Setting Up a Dormant Company to Buy Land in Thailand 

 If you are a retired expat or an investor wishing to buy real property in Thailand, you will often be advised by a real estate agent to set up a Thai company to register the ownership of land. It is fairly easy to set up a company for such a purpose and costs about 30,000 baht for a lawyer to do it for you with 500,000 baht in registered capital, but it can be burdensome over a long period of time because of annual taxes. 

You should somehow come to understand the Thai company and tax laws. A basic knowledge of accounting and corporate structure is a must. 

This company does not intend to operate, have employees and is set up with a majority of 51% Thai shareholders. You and any other foreigner in the company can own no more than a total of 49% of the shares. 

There must be three shareholders at minimum. 

You can be the Managing Director and have the authority to sign and use the company stamp on all legal transactions including at the Land Office.

 You will have to prepare the financial statements or balance sheet within 150 days from the last date of the accounting period, which is normally December 31 of every year unless you set up a fiscal year. The financial statements or Balance Sheet must be audited by a Certified Public Accountant (CPA) signing and having opinions in the auditing report attached to the financial statements. The auditing opinions of the CPA will be on four levels. These range from clean opinions for the financial statements without any irregularity, to opinions with remarks in case the CPA has found any irregularities in the accounting records, and refuse to accept such 

financial statements. You should always have a proper English version of the auditor’s report if you don’t read Thai.

The opinions of the CPA will obviously affect the ideas of persons who use or inspect these financial statements. If the company owns many plots of land, all title deeds of land should be recorded in the financial statements, with the price supported by payment documents.

If you have a non-immigrant visa or you have a Thai Managing Direct (in addition to you or instead of you) set up a company bank account or accounts if you want both a savings account and a checking account. When buying land or other real property make the payment by a bank check under the name of the company. 

It is better to actually operate the company and do something in addition to investing in property. The company cannot be dormant forever, and the Revenue Office has a current policy to inspect all dormant companies, who never pay tax for a certain period. In reality, even though the company only owns the land and house as a residence of its expat director, the Company should have income from the director as rental fees, because the company is a legal entity or juristic person separated from the shareholders or directors. The rental fees will be taxable income subject to the Corporate Income Tax of 15% of the net profits for the SME (Small & Medium Enterprise) which is defined as a company with 5 million baht or LESS in registered capital.  

If the company does not have a bank account to keep the money from capitalization, it will be deemed that the money is kept in the hands of the director. In this case, the director becomes a debtor of the company and must pay interest to the company. The interest will be taxable income of the company.

Many people make a typical mistake regarding the business objectives of the company. You may set up a limited company to do import and export business, and buy land and a house to be the office of the Company. In this case, you do not have to register either Value Added Tax (VAT) or Specific Business Tax (SBT).

However, some people mistakenly register the business objectives of purchasing, owning and selling which is the real estate business under the Revenue Code of Thailand. The real estate business is subject to a Specific Business Tax (SBT) of 3.3% of the gross income. Many lawyers will set up your company with 26 standard objectives ranging from operating a massage business to advertising. I do not recommend this at all.  List only the objectives you may actually perform like travel agency or construction.  You can add or change objectives any time with the Department of Business Development in Chonburi.

If the Company fails to file the financial statements with the Ministry of Commerce, it can be prosecuted with a fine of not more than 50,000 baht for both director and company; with the total fine being 100,000 baht. For Companies failing to file the financial statements for three years consecutively, these companies can be deemed Defunct. Under Section 1246 of the Civil and Commercial Code of Thailand a company not carrying on business, or not in operation can be deemed to be a Defunct Company, whereby the Registrar may with reasonable cause, accordingly inspect the company.

With the proper procedures of inspection, the Defunct Company may be legally forced to dissolve and the Registrar will strike the name of the company off the register. This will be complicated if the defunct company that is dissolved holds real property, and the liquidation process to share the proceeds will be costly and time consuming. 

Those persons who can clearly explain all of the above tax and legal aspects to you should be a qualified Thai Certified Public Accountant and Lawyer and most of them display their professional licenses in their office.