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Friday, July, 30, 2010 
Commerce Ministry moves to stop foreign control of property through Thai nominees
More stringent visa qualification requirements for new retirement
and married to a Thai visas combined with the restrictions on
re issuance of Tourist visas by the Immigration Bureau were
followed by Bank of Thailand restrictions on foreign capital
inflows requiring some funds to be withheld for one year. These
actions may be dwarfed by the impact proposed regulations on
foreign control of companies by the Ministry of Commerce recently
announced. These government actions are causing local expatriates
and Thai businesses catering to the foreign population to be
justifiably concerned and looking for solutions.
One local company has temporarily moved quickly away from advising
and overseeing major real estate projects in the Pattaya area
to training its staff on all the new regulations in order to
help foreigners living in Thailand protect property investments
and comply with the new visa, banking and company limited regulations.
"The recent and rapidly implemented government changes
are dramatic and affect a majority of the Expats living and
investing here in one way or the other. However, knowledge is
power and our staff has worked closely with Immigration, Labor,
Revenue and the Department of Business Development to learn
how to comply with the new regulations and reform or dissolve
companies to the benefit of foreign investors, get others visas
or work permits and most significantly protect property investments
for our clients by the use of mortgages, wills and leases on
property," Drew Noyes, Managing Director of PAPPA Co.,
Ltd. said. He can be contacted at drewnoyes@gmail.com.
PAPPA Co., Ltd. Thai staff have found ways within the law and
abiding by the new current and proposed regulations to help
expats protect their current positions and benefit greatly from
the great boom ahead in the local property market," Drew
said.
"The Chinese are shrewd business people. Their word for
crisis is a combination of the words danger and opportunity.
Go to the Pattaya Land Office and see who is buying property
now. The office is still full of people buying property in Pattaya.
They are Thai and Chinese-Thai, not Westerners. This signals
a great buying opportunity to me. Now its just a matter of knowing
how to comply with the new rule changes rather than feeling
like you can not invest. We advise clients to get current property
investments and homes in compliance with expected and current
regulations and buy more property if funds are available,"
Drew said.
Care should be taken to get visas, Thai companies and property
ownership in order. Local Pattaya businessman and civic leader,
Drew Noyes, attended an all day seminar in Bangkok held by the
Department of Business Development called, "Understanding
the Foreign Business Act of 1999." When the new regulations
go into effect he plans to use information from the DBD to hold
a seminar in English in Pattaya for foreigners to help them
protect property investments currently held as assets in Thai
companies. The PAPPA Co.,Ltd. staff who are experts in visa
applications and asset protection will also make presentations.
This seminar will be announced when the date and location in
Pattaya is set following the Cabinet's decision on eliminating
the use of Thai nominee shareholders by foreigners.
Foreigners owning land, or condominiums in excess of the 49%
ownership ratio, is prohibited under the Foreign Business Act
of 1999, but until recently a loophole existed whereby a foreigner
could use a Thai company instead of personal ownership to own
property.
Now new regulations are expected to take effect which will significantly
impact Thai Company Limited protection previously provided to
foreigners purchasing land and condominiums. The new regulations
call for a redefining of the term "alien" and thus
changing Thai law as it pertains to the Foreign Business Act
(FBA) which the Commerce Ministry will change for the first
time since its implementation in 1999.
The term "alien" in the Act refers to non-Thais (foreigners)
owning shares and providing share capital in a Thai company,
but does not specify any voting rights limitations by foreigners.
Therefore, foreigners who purchased property simply formed a
Thai company limiting themselves to minority ownership on paper
and using six or more Thai nominees who would sign over their
voting rights to the foreigner - essentially allowing the foreigner
to control, utilize and buy and sell property held as assets
of the company at any time.
This process effectively gave foreigners as Thai company Managing
Directors or decision-makers for a Thai company with a Thai
as the Managing Director all of the rights of personal ownership.
The company could continue to operate in this manner provided
the company tax payments were made and annual reporting requirements
were met.
These special arrangements between foreigners and Thai nominees
are not illegal now but the revised Act may not allow them in
the future if the Cabinet approves the recommendation of a committee
reviewing the Foreign Business Act to define the word "alien"
to limiting voting rights also.
The Department of Business Development, DBD, recently announced
a proposal by the ten-member committee the government has established
which concludes companies using Thai nominee structures should
be asked to comply with the new restrictions and foreigners
will no longer be able to control the voting rights of a company
thereby losing the right to control property held as company
assets.
This regulation is likely to go into effect immediately following
Cabinet approval and may be retroactive thereby affecting all
property owned by foreigners through Thai companies in the form
of land, houses and condominiums.
There are only about 14,000 privately-held companies in Thailand
using Thai nominees holding shares on behalf of foreign investors
to effectively keep companies under majority foreign control
by the proxy voting rights.
More than 7,000 are owned by Japanese businessmen located primarily
in Bangkok, Sriracha and Chonburi. Most of the remaining 6,000
plus companies are owned by Westerners owning homes and condos,
many of whom are centralized in Bangkok and Pattaya. All companies
are subject to the new regulations.
Currently on the DBD website, www.dbd.go.th, there is a list
of almost 3,000 companies formed in Bangkok which will be automatically
closed down for failure to pay taxes or file annual reports
for three years unless proof is provided that taxes were paid
and annual reports were filed. Foreigners with dormant companies
formed in Bangkok should check the website. Companies formed
here in Pattaya may be listed in the near future so PAPPA Co.,
Ltd. advises all foreigners to consult with their attorneys
and accountants to be sure the company has been filing its reports
and paying its taxes.
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