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Archive for the ‘Thailand Condo’ Category
14th FEB 2010
Amity Treaty Companies and Thai Condo Ownership
Posted by : admin
The Treaty of Amity between the United States of America and the Kingdom of Thailand (US-Thai Treaty of Amity) allows American Citizens to own virtually one hundred percent of a Thai company. This can prove highly beneficial to American expatriates in Thailand who wish to conduct business. That being said, there are restrictions to the types of activity that an Amity Treaty Company can undertake. Most notable amongst the restricted activities are: land ownership, internal communications, internal transportation, fiduciary functions, and the liberal professions.
Under Thai law, there is a de facto prohibition placed upon foreigners when it comes to land ownership. This means that foreign nationals are not permitted to take freehold title to Thai property without first obtaining permission from the Thai Minister of the Interior. This prohibition is not all-encompassing as foreign nationals are permitted to take freehold title to Thai condominiums. However, the condominium complex must comport to the relevant provisions of the Thai Condominium Act. Most notable among the requirements in the Thai Condominium Act is the provision that a Thai condo complex must be primarily owned by Thai nationals, meaning that 51% of the Condo units must be owned by Thais while 49% percent of the units may be owned by foreigners.
In many cases, a condominium complex is owned by a company in Thailand. Some opt to own a condo in this way in order to make selling the condominium easier, while others initially purchase the condo indirectly through a corporate entity. In either case, the practice is technically legal. Although, use of so-called “nominee shareholders,” is illegal in Thailand and Thai authorities are increasingly on the lookout for corporate structures utilizing nominees. That being said, the definition of “nominee” is somewhat vague.
This leads us back to the issue of Amity Treaty Companies. Amity Companies are specifically precluded from ownership of Thai real estate pursuant to the provisions of the Treaty of Amity, while the Thai Condominium Act allows foreigners to own a Condominium outright. This begs the question: can an Amity Treaty Company own a Thai Condo in the same manner as a foreign natural person could? This author has not adequately settled this question in his own mind and welcomes any comments regarding this issue. The provisions of the Treaty of Amity preclude land ownership and although many believe that Condo ownership is simply ownership of a unit, the Chanote does pass title to an interest in the underlying land, so there would seem to be a compelling argument that a condo owner is something of a landowner and, if so, this practice would likely be precluded under the provisions of the Amity Treaty.
26th JAN 2010
Thailand Property Issues: Benefits of a Yellow Tabien Baan
Posted by : admin
There are many foreign nationals who have opted to take up long term residence in the Kingdom of Thailand. For many expatriates, a pivotal question regarding residence in Thailand deals with the issue of Thai property law. Under the current laws in the Kingdom of Thailand foreign nationals are effectively barred from purchasing a Freehold Chanote (Title Deed) to land in the Kingdom. This being said, foreigners are allowed to take freehold title to Thai Condos provided certain legal requirements are met, but for many foreign nationals in Thailand actual home ownership is the preferred method of living in the Kingdom.
In the past, a Thai company could be used to own Thai Real Estate, but the company had to be structured in such a way that it comported to Thai law. In recent months there has been some discussion by Thai government officials about doing away with this system of property ownership. How this will play out remains to be seen, but some foreigners, who are still interested in enjoying Thai property, are looking at other ways of structuring their interests so as to properly comport with possible future restrictions.
One method involves the bifurcation of Thai title. What this means is that the land underneath a structure is owned by a Thai while any structures on the land are owned by a foreigner. This arrangement would be legal under current Thai law, but many are confused about how such an arrangement could be set up. This is where the Yellow Tabien Baan becomes an issue.
A Yellow Tabien Baan is used by foreign nationals who live in the Kingdom. However, they are very difficult to obtain and are usually only promulgated if the foreign national has bought a Thai condo. That being said, a foreign national who is on a Tabien Baan can obtain a building permit to build a structure in Thailand. Once the structure is built, it can be owned wholly by a foreign national. A foreigner could secure long term lease to the underlying property while maintaining ownership of the structure. Use of a Thailand usufruct or superficies would also strengthen the foreigner’s property interests without violating the de facto restriction placed upon land ownership for foreigners. This is not the only benefit that a Yellow Tabien Baan can confer upon a Foreigner in Thailand as there are other major benefits that foreign nationals can enjoy by being on a Foreign Tabien Baan.
