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The family office: Looking for sound Thai investments

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Thailand in the focus of international family offices

Family offices are highly specialized private wealth management advisory firms with a multi-generational approach. They provide an outsourced financial and investment solution for high-net-worth investors (HNWI’s). As a single-family office (SFO), first pioneered by the Rockefellers in the late 1800s, the client is only one individual or a rich family, while multi-family offices (MFO’s) serve numerous ultra-high net worth clients.

Apart from performing the day-to-day administration, centralized management or oversight of investments, tax planning, estate planning, and asset protection, they are typically in charge of insurance, family related employment, philanthropic intentions and charitable giving, family governance, and even concierge services and lifestyle management.

Under local legislation, single-family offices do not have to register as investment advisers and are widely unregulated. It can be estimated that there are more than 10,000 globally, about half of them set up in the past fifteen years and roughly 3,000 in North America alone. While a family office makes sense with a wealth of US$ 500 million or more, all combined control an estimated US$4 trillion.

A sensible asset diversification across several asset classes, jurisdictions and risk profiles is a cardinal aspect of a private wealth management practice. Therefore, family offices from Europe, North America, Arabia, Russia and even Asia show increasing interest for a family-style investment in Thailand’s industries, properties, and people for wealthy clans abroad.

Family affairs in Thailand: The foreign family office as venture investor

Traditionally, family offices are engaged in direct investments in private equity and venture capital, agriculture and commodities, real estate and valuables (art, etc.). They have the ambition and ability to cherry-pick the best deals. However, particular requirements have to be met.

The primary goal of a family office is to invest wealth prudently and extend it beyond generations. Accordingly, investments have to fit the family’s long-term wealth-generation strategy. As an additional requirement, they typically desire more transparency in underlying investments. Specific rules might disallow any connection to corruption and bribery, child labor, workers’ exploitation, environmental destruction and other forms of non-compliance with the family’s fundamental beliefs and social values.

Typical family office ventures in Thailand are sustainable energy, agriculture, and livestock investments. Examples are the acquisition of solar farms with long-term offtake agreements with government agencies, the breeding of halal and Kobe-style cattle, and a farm for superfoods free of poisons and toxics.

The Consulting House: The family office office in Thailand

Investments in unknown territories require qualified and trustworthy advice. Not everything that is legally permitted is also solid and sound. The Consulting House advises international family offices how to prudently invest in Thailand’s industries, property, and people.

While not providing financial services and investment advice, the Consulting House has the long-term experience and wisdom to separate risky or unreasonable ventures from sustainable family-style investments in the land of smile. This includes the practical implementation of investment strategies taking into consideration the family’s values and compliance requirements.

From its strategically favorable location in Bangkok’s central business district, investments all over Thailand can be implemented, maintained, monitored and controlled. This includes legal and tax aspects, accounting, audit and more. A sophisticated reporting system gives the foreign family office around-the-clock access to its investments and ventures.

The Consulting House offers to international family offices trustworthy cooperation from the first consideration, the successful investment and financial closing as well as the whole investment lifecycle till a possible exit and disinvestment. Confidential talks can be arranged instantly.

Company formation: The twelve-in-one concept

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The company set-up in Thailand: Protected corporate structures

To do business in Thailand, the foreign investor typically needs to set-up a Thai company. In nearly all cases the limited company (Co., Ltd.) is the only reasonable option to do things legally. The Co., Ltd. requires a minimum of three shareholders and at least one individual as the director. Additional requirements result from the necessity to apply for a work permit for each foreigner working in Thailand.

The Thai company can be set-up with a Thai majority partner as a nominee structure, which is currently still tolerated in Thailand but not at all advisable. However, with a little bit more complex corporate structure, a company can be set-up entirely in compliance with Thailand’s foreigner legislation. Under such arrangement, the foreigner is allowed and enabled to dominate “his” Thai company with a shareholding of only 49%

If the foreigner prefers a more protected investment model, this can be achieved by various tools and modules. One of such protection schemes is the two-tier-structure which integrates an own Thai holding structure in the corporate design. It incorporates a legal firewall into the investment structure.

