphoe.

As far as I know, Bill Gates, Warren Buffet, Mark Zuckerberg and a certain D.Trump, among many others, do not own (or ever have tried) to "own" any property in Thailand.
Probably a good reason behind it. What could it be?
Cheers.

[trogers]

4 hours ago, swissie said:

 

In case of any "legal-dispute" concerning such an illegal set-up, a Farang investor may be charged with the "intent of circumventing Thai-Laws", punishable by fine, and/or imprisonement.

Not only the Farang investors, but also the Thais who acted as nominees.

 

The so-called Thai company would face constant changes in majority Thai shareholders as awareness of this penalty becomes widespread, resulting in tens to hundreds of thousands baht having to change hands constantly.

[xylophone]

14 hours ago, Mysterion said:

 

My friend told me that he has seen many houses for sale via various agents.

 

The agents have told him that many of the thai freehold houses are owned by thai companies. Apparently the agents say a thai  company  is a very popular way to structure a house/land purchase for many investors for various reasons.

 

 

Take a look at the articles below, many written by Govt Officials and lawyers.....

Articles on foreign ownership in Thailand………..

 A). This from the Land Department Minister (office of)...........

 "If it is appears that the company is having foreigner as shareholder or Director or if there is a reason to believe that it is nominating the Thais to hold shares for the foreigners, the officer is to investigate income of every Thai shareholders in the legal entity by looking into their work history of what kind of work they have done and what monthly salary they earned, all of these proved by evidence.

 

If the purchase is funded by loan, then loan evidence must be provided. If after the investigation, it is led to believe that the application for land ownership is circumventing the law or any individual is purchasing land to the benefit of foreigners under the Land Act 74, paragraph 2, the officer is to investigate the case in detail and report to the Land Bureau to be waiting for further advise from the Minister".

 Some more info... http://www.thailaws....business_42.htm

 

B). Link to an article in the Telegraph....

 "Expats who own land illegally in Thailand could be deported under tough new laws being drafted by the government.

 

 Thai ombudsman Siracha Charoenpanij said earlier this month that he was drawing up "carrot-and-stick" legislation to protect the country from illegal foreign nominee ownership.

 

Under Thai laws, foreign nationals are not allowed to own residential land. They can, however, buy apartments so long as no more than 49 per cent of a development is owned by foreigners. They can also purchase detached villas, but while they can own the house, they cannot own the land the house is on and are only able to lease it for 30 years at a time.

 

To get around these restrictions, some have entered into complicated structures whereby a company is set up to purchase the land. A Thai national holds the majority of shares in that company, but in reality may have no financial interest in the company and may own it on behalf of the foreign buyer.

 

It is these such "nominee ownership" arrangements that the government now wants to crack down on, and Charoenpanij has also proposed a reward – of 20 per cent of the land’s value when sold – for those providing information about illegal ownership. His plans also include penalties for lawyers or consultants who advise foreign buyers on nominee structures".

 

C). 1). Unquestionably it is illegal to buy a house via a company.

 

 The Thailand Alien Business act is quite specific, and there is a blanket offence of circumventing land ownership laws that means anything that appears to allow foreigners to own houses is actually illegal.

 

2). Be careful here because it is illegal for a company to be formed with the sole purpose of owning a property. If the company is a trading/working entity employing Thai workers, paying taxes etc then a house can be purchased, but then again the company has to also have a majority Thai ownership and these majority Thai shareholders must be able to show how much they have invested in this company and from whence the funds came.

 

This is to prevent the “Thai nominee company” illegal workaround and nominee companies are illegal...

 

http://www.thailand-lawyer.com/land_purchase.html

 

http://www.telegraph.co.uk/finance/personalfinance/expat-money/9413075/Expats-warned-of-illegal-home-crackdown-in-Thailand.html

 

http://www.thailandlawonline.com/66-real-estate-legal-issues/14-can-a-thai-company-be-my-nominee-for-land-acquisition

 

http://www.thailandlawonline.com/article-older-archive/foreign-business-nominee-company-shareholder

 

 

[impulse]

17 hours ago, Pilotman said:

Its not illegal to have a company own a house and land where a foreigner is a minority shareholder. 

