New property law stuns foreigners

by **JimboPSM** » May 31, 2006, 8:10 am

From Bangkok Post:

Thailand's booming property sector has been thrown into confusion by a new regulation issued this month that requires all partly foreign-owned companies to prove the source of their funding before purchasing land, industry sources said Tuesday.

The new Interior Ministry regulation that went into effect on May 25 has already started to slow sales of housing estates in Thailand's popular seaside resorts, such as Pattaya, Phuket, Hua Hin and Samui Island, which have been specifically targeting well-to-do foreigners as vacation getaways or retirement homes.

"The property boom ended on May 25," said Ronachai Krisadaolarn, managing director of Bangkok International Associates, a Bangkok-based legal consultancy firm that caters to foreign clients.

Thailand has strict laws prohibiting foreigners from directly purchasing property themselves although loopholes in the law allow them to own land and their houses through long leases or a "nominee company," providing the company is majority Thai-owned.

It is common practice for such "shell companies" to include Thai nationals who have been paid to act as nominees to facilitate the deal and who have invested nothing in the purchase.

The new regulation, signed by Suraart Thoingniramol, deputy permanent secretary of the Interior Ministry, is designed to halt the use of such companies for property purchases in the future.

"If it appears that an alien holds shares or is a director or it is reasonable to believe that a Thai holds shares as a representative of an alien, the officers shall investigate the income of Thais holding shares, delving into the number of years [they have spent] in the current profession and monthly salary," reads a translation of the law. "The provision of necessary evidence is required."

The new regulation is actually an enforcement of Thailand's existing laws, legal experts said.

"It's not a radical change. It's a radical implementation," Ronachai said.

The regulation has already started to stall home sales to foreigners, sources said.

"There's a lot of confusion," said Simon Landy, managing director of the Primo Co, a property-development firm. "Some land offices don't know what to do with it, and many have simply stopped transferring land."

by **Bandung_Dero** » May 31, 2006, 9:46 am

The new regulation is actually an enforcement of Thailand's existing laws, legal experts said.

"It's not a radical change. It's a radical implementation," Ronachai said.

That's the way I see it after reading information from other sourses. The olde saying applies here:- "Buyer beware" IMO it dosen't matter what you buy in Thailand or how you do it if you can't afford to loose it don't do it.

by **valentine** » May 31, 2006, 10:05 am

I am sorry , I fail to see whats new about it and why the cause for concern. It is not retrospective, so no ones going to lose anything. It is only an amalgation of two already existing laws. One regarding the purchase of land or property by foreign "companies"Two the money laundering act. If your monetery source is legit, all taxes paid etc.Then nothings changed. If however the source is suspect or indeed even if genuine, that it hasn't been moved here to avoid duty anywhere , then no problem.
Wonder why so many are concerned?

by **Kudjap or Bust** » May 31, 2006, 12:41 pm

I think there may be cause for concern as many foreign investers have land and property registered as assets of a Thai company whose Thai share holders are merely names on paper, many paid a meagre fee for the pleasure of using a copy of their ID card and signature.

I read from above the following

"If it appears that an alien holds shares or is a director or it is reasonable to believe that a Thai holds shares as a representative of an alien, the officers shall investigate the income of Thais holding shares, delving into the number of years [they have spent] in the current profession and monthly salary," reads a translation of the law. "The provision of necessary evidence is required."

This could ask many a question of many "silent" Thai share holders and possibly jeopardise the ownership of land and property owned by persons like myself.

by **valentine** » May 31, 2006, 4:38 pm

Kudjap or Bust wrote:I think there may be cause for concern as many foreign investers have land and property registered as assets of a Thai company whose Thai share holders are merely names on paper, many paid a meagre fee for the pleasure of using a copy of their ID card and signature.

I read from above the following

"If it appears that an alien holds shares or is a director or it is reasonable to believe that a Thai holds shares as a representative of an alien, the officers shall investigate the income of Thais holding shares, delving into the number of years [they have spent] in the current profession and monthly salary," reads a translation of the law. "The provision of necessary evidence is required."

This could ask many a question of many "silent" Thai share holders and possibly jeopardise the ownership of land and property owned by persons like myself.

Well forgetting the cicumnavigating the law, whether that is a wise thing or not, in any country, not just Thailand, you should be okay as it definitely states "Will not be applied retrospectively. It is intended to close a loophole in the law, being exploited by many people and corporations in and for the future.

by **philo** » May 31, 2006, 5:00 pm

Bandung_Dero wrote:
IMO it dosen't matter what you buy in Thailand or how you do it if you can't afford to loose it don't do it.

