Change in implementation of law about foreign ownership, P2

I was saddened to see the other thread locked, as I think this will be an ongoing topic that will unfold with time, and hopefully short-term. If we can continue discussion without bickering and legal threats, please use this new thread to do so.

Luckily, I own my condo outright in my own name ... I am within the 49% allocation, but I have friends (and friends of friends) who currently own property via the "proxy company" method. They are concerned about what will happen when they try to sell. At the current time, they assume they cannot sell to another foreigner. But, does that mean they must sell at whatever price a Thai person might demand?

There have been articles in various newspapers trying to downplay the issue. I just read one (somewhere ... Pattaya Mail?) that this whole issue erupted from some land deals in Phuket that involved foreigner "companies" buying multiple (investment?) properties with money laundering suspected, and that perhaps the current enforcement of the old rules was never intended to interfere with private ownership of a single, owner-occupied, property. A nice conclusion mght be a modification of the law to permit LEGAL foreigner-controlled companies to own, or (better yet) permit outright foreign ownership of, a single owner-occupied condo or plot of land under a certain size. That would seem to be a reasonable "compromise" to me.

Regardless, please keep this topic alive with any reported developments, and let's try to avoid slanderous comments that later get edited out of posts. PLEASE???

Are you the contributor who some months ago was asking about water filters because the quality of water in your apartment sucks? If so, has it improved?

As someone (was it Hedda?) reminded us recently in a treatise on Thai politics, Thai Rak Thai does not mean what is so commonly translated "Thais love Thais" but has a more chauvinistic bent - "Thais for Thais" - I'd go so far as "Thailand for the Thais", and some of the echoes of the Third Reich's Deutschland uber Alles. This is an incredibly chauvinistic society, and Thaksin uses chauvinism as part of his appeal to the masses. Assuming that there will be some sort of "awakening" and a more fair and equitable (from a non-Thai perspective) system put in place is almost as fanciful as boygeenyus believing sex tourism to Thailand will end. I believe the only reason the Japanese (an equally if not more chauvinistic society) allow foreigners to buy land there is because the US imposed it as part of the post-war Constitution. This thread is unnecessart because, whatever you think of the fairness or otherwsie of the law, and however selectively or capriciously you think it has been applied before now, nothing is going to change. It's the Second Noble Truth (or is it the Third?) that says that one of the causes of suffering is not facing up to reality. Face up to it, get over it and move on. (I think I've run out of cliches for the moment)

Are you the contributor who some months ago was asking about water filters because the quality of water in your apartment sucks? If so, has it improved?Yes, it has. I marvel at your deep, sincere concern for my welfare! Bless you!

Now, how in any sense has your post constructively enhanced the discussion at hand: the change in implementation of law about foreign ownership? And, what took you so long: only four minutes from the original post with an attempt to hijack a thread. Tsk tsk tsk.

(Yes, Smiles, I know: DON'T FEED THE TROLLS)

Yes, it has. I marvel at your deep, sincere concern for my welfare! Bless you!My concern runs deeper than that - it is for your stupidity in buying real estate in Thailand to begin with. But then your response to my thoughtful contribution underlines that fact (your stupidity) completely. If you recall the original thread on water filters at all, you may remember that you asked and I spent some time finding out (trolling around?) details of water filtration that I have at home in Bangkok and posting them. But that of course is a mere detail in the big picture (more cliches to follow, when available)

If this company crackdown has anything to do with Thai national politics, faster your seat belts, because now that the celebration of the King's 60th year on the throne are coming to an end, Thailand is still in the middle of a historic political crisis. Nobody and I mean nobody knows how this will turn out. Will there be a coup? Will foreign land ownership xenophobia play a role in winning the masses to one side or another? Stay tuned, folks!

[Aunty]

Are there any signs yet that real estate prices, especially in markets popular with Farang, are softening - or indeed have come right back?

My rich cousin used to say, "buy when there is blood in the streets" ....

it's not going to be as bad as anyone says..
you should be more worried about property prices crashing in the West than Thailand.

The old conservatives who still exert the most influence are not going to rock the tourism boat.

Prices for anything will always react to uncertainty and fear. Even if this was "resolved" tomorrow there still would be doubts about safety for years to come. And if you really believe in xenophobic Thailand it will be clearly resolved soon, I have a bridge to sell you.

BTW, I believe it is now ALREADY fully legal for LEGIT companies to own, those with REAL Thai partners and actually involved in a REAL business. So what? The vast majority of people were only interested in buying through a PHONY shell company.