 

It is if the foreigner has effective control of the land.

[Mysterion]

4 hours ago, xylophone said:

Take a look at the articles below, many written by Govt Officials and lawyers.....

Articles on foreign ownership in Thailand………..

 A). This from the Land Department Minister (office of)...........

 "If it is appears that the company is having foreigner as shareholder or Director or if there is a reason to believe that it is nominating the Thais to hold shares for the foreigners, the officer is to investigate income of every Thai shareholders in the legal entity by looking into their work history of what kind of work they have done and what monthly salary they earned, all of these proved by evidence.

 

If the purchase is funded by loan, then loan evidence must be provided. If after the investigation, it is led to believe that the application for land ownership is circumventing the law or any individual is purchasing land to the benefit of foreigners under the Land Act 74, paragraph 2, the officer is to investigate the case in detail and report to the Land Bureau to be waiting for further advise from the Minister".

 Some more info... http://www.thailaws....business_42.htm

 

B). Link to an article in the Telegraph....

 "Expats who own land illegally in Thailand could be deported under tough new laws being drafted by the government.

 

 Thai ombudsman Siracha Charoenpanij said earlier this month that he was drawing up "carrot-and-stick" legislation to protect the country from illegal foreign nominee ownership.

 

Under Thai laws, foreign nationals are not allowed to own residential land. They can, however, buy apartments so long as no more than 49 per cent of a development is owned by foreigners. They can also purchase detached villas, but while they can own the house, they cannot own the land the house is on and are only able to lease it for 30 years at a time.

 

To get around these restrictions, some have entered into complicated structures whereby a company is set up to purchase the land. A Thai national holds the majority of shares in that company, but in reality may have no financial interest in the company and may own it on behalf of the foreign buyer.

 

It is these such "nominee ownership" arrangements that the government now wants to crack down on, and Charoenpanij has also proposed a reward – of 20 per cent of the land’s value when sold – for those providing information about illegal ownership. His plans also include penalties for lawyers or consultants who advise foreign buyers on nominee structures".

 

C). 1). Unquestionably it is illegal to buy a house via a company.

 

 The Thailand Alien Business act is quite specific, and there is a blanket offence of circumventing land ownership laws that means anything that appears to allow foreigners to own houses is actually illegal.

 

2). Be careful here because it is illegal for a company to be formed with the sole purpose of owning a property. If the company is a trading/working entity employing Thai workers, paying taxes etc then a house can be purchased, but then again the company has to also have a majority Thai ownership and these majority Thai shareholders must be able to show how much they have invested in this company and from whence the funds came.

 

This is to prevent the “Thai nominee company” illegal workaround and nominee companies are illegal...

 

http://www.thailand-lawyer.com/land_purchase.html

 

http://www.telegraph.co.uk/finance/personalfinance/expat-money/9413075/Expats-warned-of-illegal-home-crackdown-in-Thailand.html

 

http://www.thailandlawonline.com/66-real-estate-legal-issues/14-can-a-thai-company-be-my-nominee-for-land-acquisition

 

http://www.thailandlawonline.com/article-older-archive/foreign-business-nominee-company-shareholder

 

 

 

There are probably tens of thousands, or more,  houses that have been bought/sold/owned using these corporate structures.

 

Is anybody aware of any publicized reports of prosecution/penalty for using these structures in the ways described above?

 

if yes, please share the links.

[KittenKong]

21 hours ago, Mysterion said:

Apparently the agents say a thai  company  is a very popular way to structure a house/land purchase for many investors for various reasons.

 

Agents say lots of things. Personally I would not believe anything they say.

[Senechal]

21 hours ago, Mysterion said:

 

My friend told me that he has seen many houses for sale via various agents.

 

The agents have told him that many of the thai freehold houses are owned by thai companies. Apparently the agents say a thai  company  is a very popular way to structure a house/land purchase for many investors for various reasons.

 

 

 

 

LOL. Agents will say a lot of things. Why? Because they make their money in the near term. Your bad decisions will fall apart over the long term.  

 

The law is pretty clear. I suggest you break the rules only if you are prepared to accept 100% losses.

