Crackdown on foreigners using Thai nominees: DSI raid offices of law firm in Bangkok, Phuket and Samui

[inThailand]

There are too many Thai businesses making money off selling property, setting up companies, attorneys and accountants to foreigners, that these groups will lobby against any real action. But getting tea money from the foreigner offenders is more likely the outcome to turn the other cheek. It's business as usual, like most other issues here, the offenders just will have to pay up to make the problem go away. 

[Dogmatix]

4 hours ago, jayboy said:

I doubt whether DFDL (which is a reasonable legal firm and not the kind which feeds on gullible farang) was advising clients to break the law.I expect they were advising clients on structures which were legal but sidestepped the spirit if not the letter of the law.This approach is very widely used throughout the Thai business/property world.

 

Unfortunately that is correct, although using a company structure to buy land is a violation of the Land Code which is much more straightforward in its definitions, as well as a violation of the FBA which still has loopholes allowing foreign management control.  Foreigners with a company solely to own land would be a much softer target than real businesses that employ Thais and pay tax without owning land. Just going after these would have negligible downside for foreign direct investment, not all of which is unrelated to land ownership. Cracking down on illegal foreign US ownership of land has been done in Mexico, where it is illegal near the sea shore, without repercussions for US investment there.  It has also been done in Spain where the houses were demolished, not because they were owned by foreigners but because they didn't have planning permission to build in sea front zones.  I think it could be done in Thailand easily, if they had a will to do it, which I don't believe they have. There is too much money to be made out of duping foreigners who are set on owning landed property.

 

When I first came to Thailand to do a finance related business, law firms advised me that the necessary structure involved getting a licence which permitted a much more basic level of activity than we needed to do to be competitive and make money.  They assured that this was OK and that the authorities knew exactly what was going on and had no objection.  Later on I got to know some people at the SEC and they said they knew exactly what we and our other foreign competitors were doing beyond the scope of these licences which they had to approve and renew annually.  They said that they accepted that the law didn't provide a proper licence for our activities but that they needed us here to improve the standards of the local firms and generate more foreign investments.  They didn't have the means to change the law easily, so they would turn a blind eye, as long as everyone behaved themselves.  Anyway things would change in future and new legal structures would probably come along which would make it a waste of time to try to amend the existing law.  It turned out that they were right.  Within a few years the economy collapsed and foreigners were approved for majority ownership in finance businesses on a case by case basis.  After that the SEC refused to approve any of the old type of licence on the grounds that they knew the foreigners would go beyond the scope of the licence. 

 

The basic problem is that those in power love to keep the law out-of-date, ambiguous and inappropriate.  That gives them the flexibility to interpret the law as they please, often in a contradictory way from case to case.  It is not a rule of law jurisdiction.   

[Dogmatix]

15 minutes ago, inThailand said:

There are too many Thai businesses making money off selling property, setting up companies, attorneys and accountants to foreigners, that these groups will lobby against any real action. But getting tea money from the foreigner offenders is more likely the outcome to turn the other cheek. It's business as usual, like most other issues here, the offenders just will have to pay up to make the problem go away. 

 

A lot of farang  housing estates in tourist resorts would turn into slums quite quickly too.  It wouldn't take that many houses to be abandoned or sold off cheap to Thais to turn estates into nightmares for legitimate owners who try to stay on. Non payment of the central services charges would mean the end of maintenance and security services.

[DrTuner]

6 minutes ago, Dogmatix said:

 

A lot of farang  housing estates in tourist resorts would turn into slums quite quickly too.  It wouldn't take that many houses to be abandoned or sold off cheap to Thais to turn estates into nightmares for legitimate owners who try to stay on. Non payment of the central services charges would mean the end of maintenance and security services.

Not to mention they would be run down in a matter of weeks if not days, full of somchais, karaokes, trash all over and a generic apocalypse. Basically turn them into dump yards. Somchai don't do maintenance.

