Can foreigners still own land or a condominium unit beyond the foreign ownership quota with a Thai limited company in Thailand? In new regulations issued by the Thai government (starting in May 2006) this circumvention of the law by foreigners is no longer ignored by the Thai government.
Thai law permits the purchase of land or condominium by a partly foreign owned Thai company so long as the maximum foreign shareholding does not exceed 49%. Foreigners are under Thai law allowed to control a Thai company that owns immovable property and therefore you could argue that foreigners can have a form of freehold ownership or control over property that would normally be restricted for foreign ownership (land or a condominium unit beyond the foreign ownership quota).
Property ownership by a partly foreign owned Thai company is a such not illegal under Thai law, but the Thai government is restricting and discouraging the misuse of Thai companies by foreigners to circumvent foreign property ownership restrictions in Thailand. The Thai government has issued guidelines and regulation that must be applied by the local Land Offices when they are dealing with a partly foreign owned company.
Before the land office guidelines issued by the Land Department and Ministry of Interior starting in May 2006 it has been common practice for foreigners to own property through Thai limited companies. Currently this is much less common. Under the land office guidelines and regulations, when a partly foreign owned company is registering property (land or condominium beyond the foreign ownership quota) the company and the Thai shareholders in the company must be investigated by the land office official before registration and transfer of the property to the company is allowed. I.e. is it a real company or set up to circumvent the law? Are the Thai shareholders in the company real shareholders or acting as nominees on behalf of a foreigner? If the property purchase by the company appears to be a circumvention of the law the official will not allow transfer and must report the matter to the Land Department and wait for further advise from the Minister.
Existing partly foreign owned Thai companies (with up to 49% foreign shareholding) owning property are not investigated by the Thai government (unless they do not comply with the law).
The main practical drawbacks of setting up a company for property ownership by a foreigner are:
1. The purpose of a company may not be to circumvent foreign property ownership restrictions in Thailand. This would be an illegal purpose making the legal set up and property registration into the company’s name void under the Civil and Commercial Code and illegal under the Land Code Act.
The company must have a business purpose and be in operation as a normal company and file yearly balance sheets and correct accounting (i.e. the company can under Thai law not be merely a ‘special purpose company’ or dormant ‘land holding company’ for the foreigner).
2. Foreigners are not allowed to use Thai nominee shareholders in the company. According to the current guidelines ‘real shareholders’ are roughly defined as Thais with sufficient income and believable financial and employment history. Are they financially viable? They must be able to proof this at the Land Department (and be present) when registering the property to the company.
3. Whenever registering legal acts (e.g. selling the property) at the Land Department and a foreigner’s name appears on the company documents the land office official must investigate the Thai shareholders, even if the foreigner is removed from the updated shareholder list but appears on the Memorandum of Association such investigation is required.
Foreigners who decide to go the company route with additional property ownership in mind (land, land and house or condominium) should be advised by a Thai lawyer with experiences in business and property law. Too often foreigners who set up companies to own property are uninformed, not properly advised and end up with problems at the Land Department when registering the property because of mistakes made by an inexperienced lawyer not familiar with the latest Land Office regulations.