In Thailand, foreign nationals are expressly prohibited from owning land, except in certain cases, such as purchasing apartments in licensed condominiums. The country's laws, in particular the provisions of the Land Act, clearly limit the possibility of permanent ownership of land by foreigners.
However, there is growing interest from foreign investors in the Thai property market. This is stimulating the search for bypass schemes, one of which is the acquisition of properties through a Thai company. However, using a legal entity solely as a holding company to purchase real estate is contrary to the spirit of the law and is associated with a number of legal and financial risks.
How does buying property in Thailand through a company work?
The scheme of acquiring land through a Thai company is based on the use of loopholes in the legislation, arising from ambiguities in the rules. Although the law clearly prohibits foreigners from owning land, the use of a local legal entity allows the illusion of "Thai ownership".
In theory, the company registration procedure involves a series of formalities: reserving a name, filing constituent documents, holding a mandatory shareholders' meeting, obtaining a tax identification number and, if necessary, a business license. At the same time, the acquisition of real estate becomes part of the assets of the company, which must conduct legal business activities with confirmed investments from Thai partners. Thus, using this scheme, a foreign investor, in theory, gets the opportunity to indirectly own land in Thailand through a Thai company.
Various ways to circumvent the law
There are several options through which a foreign investor can attempt to purchase real estate through a Thai company:
Establishing a company with real Thai shareholders:
In this case, it is necessary that at least 51% of the shares belong to Thai citizens, and foreigners must have no more than 49%. At the same time, Thai shareholders must actually invest their own funds, and not act as nominal holders. This option requires transparency and compliance with all corporate regulations.The "disappearing shareholders" scheme:
First, the company is registered with 100% Thai investors, after which the foreign investor is added to the board of directors. Despite the apparent legality of the procedure, this method is aimed at circumventing the ban, since actual control passes into the hands of a foreigner. The Land Office and other government agencies have long been opposed to such nominal structures.Use of nominee shareholders:
In this case, the nominal shareholders act only formally in order to comply with the requirement of a Thai majority. Practice shows that such structures attract increased attention from the authorities, since their true purpose is to ensure the circumvention of the ban on foreign ownership of land.
All of the above schemes, even if at first glance they comply with formal requirements, are essentially attempts to circumvent the law, which is unlikely to be supported in the event of a court challenge.
Why this might be a bad idea
Using a Thai company as a vehicle to circumvent the ban on foreign land ownership in Thailand involves not only legal and administrative complications, but also significant financial costs. Potential investors should carefully consider all the risks and obtain qualified legal advice before resorting to such schemes.
Violation of the spirit of the law
Despite the existence of loopholes in the law that allow for formal circumvention of the outright ban on foreign ownership, the “spirit of the law” remains unaltered. Although the Land Code Act provides for foreign ownership of land by contract, the last such contract was repealed in 1970. Thus, no matter what workarounds foreign investors try to exploit, the case law consistently upholds the basic position: foreigners should not own land in Thailand. Courts from local courts to the Supreme Court in Bangkok regularly strike down schemes designed to circumvent this principle, confirming the unalterable spirit of the law.
Registration difficulties and potential problems
Registering a Thai company for the purpose of purchasing real estate is associated with a number of difficulties:
Strict requirements for registration:
According to Thai law, a company must have at least three shareholders, more than half of whom must be residents of Thailand, have a registered address, conduct legitimate business activities, generate income and pay taxes. If a company is created solely to purchase real estate without any real business activity, this immediately raises suspicions among the registration authorities.Additional verification by the Land Department:
When attempting to register land in the name of a company that has foreign shareholders or directors, employees of the land department may refuse registration. If the buyer insists on the legitimacy of the transaction, a detailed investigation of the composition of shareholders and sources of investment begins. This process can drag on for several months, which negatively affects compliance with the deadlines stipulated in the purchase and sale agreements.Risk of criminal liability:
If it turns out that the nominal shareholders have not invested real funds, and the company was created solely to circumvent the law, this may entail not only the liquidation of the company, but also criminal prosecution of the directors and foreign investors.
