Setup Thai company for property purchase, and ongoing annul costs

[xylophone]

40 minutes ago, manarak said:

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

What has been stated and backed up by "straight" lawyers and Govt depts, is that such a scheme is against the law.

 

If you wish to break the law in this country, then that is your choice.

 

My friend did so and has lost his villa.

[xylophone]

On ‎01‎/‎07‎/‎2017 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. 

Several problems here:-

 

If the sole purpose of the company is to own a house/land then that is illegal.

 

The Thai shareholders, by law, have to show that they invested money/bought their shares and from whence the money came (i.e. that they are bona fide shareholders).

 

They will have to show what the company "business" is and what returns they are getting from it.

 

Thai nominees will be harder to find since the Govt stated that they will be investigating these set ups, but being Thailand, money can buy anything, even a way to wrestle the company from you because you can't/don't actually own it.

 

Anyway I have posted enough info on this, backed up by lawyers and Govt depts., so no more is necessary. It is an illegal practice so if you wish to break the law.........up to you!!

 

[manarak]

1 hour ago, xylophone said:

What has been stated and backed up by "straight" lawyers and Govt depts, is that such a scheme is against the law.

 

If you wish to break the law in this country, then that is your choice.

 

My friend did so and has lost his villa.

 

Illegal? yes it is by the spirit of the law and the interpretation made thereof.

The scheme is not against the letter of the law, and I am not aware of any action by law enforcement to check ownership of all companies holding land where forced sale procedures were initiated.

Land offices are increasingly refusing registration of chanotes to such companies, but this is because of a directive they have been issued.

There are many companies holding land, and in this case, one just buys the company, which doesn't require a change at the land office.

 

Has the Law ever been enforced against existing chanotes other than in special cases ? no.

 

And your friend didn't lose his villa because of that law, he lost it because of fraud in the first place.

Your friend was unable to initiate legal recourse not because of the law - but because the land technically belonged to the company, so of course he can't claim it as his own.
But I guess he could initiate proceedings against shareholders for misappropriation of assets, and I think you mentioned the case was still ongoing. Par for the course as far as legal systems are concerned.

 

What I am saying is that this is a calculated risk, and if the foreign owner is careful, his maximum risk is being ordered by a court to sell his land (not necessarily the building) to a Thai within 6 months.

 

As I said, if the law continues to not be enforced - if it ever is enforced, there will be big problems with foreign institutional land owners which make the backbone of tourism and farming industries - the benefit of using the scheme is obvious. After roughly 13-15 years the house and land will have been paid off completely, and after 6-7 years only, the costs of either option balance out.

 

It's a small gamble on 6-7 years, and every person should take his own decision based on all facts, not based on theory.

[Boss]

@xylophone : very good concrete information - thanks !

[Thaidream]

It is illegal- against the spirit and letter of the law.  Thailand has a habit of luring people into unsound investments because of lax enforcement. I remember many cases of similar situations involving land encroachment; Visas; and unlicensed business.  The difference now is that there is a government who is actively pursuing all those laws that were never enforced before and they are enforcing them now.  If I had  purchased land through a company set up for this purpose- I would sell it immediately due to the current climate of enforcement and never attempt to purchase again in this manner.

[khunPer]

On 6/30/2017 at 5:31 PM, Mysterion said:

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?

Legally, it's illegal to set up a Thai company limited solely to conduct property purchase for a foreigner, if the foreigner has any control over the company – some Land Offices will not register land to a company with more than 39% foreign shareholders. Furthermore, Thai shareholders – that will own minimum 51 percent of your friends future company – shall show proof of funds, so they don't act as proxies.

 

However, your friend shall consult a law firm with experience in handling property for foreigners; they shall know the actual ways of doing it, limitations, and eventual possibilities.

 

So far scrutiny seem to have been made only into larger projects with foreign ownership, whilst small companies have not been checked – but that's no guarantee for the future...

 

Approximate set-up cost for a Thai company limited will normally be in the range of 30,000 baht to 50,000 baht. The company will need both an accountant and an auditor (the accountant will find) for annual statements, expect 30,000 baht to 40,000 baht for that service, if there are no other activities in the company (it's advisable to have other activities than just owing a land plot, leased out to a foreigner). Be prepared that the accountant may book-keep a small profit for the company, so a few thousand baht annual company tax shall also be paid.