11th JAN 2010
In recent days there has been speculation about Thai authorities cracking down on any Thai Company which was formed solely for the purpose of facilitating foreign ownership of Real Estate in Thailand. Unfortunately for foreign nationals, the Thai government restricts land ownership and will not allow foreign nationals to own land without Ministry of Interior approval. As a practical matter, this approval is nearly impossible to obtain so the Kingdom essentially has a De Facto ban on Real Estate ownership by foreigners. This being said, foreign nationals are still permitted to own Thailand property in the form of condominiums. A foreign national may own a Thai condo in freehold provided the condominium complex adheres to the provisions of the Thai Condominium Act.
In a journal written about the Thai housing market this author found the following quotation:
“[O]n May 15, 2006, the Ministry of Interior issued a policy to all provincial governors regarding the avoidance of foreign land ownership laws. The policy sought to prevent the purchase of land for the benefit of a foreigner in accordance with Section 74 of the Land Code. It directs officials to be more vigilant in scrutinizing land purchases of land by entities with foreign shareholders or directors, or where reasonable grounds exist to believe that a Thai is a nominee shareholder on behalf of a foreigner. The policy requires competent officials to carefully scrutinize the supporting evidence submitted for consideration, while paying particular attention to the occupation, duration of work and the monthly income of the Thai shareholder. If, following the investigation, the competent official’s opinion is that the transfer registration represents an avoidance of law or that a Thai is trying to purchase land for a foreigner’s benefit, he should investigate further and submit the case to the Land Department for ministerial advice.”
As can be gathered from the above quote, the Thai government places a great deal of administrative discretion in the hands of local land office personnel when it comes to the issue of foreign ownership of Thai property. It would appear that these administrative prerogatives will be brought to bear against those that use nominee shareholders to own land or Real Estate in Thailand. In this legal environment, it may be wise for foreign nationals to carefully assess their options in order to ensure that the best decisions are made with regard to property investment. In any case, it would be wise for anyone thinking of investing in the Kingdom of Thailand to consult an attorney in order to come up with a coherent strategy.
24th DEC 2009
Thailand Limited Companies: Share Classification and Voting Rights
Posted by : admin
Many people in Thailand, both foreign and Thai, choose to incorporate Thai businesses. Thailand is one of Southeast Asia’s major trading locales and as a result many individuals and business concerns need a corporate presence in the Kingdom of Thailand. In many cases, companies are incorporated with substantially similar articles of incorporation. That being said, some companies opt to incorporate with unique provisions regarding different types of shareholder rights in the corporate charter. These different types of rights can have a major impact upon the running of the business because these rights can have a collateral impact upon employee compensation, shareholder vote tabulation, and banking issues. Therefore, an understanding of share classification can be helpful to those who are thinking of incorporating a Thai company.
In the articles of association (also known as articles of incorporation) of a Thai limited company, one could denote the rights associated with different share classifications. Therefore, some shares could simply hold an equity interest in the company while not having any voting rights at shareholder meetings. Other types of shares could hold little or no equity in the company, but maintain voting rights regarding the Directors of the company. If a company owns Thai property, there could be specific shares that have certain rights in relation to the Thai property concerned. For example, a Thai company that owns Thai real estate could place special rights in the hands of certain shareholders with regard to said real estate. If a Thai company owns a Thai Condo, then share classification could be used to delineate the rights of individuals with regard to the Condo premises.
For those who are interested in Thai limited companies certified under the US-Thai Amity Treaty, these same principals could apply to an Amity Company. One shareholder could retain a sizable equity holding while another holds certain voting rights. The same could be said about a Thai limited company that has obtained a Foreign Business License. A company such as this could incorporate special shareholder rights in the provisions of the articles of association or incorporation.
These issues bleed into the realm of Thai Immigration because the shareholder in a Thai company could apply for a Thai business visa. The basis for such an application could be an impending shareholder’s meeting that the foreign national must attend. The approval of such an application would depend upon the Thai Embassy or Consulate concerned. If present in the Kingdom on another type of visa, an O visa, for example, it may be possible for the shareholder to attend a meeting in order to vote his or her shares.
14th DEC 2009
US-Thai Amity Treaty: Certification Restrictions
Posted by : admin
Thailand has become a major epicenter of trade in Southeast Asia. The Kingdom also remains one of the most important trading partners of the United States of America, the European Union, and the United Kingdom. Many businesspeople who do business in Thailand must deal with restrictions imposed upon foreigners under the Thai Foreign Business Act. American Citizens enjoy some benefits under the provisions of the US-Thai Amity Treaty. This Treaty was promulgated in the mid-60’s. In Thailand, Treaties are considered the “law of the land,” and are considered superior to locally drafted legislation (this notion is similar to many of the ideas codified in the American Constitution, specifically the Supremacy Clause). As the Amity Treaty is the “law of the land,” it supersedes the Foreign Business Act.
