Laws Governing Land Ownership Of Foreigners In Thailand
There was a conflict between two laws with regards to the rights of foreigners to own a land in Thailand.
Foreigners are given equal property rights as Thai nationals have under its Thailand Civil and Commercial Code. According to the Thailand Civil and Commercial Code, any person or foreigner can own the land and any structure built on the land. However, the Land Code Act B.E 2497 (1954) prohibits foreigners from owning land in Thailand. The Condominium Act extends the restriction to condominiums.
This conflict was settled in 1970 when the treaty allowing foreigners to own a land in Thailand under the Thailand Land Code Act was dissolved.
Home Ownership of Foreigners Before 1970
Foreigners who purchase a home in Thailand can rent the land and own the house as a personal property. In whatever land structure which is open for lease, it is advised and recommended to obtain ownership over the house. The right of a person to acquire the house on another man’s land always accords the term of the land lease or comprehensive agreement entered into by that person and cannot go beyond 30 years.
Furthermore, Section 84 of Thailand Land Code, foreigners may acquire land for purposes of residency, commerce, industry, agriculture, burial, public charity or religion. However, these purposes must be in conformation with the conditions and conditions prescribed in Ministerial Regulations and with the permission of the Minister. But these lands are further subjected to limitations such that the foreigners are only allowed to acquire land for residence with not more than 1 rai per family. This is also true with other lands acquired for purposes mentioned above in which each purpose has also limitations on the acquisition.
However, the last treaty which grants these property rights to foreigners was terminated in 1970. Since then, there has been no treaty with any country that allows foreigners to acquire and own land in Thailand. Moreover, anyone who breaches with Section 86 shall be punished in accordance to Section 111 of the Land Code Act.
Land Code Amendment Act of 1999
In theory, under section 96 of Land Code Amendment Act (1999), foreigners can own land up to 1 rai (1600 square meters) for residential purposes through the Board of Investment which will require a 40 million baht investment in Thailand. This will be under strict conditions and in specified areas and requires approval of the Minister of Interior. However, this is not a viable option in practice and is not transferable by inheritance. Thus, the ownership is extinguished once the person granted with the ownership dies.
Foreigners as a Statutory Heir
Also in theory, under section 93 of the Land Code Act, a foreigner married to a Thai national can inherit land as a statutory heir subject to the approval of the Minister of Interior. However, Section 86 of Land Code Act states that foreigners who inherited a land must dispose of this within one year of acquisition.
Land Ownership of Foreign Companies
Moreover, land ownership is also not open to foreign companies including Amity (US) companies, BVI companies or any other foreign juristic entity. However, foreign corporations with substantial investments benefiting the Thai economy may have special privileges and exemptions for land ownership which are to be governed by provisions of Section 27 of the Investment Promotion Act, Section 44 of the Industrial Estate Authority of Thailand Act, and Section 65 of the Petroleum Act.
Land ownership by a legitimate Thai company, which is partly foreign owned, is allowable under Thai laws provided the foreign shareholding does not exceed 49% in numbers of shareholders and percentage of shares in that company. This is referred as “foreign” or “alien” company.
For it to be considered a legitimate Thai company, it must comply with the policy requirements provided under the Land Code Act. A company is said to be foreign if half or more of the juristic person’s shares are owned by the foreigners.
A company may be considered a Thai company if the company has only 1 Thai shareholder given that he holds and owns the majority of the shares in the company. A Thai company structure, therefore, is not a viable or secure vehicle for a long term foreign controlling interest in real estate in Thailand.
It has been a common practice for foreigners to form a Thai company and to hold land under a Thai company structure until May of 2006. This practice became less common when there were proposed amendments to Foreign Business Act and new land office guidelines were followed by the business registration rules.
The Thai government has conducted series of discussions to compensate the loopholes and conflicts on these laws governing land ownership in the country. Thus, under the new regulations provided in the Land Code Act as amended, guidelines followed by the authorities order officials to take into the effect the Section 74 of the Land Code Act which states that “In recording rights and legal acts by the competent authority under Section 71, the competent authority shall have the power to interrogate the parties and summon persons concerned to give oral testimony or send relevant written evidence as may be necessary and then proceed as may be appropriate under the circumstances. If there is reason to believe the recording of such rights and legal acts is in evasion of the law or there is reason to believe the purchaser is purchasing on behalf of an alien, instructions shall be asked of the Minister whose word shall be final.”
Land Ownership Through A Nominee
In addition, employing nominee shareholders to evade the Thailand Land Code Act or Foreign Business Act violates what was mandated by those laws. Any alien or foreigner setting up a company with this kind of systems violates foreign ownership restrictions. Not only that, it creates an unlawful foreign ownership, not putting into fact the number of shares he possesses in the company.