One thing that guy in the other thread did say was interesting. He did say they are now STILL approving shell companies for CONDO purchases. I had not heard that from anyone else. Quite an interesting patchwork of chaos, huh?

I am within the 49% allocation, but I have friends (and friends of friends) who currently own property via the "proxy company" method. They are concerned about what will happen when they try to sell. At the current time, they assume they cannot sell to another foreigner. But, does that mean they must sell at whatever price a Thai person might demand?

One of the main problems which up until now has been largely ignored by the authorities is that anyone trying to offload property via a company is going to be asked to provide details of the twice yearly audit that is legally required and financial details of the company since its formation for calculating the tax that should have been paid.

If those audits have not been carried out s ( and most do not bother because of the cost involved or are ignorant of the requirement) sellers are going to find that they not only have difficulty completing the sale but also that they will be faced with a huge bill for failing to carry out the audits.

Of course there will be ways found to circumnavigate the regulations but it will be at the cost of a quick reduced value sale to a friendly officials brother. In Bangkok these requirements are already being more stringently enforced.

Lets hope the situation is settled soon. I intend to buy something next year if all goes to plan with my job etc.

Well, if you want a condo, no problem. Buy a foreign owned one. But you still probably want to wait to see what happens to the company owned condos, it may change the whole market.

The only possible change to the market would be that properly-owned foreigner 49% condos would increase in demand, and therefore in value.

[SteveSF-old]

I have a question about the 49% ownership rule. It has been stated in this thread that somehow if one farang buys a condo from another farang that had bought the condo properly (i.e. as one of the 'legitimate' group of 49% farang ownership), that such legitimacy transfers to the new owner. Is this actually true? Could not the authorities audit the ownership of the building, and upon finding >49% non-Thai ownership, declare the condo building out of compliance with the 51% Thai majority rule, preventing any condo in the building from being sold to a farang until a sufficient number were transferred to Thai ownership to bring the whole building back into compliance?
I understand that if the condo building was always in compliance with the percentage ownership rules, that this would not come up, but it is not difficult to foresee a case where an official in the land office makes a 'mistake' and lets a Thai sell a unit to a non-Thai, changing the balance of ownership in the building. So the basic question is, once a condo is farang owned, will the land office always allow the change of ownership to another farang?

I don't know all the technical details, but if you are buying into a fully booked 49 percent building, that is a legit concern. Ask a broker if you can write into the contract explicitly that the sale is transferred to your foreign name at the land office successfully or no sale, and also if that would actually be enforceable.

[Up2U]

This pertains to foreign (alien) ownership of a condo in excess of the 49% and is from Land Department website. A translation in simpler or clearer English please. How much is 5 rai.? The form was modified on May 25 but there's no indication what changes were made. I'm interested in Section 2.2 which I quote:
************************************************** ***********************************
2.2 The ownership in condominium units by the alien and juristic person in 2.1 shall not be in a higher proportion than forty nine percent of the total space of all units in that condominium at the time of the application for condominium registration under section 6 with the exceptions that:

a. A condominium in which the condominium units are to be owned by the alien and/or the juristic person specified in 2.1 in a higher proportion than forty nine percent must be located in the area of Bangkok Metropolis, municipality or the City of Pattaya and the land on which the condominium is situated shall not, when combined with the land provided for common use or benefit of all co-owners, be more than five rai in area. Also, the condominium units in such condominium shall not be less than forty units and the condominium shall already be registered not less than one year prior to the date of application for the alien to own the condominium units in the proportion higher than forty nine percent, and such condominium shall not be situated in the area of military safety zone under the law on military safety zone.

b. It is provided in section 9 of the Condominium Act (No. 3), B.E.2542 that at the expiration of five years as from the date of the entry into force of the Condominium Act (No. 3), B.E. 2542 (28th April 1999) the provisions as set forth in a. shall be repealed and the alien or juristic person having obtained the condominium units under a. or the alien or juristic person specified in 2.1 to whom the condominium units are transferred from the aforesaid alien or juristic person may continue to have ownership in such condominium units although in the higher proportion than forty nine percent of the total space of all units in that condominium.
************************************************** ***********************************

The others sections pertain to land and married persons. http://www.dol.go.th/guide/foreigner_Eng_ver.htm

5 rai = 2 acres

So this wouldn't apply to the typically LARGER condo building. Can anyone mention a condo building that is in practice really over 49 percent?

[Up2U]

"5 rai = 2 acres".....Thanks.