 

Your friend will need to pay a lease fee to the company – making an up to 30-years Leasing Agreement for the property – the annual leasing fee that shall be big enough to pay for company expenses and perform a profit for taxation.

 

Juts an additional note, re. other posts:

To my knowledge, a house already registered together with a land plot cannot be separated again; so for a foreigner to own a house – which is legal, but not including the land under the house – it shall either be a new build house (build by the foreigner, with permissions in the foreigner's name); or an existing house that has always been traded separated from the land.

[chickenrunCM]

buy the land in the name of a Thai person, do a usefruct contract with the new owner, put all your kids and family (brothers, nephews and sisters) in and make the contract for lifetime. Also add in the contract that after the contract finish the landowner has to buy back the house on the land for the market price. You can put the house in your name easy, it´s allowed by Thai law. It costs you a very small amount to do the usefruct contract, less than 1000 THB and you are safe!

[jacko45k]

My annual costs are 15,000 baht, which includes a small amount of taxes and preparing and submitting the annual accounts. I hear of others who pay a little less. Sorry not sure wrt all the set-up costs.

You will need 2 Thai shareholders and the necessary signatures from them that permit you to sell their shares.

 

 

[Tapster]

I pay 30,000 THB annually for accounts. The company set-up was approximately 75,000.

Yes, it is completely illegal to set up a company with the sole purpose of owning a house and the land it stands on. I know that.

I need to live in a house, ownership of which is secure. I don't want anyone selling my rented house from under me. I want to change and improve the house any way I want and have it worth something at the end when I sell it.
It is an essential part of my nature to own a house if I'm living in a country long term. It's not a big house, but it's mine. 

For this I am "happy" to take the risks mentioned in full, in the above posts.

I think it's highly unlikely that the Thai government would ever decide to void all ownership papers based on this "loophole".

The loss of probably several billion Baht, repatriated to foreign accounts to say nothing about the loss of goodwill and of many people leaving Thailand, taking their continued foreign investment with them, would not be insignificant.

However, this is Thailand! Anything is possible, just quite unlikely in this case, I think.

And, the house will take some time to sell, at some point in the far future. There's a property glut in Phuket so it might take a year or even two, to sell. That said, my Canadian neighbour sold her house within two months.

Oh, yes and our monthly "rent", taking the purchase price over 30 years, is 22,000 THB, which is much cheaper than renting this house.

And, we had capital when we came here, but not a large amount of monthly income. Interest rates being so low we were better spending capital on the house than investing it for a pittance that wouldn't have paid the rent on the sort of house we wanted.

That's my reasoning/assumptions/strategy.

It's a big caveat emptor !

 

 

[williamgeorgeallen]

4 hours ago, chickenrunCM said:

buy the land in the name of a Thai person, do a usefruct contract with the new owner, put all your kids and family (brothers, nephews and sisters) in and make the contract for lifetime. Also add in the contract that after the contract finish the landowner has to buy back the house on the land for the market price. You can put the house in your name easy, it´s allowed by Thai law. It costs you a very small amount to do the usefruct contract, less than 1000 THB and you are safe!

or just rent and leave the country at short notice if and when you feel like it. took me years to sell my houses.

[Mysterion]

Seems like there are no publicized cases of a court voiding a purchase or penalizing parties involved over all the years.

 

Considering the tens of thousands(or more) of existing company setups that own thailand properties, and the ongoing growth of homes being bought/sold via these structures.....

 

Do you guys believe the Thailand residential property market would crash hard if the powers ever actually voided a single structured corp property purchase and/or penalized the parties involved?

 

[dotpoom]

On 01/07/2017 at 7:53 PM, 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?

I have two Thai Company's, one has a condo, the other a house.

 Depending on the capitol involved, the companies to set up ranged from 15,000/Baht to 25, 000/Baht. I pay a Lawyer 12,000 Baht a year for each company to do the anual returns.

   I have a Real Estate Agent who says she can have them done for 10,000 each......but I prefer to stay with the Lawyer.

   I have owned about 5 companies during the last 17 years and never ever had a problem. 

   There are a lot of prophets of doom and gloom on here.

[xylophone]

6 hours ago, manarak said:

Illegal? yes it is by the spirit of the law and the interpretation made thereof.