Foreign investors can utilize from various promotion schemes offered by Thailand’s jurisdiction and government regulations. Thailand’s Board of Investment (BOI) promotes specific business activities. Additional tax benefits are provided, for example in case of an International Headquarters.

The Thai corporation is in most cases no isolated stand-alone business. A comprehensive tax structuring is advisable to integrate the value chain and minimize the overall tax burden. Cross-border tax advice is the key to efficient transfer pricing, avoidance of double taxation and optimization of the expat taxation under Thailand’s corporate and personal income tax environment as well as the tax system in the home country respectively headquarters.

Beyond legal and tax services: The business set-up

Each Thai company needs a registered address. In the typical business case of a foreign direct investment, this can’t be limited to a mailbox but requires real office space for the director and the foreign and Thai employees. A prestigious business address adds significant value to the corporation. If the business is directly linked to public transport facilities, this makes it even more attractive for employees and visitors.

One of the legal requirements for foreigners working in a Thai company is the employment of four Thai staff for each work permit. Given the problematic Thai labor market, the successful search for motivated and capable Thai employees requires specific knowledge and access to business networks and other resources.

Starting from its day of incorporation, the Thai company is required to maintain a proper accounting by a certified public accountant. Such CPA may be employed or this legal obligation has to be outsourced to an accredited accounting firm. The financial statement of the company has to be audited on a yearly basis by a licensed auditor.

Depending on the business background of the foreign investor and his planned activities in Thailand, it is critical for the business success to get access to suppliers, subcontractors, and other business partners. To start with nothing than enthusiasm results in an uphill battle which wastes time and efforts. It makes perfect sense to use existing business networks and proofed contacts to governmental agencies, local players and decision makers in Thailand and the ASEAN countries.

The Consulting House concept: Twelve solutions by an integrated one-stop service

The Consulting House joins all the elements described above together on the 42nd floor of the Exchange Tower in Bangkok’s central business district:

  1. Comprehensive advice on a legally compliant and tax efficient corporate and investment structure.
  2. Company formation within ten business days, in urgent cases even quicker.
  3. Protected corporate structures, entirely in compliance with Thailand’s foreigner legislation.
  4. Advice and support on investment promotion by the Board of Investment BOI or similar investment benefits.
  5. Comprehensive legal support and advice on visa and work permit, business licensing, trademark registration, corporate, investment and labor law issues.
  6. Initial and ongoing Thai and cross-border tax advice to optimize the investment structure tax-wise.
  7. First-class business address and office space in a renowned business center in the heart of Bangkok.
  8. Recruitment of Thai employees and operation as interim manager.
  9. Arrangement of business contacts and matchmaking in Thailand and ASEAN.
  10. Provision of an extensive Asian business network for networking, lobbying and connecting with local industries and global players.
  11. Tax and social security registration, monthly accounting, reporting and yearly audit.
  12. A holistic approach to business consulting for the Thai and ASEAN market development.

The Consulting House encourages foreign investors to benefit from this twelve-in-one approach to reduce expenses, administrative burdens, and internal coordination work. A comprehensive consultancy and support offer is available on request.

Board of Investment: Unknown benefits

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The Thailand Board of Investment is the government agency to support, assist and promote foreign direct investments in Thailand. Apart from this main purpose, its activities cover domestic Thai investments as well as outbound Thai investments in foreign countries.

While its main tax and non-tax incentives are well known, other benefits, especially its government guarantees and scope of protection of foreign direct investment ventures are widely unrecognized. However, it makes sense not to ignore these “small” benefits which might gain a high level of significance during the lifespan of a foreign investment in Thailand’s industries and markets.

Three main incentives: Foreign shareholding, land ownership, tax holidays

If the BOI application is successfully accomplished, the foreigner-owned Thai company is granted a Foreign Business License to carry out business activities, which are under the Foreign Business Act of Thailand restricted to companies with Thai (majority) shareholders only. In case of a Thai Company Limited (Co., Ltd.), three or more shareholders are required, but all of them could be foreign individuals or foreign corporations.

A BOI promoted company can own Thai real estate. This does not mean that the foreign investor can acquire a beach property in Samui or Phuket as a new family domicile. According to the BOI guidelines, the permission is limited to own real estate in Thailand in order to carry on the promoted activity to such an extent as the BOI deems appropriate.

