(UPDATE JUNE 2008 :
The battle is over. We won. For now.
😉

“All revisions to Thailand’s Foreign Business Act (FBA), which would have brought tighter rules for outside investors, have been scrapped, Commerce Minister Mingkwan Sangsuwan said.” )

******************************************
Here is a special “dossier” about the Foreign Business Act (version 1 and 2, the amended version that the Junta pushed last year).

My goal is clear : to help people understand what is really FBA (1 and 2), how it is really working and what are the dangers of the version 2.

Many people don’t have a clear understanding of this issue, and/or are misleaded. There is unfortunately a lot of disinformation around, because it’s a rather sensitive issue for the thai authorities.

Stay tuned. Don’t hesitate to send me your comments, and/or other datas so I can enrich the content. – > email – > cthai2 (at) yahoo.com

SUMMARY

– WHAT IS FBA ?

– FBA IS A FICTION

– FBA 2 IS WORSE THAN VERSION 1

– WHY THE THAI GVT IS FUNDAMENTALLY WRONG

– AN (IN)CONVENIENT HYPOCRISY

– WHY ANY SANE INVESTOR HAD TO AVOID FBA 1

– WHAT WERE THE SYSTEMS TO AVOID FBA 1

– THE TIMELINE

Click here to follow the lastest news about FBA.

16 Responses to “FBA : THE SPECIAL DOSSIER”


  1. 1 Tom 29 March 2008 at 10:21 pm

    My wife and I are Canadian and we are planning to buy a house/villa on Koh Samui in the very near future and we have some questions and concerns we hope someone on this forum can address.

    We recently meet with developers and the real estate agent of a high-end villa development on Samui to discuss the purchase a beachfront home. We understand the concept of circumventing the existing laws against foreign ownership by setting up a Thai company whereby a 49%-51% ownership, with majority voting shares in our favour is arranged, but our concern is with the proposed amendment to the FBA and what that will mean for foreigner home owners. I understand that the voting rights will change with the new amendments and that the current arrangements, as they now stand, will change.

    Is it for certain these amendments will be made into law thereby altering the FBA forever? And if so, will the government either force foreigners to sign over to lease-hold 30-year agreements or will those who bough be allowed “grandfather” clauses to keep the current property arrangements?

    How will this affect those who bough homes prior to the new Act?

    We do not want to purchase a home which will depreciate in value as the end of the 30 year lease near but do you think is is wise to wait for the new government to decide the fate of these amendments?

    We also hear that many foreigners are selling their luxury villas on Samui and elsewhere, is this true? If so, that is not a good sign.

    If anyone can shed some light on this situation before we buy, it would be appreciated.

    Thanks

  2. 2 thaicrisis 30 March 2008 at 4:17 am

    Several issues there Tom.

    -LAND / HOUSE
    Foreigners can’t own land. But they can of course buy… a house. That’s a classic scheme : the thai wife buys the land, then the spouses build the house, and then a 30 years lease is given to the foreign husband (for security).
    In your case, maybe the developper wants to sale you just the house, along with a long lease for the land.

    If it’s land + house with the thai company scheme, then watch out. Of course, maybe people did it and continue to do it. But I mean it’s not a valid reason.

    We shall repeat : it’s against the laws (for the land ownership and the nominees issues with the company [FBA] ).

    -GRANDFATHERING
    It would be rather strange to claim a “grandfathering” clause to “keep the current property arrangement”. 😉 Because, again, it’s against the laws.

    -FBA AMENDEMENT (or FBA 2)
    If you read the time line, you’ll see that FBA 2 was NOT VOTED by the NLA. Therefore, the current law is still FBA 1 (with the ownership of shares and majority rule as the only criteria to define a company as thai or foreign).

    To this date, as I wrote in introduction, we have absolutly no information regarding this project. The new government will push it again ? Or drop it ? Or change it (again) ? If yes, how long it will take ?

    It’s really impossible to know. Thai politics is so volatile now, and the current government has, I think, many other burning issues to solve (included its own survival…) before to take care of FBA.

    My bet : nothing will happen on short and mid term. Status quo. Even though status quo means uncertainty.

    -KOH SAMUI
    I’ve got no specific information regarding the market over there.
    We just know that the FBA 2 circus + the Coup made a lot of foreigners nervous, and therefore the market has slowed.

  3. 3 Tom 5 April 2008 at 1:59 pm

    Thank you for your quick and detailed reply.