Wise words

by **Bump** » May 31, 2006, 10:14 pm

In all honesty I have been wondering how long it was going to be before they tightened thier belt on that one. It may have been meeting the letter of the law, but it was side stepping the intent. not saying not was it right or wrong. But farrangs were not meant to hold ownership on individual homes. Creating companies side stepped that intent. With the land Boom in Pattaya and Hua Hin as well as other locations wonder how many dummy companies were formed. I'm willing to bet a lot. It had to run up the warning flag sooner or later. I hope Val is right and no one gets burnt on this.

I also wonder what effect if any it will have on the escalating property cost we have seen in the last three years. It wa obviuosly aimed at big bucks coming from out of the country a big driving force in the rising costs.

Anything around Hue Hin these day is really out of my league.

Like Arjay I would love to see ocean from time to time from my house but I don't think I could even do that anywhere in Thialand any longer.

But I got a heck of a lemon forrest :cry:

by **Bump** » June 1, 2006, 1:51 am

From Thai visa tonight:

Gazette News: Land crackdown targets Thai shareholders

BANGKOK: -- The Ministry of Interior has ordered a crackdown on property companies attempting to circumvent Section 74 of the Land Act in order to allow foreigners to control land ownership.

Section 74 states (unofficial translation):

by **Kudjap or Bust** » June 1, 2006, 8:40 am

Sorry Val, I must be missing something or not reading correctly, where does it say this is not retrospective?

Anyway I just spoke with a falang I know in Chonburi who is in the business of setting up companies for this very reason. He's been making good money out if it for some years now, totally legit, work permit and all.

His comments are quite simple. "If you know the right palms to grease it matters not what they do with the laws. Questions on forms can be answered to look right. Copies required of bank accounts are literally a list of money in and money out, put a copy of an ID to the list and hey presto".

But his final comment was "Lets wait and see what happens, knowing the way the Thai government works it'll probably take some years before this is at full throttle"

Personally I think he's a little naive or is just giving his "Don't worry, we can sort it" sales chat.

I guess as in many matters corruption rears its ugly head again.

by **cookie** » February 15, 2007, 3:30 pm

So if I read this right this means that they have been working and investigating for 9 months now.
In 9 months time they have not found one foreign that owns 49% of a company and the other 51% are not nominees??????
Am I crazy or what??????

More documents sought in nominee hunt

KANANA KATHARANGSIPORN

Inspections of land holdings by companies suspected to be foreign-owned must await documentation from the Business Development Department, according to the Lands Department. Sub Lt Khantachai Vichakkhana, the deputy director-general of the Lands Department, said it was the responsibility of the Commerce Ministry unit to determine the nationality of companies and whether illegal shareholding structures were used.

Thai law sharply restricts foreign ownership of land. Corporate entities doing so must be majority controlled by Thais. But nominee structures are commonly used to bypass the law, particularly in tourist areas such as Phuket and Pattaya.

Sub Lt Khantachai said that since last year, provincial land offices have had the authority to inspect companies suspected of having illegal nominee structures.

If violations are found, provincial governors have the right to direct the companies to sell off the land within 180 days.

But Sub Lt Khantachai said that before an inspection could be made, information was needed in co-operation with the Business Development Department, which is responsible for corporate registrations.

''We cannot check potential nominees until a prosecution is made. In any case, there must be evidence from the Commerce Ministry as well,'' he said.

The Lands Department directed its provincial land offices last June to submit information on companies that had purchased land or properties in their jurisdiction to the Commerce Ministry for verification of their status.

To date, no formal report of an illegal nominee structure has been made to the Lands Department.

Sub Lt Khantachai said Foreign Business Act reforms and tighter enforcement of existing land laws were unlikely to result in a slowdown in the property market.

''Actually, what these reforms will do will be to help clamp down on asset laundering in the country,'' he said.

Kanissorn Navanugraha, the director-general of the Business Development Department, agreed that greater co-operation with the Lands Department was needed to improve enforcement of the law.

He said the department only forwarded information on various juristic entities to the Lands Department on request, but did not have the right to stipulate whether a nominee structure existed or not.

''If a company is suspected of using an illegal nominee structure, we are obligated to report the case to the police and await a formal court ruling,'' Mr Kanissorn said.

He said the Lands Department was empowered to investigate on its own whether a foreign entity used nominees.

by **madpsyontist** » February 17, 2007, 1:27 am

What if I (Thai - American) create a Thai business with one of my Thai cousins, who has relatively little capital to invest but provides the intellectual property/research and the wherewithal/contacts) to make it come to fruition, could we own the property where the business is located legitimately?

by **BKKSTAN** » February 17, 2007, 9:11 am

If you are Thai-American,you probably have dual citizenship!If so the foreign business laws do not apply to you!

New property law stuns foreigners

New property law stuns foreigners

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