Depending on the specific case, the BOI grants tax holidays on the Thai venture. Tax holidays mean that the corporate income tax rate is reduced for a certain time from 20% to 0%. Also, the withholding tax rate for a profit distribution is reduced from 10% to 0%. Finally, the personal income tax rate on dividends from BOI promoted businesses amounts 0% instead of the progressive tax rate from up to 35%.

“Other” incentives, but highly relevant for a foreign investment

From the tax perspective, the incentives result in a reduction of import duties on machinery and raw or essential materials. Benefits are double deductions from the costs of transportation, electricity and water supply, an additional 25% deduction of the cost of installation or construction of facilities and an exemption of import duty on raw or essential materials for use in production for export. All this has to be agreed on a case-to-case basis with the BOI.

Three non-tax permissions are offered – apart from land ownership: First is the the permission for foreign nationals to enter Thailand for the purpose of studying investment opportunities. Second is the permission to bring skilled workers and experts into Thailand to work in investment promoted activities and last but not least the permission to take out or remit money abroad in foreign currency.

BOI guarantees – an underestimated advantage

BOI promoted companies are protected by the Thai government against the future – to a certain extent. Under the BOI promotion, Thailand guarantees not to nationalize the business activities in the future. The land of smile will not itself undertake new activities in competition with the promoted venture.

Thailand will not monopolize the sale of products similar to the promoted people. It will not impose price controls on the products of the promoted person’s. And it will grant permission to export at all times.

Thailand will not allow any government agency, government organization or state enterprise to import any kind of the product being produced by the BOI promoted company into Thailand by granting import duty exemption.

Protection of the Thailand venture by the Board of Investment

The scope of incentives and guarantees is completed by certain measures to safeguard the foreign investment. The government promises to charge extra import fees into Thailand on products similar to those produced by the promoted activity at a rate not exceeding 50% of the price of overseas insurance and freight charges, effective for not more than one year. If this is not sufficient to protect the FDI, Thailand will increase the measure, even by banning the import of products similar to the local productions. In the case where the promoted person encounters any problem or obstacles in the course of carrying out the promoted activity, the BOI will have the power to render any appropriate assistance.

Latest developments: More incentives for SMEs

The BOI recently approved more incentives for SMEs to cover from currently 40 to more than 100 business activities and increased the ceiling of corporate income tax (CIT) exemption up to 200 percent to enhance SMEs’ competitiveness. Regarding basic tax incentives for activity-based activities, the ceiling of corporate income tax exemption is increased from normally 100 percent to 200 percent, for activities eligible to obtain CIT exemption, meaning the amount of tax exemption on capital investment will be doubled.

Additional tax incentives for merit-based activities are granted if the SMEs operate an activity that enhances competitiveness including research and development, advanced technology training. IP licensing fees, product & packaging design, investment, and expenses conditions will be significantly relaxed to enable SMEs to have a better access to enhanced incentives.

The Consulting House: Effective BOI application support

The incentives, guarantees and protection measures mentioned above obviously leave some questions open. The Consulting House is prepared to provide further information, to guide through the hurdles of a BOI application and to advise on the scope of current benefits for already existing BOI promoted companies.

The Consulting House provides BOI accounting services for BOI promoted companies and companies with BOI promoted and non-promoted activities. Comprehensive cross-border tax planning is provided to cover the tax holiday period as well as the post-holiday years.


This website may contain information regarding legal topics, legal issues, and legal developments. These materials are for informational purposes only. They do not constitute legal advice on any particular set of facts or circumstances. and are not guaranteed to be complete, comprehensive, or up-to-date. Contact the Consulting House for individual advice, support and assistance.

Eastern Economic Corridor: How to find and get the best projects

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Business opportunities in Thailand’s new flagship investment zone

Thailand’s main industrial area has been formerly known as the Eastern Seaboard. As the “Detroit of the East“, Map Ta Phut and other industrial estates had been the birthplace of Thai heavy industry, such as the automobile, petrochemical, and electronics industries.