The scheme is not against the letter of the law,

 

9 minutes ago, dotpoom said:

There are a lot of prophets of doom and gloom on here.

There are also some folk who don't want to understand what is law and what isn't........the scheme is against the law period. 

 

I can explain it to you but I can't help you understand it.

[Tapster]

@Mysterion 

 

If a single company-structured property purchase was voided and everyone involved was punished, that would be looked at very carefully by all farang house owners.

However, if the government decided on a wholesale attack on everyone with company-structured property, that would definitely have a detrimental affect on the market, presumably as 100s of expats raced to sell their homes at the best price, before being forced into a loss-making quick sale.

 

It would be a disaster. I'm betting that it won't happen. You could lose most of your money, but I think it's unlikely.

 

 

[xylophone]

7 hours ago, Thaidream said:

It is illegal- against the spirit and letter of the law.

Agree, but what part of, "it is against the law/it is illegal" don't some folk understand?

 

I guess those who want to break the law will do so and no amount of discussion will change their "novel" viewpoints.

 

Did try to unfollow this but it didn't work, so will try again.

[Tapster]

@xylophone 

 

You seem to be taking this personally. 

 

I know this is illegal and I have explained my reasons. 

 

I don't think anyone is ignoring what you have helpfully posted. 

 

However, others choose to act differently, driven by their own wants and needs. 

 

Live and let live. We're all grown ups and know the risks. 

 

[William C F Pierce]

What is the problem with leasing the land. This situation exist in many western countries. It generally makes the running cost cheaper. My leasehold property in the UK with a 999 year lease has an annual rent of £8.40 I have to pay and no other worries. I do admit Thai land laws could do with a bit of overhaul.

[xylophone]

17 hours ago, Tapster said:

@xylophone 

 

You seem to be taking this personally. 

 

I know this is illegal and I have explained my reasons. 

 

I don't think anyone is ignoring what you have helpfully posted. 

 

However, others choose to act differently, driven by their own wants and needs. 

 

Live and let live. We're all grown ups and know the risks. 

 

Thank you for your kind words Tapster.............and no I am not taking this personally as everyone can do as they wish.

 

I am always someone who has abided by the law and see it as right to do so, others may not, but what I don't like is the way that some folk will try and put a "legal spin" on something which isn't legal and then try and argue the case!! Duh!

 

For the record, the Usufruct method may well get folks what they want, and in a legal way!!

[manarak]

21 hours ago, xylophone said:

 

There are also some folk who don't want to understand what is law and what isn't...

 

Seems you have found your audience then.

 

[manarak]

2 hours ago, xylophone said:

For the record, the Usufruct method may well get folks what they want, and in a legal way!!

many land offices refuse to register usufructs where a foreigner is the beneficiary.

how can they legally refuse to register?

I let you ponder that.

Thailand's legal system is not as clear-cut as, for example, Switzerland's.

[trogers]

18 minutes ago, manarak said:

many land offices refuse to register usufructs where a foreigner is the beneficiary.

how can they legally refuse to register?

I let you ponder that.

Thailand's legal system is not as clear-cut as, for example, Switzerland's.

I can understand why if the farang is younger than 60...

[xylophone]

43 minutes ago, manarak said:

Seems you have found your audience then.

 

Not really, who wants an audience that comes up with doozies like this.....'Illegal? yes it is by the spirit of the law and the interpretation made thereof. The scheme is not against the letter of the law'.

 

 

[EcigAmateur]

Hello,

 

So it seems that the cost to setup a company to buy a land is around 40000 the first year, then 20000 yearly.

Then if my Thai partner uses the land and/or house for a real business, the whole process of setting up a company becomes legit.

 

But should the name of a The Thai person working be added to the company documents, to be able to use this as an evidence in case of future problems ? And can we declare the purpose of the company (the real job that the Thai will do) ?

 

Thank you.

 

 

[khunPer]

On 7/3/2017 at 5:34 PM, William C F Pierce said:

What is the problem with leasing the land. This situation exist in many western countries. It generally makes the running cost cheaper. My leasehold property in the UK with a 999 year lease has an annual rent of £8.40 I have to pay and no other worries. I do admit Thai land laws could do with a bit of overhaul.