Also I found 1 rai = 1600 sqm so 5 rai = 8000 sqm or a rectangle of about 80m by 100m ( to help me visalize this). Seems like View Talay 1 or 2 would have come close to qualifying for the Section 2.2 exclusion. If I understand this correctly Part B expired 28th April 2004 so those units registered prior to that date were grandfathered. Would it not be a partial solution to the current real estate situation if Section 2.2 B were reinstituted and up the rai a little to cover some of the newer larger projects? What I don't understand is if the "grandfathered" condo keeps the exemption or the unit must be sold to a Thai only (or legal foreign company (wishful thinking)).

I still have never heard of an actual condo buiding being market as capable of more than 49 percent foreign owned.

b. It is provided in section 9 of the Condominium Act (No. 3), B.E.2542 that at the expiration of five years as from the date of the entry into force of the Condominium Act (No. 3), B.E. 2542 (28th April 1999) the provisions as set forth in a. shall be repealed and the alien or juristic person having obtained the condominium units under a. or the alien or juristic person specified in 2.1 to whom the condominium units are transferred from the aforesaid alien or juristic person may continue to have ownership in such condominium units although in the higher proportion than forty nine percent of the total space of all units in that condominium. In case anyone's eyes glazed over before they got to paragraph b, be sure to understand that the provision in paragraph a expired in 2004, as explained in paragraph b.

I have read that if a foreigner in such an over 49% building sells to another foreigner, the transfer is legal and approved. However, if at any time a foreigner in such an over 49% building sells to a Thai, then that unit cannot subsequently be sold to a foreigner until/unless the overall % of foreign ownership in the building drops enough to allow the new foreign owner to be registered within the 49%.

I have assumed that View Talay 1 & 2 fall in this category, but never checked for sure.

[Up2U]

"I have assumed that View Talay 1 & 2 fall in this category, but never checked for sure."....anybody else know the answer? What was the Pattaya real estate market like in 1999......a glut of unsold condos? If the condo market sours because of enforcement of Thai law perhaps we'll have another Section 2B.

And here's a relevant article from the June 13th Pattaya Today,

http://www.pattayapeople.com/archive/ne ... ne2006.php (http://www.pattayapeople.com/archive/news1738-june2006.php)

Was talking to someone in a bar tonight and they said that a couple of friends of theirs had had letters from the land office saying they were going to come and inspect properties registered to "foreign" companies. Apparently the plan is to assess each house for a "rentable value" and then make sure that the company is paying tax on that amount

Anyone got any more details or examples?

Seems there are a lot of people at the land office sitting doing nothing at the moment!

Was talking to someone in a bar tonight and they said that a couple of friends of theirs had had letters from the land office saying they were going to come and inspect properties registered to "foreign" companies. Apparently the plan is to assess each house for a "rentable value" and then make sure that the company is paying tax on that amount

Anyone got any more details or examples?

Seems there are a lot of people at the land office sitting doing nothing at the moment!
And that sounds dangerous, they might need to raise some farang money to justify their jobs.

[Up2U]

Was talking to someone in a bar tonight and they said that a couple of friends of theirs had had letters from the land office saying they were going to come and inspect properties registered to "foreign" companies. Apparently the plan is to assess each house for a "rentable value" and then make sure that the company is paying tax on that amount

Anyone got any more details or examples?

Seems there are a lot of people at the land office sitting doing nothing at the moment!

This is logical. You form a company and companies pay taxes. I have friends that purchased using "foreign" Thai companies and they pay an annual tax for their company. It's a small sum of money. Your friend's lawyers maybe errored when they created their companies and are not paying any taxes.

Was talking to someone in a bar tonight and they said that a couple of friends of theirs had had letters from the land office saying they were going to come and inspect properties registered to "foreign" companies. Apparently the plan is to assess each house for a "rentable value" and then make sure that the company is paying tax on that amount

Anyone got any more details or examples?

Seems there are a lot of people at the land office sitting doing nothing at the moment!

This is logical. You form a company and companies pay taxes. I have friends that purchased using "foreign" Thai companies and they pay an annual tax for their company. It's a small sum of money. Your friend's lawyers maybe errored when they created their companies and are not paying any taxes.
No, I believe if true, this might be a new twist.
The phony shell companies were required to pay a TINY TOKEN tax and also to do AUDITS.
This was just part of the phony game to act like there was a real company.
This report if true is COMPLETELY DIFFERENT.
This suggests they are going to base the tax due based on the VALUE of the property; the old method there was no such correlation. So, again if true, and I am quite skeptical of a bar rumour, this would be a ploy to SOAK FARANGS.