The eras of industrial revolution go now one step further with the development of Thailand 4.0. The extended Eastern Seaboard area, covering the provinces Rayong, Chonburi, and Chachoengsao are now promoted as Eastern Economic Corridor (EEC). To implement the EEC, the government has set out three pillars: infrastructure development, super-generous incentives, and investment facilitation.

This special economic zone of more than 13,000 square km will support the fast-growing industries smart electronics, next-generation automotive, biotechnology, efficient agriculture, and food innovation, as well as high-income and medical tourism. Also targeted are aerospace, automation and robotics, bio-chemicals and bio-energy and medical and healthcare.

To speed up the developments, the government decided to eliminate unnecessary procedures and accelerate the entire process, including the selection of private-sector partners. Under the term PPP EEC TRACK, the contracts on public-private partnerships can be signed within eight to 10 months. This has to be seen in comparison with the procedures as set out in the Private Investments in State Undertakings Act 2013 which require around 40 months and even traditional fast-track procedures that take twenty months.

The EEC Eastern Economic Corridor will be massively supported to accelerate the economic growth. This includes the development of public utilities, logistics, transportation systems, and human resources. The overall package seems to be highly attractive especially for foreign investors.

The Consulting House: Comprehensive investment support and representation

The Consulting House is deeply involved in the new developments and provides information how to benefit from Thailand 4.0 in Rayong, Chachoengsao, and Chonburi, but also the rest of Thailand. The following all-in-one services are available:

  1. Depending on your search profile, we provide you with a general overview of the legal and regulatory framework in the targeted industry. This is possible for the so-called S-curve industries which are smart electronics; medical and wellness tourism; affluent, agriculture and biotechnology; food; logistics and aviation; robotics for industry; next-generation cars; biofuels and biochemicals; digital; and medical. However, there are certain other sectors which are attractive for foreign investments in the EEC.
  2. We keep you up to date with public bidding processes, forthcoming government initiatives, public-private partnership opportunities and informal tenders. All Thai-language bidding documents are translated and clearly explained.
  3. We advise and represent foreign investors in bidding processes, taking into account formal requirements and deadlines. We act as local contact person and represent foreign investors in meetings and hearings.
  4. We advise on benefits and BOI investment promotion opportunities for the targeted project and inform about location dependencies and other restrictions if any.
  5. We advise and support regarding the required corporate structure, the company formation and all legal and business aspects connected herewith.

Contact the Consulting House for a specific support offer for investments in the Eastern Economic Corridor.

d2 consult international Asia pacific

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D2 consult international is increasing its Southeast – Asia focus and Dr. Peter Lampl as Representative Director and Business Development Consultant of D2 supports the company on its successful way to the next stage.

D2 consult international has been engaged in some of the MRTA subway projects in Bangkok in the last 10 years; eg in the Blue Line Extension and in Metro Bangkok Purple Line.

Peter Lampl, Gen. Khun Tan , Olav Doellmann

D2 consult international is founded 1986 by the two civil engineers Harald Wagner and Alfred Schulter, focusing on planning and research for underground construction projects.

2009 D2 consult international joint Dar Al Handasah group, one of the top ten international engineering consulting companies.

TWF goes ASEAN, entering the Thai market

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DI Wolfgang Tinhof, CEO of TWF, Khun Tan, local cooperation partner Khun Sam, user of TWF equipment, Dr. Lampl, MD of LC

TWF Show case in Bangkok

LBCC Lampl Business & Competence Center Co., Ltd, LC Lampl Consulting Co., Ltd., and Dr. Peter Lampl together with Mag. Markus Leitner, head of B4Y GmbH, Graz, Austria supported  and guide TWF on their way into the Thai market and arranged together with the Austrian Embassy and the Austrian  Chamber of Commerce an Show case to demonstrate in practice the shoring systems produced by TWF.

 

TWF

Trench Shoring Systems – Production

From 2004 onwards, the long experience of shoring construction technology has been offered under the name of TWF.

Since 2012 TWF is producing trench shoring systems in their factiory in Heinsberg, Germany.

TWF offers services in the field of trench support equipment including the production, sale and remntal of trench shoring systems as well as tailor made or custom made solutions for special trench shoring applications.

TWF offers a wide range of products, from light to heavy trench shoring box – systems, pile chamber, as well as single and double slide rail shoring systems.

