Owning a boat
ownership of a boat in Thailand
When a foreigner wishes to purchase a vessel and register it under Thai law, many considerations have to be taken into account. This article aims to provide a general guideline for foreigners on the procedures and regulations involved in the purchase and registration of a vessel for commerce.
Type of Vessels
In terms of nationality, the vessels can be classified as either a Thai registered vessel (Thai Vessel) or a foreign registered vessel (Foreign Vessel). For the latter, the Customs Department imports into Thailand on a temporary basis, generally for six months. This temporary importation is not considered a formal importation as taxes are not applied. Yet, an importer must execute a Guarantee Agreement with the Customs Department certifying that if an importer does not take the vessel out of Thailand within a specified period, he/she shall be fined at the amount depending on the size and quality of the vessel.
The purpose of importation of the Foreign Vessel could be anything from tourism or pleasure to sport but the importer must not use such vessel for commercial purpose. In other words, under Thai maritime law, the Foreign Vessel is basically a non-commercial boat.
Apart from the Customs requirement, there are no other particular restrictions applied to the Foreign Vessel.
The Benefits of owning a Thai Vessel
The major benefit obtained from owning a Thai Vessel is the right to engage in business and fish in Thai waters. A vessel which qualifies to be registered as a Thai Vessel but which has never been registered as such cannot enjoy such benefits. However, it will still be subject to the same fees, liability to fines and forfeiture and punishments for offences committed on board as a Thai vessel (Section 54 Thai Vessel Act).
Any mechanically propelled vessel being registered to engage in business in Thai waters must weigh at least ten tonnes. Therefore, boats weighing less than ten tonnes such as some sailboats or recreational motorboats do not need to be Thai registered in order to engage in business. They only require a boat permit. A foreigner must bear in mind that in essence he/she, as an individual, has absolutely no right to own a Thai vessel. The law explicitly stipulates that the owner of a Thai vessel, which trades in Thai waters, shall be either a Thai national as an ordinary person or a juristic entity registered under Thai law.
How can a foreigner buy a Vessel?
The most common and well-known business vehicle used by foreigners to purchase a vessel is to form a limited company. In order for a limited company to own a Thai vessel, several conditions must be satisfied:
- At least 50% of the company directors must be Thai nationals
- There must be no company regulation permitting the issue of a bearer share certificate
- No less than 70% of the share capital must be contributed by a person who is not deemed to be an alien, as defined by the Foreign Business Operation law (sections 7 and 8 Thai Vessel Act) .
Once a qualified purchaser has found a suitable vessel, the legal paperwork can be dealt with. The purchaser should ask the seller for a sale and purchase contract or should instruct a lawyer to draft such a contract. Within the contract, certain details must be included, such as the registration number (in case of a registered vessel), the size and number of the engines and a list of equipment included in the sale. The contract should also cover points in respect of the hull, place of delivery, terms of payment and liability for loss before and after delivery. Additionally, if there is a clause referring to the transfer of the crew of the vessel, the purchaser should ensure that all members of the crew are Thai nationals (section 50 Thai Vessel Act) . When all clauses, terms and conditions of the contract has been mutually agreed by the seller and purchaser, the next step is to ensure all documentation is in place for registration of the vessel.
Where a vessel is purchased directly from the shipbuilder, the purchaser should ensure that the vessel comes with express or/and implied warranties. Although warranties are not required by the Registrar, they surely protect the rights of a purchaser and constitute the duties and liabilities of the seller. Express warranties constitute anything said by the seller as to the description of the goods which constitutes the basis of the deal made between the seller and purchaser and which would normally be contained in the written contract.
There are two implied warranties which are very important: the implied warranty of merchantability and the implied warranty of fitness for a particular use.
A warranty of merchantability in essence assures that the goods are up to the standards of the trade and are fit for the ordinary purpose for which they are to be used. A warranty of fitness for a particular purpose is created when the seller knows the specific purpose which the purchaser has for the goods and also knows that the purchaser is relying on the seller’s skill and judgment to provide goods suitable for that particular purpose.
