Response to the new interior ministry regulations regarding foreigners buying a property in Thailand. Belmont Limcharoen International Law Firm. We refer to recent media reports of new regulations issued by the Deputy Ministry of Interior regarding foreigners purchasing land in Thailand…
Land ownership issues will always be a sensitive issue amongst Thai people. There would be controversial political consequences if any government in power attempts to change the Land Code to accommodate foreign ownership of land. Whilst many foreigners elect to arrange, with majority shareholding Thai partners, to set up Thai companies and thereby operate in a ?grey area? of the law, we believe the most practical and legal way to deal with the issue of foreign ownership would be resolved by legislative means, that is passing an act similar to Landlord and Tenant Acts in other jurisdictions which provide proper protection of lessees under a lease with changes to the maximum term of a lease for foreigners.
Whilst providing an opportunity to foreigners to have more secure investments in Thailand this would also solve the sensitivities attached to the concept or thought of foreigners owning or indirectly owning land in the Kingdom of Thailand. Whilst such improved leasehold legislation does not presently exist, there will continue to be, as there has been for many years, debate on what constitutes a company that is set up illegally, or what has been set up legally and which is a good structure for investment in real estate by foreigners. Unless there is a clear law that states foreigners cannot inject monies into a Thai company which has real estate assets there will be opportunities for investment and ways of protecting investors who inject more monies than others into an investment.
Ultimately, the majority of a Thai company which owns land must be owned 51% as a minimum by Thais in any event. If companies are scrutinized when title is due to be transferred this will potentially slow transactions down where the companies do not meet the requirements the officers are looking for. There is no indication that a real transaction with a real Thai company, set up correctly with real Thai shareholders and real foreign shareholders in accordance with the law, will be refused but perhaps will be subject to review. Belmont Limcharoen and its attorneys are trying to encourage the concerned government agencies to look into the possibility to start the process of legislation of a Thai Landlord and Tenant Act, an act that will seemingly take a long time to bear fruit as the nation still has no legislative body.
There has been significant drop in land transfers since the announcement on 27 June that companies with foreign shareholdings seeking to transfer land will be thoroughly investigated. According to PPLO chief, Supot Suwannachote, land transfers applied and approved by PPLO over recent months are: 20 companies in March; 17 companies in April; 24 companies in May; 17 companies in June; and just five companies in July of which all five have 100% Thai shareholders.
K Supot explained that investigations had been stepped up since the the well-publicised Bandidos case in Samui. According to press reports, the Bandidos were a gang whose three members were charged in July with extortion, money laundering and six counts of illegal sale of public land. A police spokesman was quoted in a Thai newspaper as claiming the suspects brought more than 79 million baht into Thailand over the past two years and laundered it through various tourist-related businesses. A six-month investigation by police found that the Bandidos had a network that extended to Bangkok, Pattaya, Samui and Phuket.
The PPLO issued an official letter dated 27 June to inform local companies with foreign shareholders of its stricter adherence to existing land law. We are checking for any suspicious cases in which companies have increased their capital shares or are changing managing committees to hold company shares for foreigners, explained K Supot, and are conducting business concerning properties in Thailand, such as buying, leasing, operating a hotel or building a resort.
Companies only have to present the evidence to prove that Thai shareholders are doing the land transfer and not a foreigner, K Supot said. If a Thai shareholder receives a loan to do the land transfer, evidence must be presented to officers. This should not be difficult for those who are legally transferring land.