Update on Thailand’s investment promotion

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Foreign direct investments in Thailand’s industry are governed by a restrictive foreigner legislation (Foreign Business Act, Land Code, etc.). Under this regime, foreign businesses are not permitted to do business in Thailand or to acquire legal ownership in real estate. The handling of work permits, licenses, etc.  could be felt as slow and certain bureaucratic hurdles and red-tape might slow down the investment process.

BOI promoted foreign investments

Thailand is well aware that these restrictions limit the scope of foreign direct investments. Therefore, an investment promotion agency (BOI, Board of Investment) allows qualified foreign investments by foreign-owned companies and grants additional fiscal and non-tax incentives. The devil is in the details, but in general, these investments can benefit from the BOI promotion:

  • Technology and innovation development
  • Electronic industry and electric appliances
  • Metal products, machinery, and transport equipment
  • Light Industry
  • Chemicals, paper, and plastics
  • Agriculture and agricultural products
  • Mining, ceramics and basic metals
  • Services and public utilities

The Board of Investment puts its primary focus on those investments, which are classified as activities of particular importance and benefits to the country:

  • Electronic design, software and cloud services
  • Research and development, creative product design and development centers
  • Biotechnology, engineering design, scientific laboratories and calibration services
  • Manufacture of airframes, airframe parts, and major aircraft appliances, e.g. engines, aircraft parts, propellers and avionics
  • Production of electricity or steam power from waste or refuse-derived fuel and Energy Service Company (ESCO)

Scope of investment promotion

The incentives granted can be distinguished into fiscal incentives and non-tax incentives.

Tax incentives are the exemption of corporate income tax on the net profit and dividends derived from the promoted activity for a specified period. Also, import duties on machinery are exempted or reduced, or on raw or essential materials imported for use in production for export. A double deduction from the costs of transportation, electricity and water supply.

As non-tax incentives, the promoted company can have 100% foreign shareholders. The permit for foreign nationals to enter Thailand to study investment opportunities., the permit to bring in skilled workers and experts and the permit to own land are just some of the other advantages.

Without going into details, it can be summarized that each foreign investment should carefully be screened for the possibility to obtain an investment promotion by the Board of Investment. The Consulting House is experienced to guide foreign companies through the required decisions and steps to get their investments promoted by the BOI.

Dr. Peter Lampl, new Vice – President from Rotary Club Bangkok D-A-CH

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Dr. Eder with business partner of D/A/CH – Consult at Rotary Installation Dinner

Peter Lampl is also in the Board of the Rotary Club Bangkok D-A-CH the Head of Fundraising for the Rotary Year 2017 / 2018 .

Rotary Club Bangkok DACH created a new format and promotes this this exciting new activity in 2018 very much. We are talking about a great event with the main focus of coming together, meeting Rotarian fiends, family member and also new Rotarians, friends of Rotarians as well as friends of the Rotarian idea and the Rotarian spirit. Doing something good and having fun at the same time is always a in general a concept.

Our cruising trip will take place in February 24, 2018. We will start at 4.30 PM in Pattaya and we also coming back to Pattaya at about 7.30 PM after a few hours of having a great time.

The German Foreign Business Act

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While Thailand’s legal system comprises strict rules to limit foreign business activities, foreign acquisition of real estate and residence permit, Germany is much more open to foreign investors. In general, there are no restrictions or additional requirements to set-up a foreign-owned business in Germany. This creates a leveled playing field for Thai and other foreign investors to compete with domestic corporations in Germany.

An exception to this rule are the provisions of the Foreign Business Act (“Aussenwirtschaftsgesetz”), also translated as  Foreign Trade and Payments Law or Foreign Trade Act, enhanced and specified by a governmental regulation (“Außenwirtschaftsverordnung”).

However, this legislation has to be seen as a very specific exception rule for a small scope of acquisitions in Germany, not as a general limitation of foreign investments. Domestic branches and permanent establishments of foreigners and foreign branches and permanent establishments of residents shall be regarded as legally independent. Limitations apply in cases only,

  1. to guarantee the essential security interests of Germany,
  2. to prevent a disturbance of the peaceful coexistence of nations or
  3. to prevent a substantial disturbance to the foreign relations of Germany,
  4. to guarantee the public order or security of Germany or
  5. to counteract a danger to the coverage of vital needs in Germany or in parts of Germany and thereby to protect the health and life of human beings.