[Sonhia]

Considering many past historical events, junta rule and so on, why would a foreigner want to invest money into such an unstable and unfair place.

 

Rent.

 

Don't bother about a business.

 

Enjoy, relax and move on.

[JLCrab]

Well without going to far out on the limb, if the Thai powers-that-be really came down on companies that existed solely to own property on behalf of non-Thais, it might prove profitable for Thai Property managers to buy such properties on a sell-leaseback arrangement thus avoiding the ghetto scenario above.

[Arkady]

I met a very charming retired foreign couple a couple of years back who bought a nice house in Samui to spend several months a year in.  They had bought it on advice from a law firm recommended by the developers using a 30 year lease, which they were assured could be extended for another two lots of 30 years. The ownership of the land was with someone connected to the developers or the lawyer.  Of course, the price of the freehold to a Thai buyer, if any were interested in such a property, was the same as the price of a 30 year lease.  After a couple of years happily using the house, they decided that might not be able to come to Thailand so often, if their health deteriorated, and thought it was time to get the lease extended, so it would be more saleable or of more value to their children, if they didn't sell it.  At first it took them about a year to track down the owner of their land and get a reply from him.  The answer was, sorry nothing can be done to extend the lease according to Thai law.  At the end of 30 years the lease will end and will not be renewed in favour of the couple or their descendants.  They asked me if I thought anything could be done to enforce the agreement relating to the extensions or, if there would be any way to sell the property when they were no longer able to use it much.

 

I had to tell them that the agreement covering the options to renew could not be enforced at the Land Office because the Land Code doesn't permit registrations of leases of more than 30 years for residential property.  Therefore their agreement could only be pursued in the civil court for damages, which means they could sue the nominee for perhaps the cost of renting another house for 30 years to replace the defaulted agreement.  But that could only be done, if the original nominee was still the owner and still alive and they were still alive. Plus the legal costs would high with little hope of a successful outcome.  Also I had to tell them that there was no secondary market for the residual parts of 30 leases of residential property which could only be transferred with the permission of the owner.   There would be no incentive for the owner to grant permission because he would be able to reclaim the house before the end of the 30 year lease, if it became abandoned by the tenants. 

 

In places like Singapore lawyers go to prison and get struck off for making false representations and encouraging foreigners to buy houses in areas reserved for Singaporeans (e.g. Sentosa Island) through shady structures.  In Thailand the authorities encourage the developers and lawyers by default to lie to and cheat foreign buyers in this way.

[Horace]

2 hours ago, Dogmatix said:

Unfortunately that is correct, although using a company structure to buy land is a violation of the Land Code which is much more straightforward in its definitions, as well as a violation of the FBA which still has loopholes allowing foreign management control. 

 

This is flat out wrong.  The Land Code is not at all straightforward in its definitions.  It does not prohibit foreign management control.  And it does not prohibit foreign economic benefit.  It does not contain a single provision that that refers to control or economic benefit.  It you claim otherwise, provide a cite.  And remember that when Thai law refers to ownership of shares, it means the nationality of the person who owns the shares and nothing more.

 

Thai law does not have a distinction between beneficial and registered ownership.  That is a common law concept that does not exist in Thai law.  And its near impossible to include it in Thai law because Thai law does not allow for trusts (unless a specific Thai law creates one, which it does not here). You need a legal system that recognizes trusts to make this distinction, and Thai law does not recognize trusts in this area.  Hence, the Land Act is even more problematic when it comes to foreign control and economic benefit.  To bar foreign control or economic benefit, the law has to specifically refer to and bar foreign economic control and benefit.  It does not under the Land Act and the FBA.  But there is express language under other laws referring to control in other sectors (e.g., banking), which shows that that the Thai lawmakers and jurists understand that if you want to bar foreign control or economic benefit under Thai law you need to expressly say that they are barred.  No such bar in the Land Act or the FBA, which means there is no such bar.

