Update on the ownership of company property in Thailand by foreigners to circumvent the ownership restriction
Can foreigners own land or a condominium unit beyond the foreign ownership quota with a Thai limited partnership in Thailand? In the new regulations issued by the Thai government (as of May 2006) this circumvention of the law by foreigners is no longer ignored by the Thai government.
Thai law allows the purchase of land or condominiums by a partially foreign-owned Thai company as long as the maximum foreign ownership does not exceed 49 percent. Under Thai law, foreigners are allowed to control a Thai company that owns real estate, and therefore it could be argued that foreigners may have a form of absolute ownership or control over property that would normally be restricted to foreign ownership. (land or a condominium unit beyond foreign ownership). ownership fee).
Ownership of a partially foreign-owned Thai company is not illegal under Thai law, but the Thai government is restricting and discouraging the misuse of Thai companies by foreigners to circumvent foreign ownership restrictions in Thailand. The Thai government has issued guidelines and regulations that must be enforced by the local Land Offices when it comes to a partially foreign-owned company.
Before the land office guidelines issued by the Department of Lands and the Ministry of the Interior from May 2006, it was common practice for foreigners to own property through Thai limited partnerships. Currently this is much less common. According to the land office guidelines and regulations, when a partially foreign-owned company registers a property (land or condominium beyond the foreign ownership quota), the company and the Thai shareholders of the company should be investigated by the official of the land office before the registration and transfer of the property. Property is allowed to the company. That is, is it a real company or created to circumvent the law? Are the Thai shareholders of the company actual shareholders or are they acting as nominees on behalf of a foreigner? If the purchase of the property by the company appears to be a circumvention of the law, the official will not allow the transfer and should report the matter to the Department of Lands and await further advice from the Minister.
Existing Thai companies partly foreign owned (with up to 49% foreign ownership) that own property are not investigated by the Thai government (unless they do not comply with the law).
The main practical drawbacks of setting up a business for real estate by a foreigner are:
1. The purpose of a company cannot be to circumvent foreign ownership restrictions in Thailand. This would be an illegal purpose that would nullify the legal establishment and registration of the property in the name of the company according to the Civil and Commercial Code and illegal according to the Law of the Land Code.
The company must have a business purpose and operate as a normal company and present annual balance sheets and correct accounting (i.e. according to Thai law, the company cannot simply be a ‘special purpose company’ or a ‘land holding company ‘inactive for abroad).
2. Foreigners cannot use Thai registered shareholders in the company. Under current guidelines, ‘real shareholders’ are roughly defined as Thais with sufficient income and a credible financial and employment history. Are they economically viable? They must be able to prove this at the Land Department (and be present) when registering the property with the company.
3. Whenever legal acts (for example, selling the property) are registered with the Land Department and the name of a foreigner appears on company documents, the land office official should investigate Thai shareholders, including if the alien is removed from the updated list of shareholders but appears in the Memorandum of Association such investigation is required.
Foreigners who decide to go the company route with additional property in mind (land, land, and house or condominium) should be advised by a Thai attorney with experience in commercial and property law. Too often, foreigners setting up businesses to own property are uninformed, not properly advised, and end up in trouble at the Land Department registering property due to mistakes made by an inexperienced attorney unfamiliar with the latest Land Office regulations.