My company owns property, and our auditors have ALWAYS required us to reflect appropriate rental income.

My company owns property, and our auditors have ALWAYS required us to reflect appropriate rental income.
Be more specific.
Do you have a real company with real Thai investors, or do you have a phony shell company?
Does your company do more than own property?
Does it engage in other business activities?
Does the audit reflect actual rental income or POTENTIAL rental income, as would be the case of a tax assessment based on a farang living in a phony company house that he "owns"?

You really expect me to answer all those questions when you responded to my simple query as to how long you'd been in Thailand with a curt "none of your business"?

You really expect me to answer all those questions when you responded to my simple query as to how long you'd been in Thailand with a curt "none of your business"?
That was in the context of you insulting me.
This is in the context of sharing relevant information that may inform others during a time of chaos and uncertainty in the real estate market in Thailand.
Up to you! But consider if someone you liked had asked here, would you answer, because I only asked so that we can learn more about what is going on.

A meaningless question, as I don't like ANYONE here (except Homintern).

A meaningless question, as I don't like ANYONE here (except Homintern).Gulp

The law in Thailand about companies is that a company MUST trade ie. have income, otherwise it gets struck off. Forming a company to hold a property on behalf of a Westerner can thus be struck down on two fronts
(!) It is a sham
(2) It is not trading

To "tax" a putative rental income is, I guess, one way around it. However I understand all companies also have to be audited so there are additional grounds for striking off if this requirement is not met

Yes.

A company need not reflect rental income if the property is unoccupied. That's part of the reason for the revenue department making a visit. If it IS occupied, and not being used for the purposes of carrying out business, then whoever is occupying it is responsible for paying rent to the owner of the property (in other words, the paper company). The paper company must therefore reflect the income and pay the tax.

Setting up a shell company is not something to be taken lightly.

[Aunty]

God this whole company thing sounds like such a huge mess.

So now, if I own a Thai registered company so I can have a property in Thailand (let's say it's my holiday apartment) the company will be expected to pay tax on the basis of the rental income it should be earning (if the apartment were actually rented), as presumably as a legitimate company that owns property it will be generating a rental income, right? In other words I have to pay a big fat tax to Thailand so I can live in my own condo, otherwise they'll take it off me (because it's all a sham) and maybe I'll loose all my money. Fuck that! Wouldn't it be easier to just rent a place and not have all the hassles?

As we say in New Zealand, if some money hungry real estate agent had gotten me tied up in one of these deals I'd be fucken spewing.

Well, it's not really "your" own condo, is it then? It's owned by a company, of which you are only a minority shareholder. If you live in a company-owned property, you obviously have to pay rent to that company, don't you? And that company must pay tax on the rental income received.

It all makes 100% perfect sense.

The tax is very small.

I have been leery of the "shell/proxy" company routine from the very beginning. On the old forum, I recall people telling me not to be nervous about it, that even though it admittedly was illegal, that "everybody did it." I don't recall anyone mentioning the tax-for-rental-income aspect, either, at that time.

However, the things I've read in the media: the legal guy that writes for Pattaya Today, being one, and the articles in the monthly Property Trader being another, clearly spelled out the obligation and expectation that the company would pay tax on the fair value rent for the property. I'm sure any competent, non-biased lawyer would advise the same.

As bg says above, it makes perfect sense and there's no excuse (being lazy? claiming ignorance?) for not filing and paying the taxes in a timely manner. Unless there is a valid basis for the attitude: "I'm already doing something illegal, why should I follow any of the legal requirements"? <shrug>

As boygeenyus says, you don't own the condo, the company does. The NZ tax laws are exactly the same; if a company owns property and a shareholder occupies that property and pays no rent then the IRD will "impute" rental income to the company and levy tax on it. As usual, a lot of the discussion on this thread comes from a general ignorance (in this case of commercial law and tax generally (not just in Thailand)) plus people being in denial about the whole company scheme being a sham to get around the law and not understanding This Is Thailand - application of the law is capricious and arbitrary

[Up2U]

The tax is very small.

True, and no property tax and sink fund fees are very low too.

30% is "not exactly small"?

The more I think about it, the more I think farangs should BOYCOTT buying any company owned property even if they back off on enforcement. Just say NO. Then, wait and see how things change to offer a less messed up way to buy. I am not talking about full ownership of house and land, but it is really high time there is a fully legal secure way for a farang to buy a house and land. In many ways, we asked for this by cooperating with this BS to begin with.

FOREIGNERS CANNOT OWN LAND IN THAILAND.

It is not hard to understand.

Get over it.

