Foreign Land Ownership Options in Thailand

[Sundance2020]

Land Ownership by a Foreign National
The bad news right in the beginning: Foreigners cannot own land in Thailand but (in theory) individual foreigners can own land up to 1 rai (1600 square meters) in specified areas for residential purposes through a Board of Investment regulation (section 96 bis Land Code Act) which requires in addition to the land purchase a 40 Million THB investment into Thailand in specified assets or government bonds beneficial to the Thai economy. If ever granted (unlikely) it is under strict conditions and the land must be located in specified areas and requires approval of the Minister of Interior. Moreover this ownership is not transferable by inheritance, therefore limited to the life of the person granted the right to own the land for residential purposes under this exception. In practice, even if you would be very rich, this is not a viable option. Besides this one exception land ownership in Thailand is strictly prohibited for foreign individuals Under the Thailand Civil and Commercial Code foreigners in principle have the same property rights as are available to Thai nationals, however it is under the Land Code Act B.E. 2497 (1954) prohibited for foreigners to own or possess land in Thailand. As ownership of land is an essential element of any real estate (land and house) ownership it leads to the conclusion that, besides an apartment in a licensed condominium, there is no freehold ownership of real estate (land and house) available for foreigners in Thailand.

Foreign Land Ownership under a Treaty
Under the Thailand Land Code Act foreigners may own land under the provisions of a treaty, however the last treaty allowing foreigners to own land in Thailand was terminated in 1970 and there is currently NO treaty with any country allowing foreigners to acquire and own land in Thailand. In fact anyone who contravenes with the above section shall be punished with a fine not exceeding twenty thousand baht or an imprisonment not exceeding two years, or both (section 111 of the Land Code Act).

• Section 86 Land Code Act:
  'Foreigners may acquire land by virtue of the provisions of a treaty giving the right to own immovable properties and subject to the provisions of this Code'

Exemptions for Foreign Land Ownership
In theory foreign individuals can own land up to 1 rai (1600 square meters) under section 96 bis of Land Code Amendment Act (1999) for residential purposes through the Board of Investment which requires a 40 million baht investment into Thailand in specified assets or government bonds beneficial to the Thai economy. If granted it is under strict conditions and in specified areas and requires approval of the Minister of Interior. In practice, even if you would be able to make an additional investment in the Thai economy of 40 Million THB, this is not a viable option. In addition this ownership is not transferable by inheritance, therefore limited to the life of the foreigner granted the right to own land under this exception.

Foreign Companies
Ownership of land is also not open to foreign companies, including Amity treaty (US) companies, BVI or Hong-Kong limited companies or any other foreign juristic entity. These companies may, similar to foreign individuals, have a minority shareholding in a Thai company but may not use nominee shareholding structures to create a Thai company for land ownership. Foreign corporations with substantial investments benefiting the Thai economy may have special privileges and exemptions for land ownership granted for the duration of their business in Thailand under:

• Section 27 of the Investment Promotion Act
• Section 44 of the Industrial Estate Authority of Thailand Act
• Section 65 of the Petroleum Act

Foreigners Inheriting Land
Again in theory, a foreigner married to a Thai national may as a statutory heir with approval of the Minister of Interior inherit land under section 93 of the Land Code Act, however this section must be read in combination with the above section 86 of the Land Code Act (i.e. in relation to foreign ownership granted under a treaty) therefore it does not apply to foreigners inheriting land from a Thai spouse. They may inherit land but cannot register ownership and must dispose of the land within one year from the date of acquisition (Land Code Act).

Foreign Controlled Thai Companies
Up till May 2006 it was common practice for foreigners to form a Thai company and to hold land under a Thai company structure. Since the land office guidelines starting in May 2006 followed by the business registration rules and the proposed amendments to the Foreign Business Act this practice is less common. Recent discussions in the Thai government to further clamp down on this structure through new laws and regulations have led to the conclusion that a Thai company structure is not a viable or secure vehicle to create a long term foreign controlling interest in real estate in Thailand.

[Sundance2020]

Thailand Nominees | Thailand Land Ownership on behalf of Foreigners

Thai Nominee Land Ownership
Thai land laws prohibit foreigners from owning land in Thailand but also makes it illegal for Thai nationals to act as an agent or a proxy nominee owner of the land on behalf of a foreigner (section 96 Land Code Act). When the Thai national is acting as the agent of the foreigner the actual owner is legally under Thai law considered the foreigner (leading to illegal foreign land ownership). You could use the same section to argue that it is forbidden for Thai companies to hold the land on behalf foreign nationals, but with property holding companies the main additional issue is that the Thai shareholders hold the shares in the company on behalf of the foreigner, the actual owner of the shares is legally considered the foreigner and therefore the company deemed foreign (leading to illegal foreign land ownership).Land laws.

