Real Estate Purchase in Foreign Controlled Thai Company

Under the Thai law, using a foreign controlled Thai company to own land in the country is not allowed and punishable by the law. However, Thai law allows land ownership by a legitimate partly foreign owned Thai company if the foreign shareholding does not exceed 49% in number of shareholders and percentage of share.

Moreover, in view of purchasing real estate in a foreign controlled Thai company, it is not allowed for foreigners to use nominee Thai shareholders to create a majority Thai owned company for the purpose of land ownership. Thus, the use of this set-up to evade the Thailand Land Code Act or Foreign Business Act (FBA) is illegal and any foreigner setting up a company using nominee shareholders is in violation of foreign ownership regulations and creates an unlawful ownership.


Basics of Thailand Real Estates Laws

Thailand laws restrict foreigners from owning land in Thailand and in most cases these laws limit foreign property possession in the country. Moreover, purchasing a real estate property in Thailand follows a different legal process than buying realty in a country offering absolute property ownership for foreigners. Property laws in Thailand are straightforward in entailing that foreigners cannot own land but sales structures aimed at foreigners are often multifaceted and confusing. Real estate in Thailand can legally be divided into the following objects:


  • Apartments registered under the Condominium Act of Thailand
  • Apartments not registered under Condominium Act
  • Land
  • House
  • Land and House


Laws Affecting the Determination of a Thai and Foreign Controlled Companies

According to the Thailand Land Code Act, a company is defined as “foreign” or “alien” if more than forty-nine percent (49%) of its capital is owned by foreigners or more than half of the company shares. As of July 2008, the private limited company must have a minimum of three (3) shareholders at all times, and for it to be considered Thai controlled company under the Land Code Act, it must have at least two (2) Thai shareholders and one (1) foreign shareholder. The latter may possess up to forty-nine percent (49%) of the total shares.

Furthermore, under the Foreign Business Act (FBA), a company is recognized as foreign if half or more of the shares of the juristic person is held by foreigners. On the other hand, a company is still considered Thai controlled company under this Act even if only one (1) Thai shareholder as long as he or she owns the majority or more than fifty percent (50%) of the shares in the company.


New Property Laws Set Up by Ministry of Interior and Local Land Bureau

It has been reported in the Ministry of Interior of Thailand that there have been foreigners working with Thais or had commissioned the Thais to put up corporation to do property dealing by primarily purchasing land and house for the principle of making this property a home or office and afterwards apply to modify the usage to for sale or subdivide and sale to foreigners which constitutes a violation of law.

In connection to this, the Land Bureau and the Ministry of Interior jointly set up new guidelines which come into effect on May 25, 2006, for legal entity which has foreign ownership. These affect Thailand’s property sector by requiring all partly foreign owned companies to demonstrate the source their capital before being allowed to buy land or house.

Furthermore, these new guidelines provide that if a company appears to have foreigners as shareholder or Director or of there is a reason to believe that it is nominating the Thais to hold shares for the foreigners, the land department office of Thailand must investigate the income of every Thai shareholder in the legal entity by looking into their work history of what kind of work they have done and what monthly salary they earned, all of these must be proved by evidence.

Consequently, it was a common practice for foreigners to form a Thai company for the purchase of land, house, or condominium beyond the foreign ownership quota in Thailand. As long as the company had majority Thai shareholdings, there were no restrictions when purchasing a property and the partly foreign owned company was treated like any other Thai company.

Nowadays, the government is restricting the illegal use of Thai companies and nominee shareholding structures by foreigners. Under new regulations, the officials must follow procedures when dealing with partly foreign owned or controlled Thai companies to determine if the Thai shareholders are not illegally acting as nominee shareholders on behalf of foreigners and if the company is not set up to circumvent the law.


Formation of a Thai Company for Foreign Property Ownership

Nowadays, the exercise of holding companies for property purchases by foreigners is much less common. A Thai company created merely as a facade for foreign property ownership is against the laws of Thailand and leads to illegal foreign ownership. Moreover, when a foreigner decides to be the owner of a property in a Thai company in Thailand, the foreigner will generally not become visible on the company formation documents such as Memorandum of Association or Shareholder list. After the property has been transferred to the one hundred percent (100%) Thai company, up to forty-nine percent (49%) of the preferred shares will be transferred to the foreigner. A company that owns a real property must appear to be a normal active company running a business and file yearly balance sheets and correct accounting. It may not be a dormant property holding company.