 

Remember this: Real estate is *only* a good investment insofar as losses can be predicted within a percent range. The game you are playing (or your friend) carries a potential loss of 100%. If that still sounds like a good investment to you, then it must be some house!

 

[trogers]

2 hours ago, Mysterion said:

 

There are probably tens of thousands, or more,  houses that have been bought/sold/owned using these corporate structures.

 

Is anybody aware of any publicized reports of prosecution/penalty for using these structures in the ways described above?

 

if yes, please share the links.

There are foreigners who do fit into this country with their Thai-like behaviour. I do it because the law is not strictly enforced. It's the same, whether it is dashing through a red light, or ride a motorcycle without a crash helmet, or use nominees to own something that is forbidden.

 

And when they do face enforcement, the excuse is thousands do it or that there is legal uncertainty to own real estate in Thailand. But they are not willing to face the truth that the uncertainty and difficulty are all self-created.

[xylophone]

3 hours ago, Mysterion said:

 

There are probably tens of thousands, or more,  houses that have been bought/sold/owned using these corporate structures.

 

Is anybody aware of any publicized reports of prosecution/penalty for using these structures in the ways described above?

 

if yes, please share the links.

Firstly it matters not how many of these structures have been utilised in the past, because if they are illegal, then they are illegal and you use them at your own risk.

 

I do recall a few Thai nominee company directors being fined here for this practice and this was done to set an example to others.

 

More to the point, you may recall a case where a farang was swindled out of his property here by his Thai wife and a lawyer and one of the reasons why it has been so difficult to fight this case was because he bought the property through the very channel you are advocating, so it was in fact ruled illegal, hence the barriers to him fighting his case.

 

Closer to home, for me anyway, is the case of a friend who was working overseas for a while and whilst he was away his lawyer issued a new chanote on his villa in Rawai, inserted his name as the owner and then sold it. My friend has had no luck in pursuing legal recourse to have his villa returned and the simple reason is because he purchased it through the Thai nominee method (that which you are advocating) so his "ownership" through an illegal means has meant he has gotten nowhere with his case and has now been almost 3 years.

 

I echo the sentiments of other posters in this matter (trogers, Senechal, kittenkong etc)- - - - just because others get away with it, doesn't mean that it is legal, or indeed that you or your friend will get away with it, and of course they could be open to the same sort of chicanery that I have mentioned above.

[ross163103]

I did this same thing years ago; forget what it cost to set it up but I was paying approx 19000 baht a year to keep the company going. One thing to keep in mind is the cost of finishing the company later on. I'm changing the house to a Thai name and finishing the company and its going to run approx 150,000 baht. I didn't check into this when I set up the company and was surprised as to the cost. Just something to keep in mind. I know there are cheaper set up costs but mine was done by a local, large developer so never had any issues. Keep in mind you get what you pay for.

[Thaidream]

IMHO anyone who does this is playing Russian roulette. It is not legal and whether one gets documentation  indicating it is doesn't make it so as evidenced by cases that go to court without recourse.

With the current Government in power- they will eventually start cracking down on this just as they have gone after Thais who for decades have encroached on land and are currently attempting to takeaway part of Walking Street in Pattaya. An honest real estate agent or lawyer would never process a company registration for this purpose.

To me, it's not only the loss of money that would be involved but potentially jail time and deportation with blacklisting. Why take a chance?

[manarak]

Xylophone and other have laid down the (to date still) theoretical risk of such a scheme.

 

Yet I have never heard of a farang owner dispossed of a residential plot of land with his house on it.

When land is found in ownership of a foreigner, usually if inherited from a Thai parent or after a divorce, then a court issues an order to the owner to sell the land within 6 months to a Thai person.

So even if this happens, not all is lost.

 

Then, one also have to consider that payments to rent the house and the investment to purchase the house break even after approx. 13 to 15 years, depending on the purchase price.

This effectively means that if house and ground would just disappear with a value of 0 after 15 years, the deal would still be profitable.

 

I consider the deal a good investment and low risk - much lower risk than putting the property in a Thai partner's name anyway.

 

Of course, do the deal properly, use a reputed lawyer and keep any other Thai person such as your wife completely out of it, don't show any company papers, chanote or bank account. Lock your business away in a safe. This information is dangerous is Thailand. A trusted lawyer is your best friend in this country.