Restrictions and obligations to act shall be limited in nature and scope to the extent necessary to achieve the objective. They shall be framed in a manner which intervenes as little as possible in the freedom of economic activity. Restrictions and obligations to act may affect existing contracts only if the objective is in serious jeopardy. They shall be revoked as soon as and insofar as the reasons warranting their imposition no longer apply.

The Consulting House and its German professionals are well experienced to advise on foreign investments into German industries. Ask for our specific German know-how to acquire existing stock corporations and key industries in the powerhouse of Europe.

The underestimated importance of accounting

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Accounting is a centuries-old craft that has changed significantly after the invention of computers and the Internet. While the requirements for office equipment increase, the expectations regarding the accountant run low. Modern software often replaces personal expertise.

This approach is not always successful. For foreign-owned companies in Thailand, accounting is sometimes a minefield. This article explains why a regular review of accounting from the point of view of a German tax advisor can be meaningful.

Legal requirements

The Thai accounting standards are greatly similar to the generally accepted German accounting principles as well as the current international rules. The caution of a prudent businessman is always advised.

Every Thai Limited Company requires proper accounting and an audited annual financial statement. Unlike in Germany, there is no exemption for small companies that need no auditor’s certificate. A dependent branch is subject to these principles as well, even for a non-taxable representation office.

The quality of external accounting services lacks transparency. Often the client judges on secondary virtues such as accessibility at all times, an English-speaking contact person or timely submission of monthly documents and annual financial statements.

Accounting as a steering instrument

Experience shows that externally managed accounting is not always flawless. The observing client sometimes identifies errors at first. Typically discovered accounting errors are corrected at the expense of the customer.

The error detection and correction often require the involvement of the management. This results in a time burden and, therefore, indirectly results in higher cost. The working hours of the entrepreneur are one of the most limited resources. A cheap service, combined with testing and cleanup work from the management, is actually an inefficient, expensive accounting service.

The existing option rights and leeway for assessment are well known to the accountant. However, he has no knowledge of how to use these features efficiently for the benefit of the company. He, therefore, focuses on the safest assumed way, and he follows the methodology of the past. However, well-intentioned does not always mean good. In the end, accounting loses its function as a steering instrument.

Which action is needed?

What are the critical points at which an intervention by the company is required? The Thai Foreign Business Act restricts direct investments from abroad. These restrictions generally require a more complex group structure than necessary from a business point of view.

This often results in a different viewpoint from the German and Thai perspectives. Accounting of the group structure is a very sensitive topic. The consistency principle asserts that any (wrong) accounting decision has to be continued over many years.

In the end, small inaccuracies can develop over the years into big problems. This is often not obvious before the point of disinvestment, which means the sale of the company.

This issue arises not only in the recording and accounting of a company’s shares. The financing of the company is often more problematic. The application of normal Thai accounting principles may lead to a breach of Thai foreign law. If this is not carefully identified in advance, this problem can be hidden in the accounts and gains can gather more and more significance from year to year.

A project promoted by the Thai Board of Investment is typically subject to specific requirements, particularly on the equity side. An accounting policy that does not recognize these requirements will probably not take them into account. Subsequent repair work is difficult and expensive.

The same applies with respect to the overall group accounting policy. This may address financial covenants or a transfer pricing strategy, for example. If the policy is not properly communicated to the accountant or not precisely understood, it is no wonder that unwanted results will arise.

A detailed review of the monthly financial notes is also required in the context of sophisticated tax planning. All things considered tax-wise, the inclusion of the German and international tax laws can help companies avoid expensive contradictions.

German philosopher Johann Gottfried Herder offers the insight that time is a strict accountant who overlooks nothing and never lies. Behind the short-term monthly data and figures stands a commitment for a balance sheet decision that will be relevant to the company even in later years. The attitude of looking down on accounting misjudges its sustainable relevance for a business’s success. The Consulting House provides professional accounting and audit to meet the expectations of international clients.