When a nominee land ownership is put in place both parties risk being fined and jailed.
Thai land laws prohibit foreigners from owning land in Thailand but also makes it illegal for Thai nationals to act as an agent or a proxy nominee owner of the land on behalf of a foreigner (section 96 Land Code Act). When the Thai national is acting as the agent of the foreigner the actual owner is legally under Thai law considered the foreigner (leading to illegal foreign land ownership). You could use the same section to argue that it is forbidden for Thai companies to hold the land on behalf foreign nationals, but with property holding companies the main additional issue is that the Thai shareholders hold the shares in the company on behalf of the foreigner, the actual owner of the shares is legally considered the foreigner and therefore the company deemed foreign (leading to illegal foreign land ownership).
- Section 96 Land Code Act: '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 Act: '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'.
A structure that sometimes is put in place is that a foreigner loans money to Thai to buy land, and in consideration for the financial loan the Thai national rents the land back to the foreigner under a 30 year land lease agreement whereby rent is set-off against payment of interest on the loan. The legal restriction in this setup is that the Thai may not be deemed the agent of or nominee owner on behalf of the foreigner. When the Thai national can’t be seen as the freehold owner this structure becomes illegal - continue Land Department info...
Note: freehold owner could be defined as the person with the right to sell, mortgage, transfer or exchange the property, and/or to exclude others from doing these things. 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 in the property through a lease or usufruct but he will not obtain the title to the property.
In any lease structure there are tax liabilities for the Thai land owner. Income or assessed income derived from a lease is taxed as personal income for the Thai individual.
Section 74 Land Code Act
If there is reason to believe that a Thai national is purchasing land on behalf of an alien the land office must interrogate the parties and could refuse transfer of land to the Thai national (section 74 Land Code Act). For this reason, if a nominee structure is put in place, transferring land to the Thai national and at the same time registering rights for the benefit of a foreigner (a real estate lease or usufruct) is usually not done on the same day but usually several weeks later.
Section 74: '.... ..... 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'.
Actual and nominee owner
What does it legally mean under Thai law when land is purchased by a Thai on behalf of a foreigner?
Under Thai supreme court judgement (e.g. Scj. 2690/2538), when a foreigner owns land through a Thai national who acts as the agent or owner on behalf of the foreigner and who appears as the registered owner of the land, then such transaction/ agreement is void (illegal) but the acquisition of the land by the foreigner (considered the 'principal' or true owner) is still effective, and as the real owner the foreigner must dispose the land within a period of time fixed by the Director General of Land Department. The foreigner must receive the proceeds from the sale of the land.
Nominee practice example
Land registration in a Thai girlfriend's name
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 Land Office must inform the foreigner and the Thai girlfriend of the following;
A Thai national who is married to a foreigner can also be deemed an illegal nominee acting on behalf of the foreign spouse (read article...), but he or she is not a nominee for land ownership if the correct legal procedure for the acquisition of land by a Thai national married to a foreigner has been followed read more...
Source: Department of Lands
Enforcement and Punishment Measures in Land Holding as an Agent for a foreigner
If it appears the fact last that there is the threat of land holding as an agent for a foreigner, the measures to the land disposal and the offender punishment shall be enforced as follows;
|Offenses against the Criminal Code Section 267 due to information the competent official to recode false statement in the official documents shall be subject to punishment with an imprisonment of not exceeding three years or a fine of not exceeding 6,000 Baht or both.
|Offenses against the Land Code. The alien who commits the offenses under the Land Code Section 111, due to the acquisition of land illegitimately; shall be subject to punishment with a fine of not exceeding 20,000 Baht or an imprisonment of not exceeding two years or both. Juristic person who commits the offense under the Land Code Section 112, or Section 113 in case of Thai people; due to the acquisition of land as the agent for a foreigner or foreign entity shall be subject to punishment with a fine of not exceeding 20,000 Baht or imprisonment of not exceeding two years or both.