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Phuket Property Guide: Owning your home through a Thai limited company

Phuket Property Guide: Owning your home through a Thai limited company

Most people know that Thai law prohibits landed property ownership by foreigners. This means neither plots of land, nor landed houses or villas may be titled in the name of a foreign national.

By Thai Residential

Saturday 31 August 2019, 02:00PM

Done properly, legally owning your own home in Phuket brings no surprises. Photo: Cytonn Photography / Unsplash

Done properly, legally owning your own home in Phuket brings no surprises. Photo: Cytonn Photography / Unsplash

But the law has not deterred everyone from the pursuit of their dream house, and the most common way foreigners attempt to get around the law is by setting up a Thai limited company.

As a Thai entity, a company is allowed to own the property, and if done properly it perfectly permissible. Unfortunately, the correct boxes are not always ticked, and the foreigner winds up with a potential legal hot potato.

There are no issues with foreigners setting up a company in Thailand; it is done every day, and the government welcomes in the inflow of capital into the country. A foreigner may even be a director, but their share ownership will be limited to 49%.

For a company, especially one with foreign directors, to purchase a property, there a few criteria which must be observed:

  • it should be a legitimate business, and actually generate income;

  • it should file audited accounts, pay taxes and abide by Thai company law;

  • it must hold board meetings and have minutes of those meetings; and

  • it must have proper Thai shareholders.

The most important thing to understand is that the company is the legal owner of the house/villa – not the foreigner. They may be a director, and they may live in the villa, but they do not own it (more on this point below).

QSI International School Phuket

The approach most foreigners take is to establish a Thai limited company with the sole and express purpose of buying a villa. Using Thai nationals as “straw men” (nominee shareholders), who satisfy the 51% Thai shareholding requirement, but with whom the foreigner has zero future relationship.

Such structures run into trouble for two main reasons, both of which are easy for the authorities to verify. First, Thai law does not recognise holding companies, so establishing a company for the sole purpose of buying landed property is against the law. Second, the use of nominee shareholders is illegal.

Thai shareholders should ideally have some interest in the company’s success (e.g. as investors). If ever investigated, the authorities would have no trouble identifying sham shareholders, and this would place not only the foreign director, but also the Thai nationals in legal trouble.

So, let’s assume you’ve ticked all the boxes – legitimate business, generating revenue, filing accounts, paying taxes, board meetings with minutes, proper Thai shareholders – there is still one more thing to be aware of: let’s return to the foreign director living in the company-owned villa.

This is perfectly acceptable, but please be aware that it is both a “benefit in kind” to you and “revenue in kind” to the company. In other words, the villa is a perquisite, and you should be declaring the market value of the rent as taxable income. Furthermore, the company should be paying taxes on the presumed rental income. (This was covered in greater detail in our April installment titled “Your Shelter In Not a Tax Shelter”.)

Even people trying to do everything correctly often forget this part.

If you have an experienced lawyer in Phuket they can advise you on setting up everything exactly as it should be. Be wary of short cuts. If you do things the right way, you can enjoy a lovely Phuket villa – your own slice of paradise – without the fear of legal repercussions which hangs over those who cut corners.

This article is taken from the 2018/2019 Phuket Property Guide. To view the complete 2019/2020 Thai Residential Phuket Property Guide online, you may click the link or visit thairesidential.com/phuket-property-guide. You can also contact Thai Residential directly on:

Email: phuket@thairesidential.com
Tel: +66 9484 11918

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Christy Sweet | 03 September 2019 - 21:51:00

Leases on residential property  null upon death of the Lessor.  One  can certainly add a clause  asserting otherwise, but  that heir can take it to court- guess who'll win. Rent short time. You never know who'd going to move  in next door and what violations of consideration you'll  endure if you're trapped.   

Kurt | 03 September 2019 - 13:06:06

A 30 years lease not end by the owner's death. The person/company that inherit has to accept a inheritance with all the lusts and lasts. That includes 30 years lease contracts too.  Would be funny to have a 30 years lease, and when owner dies after 8 years lease you get kicked out.  Many things are TIT here, but not that crazy.

Christy Sweet | 02 September 2019 - 23:29:56

Adding if the 30 year lease owner dies,  the lease is voided. Rent and rent cheap with a good agreement, remembering only one month deposit is allowed by law.

Christy Sweet | 02 September 2019 - 13:31:55

Articles like this should have a 'Paid ad" disclaimer. Omitted is the fact foreigners can own the building, and simply lease the land it is on, but also rife with pitfalls, most likely a diminished  resale value. I'm reminded of the scam  30 + 30+ 30 leases- no such lease exists- after the initial  30 years, the owner is free to do whatever s/he wishes including eviction. 

Shwe | 01 September 2019 - 12:44:25

Why bother? If you don't own the house and have to pay tax, just rent, then the owner is responsible for the repairs that are inevitable with the poor quality of build here, then when theyy build a condo right next to you, you can move quickly, selling the company owned house can take a long time

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