You cannot compare UK land lease with Thailand. First of all, in Thailand one have to follow Thai laws. Secondly a land lease cannot legally last longer than 30-years; and option for extended period in the original lease contract makes the lease-agreement legally void. Any suggestions of another 30-year extension is based on a separate (written) agreement between two parties, and if not kept, that contract need to be taken to a Thai Court as a separate unfulfilled promise; a foreigner that summons a Thai. 

 

What if the original lessor is dead and it's the heir(s), which now owns the land and have made no agreement of a lease-extension with you, you're going to meet in the court..?
Or what if the lessor has sold the land..?

 

You cannot comparing a symbolic price of £8.40 with factual lease prices in Thailand. Leasing is business, and you may pay full land-value price, or more, over a 30-year period, for land with permission to build a house, and you may even pay it up-front. After 30 years you have nothing, whilst the lessor still owns the full value of the land – and your house...

[khunPer]

2 hours ago, EcigAmateur said:

Hello,

 

So it seems that the cost to setup a company to buy a land is around 40000 the first year, then 20000 yearly.

Then if my Thai partner uses the land and/or house for a real business, the whole process of setting up a company becomes legit.

 

But should the name of a The Thai person working be added to the company documents, to be able to use this as an evidence in case of future problems ? And can we declare the purpose of the company (the real job that the Thai will do) ?

 

Thank you.

A Thai company limited will in its clauses have a list "particulars of the objective", which include "General objective" and "The objective in corroboration of the service transactions". Normally a lawyer will include some 20 items in the list, like for example "Buy, procure, receive, hire, hire–purchase, own, possess, improve, use and manage in other matters so that any property includes the fruits of the property" as a General Objective, and "Business enterprise of laundry, hairdressing (hair cutting, hair setting) beauty salons", or "Business enterprise of hotels, restaurants, bars, night clubs", as ...Service Transactions. A variety of typically performed business are included in the list, you just need to make sure the actual business your company limited will perform, is included.

 

To my knowledge it's the annual statements that shows what kind of business the company undertakes. If the only activities in the company is owing a house and receive a lease fee – and with a 49% foreign ownership – your company is legally operating in a gray zone.

 

Thai workers will receive a salary, which is part of the book keeping and annual tax statement, and a worker will (normally) pay Social Security (50% by employee and 50% by employer). That is your proof of Thai staff.

 

Your annual costs for operating an active company limited may well be (much) more than 20,000 baht.

 

[William C F Pierce]

On 12/11/2017 at 8:13 AM, khunPer said:

You cannot compare UK land lease with Thailand. First of all, in Thailand one have to follow Thai laws. Secondly a land lease cannot legally last longer than 30-years; and option for extended period in the original lease contract makes the lease-agreement legally void. Any suggestions of another 30-year extension is based on a separate (written) agreement between two parties, and if not kept, that contract need to be taken to a Thai Court as a separate unfulfilled promise; a foreigner that summons a Thai. 

 

What if the original lessor is dead and it's the heir(s), which now owns the land and have made no agreement of a lease-extension with you, you're going to meet in the court..?
Or what if the lessor has sold the land..?

 

You cannot comparing a symbolic price of £8.40 with factual lease prices in Thailand. Leasing is business, and you may pay full land-value price, or more, over a 30-year period, for land with permission to build a house, and you may even pay it up-front. After 30 years you have nothing, whilst the lessor still owns the full value of the land – and your house...

I was making a comparative note. At the same time, this shows how little you know about Thai lease laws. At the end of 30 years you still have up to 1 year to sell your property. This does not happen in western countries. At the end of the lease you lose it if you don't renew it. So I do understand the differences between the 2. I doubt if you are aware of recent changes to a proposed 50 year lease. I have repeatedly read about Thai land laws over the last 12 years.

[khunPer]

4 hours ago, William C F Pierce said:

I was making a comparative note. At the same time, this shows how little you know about Thai lease laws. At the end of 30 years you still have up to 1 year to sell your property. This does not happen in western countries. At the end of the lease you lose it if you don't renew it. So I do understand the differences between the 2. I doubt if you are aware of recent changes to a proposed 50 year lease. I have repeatedly read about Thai land laws over the last 12 years.

Thanks for your reply.

 

»At the end of 30 years you still have up to 1 year to sell your property.« That's interesting, can you eventually point to where in the Thai hire-law that is mentioned – or other reference with legal value – as I'm not familiar with that, especially since it's normally stated, that a foreigner's ownership of a house (building) is based on permission to use the land, i.e. a lease and/or superficies; and that a "hire" (lease of land) automatic terminates at the end of the agreed period (which cannot be longer than 30-years).