• Section 96
  Land Code Act: 'When it appears that any person (including a juristic person) has acquired land as the owner in place of an alien or juristic person under the provisions of Section 97 and 98, the Director-General shall have the authority to dispose of such land and the provisions of Section 94 shall apply mutatis mutandis'.
• Section 113
  Land Code Act: 'Any person who acquires land as an agent of an alien or juristic person under the provisions of Section 97 or 98 shall be punished with a fine not exceeding twenty thousand baht or an imprisonment not exceeding two years, or both'.

NOTE: When a nominee land ownership is put in place both parties risk being fined and jailed !!

Practical
A structure that sometimes is put in place is that a foreigner loans money to Thai to buy land, and in consideration for the financial loan the Thai national rents the land back to the foreigner under a 30 year land lease agreement whereby rent is set-off against payment of interest on the loan. The legal restriction in this setup is that the Thai may not be deemed the agent of or nominee owner on behalf of the foreigner. When the Thai national can’t be seen as the freehold owner this structure becomes illegal.

• Freehold owner could be defined as the person with the right to sell, mortgage, transfer or exchange the property, and/or to exclude others from doing these things. The Thai national must have the title to the property, to the exclusion of the foreigner. The Thai must have the right to dispose of the property. The foreigner may have an interest in the property through a lease or usufruct but he will not obtain the title to the property.In any lease structure there are tax liabilities for the Thai land owner. Income or assessed income derived from a lease is taxed as personal income for the Thai individual.
• Section 74 Land Code Act If there is reason to believe that a Thai national is purchasing land on behalf of an alien the land office must interrogate the parties and could refuse transfer of land to the Thai national (section 74 Land Code Act). For this reason, if a nominee structure is put in place, transferring land to the Thai national and at the same time registering rights for the benefit of a foreigner (a real estate lease or usufruct) is usually not done on the same day but usually several weeks later. Section 74: '.... ..... if there is reason to believe the recording of such rights and legal acts is in evasion of the law or there is reason to believe the purchaser is purchasing on behalf of an alien, instructions shall be asked of the Minister whose word shall be final'.

Actual and Nominee Owner
What does it legally mean under Thai law when land is purchased by a Thai on behalf of a foreigner? Under Thai supreme court judgement (e.g. Scj. 2690/2538), when a foreigner owns land through a Thai national who acts as the agent or owner on behalf of the foreigner and who appears as the registered owner of the land, then such transaction/ agreement is void (illegal) but the acquisition of the land by the foreigner (considered the 'principal' or true owner) is still effective, and as the real owner the foreigner must dispose the land within a period of time fixed by the Director General of Land Department. The foreigner must receive the proceeds from the sale of the land.

Nominee Practice Example Thai Spouse and Nominee
A Thai national who is married to a foreigner can also be deemed an illegal nominee acting on behalf of the foreign spouse, but he or she is not a nominee for land ownership if the correct legal procedure for the acquisition of land by a Thai national married to a foreigner has been followed.

Land Registration in a Thai Girlfriend's Name
A foreigner bought land and had title deed issued in Thai girlfriend's name. Later, the girlfriend applied for a mortgage and tried to use the land as collateral, but the Land office refused to allow this because she did not submit the original title deed with her application. The Thai girlfriend claimed that the foreigner had the possession of the land title deed and applied for a replacement land title deed to be issued to replace the original deed. The foreigner requested the Land Office not to issue a replacement title deed.

• The foreigner's application for the Land Office to deny issue to Thai girlfriend of a replacement title deed is believed to express his intention to prevent her from distributing, selling or transferring the land, or using it to borrow money or as collateral for debt repayment. In this case it must be deemed that the Thai girlfriend has acquired the land under section 96 of the Land Code, but as the owner in place of the foreigner, which contravenes section 113 of the Code.

• In doing so she has provided false information to government officers, which contravenes section 137 of the Penal Code, making her liable, if found guilty, to a term of up to six months in jail or a fine of 1,000 baht, or both. She has also contravened section 267 of the Penal Code, which carries a penalty of up to three years in jail and/or a fine of 6,000 baht. (read Penal Code).

