Land purchase by a Thai national on behalf of the foreigner


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Land ownership in the name of a Thai national

Following the government's move restricting the practice of foreigners using nominee structured companies to purchase land an alternative ownership structure suggested is a Thai national who purchases the land as the owner acting on behalf of the foreigner and the foreigner controlling his investment through this nominee owner.

The Land Code Act prohibits the use of Thai nationals who act as a nominee owner/ agent acting on behalf of foreigners or the owner in place of the foreigner (section 96 Land Code). If this structure is put in place both parties risk being fined and jailed. You could use the same logic for land holding companies created by foreigners to hold the land.

		Section 96 Land Code; 'When it appears that any person (including a juristic person) has acquired land as the owner in place of an alien or juristic person under the provisions of Section 97 and 98, the Director-General shall have the authority to dispose of such land and the provisions of Section 94 shall apply mutatis mutandis'. Section 113 Land Code; 'Any person who acquires land as an agent of an alien or juristic person under the provisions of Section 97 or 98 shall be punished with a fine not exceeding twenty thousand baht or an imprisonment not exceeding two years, or both'.

In practice the foreigner may help a Thai national to buy land. Simply as a gift or the purchase of land is funded by a loan issued by the foreigner. A structure that is sometimes put in place is that in consideration for the financial loan the Thai national leases out the land to the foreigner. Land rent is set-off against payment of interest on the loan. The legal restriction in this construction is that the Thai may not be deemed the agent of and/ or acting as the nominee owner on behalf of the foreigner or 'acting as the agent on behalf of the foreigner', meaning; if the Thai national can’t be seen as the freehold owner this structure becomes illegal.

The Thai national must have the title to the property, to the exclusion of the foreigner. The Thai must have the right to dispose of the property. The foreigner may have an interest through a lease or usufruct. On registration proof could be required from the Thai national that he is not acting as a nominee on behalf of a foreign buyer. There are possible tax liabilities for the Thai land owner in these lease structures. Income or assessed income derived from a lease is personal income for the Thai individual.

A foreigner bought land and had title deed issued in Thai girlfriend's name. Later, the girlfriend applied for a mortgage and tried to use the land as collateral, but the Land office refused to allow this because she did not submit the original title deed with her application.

The Thai girlfriend claimed that the foreigner had the possession of the land title deed and applied for a replacement land title deed to be issued to replace the original deed. The foreigner requested the Land Office not to issue a replacement title deed.

The Land Department considered both applications and delivered the following response; The foreigner's application for the Land Office to deny issue to Thai girlfriend of a replacement title deed is believed to express his intention to prevent her from distributing, selling or transferring the land, or using it to borrow money or as collateral for debt repayment. In this case it must be deemed that the Thai girlfriend has acquired the land under section 96 of the Land Code, but as the owner in place of an alien, which contravenes section 113 of the Code.

In doing so she has provided false information to government officers, which contravenes section 137 of the Penal Code, making her liable, if found guilty, to a term of up to six months in jail or a fine of 1,000 baht, or both. She has also contravened section 267 of the Penal Code, which carries a penalty of up to three years in jail and/or a fine of 6,000 baht.

The foreigner has acquired land by means that contravene section 86 of the Land Code, and so has committed an offence aiding and abetting the commission of an offence under section 111 of the Land Code, which carries a penalty of two-thirds of that of the offence itself.

The Land Department ordered the local Land Office to file a complaint with the Inquiry Officer (the relevant legal authority) and take legal steps against both the foreigner and the Thai girlfriend.

The Land Office was also ordered to inform the foreigner that he must dispose of the land within one year of receiving official notice to do so.

If the foreigner fails to dispose of the land within the time given, the Director-General of the Land Department is authorized to dispose of the land and retain a fee of 5% of the sale price before any deductions or taxes.

The Land Office must inform the foreigner and the Thai girlfriend of the following;
	1.	The person who is to be registered as the new owner of the land - including an person the foreigner consents to selling the land to – must be a person who can lawfully possess the land;

	2.	The sale price of the land must be fixed by the foreigner, and the foreigner must be the recipient of the money;

	3.	As the person in whose name the land is registered, the Thai girlfriend's duty will be to manage the disposal of the land. But she will not be involved in selecting the recipient.




	Copyright 2008





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