A Thai Limited Company certified under the provisions of the Treaty of Amity is a good vehicle for conducting business in Thailand, but the Treaty does have caveats and Companies conducting certain types of business cannot obtain Treaty Certification. Most importantly for some, Amity Treaty Companies cannot own land. Even though an Amity Company is accorded “National Treatment,” the company is barred from holding property in the form of Thai Real Estate. Although, technically it may be possible for an Amity company to purchase a Condo in Thailand.
Aside from ownership of Thai property, there are other activities which an Amity Company cannot engage in, such as: Inland Transportation, Communications, Fiduciary Functions, and the Practice of Professions. Each of these types of activity are reserved to Thai nationals and/or Thai Companies. Even still, the Amity Treaty provides American Citizens with the opportunity to own virtually 100% of a Thai company. For many types of businesses the Amity Treaty is a perfect solution to the problems imposed upon foreigners by the Foreign Business Act.
Some have postulated regarding the possibility of using American Citizens as nominees in order to obtain Amity Treaty benefits. This is basically impossible as nominee shareholders are illegal under current Thai law. That being said, delineating whether or not an American Company is “American,” could be difficult. The relevant agencies of the Thai Ministry of Commerce adjudicate Amity Treaty Certification applications on a case by case basis and come to a decision based upon the makeup of the corporate shareholders in question.
An Amity Treaty Certificate is somewhat similar to a Foreign Business License. However, the two documents are issued based upon different legal foundations. There are some US Immigration benefits accorded to Thai nationals under the US-Thai Treaty of Amity in the form of E visas, but there is not a direct counterpart found under Thai Immigration law.
24th NOV 2009
A License for a Foreign Owned Company in Thailand
Posted by : admin
Thailand is one of the major trading centers in Southeast Asia. As a result, many foreign nationals wish to conduct business in the Kingdom of Thailand. However, the Thailand Foreign Business Act precludes foreign ownership of Thai companies. Strictly speaking, foreign ownership is not technically illegal, but operating such a company for profit is against the law.
When we say, “foreign ownership,” we mean foreign majority ownership as foreign nationals are allowed to own a minority stake in a Thai company, up to forty-nine percent. If a Thai owns fifty-one percent of a company in Thailand, then that company is considered to be a “Thai Company.”
There are some who incorporate “Thai companies” that utilize so-called “nominee shareholders.” A nominee is one who owns shares in a Thai company on behalf of another. A nominee is not an “active shareholder,” in a company. Under current Thai corporate law nominee shareholders are illegal. However, defining what constitutes a “nominee shareholder,” can be difficult.
Thai law does provide for a way around the restrictions imposed by the Foreign Business Act. There are ways to license a Thai Company, with majority foreign ownership, to conduct business in Thailand.
On method of facilitating a foreign company to conduct business in Thailand is through a Foreign Business License. These documents can be difficult to obtain and the process for obtaining a Thai foreign business license can be very time consuming. Once granted the license will specify the exact nature of the business and the company will be precluded from conducting any other type of activity, unless another license is obtained.
Another method of facilitating foreign ownership of a Thai company is through the US-Thai Amity Treaty. As the name suggests, the US-Thai Treaty of Amity and Economic Relations is a bilateral agreement between the Kingdom of Thailand and the United States of America. A company certified under the terms of the Treaty is given “national treatment,” allowing it to operate in the same way as a “Thai Company.” The major exception being that an Amity Treaty Company is precluded from owning real estate in Thailand. Other types of Thai property could be owned by an Amity Company, such as a Thai Condo. Also, the provisions of the Treaty grant the aforementioned benefits exclusively to United States Citizens. Therefore, this method of certification is not for everyone.
The Australia-Thai free trade agreement provides some special benefits to Australians in Thailand as Australian Citizen may be allowed to own a majority stake in certain types of Thai companies.
A final method of licensing a foreign company in Thailand is through the Board of Investment or BOI. A BOI company can receive special benefits in the form of rights to operate and some BOI companies can own land. That being said, BOI companies are very difficult to incorporate and require a great deal of legal expertise to set up. BOI Companies are generally not advisable for those thinking of establishing a small Thai business. For large enterprises, such a setup may be advisable due to the fact that a Thailand visa and/or work permit is generally easier to obtain for a BOI company.
