Thailand has long been a popular destination for foreigners looking to invest in property. However, with strict restrictions on foreign land ownership, many consider setting up a Thai company as a way to bypass these limitations. But is this a safe and legal option?
This article explores the legal restrictions, documentation requirements, tax implications, and potential pitfalls of buying property in Thailand through a company.
Restrictions on Foreigners in Thai Companies
Thai law allows foreigners to own up to 49% of shares in a company that owns land. The remaining 51% must be owned by Thai nationals or entities. Legally, this means you do not have full control over the company or the property. Some individuals attempt to circumvent this restriction by appointing "nominee shareholders" who have no real influence over the company.
Important: Using nominee shareholders is illegal. Authorities have tightened their enforcement of this rule, and violations can result in severe legal consequences, including confiscation of the property.
Documentation Requirements and Maintenance
Setting up and maintaining a company for property ownership requires significant administrative work:
Registration: The company must be registered with the Department of Business
Development (DBD), with full documentation of shareholders and directors.
Annual Reporting: Even if the company does not engage in business activities beyond property ownership, it must file annual financial statements and reports.
Minimum Capital Requirements: Companies must meet minimum capital requirements, which may need to reflect the value of the property.
Ensure you account for these costs and time commitments when choosing this ownership structure.
Tax Implications when owning a property in Thailand through a company
Owning property through a company comes with specific tax considerations:
Property Sale: Gains from the sale of property are taxed as corporate income, which may result in higher taxes compared to private ownership.
Annual Taxes: The company may be subject to property taxes and other corporate
levies.
Dividend Tax: If the company distributes dividends to shareholders, these may be
taxed both in Thailand and in the shareholder’s home country, depending on
applicable tax treaties.
Legal Risks and Consequences
1. Government Oversight:
Thai authorities have the right to investigate the structure of companies owning land.
If illegal practices, such as nominee shareholders, are detected, the property could be
confiscated.
2. Changes in Law:
Future legal changes could further restrict the ability of foreigners to maintain such
ownership structures.
3. Limited Control:
Even with safeguards in place, the Thai shareholders, who must own the majority of
shares, can exercise control over the company and its assets without your approval.
Alternatives to Company Ownership
If the goal is to own property in Thailand, consider these legal alternatives:
Condominium Ownership:
Foreigners can own up to 49% of the total floor area in a condominium building. This means you can own 100% of a specific unit, provided the overall foreign ownership in the building does not exceed 49%.
Leasehold Agreements:
Leaseholds allow you to lease land in your name for up to 30 years, with the
possibility of renewal. This provides usage rights without direct ownership.
Spouse Ownership:
If married to a Thai national, the property can be registered in your spouse's name.
This option comes with its own risks and requires careful consideration.
Buying property in Thailand through a Thai company may seem like a viable solution to foreign ownership restrictions, but it carries significant legal and financial risks. Understanding Thai laws and compliance requirements is critical to avoiding penalties or loss of your investment.
Before making a decision, consult an experienced lawyer with expertise in Thai property law to ensure your interests are fully protected.