 

This means that the provisions allowing foreign management control and economic benefit are not "loopholes".  The definition of an alien was discussed when the FBA was enacted in 1998, and it was agreed that after much debate and consideration that the definition would not include management control or economic benefit.  The definition of an "Alien Company" was precisely defined in terms of ownership of shares and nothing else.  That was not an accident or oversight. 

 

It that wasn't enough, a Coup government re-visted this issue in 2006 and tried to change the definition and, in the face of foreign opposition, agreed not to do so.  In other words, the government agreed that the ownership control and economic benefit would not be taken into account when determining if a company is an Alien.  This is further evidence that foreign control and economic benefit is not a loop hole.

 

A second Coup government in 2014 again tried to change the definition, the Japanese said this was unacceptable, and the government again agreed that ownership control and economic benefit would not be taken into account when determining if a company is an Alien,  

 

Prior Director Generals of the Department of Business Development spoke at forums attended by foreign investors and expressly said ownership control and economic benefit would not be taken into account when determining if a company is an Alien.  Thailand needed investment, and policy makers recognized that if the law was changed to bar control and economic benefit, it would chill investment.  This was a conscious decision. Thus, allowing foreigners to have management control and economic benefit is not a loophole.  It was conscious decision by the Thai government after considerable discussion and deliberation.

 

 

[JLCrab]

From Post #1 

-- Coordinated raids on the offices of what appears to be a single advisory firm were conducted by Department of Special Investigations police and Board of Investment representatives. 

-- The raids were conducted in relation to the use of (foreigners) using Thai nominees to allow matters like land purchase and the operation of businesses restricted under the Foreign Business Act. 

-- Nominees have increasingly been used to circumvent the laws on foreigners owning land in Thailand and other business related matters. 

 

So is the DSI is misguided and maybe there is nothing wrong with the above mechanisms?

[Dogmatix]

1 hour ago, Horace said:

 

This is flat out wrong.  The Land Code is not at all straightforward in its definitions.  It does not prohibit foreign management control.  And it does not prohibit foreign economic benefit.  It does not contain a single provision that that refers to control or economic benefit.  It you claim otherwise, provide a cite.  And remember that when Thai law refers to ownership of shares, it means the nationality of the person who owns the shares and nothing more.

 

Thai law does not have a distinction between beneficial and registered ownership.  That is a common law concept that does not exist in Thai law.  And its near impossible to include it in Thai law because Thai law does not allow for trusts (unless a specific Thai law creates one, which it does not here). You need a legal system that recognizes trusts to make this distinction, and Thai law does not recognize trusts in this area.  Hence, the Land Act is even more problematic when it comes to foreign control and economic benefit.  To bar foreign control or economic benefit, the law has to specifically refer to and bar foreign economic control and benefit.  It does not under the Land Act and the FBA.  But there is express language under other laws referring to control in other sectors (e.g., banking), which shows that that the Thai lawmakers and jurists understand that if you want to bar foreign control or economic benefit under Thai law you need to expressly say that they are barred.  No such bar in the Land Act or the FBA, which means there is no such bar.

 

This means that the provisions allowing foreign management control and economic benefit are not "loopholes".  The definition of an alien was discussed when the FBA was enacted in 1998, and it was agreed that after much debate and consideration that the definition would not include management control or economic benefit.  The definition of an "Alien Company" was precisely defined in terms of ownership of shares and nothing else.  That was not an accident or oversight. 

 

It that wasn't enough, a Coup government re-visted this issue in 2006 and tried to change the definition and, in the face of foreign opposition, agreed not to do so.  In other words, the government agreed that the ownership control and economic benefit would not be taken into account when determining if a company is an Alien.  This is further evidence that foreign control and economic benefit is not a loop hole.