FOREIGNERS CANNOT OWN LAND IN THAILAND.

It is not hard to understand.

Get over it.
I agree, so we should stop acting like we can.

[Impulse]

I wish they never came up with this company proxy thing.Either you can own or you cant.Im more than likley gonna lose 10k dollars(400,000baht) which is my own fault for listening to the realtors here.Actually I never intended to form a company I planned on coming here when the project was finished.My mistake was not buying an already finished building where it was clearly foreign available or not. I do agree with not letting foreigners buy land or houses.With the limited supply prices would skyrocket and leave most Thais unable to afford property.

I wish they never came up with this company proxy thing.Either you can own or you cant.Im more than likley gonna lose 10k dollars(400,000baht) which is my own fault for listening to the realtors here.Actually I never intended to form a company I planned on coming here when the project was finished.My mistake was not buying an already finished building where it was clearly foreign available or not. I do agree with not letting foreigners buy land or houses.With the limited supply prices would skyrocket and leave most Thais unable to afford property.
I agree with you that the company idea was a bad idea. But realtors are very creative beasts, caveat emptor as someone here said. I don't agree with you that opening land up to foreigners would have that great an impact outside certain areas of Bangkok, certain areas of Chiang Mai, and some resort areas. Thailand has a lot of land, and it ain't going anywhere. The farangs die and eventually the land is still Thailands, it always was Thailand. It is simply xenophobia, and a way to rile up the masses for one candidate or another.

[Up2U]

I find this website to have a wealth of relevant information. I have seen some of their condensed articles in the Pattaya Today (http://www.pattayatoday.net/index.php?newsgroup=48)

http://thaisolicitor.com/files/index.php?id=13

If you don't mind I am going to copy a post from Thaivisa that puts more light on people's theories that 100 percent ownership of condos is possible at some condos in Thailand. As I expected, it appears this is not possible:


The unlimited foreign ownership scheme referred to under section 19 was a 'special offer' by the Thai government to help boost condo sales in certain areas. It ended in April 2004 or thereabouts. The developers of View Talay 2A in Jomtien sold rooms based on this promotion, but overlooked the need to register for this scheme with the Land Office at least a year before the building was expected to be complete and ready for registration. So they continued to sell rooms to foreigners in the expectation of unlimited foreign ownership. All went well until the 49% was reached in View Talay 2A, then the Land Office said 'no more'. Caught somewhat off the hop, a somewhat embarrassed View Talay offered those who had purchased in the expectation of foreign ownership but were yet to register ownership either a full refund or company ownership with the company formation and balance sheets etc costs covered for 3 years. View Talay wasn't the only one caught out by the requirement to register for the scheme 12 months before completeion, I understand that the neaby Thai Bali development also found itself in the same boat.

[Aunty]

I find this website to have a wealth of relevant information. I have seen some of their condensed articles in the Pattaya Today (http://www.pattayatoday.net/index.php?newsgroup=48)

http://thaisolicitor.com/files/index.php?id=13

Thanks for that link Up2U. Most interesting. This whole thing is like watching a train wreck.

I don't blame the Thai Govt. or the authorities, the law is very clear, but when you do business in the 'third world', you really are doing business in the third world. The blame as far as I can see it lies directly at the feet of property developers and speculators, together with their money hungry real estate agent flunkies, who have pushed and schemed and have come up with all sorts of illegal bullshit to entrap naive foreigners into buying properties in Thailand that quite simply, they are just not legally entitled to buy. I've even seen them on this board as have we all making all sorts of inflammatory claims about amassing fortunes through Thai real estate, and let me tell you that making these extravagant claims and talking up the market for nothing other than selfish greed at the expense of others, is nothing short of disgraceful!

Given that it is against the law for Thai nationals to be nominees (up to two years in prison) in these so-called property companies, and no doubt many of these property pushers are, well I'm surprised that complaints are not being made to the police as we speak to bring some of these individuals to justice!

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[Aunty]

I'm not saying you were, or you weren't selling these schemes John, (my comments above are not meant as any reflection on you) but the fact of the matter remains that these instruments were expressly invented to evade the law; and that is, that except in some circumstances, you can't own property in Thailand if you're not a Thai. Beginning, middle and end of story. So if that is the law, why were these properties been sold to foreigners in the first place. If you build your house on sand dear................

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[Davey612]

I am adding this link from the Hua Hing newspaper www.huahintoday.net/index.php?action=show&type=news&id=965 (http://www.huahintoday.net/index.php?action=show&type=news&id=965)

It has one simple advise: Ask a Thai official.