    I figure if the likes of David Beckham and large hotel chains like the Four Seasons have had confidence to invest recently, then the situation cannot be all bad moving forward. I am certain they have done their due dilegence, complete with high-priced lawyers and research into risk analaysis, and they have still decided to put considerable amounts to capital (much more that we plan to) into real estate holdings. Were they not worried?

    Nevertheless, we will look further into this matter with our Bangkok-based lawyer and decide accordingly.

    Thaicrisis, have you heard of any situations where these Thai company “arrangements” involving real estate has gone bad?

    Thanks again!

  4. 4 thaicrisis 5 April 2008 at 4:01 pm

    I would advise you to read this piece… about -large- western companies who made obviously some mistakes…

    https://thaicrisis.wordpress.com/2008/04/05/2-european-investors-sale-their-shares-in-padeang-industry-because-they-cant-secure-control

    As for DB and Four Seasons… I mean you don’t know what were the schemes they used, how they’ve invested, how much, with who etc.

    I never said that it was impossible to invest in Thailand. Far from it.

  5. 5 thaicrisis 5 April 2008 at 4:11 pm

    As for your last question : no. I don’t have first hand stories.

    I just want to emphasize : what you call “arrangements”… are exactly that : arrangements.
    It means they can turn bad, because they are on the wrong side of regulations if I may say… 😉

    You can win, and surely many people did. But you can loose.

    Furthermore, foreigners can invest (direct, and/or via loans) as minority shareholders. Sure, it’s possible to find good thai partners.

    As for myself, however, it goes against the very basic rule of business : control.

    Some people are ready to put their money into something they don’t control… fair enough. Not me. Therefore, I need to follow regulations… Therefore this is how I took interest into FBA. Therefore this is why I don’t trust lawyers who say always “sure it’s possible no problem”. 😉

  6. 6 Tom 7 September 2008 at 1:15 pm

    ThaiVisa, this is Tom from Canada again. I wanted to share an update with you regarding our plans to purchase a villa in Thailand. We have just been informed by our lawyers that a new rule has been inacted which states that the “Thai Shareholders” of our Thai company (which we set up to purchase our villa) must provide proof of where their money comes from to buy the property in question. That is to say they must prove they are legitamate investor using their own money to buy into this company we set up to buy the land.

    This, in essence, closes the loop-hole used by foreign investors to secure property. Have you heard anything more about this?

  7. 7 ThaiCrisis 7 September 2008 at 2:16 pm

    Sure Tom. But this is not new. Check :

    http://www.thaivisa.com/forum/Supplementary-Document-Required-P-t77483.html&hl=FBA++shareholder++proof++funds

    July 2006…
    😉

    But as usual (this a big problem in Thailand)… such rules, regulations, laws… are enforced… sometimes… regarding the location, the weather, the position of the moon, and the mood of the officer you’re talking too.

    I wrote it many times : uncertainty is the biggest issue.

    This is why all the talkings about FBA are important. This law is important. It has been rarely enforced but… hop… one day it can re-surface. And then the shit hits the fan.

    Anyway, in a country where the Prime Minister declares the State of emergency… and then the police and the army decide -by themselves- to not enforce it… well… you have the whole picture and you should not be surprised.

    Rigth ?

  8. 8 Tom 7 September 2008 at 2:52 pm

    Thanks for the quick reply ThaiCrisis. I am very concerned with this development and quite upset with lawyer for not warning me that this type of letter would be sent and that proof of funds will be required for the final registration. We’ve spent several thousand dollars on his services only to be informed of this potential deal-breaker last week! And there is no way i can sign this property over to a Thai national and risk losing my investment, as he suggested. This is a very reputable, international Bangkok law firm I am dealing with and if they don’t know whats going on who the heck does??

  9. 9 ThaiCrisis 7 September 2008 at 3:06 pm

    Anyway Tom, beyond the legal (or half legal) issues… I mean… are you sure that you really want to buy a house… now ?
    😉

    Look at the news : instability, political crisis… and a highly likely global slowdown…

    You should take your time… Enjoy the freedom (and risk free) of a rent…

    As for the lawyers… it’s very easy : don’t trust them.

    They’re not working for you… First, they are working for themselves….

    Last thing : I repeat that this “regulation” about proof of funds is probably not enforced. Everywhere. Everytime.

    And last last thing : you said “loophole”. 😉 Indeed.
    The company scheme, to avoid land regulations, and the nominees to avoid FBA… are clearly not casher ways.

  10. 10 Tom 7 September 2008 at 3:14 pm

    I think you may be right. It’s just that we got our hopes up these past few months only to be let down. It did appear suspicious to us that there seemed to be so many foreigners trying, often time desperately, to sell their villas in Thailand recently. And I’m talking long term residents who “bought” 10 yrs. ago, and that made me nervous.

