Purchasing | Lease or purchase by a company
In certain cases, it is advisable to register a property and/or house in the name of a Thai business that you have established instead of leasing it. You can also have the real estate put on the name of the business. Do realise, however, that a foreigner in Thailand can only own 39% of real estate, whereby complete security can be attained through good company statutes, but first certain procedures must be carried out. Consequently, good book-keeping is necessary and one is obliged subject to business tax duties.
If you wish to start a business in Thailand, there is another excellent option in order to make a lease. This is to issue your own business with a loan. The Thai business buys a property of your choice. You then lease that property from your own business. The piece of land remains the property of the business, which is the juridical owner. The value of the property (including house) can then be calculated with your income in the share-capital and eventually paid back.
Business Law in Thailand
Foreign entrepreneurs usually choose one of the three following ways to invest:
- Establishing a Thai Company Limited (BV).
- A company controlled from abroad with the protection of BOI.
- Establishing an American-controlled company, with protection under the "Treaty of Amity and Economic Relations between Thailand and the United States."
By establishing a business (Co. Ltd.), a foreigner has the right to by land or real-estate.
Book keeping and statutes
The business accounting laws in Thailand are made by the government, with the rectifications and regulations published in: the AL (AL). The Department of Commercial registration (DCR: the central accounting governmental organization) is empowered by the Ministry of Commerce to control the financial statements and to control the book keeping and to rectify and approve the supporting documents, which have to be kept up to date by the businesses.
The task of the DCR is to supervise and the Director General (DG) carries the final responsibility. Under the AL, the financial statement must refer to a report that states the operational and financial conditions of the business and/or the changes in the financial status of the business. Examples include statements regarding the profit and loss, income, asset, cash-flow and alterations in the registry of shareholders.
Mortgage on a lease
A business can receive a mortgage on the lease of a property and/or buildings in order to finance its activities in Thailand. Because a lease right can be mortgaged, in case the mortgagee is left with a debt, the mortgage lender can seize the lease and make it available to the public for sale.
Broadening of possibilities for businesses
Since the 'Act Governing the Lease of Immovable Property for Commercial and Industrial Purposes' has been altered, which means that the maximum lease period has been lengthened from thirty to fifty years, foreign companies will more easily be able to do business in Thailand. A lease period of that duration allows for long-term business planning and potentially using the lease as a security to be drawn upon for financing, as is possible in Thailand.
The 50 year maximum leasing period is only applicable for commercial and business use. Only the owner of a business can make a lease, which must have a written agreement and be registered at the District Council.
The Thai State Newspaper published in the Issue of August 2000 that a business has to meet one of the following criteria in order to have a fifty year lease be taken into consideration:
- Commercial businesses, persons or organizations that have invested, or wish to invest, at least 20 million in Thailand.
- Industrial companies or organizations that meet the criteria stated in the 'Investment Promotion Act'.
- Other commercial or industrial companies that make a positive contribution to the Thai economy.
Foreign leasers are also required to submit to the stipulations made in the 'Foreign Business Act'. A lease can be extended by fifty years after the first leasing period. If a leaser dies, the heirs can continue the lease as normal. A leased section and/or property can be subleased as a whole or in part.
Working opportunities for foreigners
There are two laws that lay down the criteria that foreigners must fulfil in order to be eligible to engage in paid work in Thailand: The foreign business law, better known as the 'Alien Business Law' (ABL) and the Foreign Employment Law (FEL).
The FEL regulates the jobs for all foreigners, not for Thai citizens, as well as the regulations for the business operations of all foreign workers. The FEL states that every employer can decide to employ a foreign worker in his/her business, with the restriction of requiring a work permit, with the name of the employee at the "Alien Division, Employment Department, Minister of Social Welfare." The Alien Division regulates and also issues the work permits.
A hired employee does not have the right to work before the visa and work permit have been issued. The employer must adhere to these rules and is responsible if a foreigner works without a work permit. No work can be carried out or other activities undertaken, which are not stated in the work permit.
Protected professions
The FEL publicizes a list of professions that are exclusively for Thai citizens and are not permitted for foreign workers, even if they have a work permit.
Regulations regarding a work permit
In order to apply for a work permit, the applicant is required to show certain documents in accordance with the laws and regulations. Foreigners who want a work permit can make an application. These are normally issued on a yearly basis; do however follow the visa date in your passport.
Visa regulations in order to be able to apply for a work permit
Every foreigner who has the intention of working in Thailand can enter the country by applying for a 'non-immigrant' visa at the Thai Embassy or Consulate in his/her native country. An accompanying spouse and/or children will need to follow the same procedure and require the same visa and documents. The visa is normally issued for a period of 90 days or one year and can be extended each year in Thailand for another year. This visa gives the right to apply for a work permit. Foreigners, who have a different kind of visa, such as tourists are not eligible to apply for a work permit. When applying for a visa and work permit, you need to observe the Thai laws, regulations and guidelines and must have the correct supporting documents.
Ownership of land by foreigners
A number of people can share the title of land. They are all stated in the ownership document, which is recorded at the District Council. Foreigners or foreign businesses are excluded from the ownership of land, unless the Minister of Internal Affairs gives permission. A foreigner can buy and own a condominium/apartment as an individual or as a business.
The Thai government has already been considering for a while to give each foreigner the right to purchase 1500m2 of land without regulations. A bill has been put forward. We must wait for the outcome of this debate and the restrictions that will accompany it. It is good to know that a Thai man or woman, who is married to someone with a different nationality, must make a written declaration of capital, which states that the purchase is financed through his or her own means and not by the spouse.
Ownership of houses for foreigners
Foreigners can own houses, provided the land papers are arranged correctly. This refers to the correct, complete 'Janots' that are officially registered at the District Council, with all of the comprehensive and properly registered land documents.