 

Does your suggested 1-year period to sell a house, owned by the hirer, after the end of a lease term, mean that the new house-owner automatic shall be granted a lease on the land under the house..?

 

To my knowledge, from what was mentioned in the news about the 50-year lease suggestion, it is for some specified industrial zones, and intended for foreign investment in production facilities. Do you have any reference to where it specific mention that the 50-year land-lease can be used for a foreigner to build a house to live in..?

[William C F Pierce]

13 hours ago, khunPer said:

Thanks for your reply.

 

»At the end of 30 years you still have up to 1 year to sell your property.« That's interesting, can you eventually point to where in the Thai hire-law that is mentioned – or other reference with legal value – as I'm not familiar with that, especially since it's normally stated, that a foreigner's ownership of a house (building) is based on permission to use the land, i.e. a lease and/or superficies; and that a "hire" (lease of land) automatic terminates at the end of the agreed period (which cannot be longer than 30-years).

 

Does your suggested 1-year period to sell a house, owned by the hirer, after the end of a lease term, mean that the new house-owner automatic shall be granted a lease on the land under the house..?

 

To my knowledge, from what was mentioned in the news about the 50-year lease suggestion, it is for some specified industrial zones, and intended for foreign investment in production facilities. Do you have any reference to where it specific mention that the 50-year land-lease can be used for a foreigner to build a house to live in..?

(......which cannot be longer than 30-years.). If you have a Usufruct then your lease is for life, so their is no time limit on it other than your lifetime. The downside of this is you cannot sell if you need to.

 

There is no reason why a new house owner would get a lease if he or she is a Foreigner, but a new Thai owner would automatically gain ownership of the land with the sale.

 

The 50 year lease I believe was covered by a previous news item on ThaiVisa which I believe included both housing and business, but a further proposal made for a 99 year lease to make it more attractive for long term business inward investment.

 

Read as many Real Estate sites as possible about ownership. Many have information regarding the land laws covering the different types of land ownership. Above all use a reliable lawyer the same as you would in your own country

[khunPer]

16 minutes ago, William C F Pierce said:

(......which cannot be longer than 30-years.). If you have a Usufruct then your lease is for life, so their is no time limit on it other than your lifetime. The downside of this is you cannot sell if you need to.

 

There is no reason why a new house owner would get a lease if he or she is a Foreigner, but a new Thai owner would automatically gain ownership of the land with the sale.

 

The 50 year lease I believe was covered by a previous news item on ThaiVisa which I believe included both housing and business, but a further proposal made for a 99 year lease to make it more attractive for long term business inward investment.

 

Read as many Real Estate sites as possible about ownership. Many have information regarding the land laws covering the different types of land ownership. Above all use a reliable lawyer the same as you would in your own country

Thanks for your reply.

 

I'm afraid you misunderstand the difference between a lease agreement (hire in official translation of the Thai law) and usufruct. Usufruct is not a lease.

 

A house can be owned by a foreigner, but not the land under it. A house build on leased land, or by superficial permission, do not include the land under it, if the house is sold. Even a Thai buyer cannot automatically own the land under a leased house, or a house build on land by superficial permission, but still need to follow the terms in the land lease agreement, which by law can only be transferred to another hirer (lessee), if it's clearly stated in the agreement, that it can be transferred or sub-leased.

 

May I kindly suggest that you read the Thai Law about hire, which you can find in English translation here.

 

The extension of lease periods to 50-years and optional 99-years seem still to be only suggestions – might be something I missed in the news, but it probably would create lots of debate in ThaiVisa forums, so my attention would be drawn to it – the article I bear in mind is the one from April in the Nation, where it's stated that »The government’s plan would extend leaseholds in the special economic zones of the Eastern Economic Corridor (EEC) from 30 to 99 years, with an initial lease of up to 50 years and a renewal of up to 49 years.«

Full article here: "Property sector welcomes 99-year leases".

There was another article in March in a Bangkok based news Post I'm not allowed to link to from this Forum, talking about 50-year lease likely for foreigners.

 

A very good, and often cited, site to get information about legal rights with lease, superficies, and usufract is the site SamuiForSale.