TO set up a company to buy property is not really a complicated matter. It is why many unlicensed persons find the way to make easy money from the gullible foreigners. These unlicensed professionals are foreigners who can speak English with the beautiful native accent by just say “No problem my friend, everyone does like this in Pattaya”.
If you need a lawyer, you should deal directly with the Thai lawyer who is licensed as a “Tanai Kwam” not only “Legal Advisor”. You may check his or her professional license which must be issued by the Lawyers Council of Thailand.
A qualified accountant must hold a license issued by the Federation of the Accounting Professions of Thailand. A qualified accountant may work under the same roof with a licensed lawyer but not with a certified public accountant (CPA) who has to work independently. It is similar to the relation between a “solicitor” and “barrister” in the UK who have to work independently.
Most foreigners who set up a company to buy the real property will know only they have to pay for their accounts every year. Do they know what lies beneath their accounts?
The Annual Financial Statements (Balance Sheets & Tax Returns)
Before paying for the annual financial statements which are balance sheets and tax returns, you should have a profound discussion with your licensed lawyer and qualified accountant about the accounting and tax structure of your company. You may search for more information about taxation for dormant companies in our reading room http://www.thaisolicitor.com./
The English language of Thai professionals in Pattaya may not be so excellent but somewhat fair enough for your understanding in all technical aspects. Most of them will prepare a trial balance in English in order that you may review the structure of assets and liabilities to verify tax implications.
If you set up a company to buy the real property which includes the piece of land and building house, the assets in your balance sheet should be recorded as follows:-
- Cash & Bank Deposit
- Accrued Interest Receivable
- Account Receivable & Loan from Director
- Land & Building
Total Fixed Assets
If you buy the land and house, you should check if the seller has registered with the land office for transfer of both land and building house to you. Some unethical developers avoid the transfer tax by only declaring the land not the building house in order that the transfer tax will be based only on the land.
Some buyers may receive only the land not the building house once they buy the property. It is advisable to use the term “land & building house” in stead of “property” once you deal with a seller or broker.
Once you prepare the balance sheet, you should ensure if the “building house” is also recorded in the balance sheet.
What tax lies beneath?
The problem can be that some buyers buy the “property” from the developer who avoids the transfer tax by registering with the land office only for the transfer of the “land” not the “building”. The developer may use the name of your company to apply for a building permit. Your company will automatically become the owner of the building house. The question is “How you get this house?”
If it is understood that you bought the house from the developer but you fail to register the transfer of ownership of the house with the land office, it can be regarded that you are involved with the “conspiracy theory of tax evasion” with the developer which is punishable under Thai law.
The developer may say that you hire the developer to build up the house for you. In this case, the payment you make to the developer will be subject to the 3% withholding tax which must be your responsibility.
What lies beneath is the 3% withholding tax with the scenario which may shock you more than a thriller from Hollywood.
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