 

A second Coup government in 2014 again tried to change the definition, the Japanese said this was unacceptable, and the government again agreed that ownership control and economic benefit would not be taken into account when determining if a company is an Alien,  

 

Prior Director Generals of the Department of Business Development spoke at forums attended by foreign investors and expressly said ownership control and economic benefit would not be taken into account when determining if a company is an Alien.  Thailand needed investment, and policy makers recognized that if the law was changed to bar control and economic benefit, it would chill investment.  This was a conscious decision. Thus, allowing foreigners to have management control and economic benefit is not a loophole.  It was conscious decision by the Thai government after considerable discussion and deliberation.

 

The Land Code is straightforward in as much as it says that aliens may only own land in accordance with treaties that existed between foreign countries and Thailand when the code was promulgated in 1954, or with special permission from the minister, or under the 1999 amendment that provided for aliens investing 40 million baht to acquire up to 1 rai of residential land in certain zones under conditions that are no longer possible to fulfil because the qualifying investments for the 40 mil no longer exist.  Since the last of those treaties was scrapped in the early 70s, that basically means that all land ownership by aliens has to be with special permission of the minister which includes BOI companies and nothing much else as far as I know. 

 

It gives a clear definition of an alien company, being one in which aliens hold more than 49% of the shares or comprise more than 49% of the shareholders.  A clause defining a company with alien directors or managers as alien was deleted in 1959.  

 

Fine so far.  Now here comes a bit of a hiccup in 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." That definitely means that registrations can be blocked if a Thai company is believed to be buying land on behalf of a foreigner.  We know this for sure because this provision is used regularly to prevent registrations of land by companies, even if they have no foreign shareholders or directors.  A fully Thai owned company applying to transfer ownership of a house with land using all its capital plus debt and no ostensible operations or reasons for wanting to own a house in a resort is likely to be blocked.   In addition the Land Code does not limit the minister's authority to applications for transfers alone.  The Land Department can investigate land ownership retroactively as well.  Indeed in the case of corporate ownership, it is right and proper that it should, since shareholding structures of company's and effective management control over them may change.

 

Under the Land Code the minister's word is final.  Thus he alone has the power to decide whether land has been acquired on behalf of an alien.  There is no judicial process, nor is there any avenue appeal against the minister's judgement in determining whether a piece of land has been illegally purchased on behalf of an alien and or against the process under the Land Code for divestiture of the illegally acquired land.  However, a judicial process would be required to impose the criminal penalties provided under the Land Code which are:   "Section 113 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."

 

Since the Land Code gives the interior minister full discretion to determine whether land has been acquired on behalf of an alien, that does seem to be pretty straightforward.  There is no need for him to worry about those finer nuances of effective management control, preference shares or economic benefit.  He can leave that headache to the Commerce Ministry in its policing of the FBA through the BDD.  If he got around to thinking about it, he would probably come to the conclusion that all companies with no operations that have used all their capital plus some debt to buy a house with land in a resort that is lived in by a foreigner are guilty of purchasing land on behalf of foreigner.  More than 99% of the time he would be right.  

 

The point to grasp re land ownership is that using nominees to acquire land is a flat out violation of a law that, rightly or wrongly, is very emotional to most Thais.  Running a genuine business that employs Thais and pays tax and is effectively controlled by foreigners in compliance with the FBA is separate issue. 

   

[Horace]

3 hours ago, Dogmatix said:

American lawyers have to pay into funds that will compensate their clients in the event of malfeasance. After a year or two the fund reimbursed the losses of all the divorcees in full.  That is what makes Thailand different.   There is no accountability for lawyers or compensation for their bilked clients.  Basically no rule of law and police, bank managers, prosecutors and judges are all more than happy to join in the scams because they know there is no downside when dealing with cheated foreigners.  

 

I do agree with this, that is the absence accountability.  IMHO, that is the probably the biggest problem in Thailand.

