Using a Thai-registered company with foreigners as shareholders is illegal in most cases.
Foreigners Beware!
Isan Real Estate, www.isanrealestate.com/en/, a professional and award-winning real estate brokerage in Thailand’s Northeast region, and Lawyers for Expats Thailand www.lawyersforexpatsthailand.com frequently encounter inquiries from foreigners who have been advised that establishing a Thai company with foreigner shareholders is permissible to ‘purchase land’ in Thailand. It is crucial to emphasize that this practice is entirely illegal under Thai law.
Foreigners should be fully aware of the significant risks associated with such arrangements. While some agents or even local authorities may facilitate this process, it remains a violation of the law, and those who pursue this route could face severe legal and financial consequences in the future. This approach is highly discouraged, and individuals considering it should proceed with extreme caution and at their own risk.
Reviewing the relevant legal frameworks, including the Land Code Act (1954) and the Foreign Business Act (1999), is strongly recommended for further clarification. The only exception to this rule is if the Thai company is a legitimate operational business, not merely a shell company created for land ownership. Always conduct thorough research and seek professional legal advice before making any decisions.
The prohibition against foreigners using Thai companies to own land in Thailand is primarily governed by the Land Code Act (1954) and the Foreign Business Act (1999). While no specific “law gazette number” explicitly states this prohibition, the legal principles are well-established through these laws and related regulations. Below is an explanation of the relevant legal framework. Please research and conduct your due diligence and heed our advice to avoid severe consequences in the future.
1. Land Code Act (1954)
The Land Code Act is the primary legislation governing land ownership in Thailand. Section 86 of the Act explicitly states that foreigners cannot own land in Thailand, with limited exceptions (e.g., investment under the Board of Investment (BOI) or treaties that grant reciprocal rights).
Some foreigners have attempted to purchase land using Thai companies to circumvent this restriction. However, this practice is illegal if the company is deemed a “nominee” or “sham” company established solely to allow a foreigner to own land.
2. Follow The Law:
The Foreign Business Act (FBA) regulates foreign involvement in Thai businesses. Under the FBA, certain business activities are prohibited for foreigners unless they obtain a foreign business license.
- Section 36 of the FBA prohibits foreigners from using Thai nationals as nominees to hold shares on their behalf. This means that if a Thai company is set up with Thai shareholders acting as nominees for a foreigner, it violates the FBA.
- Section 4 defines a “foreigner” as any entity with more than 49% foreign shareholding or where foreigners hold most voting rights.
Suppose a Thai company is found to be violating the FBA by allowing a foreigner to control land ownership through nominee shareholders. In that case, the company can be dissolved, and the land can be confiscated.
3. Department of Lands Guidelines
The Department of Lands, which oversees land ownership in Thailand, has issued guidelines to prevent the misuse of Thai companies for land ownership by foreigners. These guidelines include:
- Investigation of Shareholding Structures: The Department of Lands may investigate companies purchasing land to ensure that Thai shareholders are genuine and do not act as nominees for foreigners.
- Proof of Business Operations: Companies must demonstrate that they are engaged in legitimate business activities and are not merely set up to hold land.
If a company cannot prove its legitimacy, the land purchase may be denied, or the land may be seized if the purchase has already been completed.
4. Supreme Court Precedents
Thai courts have ruled on cases involving the illegal use of Thai companies for land ownership by foreigners. In many instances, the Supreme Court has:
- Declared land purchases by nominee companies void.
- Ordered the confiscation of land purchased through illegal means.
- Imposed penalties on both the foreigner and the Thai nominees involved.
These rulings reinforce the legal principle that using Thai companies to circumvent land ownership laws is illegal.
Key Takeaways
Foreigners cannot be shareholders in a Thai company for the sole purpose of owning land, the combined effect of the Land Code Act, Foreign Business Act, Department of Lands guidelines, and Supreme Court rulings makes it clear that this practice is illegal.
Foreigners who attempt to use Thai companies to own land risk:
- Having the land confiscated.
- Facing fines, deportation, or criminal charges.
- Losing their investment in the property.
What Should Expats Do?
If you’re considering purchasing property in Thailand, it’s essential to:
- Consult a Qualified Lawyer: Seek advice from a reputable Thai lawyer specializing in property law.
- Explore Legal Alternatives: Consider leasehold agreements, condominium ownership, or usufructs, which are legal options for foreigners.
- Avoid Nominee Structures: Do not use Thai companies or nominees to purchase land, as this violates Thai law.
Adhere to Thai laws and regulations to protect your investment and enjoy your time in Thailand without legal complications.
We, Isan Real Estate Co., Ltd, in conjunction with Lawyers for Expats Thailand, can provide you with legal alternatives to guarantee your investment and ensure your long-term stay in Thailand is peaceful, enjoyable, and, most of all, legal.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Always consult a qualified legal professional before making any property-related decisions in Thailand. Contact: www.lawyersforexpatsthailand.com/ or www.isanrealestate.com/en/,
© Isan Real Estate Co., Ltd 2025
Author: Ernie Draper, Managing Director, Isan Real Estate Co., Ltd.