The seller or the purchaser should arrange an appointment with the maritime inspector to inspect the vessel. If the vessel is approved, a Certificate of Inspection will be issued. Both parties, thereafter, attend the Harbour Office in the region where the purchaser is domiciled, and they should submit the Certificate of Inspection together with photos of the vessel showing front, side and rear views.
The purchaser should also furnish two copies of all company documents (in case of limited company), a copy identification card or passport for each director, evidence of ownership such as a receipt from a shipbuilder, hire-purchase agreement or sale and purchase contract, a Power of Attorney if a proxy attends in place of the purchaser and a company seal which the purchaser or proxy will use when filling out the official transfer of ownership forms. If the documents are accepted, the Registrar will advise the purchaser as to the date when he will receive the vessel registration and vessel permit booklet.
Transferring a Foreign Registered Vessel to a Thai Registered Vessel
If a former foreign registered vessel is being registered as a Thai vessel, the process is much more complicated. Prior to proceeding with registration, the owner or importer must formally import the vessel through the Customs Office at the Harbour.
It used to be the case that a vessel import was subject to substantial taxes. However, on 13 February 2004, two extraordinary notifications were issued by the Ministry of Finance. One related to a duty exemption and the other related to an excise tax exemption.
A 35% Customs Duty of the value of the vessel used to apply to all types of imported vessels. This is now exempt. Excise tax, up to 50% of the vessel’s value, is still applied, however, there is now an exemption for pleasure yachts and other similar vessels.
VAT at 7% of the sale value is still applied.
The vessel import must be carried out by a licensed customs agent. The vessel must be presented at the harbor for inspection by the Customs Official. The whole import process normally takes one day to complete. If the import is granted, the Customs Official will issue a VAT receipt and a certificate of import (Form 32).
The De-nationalization process of a vessel is as follows.
First, the Thai Registrar requires a surrender of the Certificate of Registration issued by the foreign harbour department. The procedure for the surrender or closure of registration depends on the regulations and common practices of each foreign country. Ultimately, the foreign harbour department should issue a Certificate of De-nationalization. If such certificate is written in English, it must be translated into Thai and certified by the Thai Consulate. If it is in any other language, it shall be translated into English and Thai with a certification of a translation by the foreign Embassy or Consular in Thailand and the Thai consular respectively.
Once the purchaser has obtained the Import Certificate, the VAT receipt and the Certificate of De-nationalization, he/she shall prepare the same documents that are submitted when a vessel is purchased directly from the shipbuilder.
The only other essential document is the sale and purchase contract, written or translated into Thai. Basically, a foreigner should note that all documents submitted to any governmental organization should be executed or translated into Thai and certified (if required by relevant law). The process after submission of the documents is the same as mentioned above.
Other issues the new vessel owner should be aware
In the case of a limited company, if the company becomes disqualified for whatever reason, any interested person or a public prosecutor may apply to the court for an order of sale, by a public auction, of shares to persons entitled, within 90 days from the date on which such disqualification came to be known to that person or the public prosecutor (Section 34 Thai Vessel Act). To prevent such incident, a foreigner should strictly comply with the Thai vessel requirements for the duration of the business operations.
If the number of directors is not in accordance with the requirement mentioned above, the managing director must inform the Registrar at the Harbour Office where registration was completed, within 30 days of the date when the fact became known and the Registrar will revoke the registration if the number of directors is not corrected within 30 days of the report date (Section 35 Thai Vessel Act).
In relation to documentation, it is requirement that during the validity of Thai vessel registration, the vessel registration, vessel permit booklet, certificate of vessel inspection, employment contracts of the crew, vessel history record and certificate of departure (if any) must be retained on board the whole time (Section 49 Thai Vessel Act). Further, the vessel permit needs to be renewed annually.
As can be seen from above, the purchase of a vessel can be a very complex transaction. It is advisable for any purchaser to be very cautious with a sale contract and registration procedure. Before entering into the contract for a used vessel, the purchaser must check the vessel registration to see whether there is any lien over the vessel as it is possible for a vessel to be mortgaged.
During the registration process, it is recommended that the purchaser is present at the Harbour Office on the transfer date in order to prevent any mistakes being made. A proxy may attend in place of the purchaser but a proxy may not be empowered to complete all documents on the purchaser’s behalf.
There are also government fees and stamp duty which must be paid on the transfer date.