New Property Law may signal boom end
Source: Samui Community Newspaper - June 2006
A new Interior Ministry regulation that came into effect on May 25 seriously affect Thailand's property sector by requiring all partly foreign owned companies to demonstrate the source of their capital before being allowed to buy land. The regulations have already caused property sales in Thailand's popular beach resorts to slow down, as they effectively remove a loophole in Thailand's strict laws that otherwise prohibit foreigners from directly purchasing property themselves.
Until now, foreigners have been able to own land and houses through long leases or via a ‘nominee company', as long as the company is majority Thai-owned. It is common practice for such companies to include Thai nationals to simply act as nominees in order to facilitate the deal, but who have not actually invested in the property or the firm.
The new law requires the provision of ‘necessary evidence'. This means that in cases where a foreigner hold shares, or is a director of a company in which Thai nationals only hold shares as representatives, the Ministry may investigate the income if Thais holding those shares, and also look into their occupation.
The new regulation will effectively prevent the use of such companies for property purchase and will undoubtedly lead to confusion and even bring sales to a complete standstill while land offices and agencies determine their full extent and application.
New property law stuns foreigners
Source: Bangkokpost - June 2, 2006
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."
Read ups: initial regulation issued, holding companies article