[Destiny1990]

47 minutes ago, Dogmatix said:

 

The Land Code is straightforward in as much as it says that aliens may only own land in accordance with treaties that existed between foreign countries and Thailand when the code was promulgated in 1954, or with special permission from the minister, or under the 1999 amendment that provided for aliens investing 40 million baht to acquire up to 1 rai of residential land in certain zones under conditions that are no longer possible to fulfil because the qualifying investments for the 40 mil no longer exist.  Since the last of those treaties was scrapped in the early 70s, that basically means that all land ownership by aliens has to be with special permission of the minister which includes BOI companies and nothing much else as far as I know. 

 

It gives a clear definition of an alien company, being one in which aliens hold more than 49% of the shares or comprise more than 49% of the shareholders.  A clause defining a company with alien directors or managers as alien was deleted in 1959.  

 

Fine so far.  Now here comes a bit of a hiccup in 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." That definitely means that registrations can be blocked if a Thai company is believed to be buying land on behalf of a foreigner.  We know this for sure because this provision is used regularly to prevent registrations of land by companies, even if they have no foreign shareholders or directors.  A fully Thai owned company applying to transfer ownership of a house with land using all its capital plus debt and no ostensible operations or reasons for wanting to own a house in a resort is likely to be blocked.   In addition the Land Code does not limit the minister's authority to applications for transfers alone.  The Land Department can investigate land ownership retroactively as well.  Indeed in the case of corporate ownership, it is right and proper that it should, since shareholding structures of company's and effective management control over them may change.

 

Under the Land Code the minister's word is final.  Thus he alone has the power to decide whether land has been acquired on behalf of an alien.  There is no judicial process, nor is there any avenue appeal against the minister's judgement in determining whether a piece of land has been illegally purchased on behalf of an alien and or against the process under the Land Code for divestiture of the illegally acquired land.  However, a judicial process would be required to impose the criminal penalties provided under the Land Code which are:   "Section 113 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."

 

Since the Land Code gives the interior minister full discretion to determine whether land has been acquired on behalf of an alien, that does seem to be pretty straightforward.  There is no need for him to worry about those finer nuances of effective management control, preference shares or economic benefit.  He can leave that headache to the Commerce Ministry in its policing of the FBA through the BDD.  If he got around to thinking about it, he would probably come to the conclusion that all companies with no operations that have used all their capital plus some debt to buy a house with land in a resort that is lived in by a foreigner are guilty of purchasing land on behalf of foreigner.  More than 99% of the time he would be right.  

 

The point to grasp re land ownership is that using nominees to acquire land is a flat out violation of a law that, rightly or wrongly, is very emotional to most Thais.  Running a genuine business that employs Thais and pays tax and is effectively controlled by foreigners in compliance with the FBA is separate issue. 

   

Since everyone knows for decades  abouts these company formations Why first allowing it for 30 years?

[Horace]

42 minutes ago, Dogmatix said:

 "Section 113 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."

 

The law you cite refers to an agent.  An agency relationship is not the same as nominee relationship.  There is a major difference between the two.  An agency relationship is defined in Thai law and is typically pretty clear cut.  In other words, there is nothing in the Land Act that even purports to criminalize nominee ownership of land by a Thai on behalf of an alien.  The Thai must be an agent. 

 

Also, a Minister will not have the final word when the penalty for acquiring land as an agent is two years imprisonment.  This law was passed long before "Section 44" was dreamed up.  A Minister, cannot in his or her sole discretion, expropriate property based on his or her finding that there is an agency relationship without any judicial review.

[xylophone]

1 hour ago, Dogmatix said:

The point to grasp re land ownership is that using nominees to acquire land is a flat out violation of a law

That is/was my understanding and I was about to reply to a previous post by Horace with the following...…..

 

If I understand this correctly (and it’s quite possible I don’t) I believe the area you are focusing on is different to that which I and many others on this thread are doing.

 

Most of the posts are related to the acquiring of land with a house, when bought through a Thai nominee company as they are known. I know you have gone into a rather circuitous argument with regards this/the meaning of nominee, however surely it is fairly straightforward in this regard: –

 

If a company is set up with a foreigner and its sole intent is to own property and land AND…….

