By Ponthep Werachon

There are more and more foreigners coming to Thailand for their long-stay. Most of them are middle age men dreaming of package of happiness with beautiful house with lovely family. With the reasonable cost of living, Pattaya seems to be more and more the best destination for foreigners to enjoy their hibernation.
Most of them liquidated all properties in their countries and bring money to buy properties in Thailand. The dream to spend the rest of their lives comes true for some while some end up in a fiasco.   We came across some foreigners who had no place to stay before being repatriated to their countries. Some died without family. Everything goes very fast. Yesterday is a past. People just talk about tomorrow and the newcomers. There is no legend for anybody.

This article will definitely assist you to avoid the nightmare and make your dream come true.

Foreigners planning to buy land and house should try to learn and understand the restrictions under Thai laws governing foreign ownership. The Land Code of Thailand prohibits foreigners to the ownership of land. Any transactions circumventing this restriction will be nullified and indictable under Thai laws.

Many foreigners may seek advice from consultants recommending many legal devise and process to obtain the ownership. In Thailand all laws and official documents are in Thai language. What you understand is just what the other told you. The messengers are always the problems for everybody. What they convey to you about Thai laws should be carefully considered. The image of Thai laws and Thai authorities are always damages by the unscrupulous and bias messengers.

You should understand the concept that all legal structures you are contriving with many persons involved to circumvent the restriction under the Land Code is in violation of the law. All juristic acts entered accordingly can be challenged and nullified by the aggrieved person.
The following are the legal check-list you should consider for your protection:-

1)      Verifying the legal method or devise to register the ownership of land and building to select the most appropriate legal method if the ownership should be registered under either Thai company or Thai spouse or Thai nominal owner.

If you want to set up a Thai private company to run business, the land can be registered as the asset of the company and the money you paid for the price of land can be recorded for capitalization.

The company eligible to ownership of land must have Thai majority shareholders of at least 51% whereby a foreigner will be a minority shareholder of only 49%. Thai limited company is controlled by a majority vote of shareholders generally one share for one vote. The director can be also removed by a majority vote.

There are many legal mechanisms to protect the minority shareholders by using the special articles of incorporation (by-laws) setting forth the special regulations to control the transfer of shares to outsiders which must be first approved by the Board of Director. You may also mention the minority foreign shareholders can have double vote by classification of shares of one share for two votes or the minority foreign shareholders can have the preferential shares. There are many tailor-made by-laws to serve your purpose.

Having Thai nominal shareholders is illegal. However, there are many foreigners having the majority Thai shareholders who are only nominal shareholders (Dummy Shareholders), Thai nominal shareholders are always asked to sign the blank share transfer deed. Thai nominal shareholders should not be a consultant or even lawyer because it is a conflict of interest. All the corporate documents should be clearly understandable with complete English translation. The share certificates should be endorsed by the nominees. Their signatures should be made in your presence. Their identity should be also verified. The transfer of shares requires at least two witnesses. You should be able to prove the identity of these witnesses. You will keep the share transfer deed with photocopies of all shareholders and witnesses, pledge of share agreement and share certificates of all nominee shareholders.

In many situations, only blank share transfer deed is not really effective to control the nominee shareholders. There are many legal booby traps that you do not understand. The company whose majority of shares held by Thai nominee must have the complete documents, for example, share certificates, share register book, minutes of meeting etc. These documents should be translated in English for your understanding. It is advisable to avoid this method if it is not necessary.

Some foreigners lend money to Thai shareholders to buy 51% shares in the Company and the latter pledge their shares as the security for the loan. The foreign shareholders may keep the share certificates which are pledged  to them. The pledge of share agreement should be signed with all supporting documents including share transfer deed. It can be a problem for many lenders who have only the agreement signed by the borrower. But the lender has no document to prove that the borrower really received the money. There should be a bank slip showing that money has been transferred into the account of the borrower. It is a matter of fact which must be proved.

In Thailand, there is no special status for holding or dormant companies. All companies must prepare the financial statements (balance sheet) at the end of the year and file with the authorities. If the companies remain dormant for certain period of time, it can be probably inspected by the tax authorities on random basis. Therefore, there should be a movement in your company.

2)      Ascertaining the appropriate tax structure for the company. All tax compliance must be clear by the monthly or yearly chart. You should discuss with a Thai Certified Public Accountant (CPA) who will audit your financial statements at the end of the year.