[manarak]

15 hours ago, xylophone said:

Firstly it matters not how many of these structures have been utilised in the past, because if they are illegal, then they are illegal and you use them at your own risk.

 

I do recall a few Thai nominee company directors being fined here for this practice and this was done to set an example to others.

 

More to the point, you may recall a case where a farang was swindled out of his property here by his Thai wife and a lawyer and one of the reasons why it has been so difficult to fight this case was because he bought the property through the very channel you are advocating, so it was in fact ruled illegal, hence the barriers to him fighting his case.

 

Closer to home, for me anyway, is the case of a friend who was working overseas for a while and whilst he was away his lawyer issued a new chanote on his villa in Rawai, inserted his name as the owner and then sold it. My friend has had no luck in pursuing legal recourse to have his villa returned and the simple reason is because he purchased it through the Thai nominee method (that which you are advocating) so his "ownership" through an illegal means has meant he has gotten nowhere with his case and has now been almost 3 years.

 

I echo the sentiments of other posters in this matter (trogers, Senechal, kittenkong etc)- - - - just because others get away with it, doesn't mean that it is legal, or indeed that you or your friend will get away with it, and of course they could be open to the same sort of chicanery that I have mentioned above.

You have to be honest: people swindled out of property happens with all kinds of properties, regardless of it being in your own name or not. People just bring photocopies, amend them as needed and go "pretend".

I also think that these cases you mentioned happened to people who have been careless to some degree in their dealings.
Of course the property is gone if one loses control of the company, and the control can only be guaranteed by the lawyer, whose loyalty must be beyond doubt.

[KittenKong]

2 hours ago, ross163103 said:

One thing to keep in mind is the cost of finishing the company later on. I'm changing the house to a Thai name and finishing the company and its going to run approx 150,000 baht. I didn't check into this when I set up the company and was surprised as to the cost.

 

I think that most of that 150,000B will actually be the transfer tax/fee from the Land Office for the actual sale. Winding up the company should only be a part of that.

[KittenKong]

9 minutes ago, manarak said:

You have to be honest: people swindled out of property happens with all kinds of properties, regardless of it being in your own name or not. People just bring photocopies, amend them as needed and go "pretend".

 

It is quite hard to do this with a property for which the chanote is in a single name (ie a farang-owned condo). The Land Office wont accept copies and is quite strict about issuing replacements. Not to say that such fraud isnt possible of, course.

 

I think that the vast bulk of property fraud here, and there is a lot of it, involves company-owned property as a fraudulent company sale just requires a dodgy lawyer, of which there is no shortage here.

[williamgeorgeallen]

On 2/7/2560 at 2:42 AM, Pilotman said:

Its not illegal to have a company own a house and land where a foreigner is a minority shareholder. 

yes thats correct however you may have to set up the business with all thai partners, then buy the house then change yourself back to being a shareholder. the land office would not put property in the name of companies with foreign share holders when i bought one of my houses. all in all it is generally not a good idea to buy property in thailand. over 10 years everyone i saw do it regretted it. myself included.

[trogers]

3 minutes ago, KittenKong said:

 

It is quite hard to do this with a property for which the chanote is in a single name (ie a farang-owned condo). The Land Office wont accept copies and is quite strict about issuing replacements. Not to say that such fraud isnt possible of, course.

 

I think that the vast bulk of property fraud here, and there is a lot of it, involves company-owned property as a fraudulent company sale just requires a dodgy lawyer, of which there is no shortage here.

I wonder if people in farangland open a company just to purchase a piece of land with a house on it, using a few strangers to hold majority shares of the company...

[henry15]

On 1/7/2017 at 9:42 PM, Pilotman said:

Its not illegal to have a company own a house and land where a foreigner is a minority shareholder. 

Than he is not the owner of the real etate nor the owner of the house. The company shareholders can sell the property without his knowledge or aproval.  And Its a illegal for a foreigner to set up a company with the sole purpose to buy real estate.  The Landdepartement have the riggt to Non Void the contract. In such case you not only loose your property but also your invested capital.