If it has no business operation as such and/or does not have the requisite number of Thai employees.

If it returns no dividends to the shareholders.

If those shareholders have not contributed/invested their own funds to acquire their shareholding.

Then that company/setup/whatever you want to call it, is illegal, irrespective of what name one wants to apply to it.

As I understand it???

[Dogmatix]

1 hour ago, Destiny1990 said:

Since everyone knows for decades  abouts these company formations Why first allowing it for 30 years?

There is no clear answer to that.  Most farangs, as well as Japanese and Indonesians and British colonial subjects, when they still existed, were allowed to own land according to their treaties until the early 70s. Although it was often quite difficult, or even impossible in many cases, to get the required permissions, it was not illegal for foreigners to own land and the Land Code has a set of detailed provisions dealing with this.  The Americans came up with a theory that foreign ownership of land was a bad thing because they believed that ownership of land by peasants should be a cornerstone policy in the Cold War to prevent the Domino Theory from swallowing up all of SE Asia.  Therefore they readily acquiesced to Thai suggestions to renegotiate their Treaty of Amity and Economic Relations, expunging the provisions to do with reciprocal land ownership rights.  There was no backlash from American business, since few had any interest in owning Thailand for their businesses at that time, which is not surprising given the uncertainty over Thailand's survival as a capitalist nation.  Once the US had caved in on land ownership rights for its citizens and businesses, it was an easy task for the military Thai government to ditch completely the remaining treaties with other countries that had little interest in Thailand at that time and weren't pouring in cash and arms like the US was.  Only the US bothered to negotiate a new treaty after that which is why Americans can still own their own businesses in most sectors.     

 

So we are basically talking about a period of around 30 years, as you say, from the early 70s when foreigners lost their rights to own land until 2006 when the Interior Ministry started a serious crack down to prevent companies acquiring land on behalf of foreigners.  I think that during the 70s, 80s and 90s the company ownership route went more or less unnoticed, as it remained relatively small scale.  Until 1999, it was also the only easy way for a foreigner married to a Thai woman to own land, since the Land Department refused to allow Thai women married to foreigners or known to be cohabiting with them to register land before that date.  The first wave of resort property development before the Tom Yam Kung crisis of 1997 was mainly condos and after the Condominium Act was promulgated, foreigners could legally own 49% of the usable space of a condo building.  I think the phase of developing housing estates in resort areas, specifically for foreign buyers, only started in earnest after the economy had recovered from crisis, in the early 2000s.  Then it became very noticeable that foreigners were buying Thai land and the amount of that which was prime beachfront land was highly exaggerated for sensational value.  In fact it didn't take the Interior Ministry very long to take action from that point, since its first serious directive against companies buying land for foreigners was issued in 2006.  

[Dogmatix]

1 hour ago, Horace said:

 

The law you cite refers to an agent.  An agency relationship is not the same as nominee relationship.  There is a major difference between the two.  An agency relationship is defined in Thai law and is typically pretty clear cut.  In other words, there is nothing in the Land Act that even purports to criminalize nominee ownership of land by a Thai on behalf of an alien.  The Thai must be an agent. 

 

Also, a Minister will not have the final word when the penalty for acquiring land as an agent is two years imprisonment.  This law was passed long before "Section 44" was dreamed up.  A Minister, cannot in his or her sole discretion, expropriate property based on his or her finding that there is an agency relationship without any judicial review.

 

Actually I said that a judicial process would be required to impose criminal penalties.  What I said was that the Land Code gives the Interior Minister the final say in determining whether a purchase of land is on behalf of an alien and therefore illegal.  In such a case a judicial process would be redundant, as the law clearly states the minister has the final word. The word agent (tua thaen) only appears in Section 113 regarding penalities. The relevant clause regarding the acquisition of land on behalf of aliens is 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."  There is no mention of agent or nominee. It is enough for the minister to believe that purchase will be (or has already been made) on behalf of an alien.  