    Perhaps putting our plans on hold is the best bet for now. Thanks for the advise ThaiCrisis!

    Tom

  11. 11 Tom 7 September 2008 at 3:30 pm

    One point about your last post. We actually received a letter asking for this proof of funds before the registration of the Thai company can be finalized. Without this proof there is no company and thus no villa purchase. So this is enforced b/c without all bank records, etc, there is no setting up of this Thai business entity.

    If this is the case for all land deals moving forward then they have indeed just closed off the last avenue for foreigns to acquire a villa (non-condo) property.

  12. 12 ThaiCrisis 7 September 2008 at 4:12 pm

    Who sent you this letter ?

    And what the letter was stating, asking for ?

    At which stage of the company registration process this letter was sent ?

    My point : when you register a company, you don’t state that it’s to buy a piece of real estate, right ?

    So, I would like to know if this letter is for all company that have thai shareholders + foreign shareholders ? Or if your lawyer blew up and talked with them (about the real estate project).

    Anyway, I would appreciate if you could e-mail me a scan of this letter (remove all IDs parts). cthai2 @ yahoo . com

  13. 13 T42 6 October 2008 at 9:18 am

    Hi Tom

    there is other ways to run a thai company being thai but not controlled by thai and also comply with current and proposed laws!

    Please give me your email and will be in contact with you.

  14. 14 lek 1 March 2009 at 5:50 am

    dont buy land here you cannot. dont lease land here it is not safe either. first, you have no way to know if the land title under the house is genuine or not. second, you have to deal with local land office to register lease and they can do anything they want, or not do it.

    for example, i know one foreigner who leased a shophouse. they refused to allow him a water hook up because he was a foreigner. they told him water is for the thai people. so he has a shophouse with 30 year lease but no water. this kind of example is common around the country. local officials do anything they want and you can do nothing. then, remember you dont get any kind of residency.

    if you try to live in your house on tourist visa you have problems. also, the laws change all the time.
    actually, the law itself never is the issue. all the laws are vague intentionally so things can be negotiated. and then every time there is a change in government the priorities and enforcement can change.

    i do agree the fba is not real. example, only thai citizen can be a tailor but there are only a handfull of thai tailors in the country. how can this be? corruption, of course. basically, as i see it, the foreigner who is honest and wants to follow the law will be singled out for destruction.

    the foreigner who is corrupt will be able to work well in the system. of course, this is to the long term destruction of our country but greed trumps civics. running a business here anyway, the foreigner will have problems only once they start to make a profit. Then they will be attacked as taking jobs, wealth, etc. from the thai people.

    as long as they are bringing money into the business then no problem. Can do anything. but start to earn profit and it will be taken away. the customer will steal from you or become your competitor. your staff will steal from you or become your competitor. the government will come to take more and more, your suppliers will become your competitor, the police will start to ask about you, who are you and what are you doing to make money here. if you have no one big in bangkok above level of major or even general you can not protect yourself.

    again, dont buy land, house or business here unless you assume you will lose everything from the beginning. just rent month by month and enjoy your life keeping low profile. Also, make sure you have good dog to protect yourself inside your home at night. many foreigners are now being killed for their montey and businesses all over the country. this is not to scare you but to tell you this is reality now.

  15. 15 bodhisattva 2 October 2009 at 1:32 pm

    I agree with Lek here above. Her arguments are my experience.

    Simple: Don´t buy anything, don´t try to work or invest. Just rent, keep a low profile and enjoy.

    I´m glad to see that Tom has gotten the right information and decided on not buying or building a Villa. The Thai´s would never do anything to damage there reputation to the outside world by attacking the likes of Beckham 🙂 But they will do it to anyone who can not defend themselves and they will milk you all the way to the airport.

    I know that Samui is one of the best places investment vice but the island is full of foreign small time criminals who thrive in a lawless land where all things are vague and differ.

    Lek is also right about this fact: That while you are bringing in the bacon/money they will not do anything but you can count on them getting all over you after you are stuck and then the sucking will begin. That´s for sure.

  16. 16 jack 5 January 2010 at 12:29 pm

    There is no evidence at all that Beckham purchased property in samui. Absolutey zero in fact, so we may assume that he did not.

    Also, the four Seasosn is owned by a very significant Thai PCL, and is not owned the Fours Seasons, therefore the premise of the Samui defender’s post is approx 99% incorrect. Most notably that both of these parties invested and carried out prior due dilligence etc…. all fanatsy.


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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.


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