3)      Justifying the transaction for transfer of money from aboard to meet the requirement of the Anti Money Laundering Office (AMLO). Any suspicious transaction can be inspected anytime.

If you buy the land under the name of Thai spouse, the ownership of land can be put under the name of your spouse. Thai spouse means only in case you have registered

the marriage with her at the Administrative Office or Thai consulate. The land will become her private property not marital or common property. In case of separation, you can have only your golf bag.

During the period the honey is still sweet, you may beg her to register the right of habitation with the land office for 30 years. With this registration, nobody can disturb you for 30 years.

In case she dies before (predecease) you, you will have the right of inheritance. In this case, you have to share with all her children including your own and step children. If she has no children, you have to share with her parents or brother or sisters as the case may be. However, you may beg her once again to make a last will and testament to bequeath the land to you which is very fair.

Under Thai laws, ownership of a house can be separated from a land. There is a precedence of the Supreme Court No: 301/2538(1995) affirming this concept. The house can be registered under a name of foreigner who may request for the special House Registration Certificate (TABIAN  BAN) which is a “Yellow Book” (Thor.Ror.13).

It can be the case whereby a foreigner buys the empty plot of land under his Thai wife name and the latter registers the 30-year lease or right of habitation for her foreign husband. In this connection, the foreign husband can apply for a construction permit under his name. With these documents, the foreign husband will have the ownership of a house or building and movable properties inside the house and also be able to apply for the “Yellow Book”.

If  the foreigner buys a land with a completed house from a Housing Estate Project (MOOBAN), he should instruct the seller to put the house under his name. However, most of sellers are reluctant to do accordingly because there must be two separated transactions which are burdensome for them. They just want do all things “Easy” and “Sabai  Sabai”.
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If you do not have Thai spouse and still want to put in a name of your Thai friend, you may lend him or her money to buy the land. He or she will mortgage that land to you as security for the loan. You may also register with the land office for 30-year lease. This transaction is very susceptible to the contestation for fraudulent act unless you can prove your good faith.

4)      Designing the legal structure and drafting contracts to safeguard the buyer. The tax structure should be verified and discussed with the owner to clarify that you will not be responsible for the Income Tax of the seller which must be withheld by the land office, and also Specific Business Tax (SBT) which must be absorbed by the seller. These taxes are based on the actual price.

The tax you will negotiate will be only transfer fee and stamp duties which are 2.5 % of the official appraised value. It can be jointly absorbed according to the

negotiation. In addition, once the seller agrees to absorb for withholding tax and specific business tax, the seller will put the selling price very low to avoid the tax burden. Even it will not effect the transfer fees and stamp duties which are on fixed official price, it will cause “Capital Gains” once you sell the land  in the future.

5)      Verifying the ownership of the land and authenticity of title documents, i.e., land title deed (CHANOD) or (NOR SOR 3 KOR), the restrictions, lien or encumbrance on the land and identification of the owner. Some land is subject to the encumbrance, e.g., 30 year-lease, mortgage or attachment by court. There are many people paying deposit for the fake title deed.

6)      Verifying the location and area of the land by official or private surveyor to check the proper location and landmarks. It is always problematic for the empty plot of land whereby the plot shown to you is not the plot which is later transferred to you. If you buy an empty plot of land, you should check the zoning law to verify if there is a restriction on the construction. In addition, you may also check if your land and house is the area under the eminent domain law.

7)      Drafting the Contract for Purchase and Sale with Deposit to be signed with the owner before the payment is made by a bank draft not cash. The bank draft should payable only to the owner whose name appears in the land title deed or director of the Company who owns the land. If they do not accept this kind of payment, you may have the presumption that they are not decent persons with whom you may deal.

8)      Designing the transaction for transfer of money and controlling the remittance to comply with the regulations of the Anti Money Laundering Office (AMLO) and compiling the remittance documents (THOR.TOR.3).

9)      Ensuring that the registration with the Land Office is legally complied with the proper transaction and the name of the new owner is properly recorded.

Your understanding in the overall transaction will obviously assist you to avoid the legal dilemma and stay happily in Thailand.

It is advisable to find a qualified Thai lawyer and Certified Public Accountant (CPA) who may explain to you on the specific issue. These persons should be able to professionally represent you without any “Conflicts of  Interest”.