Additional commercial expenses
Even if the Thai company registration scheme is successful, the owner faces a number of ongoing business expenses:
Administrative expenses:
The company is required to have a registered office, maintain accounting records, submit audited accounts annually and file tax returns. These expenses can significantly increase the cost of owning a property.Tax burden:
When a company receives income from renting out real estate, it is liable to pay corporation tax. When selling real estate on the company's balance sheet, higher tax rates apply (for example, stamp duty of 3.3% instead of the 0.5% paid by individuals).Risks associated with changes in legislation:
In the event of a change in tax or corporate policy, the company's financial obligations may increase, which will create an additional financial burden for the foreign investor.
Legal Options for Owning Land through a Thai Company
Subject to compliance with all legal requirements, companies conducting actual business have the right to acquire and register land, which allows them to avoid violations and unnecessary questions from regulatory authorities.
For example, a company engaged in real estate development or management can legally own land plots even if it includes foreign investors in a minority stake. The main condition here is that at least 51% of the shares are owned by Thai citizens, the actual capital must be contributed by Thai shareholders, and the company's activities must be aimed at generating profits from the operation of the acquired real estate.
Another example is a company that manages commercial properties such as offices, shopping malls or hotels. In this case, the property is used for legitimate business activities, as evidenced by real income and operational processes. A similar scheme is used in the education sector - international schools with foreign minority participation legally own land and buildings, since they conduct full-fledged educational activities and are in the public interest.
Thus, when properly structured and managed, owning land through a Thai company is a legal and transparent mechanism that allows foreign investors to participate in the Thai property market without violating legal regulations.
Alternative options for acquiring real estate by foreigners
Foreign investors in Thailand have several legal options for participating in the property market, each with its own advantages and disadvantages. Below are the main options and their differences:
Freehold Condominium
Foreigners can directly purchase condominium apartments using a freehold purchase agreement.
Advantages :
- Direct ownership without intermediaries;
- A simpler and more understandable legal mechanism, since condominium legislation is clearly regulated.
Flaws:
- The limit on foreign share is no more than 49% of the total area of the condominium;
- Only applies to properties of this type, which does not cover the need for villas or land plots.
Long-term lease of land with the right of ownership of the constructed property
Another option is to lease land for a long term, on which a villa or other real estate property is built and operated.
Advantages :
- A properly structured lease agreement ensures the legal security of the transaction;
- Allows the investor to gain actual control over the property without having to circumvent the law on direct land ownership.
Flaws :
- Lease is not a freehold property – the investor's rights are limited by the lease term and the terms of the agreement;
- There may be risks associated with extending or revising the lease terms.
Acquisition under Section 96 of the Land Code
In exceptional cases, a foreigner may apply to own a land plot of up to 1,600 m² if an investment of at least 40 million baht is made in government bonds or in the share capital of a company receiving investment incentives.
Advantages :
- Provides a direct and absolute path to legal ownership of land;
- Allows investors willing to make significant capital investments to gain control over luxury real estate.
Flaws :
- A large investment is required, making this option available only to a limited circle of investors;
- Investment conditions must be met for at least five years, which limits the flexibility of using capital.
Using companies promoted by the Board of Investment (BOI)
Foreigners can establish or invest in a company that has received a status that encourages investment in Thailand. This status may include tax incentives and permission to own land.
Advantages :
- Significant business incentives and tax advantages are possible;
- Allows foreigners to manage assets, including real estate, through control of a company.
Flaws :
- The scheme requires compliance with strict criteria: significant investment, compliance with environmental and technological standards, running a full-fledged business;
- Loss of status or termination of a company's activities may result in the need to sell the property.
Purchasing property in the name of a Thai spouse
Previously, there were restrictions on Thai women marrying foreigners, but since 1998, a Thai wife has the right to own land. Thus, real estate can be registered in the name of the Thai spouse, and the foreign spouse can effectively control the property through internal arrangements.
Advantages :
- Direct violation of the law prohibiting foreign ownership of land is avoided;
- The Thai spouse is the legal owner, which simplifies issues of registration and disposal of property.
Flaws :
- A foreign spouse does not have formal property rights, which creates risks when the family status changes or in the event of disputes;
- There may be difficulties with inheritance and subsequent disposal of property if the relationship changes.
Each of the listed options has its own specifics, and the choice depends on the financial capabilities of the investor, his long-term goals and readiness to comply with complex legal requirements. Regardless of the chosen scheme, consultation with qualified lawyers and investment experts is strongly recommended to ensure full compliance with legal regulations and minimize risks.