As a general matter, Thai law prohibits foreigners from owning land in Thailand. The prohibition applies to foreign individuals and juristic entities (e.g., companies or partnerships). Additionally, it applies to Thai registered juristic entities, which are owned or controlled by foreigners. This law note describes generally the Thai law prohibiting land ownership by foreigners, as well as exceptions to and strategies for operating under the prohibition.
Prohibition on Foreign Ownership of Land
1. Thai Land Law:
Under Sec. 86 of the Thai Land Law, a foreigner may own land in Thailand only if permitted by treaty. In fact, Thailand does not have a treaty with any country permitting foreigners from that country to own land. Therefore, foreigners are effectively prohibited from owning land in Thailand. Under Sec. 97 of the Land Law, the definition of a foreigner includes Thai registered companies or partnerships in which more than 49% of the capital is owned by foreigners or of which more than half the shareholders or partners are foreigners.
As a practical matter, it is often difficult for a Thai company with foreigners having substantial minority ownership (e.g., 51% Thai, 49% foreign) to acquire land in Thailand. The policies of Land Offices vary throughout Thailand, but often they require that Thais own at least 60% or 70% of a company in order to register land ownership.
Under former Land Office policy, Thai nationals who married foreigners were prohibited from ownership of land in Thailand. This prohibition was based on principles of community property law and a general presumption that the Thai spouse was holding the land for the benefit of the foreigner. However, under current Land Office policy the Thai spouse can own land in Thailand, provided that the foreign spouse signs a letter declaring the property to be the separate property of the Thai spouse and waiving any interest in the property.
2. Condominium Act (No. 2) of 1990:
Sec. 19 of the Condominium Act effectively prohibits ownership of condominium units by a foreigner unless the foreigner qualifies for foreign ownership as described below.
3. Alien Business Law:
The Alien Business Law, which regulates foreign investment in Thailand, can have an indirect impact on the ability of foreigners to own land. For example, under the terms of the Alien Business Act of 1999, "land trading" is considered a Schedule One activity and is generally prohibited to foreigners.
Exceptions to the Prohibition
1. Board of Investment (BOI) incentives:
Sec. 27 of the Investment Promotion Act authorizes the Board of Investment (BOI) to grant a foreign owned company permission to own land for the purpose of conducting the promoted activity. The area of the land must be approved by the BOI, which will review the land and proposed construction plans to determine that the land's size is suitable for the promoted activity. The use of the land must be limited to the promoted activity, and if the promoted business is later dissolved the land must be sold within one year of the termination of that business. The BOI exception to the prohibition against foreigners owning land is primarily limited to the ownership of land and factory for a promoted manufacturing activity.
In addition to permitting foreign ownership of land for the purpose of conducting a promoted business, BOI privileges can authorize a foreign owned company to conduct business activities which would otherwise be prohibited under the Alien Business Law. Thus, the indirect impact of the Alien Business Law on foreign land ownership can be reduced under BOI privileges.
2. Condominium Act (No. 2) of 1990 (as amended April 27, 1999)
Sec. 19 of the amended Condominium Act authorizes qualified foreigners to own individual condominium units provided that the total area of foreign-owned units within the condominium project does not exceed 49 percent of the total area of all units within the project. In Bangkok and other municipalities to be designated in ministerial regulations, the 49% limitation does not apply. The following foreigners qualify for condominium unit ownership:
a. Individuals having permanent residence status in Thailand.
b. Individuals who have been permitted to enter Thailand under BOI privileges.
c. Juristic entities registered in Thailand but being classified as "foreign" under the Land Act.
d. Juristic entities, which have been granted investment privileges by the BOI.
e. Individuals or juristic entities, which have brought foreign currency into Thailand for the purpose of purchasing the condominium unit.
Despite the broad scope of the prohibition on foreign ownership of land and condominiums in Thailand, and the narrow scope of the exceptions, a variety of tactics can be used to minimize the impact of the prohibitions. These include, for example:
a. Forming joint venture companies with majority Thai ownership but adequate safeguards for the foreign minority interest.
b. Long term leases with rights to renewal.
Recently there have been many proposals trying to liberalize land ownership by foreigners, and indeed in April 1999, after several years of rumors the rules on foreign ownership of condos were liberalized. Often the proposals are reported as having already taken effect long before they actually become law or official policy. A foreigner who is considering acquiring an interest in land in Thailand should check carefully the current status of laws and policies before taking action.
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