• The foreigner has acquired land by means that contravene section 86 of the Land Code, and so has committed an offense aiding and abetting the commission of an offense under section 111 of the Land Code, which carries a penalty of two-thirds of that of the offense itself.

• The Land Department ordered the local Land Office to file a complaint with the Inquiry Officer (the relevant legal authority) and take legal steps against both the foreigner and the Thai girlfriend.

• The Land Office was also ordered to inform the foreigner that he must dispose of the land within one year of receiving official notice to do so. If the foreigner fails to dispose of the land within the time given, the Director-General of the Land Department is authorized to dispose of the land and retain a fee of 5% of the sale price before any deductions or taxes.

The Land Office must inform Foreigner and the Thai Girlfriend of;

• The person who is to be registered as the new owner of the land - including an person the foreigner consents to selling the land to – must be a person who can lawfully possess the land;
• The sale price of the land must be fixed by the foreigner, and the foreigner must be the recipient of the money;
• As the person in whose name the land is registered, the Thai girlfriend's duty will be to manage the disposal of the land. But she will not be involved in selecting the recipient.

Thai Spouse and Nominee
A Thai national who is married to a foreigner can also be deemed an illegal nominee acting on behalf of the foreign spouse, but he or she is not a nominee for land ownership if the correct legal procedure for the acquisition of land by a Thai national married to a foreigner has been followed.

Enforcement and Punishment Measures in Land Holding as an Agent for a foreigner

• If it appears the fact last that there is the threat of land holding as an agent for a foreigner, the measures to the land disposal and the offender punishment shall be enforced as follows;
• Measures on land by enforcement to dispose of the land in accordance with legal procedures. Under Section 94 and 96 of the Land Code, stipulate the regulation when it appears that person who obtained the land as an agent for a foreigner or foreign entity or foreigner who obtained the land illegitimately, he/she shall dispose of such land in the portion of his/her possession within the period of time specified by the Director-General of the Department of Lands which shall be not less than one hundred eighty days and not more than one year. The Director-General shall have the power to dispose of such land if time limit elapses.
• Measures on individuals with criminal offense and to be punished in accordance with laws. In the case of applying for land registration as an agent for a foreigner, there will be a criminal offense as follows;
• Offenses against the Criminal Code Section 267 due to information the competent official to recode false statement in the official documents shall be subject to punishment with an imprisonment of not exceeding three years or a fine of not exceeding 6,000 THB or both.
• Offenses against the Land Code. The alien who commits the offenses under the Land Code Section 111, due to the acquisition of land illegitimately; shall be subject to punishment with a fine of not exceeding 20,000 Baht or an imprisonment of not exceeding two years or both. Juristic person who commits the offense under the Land Code Section 112, or Section 113 in case of Thai people; due to the acquisition of land as the agent for a foreigner or foreign entity shall be subject to punishment with a fine of not exceeding 20,000 THB or imprisonment of not exceeding two years or both.

[Barfly]

Proposals to increase Foreign Ownership Quota for Condos, extend Leasehold Rights Rejected

While plans for a 10-year visa scheme for the wealthy and high-skilled professionals is moving forward, proposals to increase the foreign ownership quota for condominiums and the maximum lease for foreigners were rejected by Thailand’s Centre for Economic Situation Administration. The proposal to allow foreigners to hold ownership of one rai of land for residential purposes was agreed in principle.

In its meeting last month, chaired by PM Prayut Chan-o-cha, officials decided to scrap the proposals for an extension of leasehold rights to the current maximum of a 30-year lease for expats to a 50-year lease as well as an increase of the foreign ownership quota for condominiums, which is currently set at 49%. Some say the foreign ownership quotas are still not being reached, so that rejected proposal won’t have much impact. The chief corporate strategy and creation at SET-listed developer AP Thailand Plc told the Bangkok Post that even Bangkok and Phuket, with large expat communities, are not hitting the 49% quota.

“Both Bangkok and major foreign-tourist destinations like Phuket are still seeing a condo ownership quota of less than 49%. As a result, the rejected proposals will not have an impact on property developers.”

The chairperson of property consultant CBRE Thailand told the Bangkok Post that the government should reconsider the proposal to extend leasehold rights from 30 years to 50 years. The extension of the leasehold rights is intended to make investments in large-scale projects more attractive. Foreigners cannot buy houses on a freehold basis, so a longer leasehold would potentially increase demand in the low-rise housing market.

Condo Ownership in Thailand by Countries