Foreign Land Ownership and Limited Companies in Thailand
Thai company laws and the FBA permits management and foreign control in a Thai company through a preference shares and Thai land laws allow the purchase of land by a Thai company with foreign shareholders, as long as foreign participation in the company does not exceed 49% in shares and number of shareholders. The company must however upon registration of ownership comply with the land office guidelines restricting the use of Thai nominee shareholders in a Thai company.
Foreign companies and companies incorporated under Thai law that are considered foreign (e.g because the Thai shareholders are deemed nominees) are not allowed to own land or condominium beyond the foreign ownership quota.
There are 3 foreigner definitions relevant under Thai law;
- the foreigner definition under the Land Code Act
- the foreigner definition under the Foreign Business Act
- the foreigner definition under the Condominium Act
1 - Section 96 of the Land Code Act:
"The following juristic persons may have the same rights in land as aliens:
- Limited companies with more than forty-nine per cent of their capital owned by aliens or more than half of whose shareholders are aliens, as the case may be; (For the purposes of this Chapter, if any limited company issues bearer shares, the shares shall be deemed held by aliens)
- All limited partnerships or registered ordinary partnerships with more than forty-nine per cent of their capital owned by aliens or more than half of whose partners are aliens, as the case may be;
- Societies including cooperatives more than half of whose members are aliens or which operate especially or for the most part in the interest of aliens;
- Foundations whose object is especially or for the most part in the interest of aliens;
- Any juristic person in this Section which has manager or member of the board of directors who is an alien."
2 - Section 4 Foreign Business Act:
"Foreigner means:
- Natural person not of Thai nationality
- Juristic person not registered in Thailand
- Juristic person registered in Thailand having the following characteristics (a) Having half or more of the juristic person's capital shares held by persons under (1) or (2) or a juristic person having the persons under (1) or (2) investing with a value of half or more of the total capital of the juristic parson (b) Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager.
- Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2) or (3), or a juristic person having the persons under (1), (2) or (3) investing with the value of half or more of its total capital.
For the purpose of the definition, the shares of a limited company represented by share certificates that are issued to bearers shall be deemed as the shares of foreigners unless otherwise provided by ministerial regulations."
3 - Section 19 Condominium Act:
"Section 19. Aliens and juristic persons regarded by law as aliens may hold ownership of an apartment if the are the following:
- Aliens permitted to have residence in the Kingdom under the Immigration law;
- Aliens permitted to enter into the Kingdom under the investment promotion law;
- Juristic persons as provided in Section 97 and 98 of the Land Code and registered as juristic persons under Thai law;
- Juristic persons which are aliens under the Announcement of the National Executive Council No.281 dated November 24, B.E. 2515 (repealed by the Foreign Business Act) and have obtained promotion certificate under investment promotion law;
- Aliens or juristic persons regarded by law as aliens who have brought in foreign currency into the Kingdom or withdraw money from Thai baht account of the person who have residence outside the Kingdom or withdraw money from a foreign currency account."
Note: any juristic person deemed foreign under the Foreign Business Act or the Land Code Act will be deemed a foreign company under the Condominium Act. Any company deemed foreign under the Foreign Business Act is deemed foreign under the Land Code Act.
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The practice of partly foreign controlled Thai companies owning real estate
Up till the May 2006 Land Office guidelines it was common practice for foreigners to purchase property through nominee structured Thai limited companies. As long as the company had a majority Thai shareholdings on paper there were no restrictions and any partly foreign owned Thai company was treated like any other Thai company. Since 2006 the government is restricting the misuse of property holding companies by foreigners in new regulations aimed at preventing the use of Thai nominee shareholders.
The main questions one should ask before forming a company for property ownership in Thailand are:
- Do I have Thai shareholders in the company I can trust?
A company must have at least 3 shareholders who can be foreign or Thai, but to be considered a Thai company under the Land Code Act more than half of its shareholders must be Thai nationals and at least 51% of the shares must be held by Thai nationals. The Thai shareholder may not be nominees acting on behalf of the foreigner but must be regarded as real shareholders. As real shareholders they will have at least a 51% interest in the company, and thus its assets.
- Do I have a business purpose for the company?
The purpose of the company may not be landholding or a property holding vehicle for the foreigner. This would be an illegal purpose, void under the Civil and Commercial Code and illegal under the Land Code Act. The company must have a business purpose and considered active. As an active company the foreigner should be aware of foreign business restrictions under the Foreign Business Act and foreign employment restrictions. Foreigners could be considered braking 2 laws read article...
- Can I comply with the company accounting and reporting requirements in Thailand?
A company cannot be a dormant holding company under Thai company laws and must be considered active and in operation and file yearly balance sheets and correct accounting before the first of May each year. Where the Registrar of Companies has reasonable cause to believe that a company is not carrying on business or in operation (i.e. not submitting yearly accounting) this could lead to fines and removal of the Registrar of Companies (section 1246 Civil and Commercial Code).
A Thai company as a vehicle to circumvent the law is not recommended. If any of the above questions is answered with NO the foreigner should not consider the company route.
In addition
Foreign real estate ownership through Thai companies is not open and and above board under Thai law. Besides possible overall stricter enforcement of existing laws, also the foreigner definition of Thai companies with foreign participation could change overnight, and forcing foreigners owning real estate through limited companies to sell or restructure their company, i.e. giving up control read more...
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