12th NOV 2009
Multiple Long Term or 30 Year Leases in Thailand
Posted by : admin
For many people living in Thailand, the prospect of owning property would be considered highly beneficial. Unfortunately, Thai law places great restrictions upon foreign nationals who wish to purchase property. That being said, no such restrictions are placed upon those who wish to lease Thai real estate.
In Thailand, the Civil and Commercial Code provides for leases of varying lengths of time. A lease’s enforceability is based, in part, upon the length of the lease. For example, a common misconception among many foreigners is based upon the idea that a lease can be unrecorded and enforceable for a period exceeding 3 years. However, this is not the case as parties to a Thai lease exceeding 3 years must record the instrument upon the Chanote (Title Deed) in order for a subsequent court to enforce the provisions agreed therein.
In Thailand, the longest lease that one can practically obtain has a duration of 30 years. A novel approach to acquiring what amounts to a longer lease would utilize multiple 30 year leases in which the date of lease commencement coincides with the end of the prior lease. For example, one could acquire a 30 year Thai lease that begins in 2010. Then acquire another 30 year lease to the same property, only this lease does not come into effect until the day after the prior 30 year lease is expired in 2040. As a result of these efforts, the leasee would effectively have a lease that runs for sixty years, but in reality, the applicable Thai laws have been adhered to because the 60 year lease period is the product of two legal leases each for no more than 30 years.
Although this type of legal configuration may be possible in theory, these types of staggered lease agreements, like any legal construct in Thailand, may not be practically feasible as the officers at the Thai land department may not accept the documentation and thereby could preclude this legal instrument from being recorded on the Chanote. Each Thai land office interprets the rules and laws differently. Therefore, retaining experienced counsel in the form of a Thai attorney to assist in recording leases and other property instruments may be beneficial to a foreigner in Thailand as the attorney could assist in facilitating the recordation of a rarely seen legal instrument.
Another issue that may be of interest to foreigners is the use of a Thai usufruct. A usufruct allows a foreigner to retain lifetime rights of use in the underlying Thailand property. Therefore, this type of instrument can act as a sort of “lifetime Thai lease,” as the beneficiary of the usufruct could use the Thai property until his or her death. It should also be noted that different rules apply to those looking to purchase a Thai condo because it may be possible for a Foreign national to purchase a Thai Condo in freehold.
26th OCT 2009
Foreign Capital Flight and Thai Condominium Ownership
Posted by : admin
For those interested in purchasing property in the Kingdom of Thailand, Condominiums can be an attractive proposition. One of the major benefits of Thai Condo ownership is the fact that a foreign national is allowed to take possession of foreign freehold title to that particular piece of Thai Real Estate. In Thailand, foreigners are greatly restricted with regard to Thai property as they cannot own land outright. There are certain situations in which a Thai company can be utilized in such a way that a foreigner enjoys the benefits of land ownership, but these type of structures can be cumbersome and recently the Thai authorities have been cracking down on such entities.
Thai Condos provide the benefit of allowing the foreign national to be registered on the Thai Chanote (Title Deed). Further, by being the owner of a Condo in Thailand, the foreigner can apply to obtain a foreign Tabien Baan (house registration booklet) which can be a major benefit as this document is very useful in conducting legal and business transactions in the Kingdom of Thailand. Further, a Thai Condo owner may be able to enjoy some immigration benefits in the form of a Thailand visa as the owner can show that they are living in the Kingdom and contributing to the economy.
One notable issue that often arises in cases involving Thai Condominiums is the requirement that all funds used to purchase the Condo must originate from overseas. This requirement can be met by those earning an income in Thailand, but a great deal of paperwork must be submitted in order to use income earned in Thailand. An even more pressing issue, however, is that of capital flight after the future sale of a Thai Condo unit. The government of Thailand along with the Thai banks have promulgated policies in order to keep foreign capital in the Kingdom when that capital has been previously used to purchase Thai real estate. For example, if a foreigner in Thailand has a Condo unit and opts to sell it. The proceeds from the sale could be practically impounded in the sense that the Thai authorities will place many restrictions on sending said funds abroad. This situation can be averted throught prior planning. If one seeks the advice of a Thailand Real Estate lawyer, they could provide advice and strategies about how one can structure a Thai Condo purchase in such a way that the proceeds from a future sale can be moved abroad at a future point in time, should a sale even occur.
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