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Another lawyer interview

The laws and regulations here aren’t that straightforward as far as everyone is concerned, Thais and foreigners alike. This week I continued looking for a lawyer and interviewed another one on Theppasit road.

The subject of my query is about costs and legal aspects of using a Thai limited company to do a real estate development. It is much more complicated than buying a residence using a company or lease.

Some new information: There is an employment withholding tax that must be paid to the government for services rendered. This is 3% of the amount of labor. Also confirmed was that VAT isn’t really an issue. There is a 20% income tax which is normally ‘minimalized’. But you should list as an expense the labor cost, which mandates the payment of the 3% (the theory being 3% is better than 20%).

A side tidbit of information with regards to having a company holding a personal residence: As far as a personal residence when owned by a company, the persons living in the house should be paying the company rent, which will be added to the company income statement. (You should set this up with your accountant if you have a company holding real estate).

Observations: You’ll notice that virtually all Thai real estate developments (large and small) are almost never done using a company. If you buy a house from even a large development, you will notice a relative or employee goes to the land office when the deed is transferred. They are the registered owner. The transfer is being done, not using a company (the property is in the name of an individual). Normally in a large development there will be several proxy owners of land plots. This is done to save on various taxes and regulations. Personal land transfer is the no hassle route.

More observations: Doing any kind of real estate development (buy and sell) land via a company does put one at a competitive disadvantage. It is hard to come up with an exact percentage (like using a company you will pay 4% more in taxes) — but it is obviously a serious disadvantage.

As for me I’m still considering options as far as the set up goes. I am going to talk with a farang business consultant on Monday for a consolation. Normally, as I’ve stated before, I prefer to use strictly Thais in my projects for many reasons. But as far as legal, it is easy to get the details but I need someone to summarize and brainstorm with. I will advise after the meeting how it went.

1 Comment

  1. Hi Dozer

    Surely the case where there is a proxy local owner, means that you dont have any real ownership at all. Buying and selling is all an act of faith for the building only. a proxy ownership could blow up in the future at any time, particularly once the developer has sold all his units and left the district. The land parcels can then be sold on to some anonymous who knows what with dire consequences. Some may argue this has never happened – dream on.

    Falang business consultant?? a contradiction in terms There’s no such thing as a free lunch Robin

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