 

The minister has neither the authority to impose criminal penalties, nor to order expropriation.  But the Director General of the Land Department has the authority to order the owners of land illegally held on behalf of an alien to sell it within not less than 180 days.  

 

Effectively an appeal process would be available through the Administrative Court but it is unlikely that the court would issue an injunction to halt the forced sale of the property which can be auctioned by the Legal Execution Dept, if the owner doesn't sell within the time limit specified by the DG.  To win in the Admin Court the company's Thai directors would have to make a very convincing case that it was a real operational company and there was a good business reason for purchasing a house and renting it out to an alien, which could be difficult, if they are drivers, maids, or employees of law or accounting firms.  If the plaintiff won the case, the court would probably not be able to order reinstatement of the chanote, since someone else will have lawfully purchased it.  So the plaintiff would have to sue for damages which would be difficult to prove, since they were given at least 180 days to sell the property which should have been enough for them to realise full market value and the court would probably conclude that no financial damage was done. 

 

As for whether a criminal court would accept the definitions of "agent" under the Civil and Commercial Code as being relevant to a criminal prosecution under the Land Code is an interesting legal argument that would probably require a test case.  One thing that mitigates against this is that the Civil and Commercial Code specifies that buying property is one thing that an "agent" may  not do on behalf of a principle.  Therefore using the CCC's definition here would imply that the criminal penalties for purchasing land on behalf of an alien are redundant because it is not possible under the CCC for anyone to act as an agent to buy land for anyone else.  Personally I would not be willing to chance on my freedom on a sophistic argument that someone who deliberately broke the law to buy land on behalf of an alien could not be held criminally accountable because of the way "tua thaen" is defined in a different statutory law.  Since they don't have to take much account of precedents, Thai judges have a great deal of flexibility in interpreting statutory laws which are usually written ambiguously to allow just such flexibility.

 

[gaff]

hello,

 

And what do you think about a newly created company that will buy a land to build a business premises on this land ?

 

If a business really exist on this land and can be checked anytime, is it officially legal even if the land has been bought right after the company creation ?

 

Thanks.

[Dogmatix]

1 hour ago, gaff said:

hello,

 

And what do you think about a newly created company that will buy a land to build a business premises on this land ?

 

If a business really exist on this land and can be checked anytime, is it officially legal even if the land has been bought right after the company creation ?

 

Thanks.

 

I don't think the Land Department would have a problem with allowing a transfer of land to a newly formed company, if it passed some simple sniff tests. Mainly because there is so much cheating going on in land transactions, land officers are obligated to interview all buyers and sellers and ask simple questions such as whether the buyer is sure he knows the correct location of the plot (land officers upcountry have told me they get complaints every day from buyers who were deceived about the location of the plot they bought) and whether the seller has been paid in full yet.  Since 2006 they have also been obliged to do much more thorough interviews of corporate buyers where there is any foreign involvement or a suspicion of it.  So, if it is a newly formed company and there is a foreign shareholder or director, there will be detailed questions about the sources of funds of the Thai shareholders to buy the shares and the company's business plans that require the purchase of the land, as well as the company's sources of funds to buy the land, being share capital or debt.  If, for example, the new company which has a foreign shareholder and director is buying land in an industrial estate to build a factory, I can't imagine there would be a problem, even the foreign director ends up with a small apartment in the factory building.  Of course, they are on alert in resort areas when companies even without foreign involvement come in to buy residential land or a pre-build house in developments they know have been targeted at foreign buyers. Thai buyers rarely buy homes through companies as it is generally tax disadvantageous to do so, particularly when the company sells it, and they would not want to create an accounting burden in addition, if the company has no real business.  A credible Thai director might be able to convince them he is buying a house to use as a home office, if there is no visible foreign involvement.  Even if there is, he should be able to get it approved, if he can show he has his own source of funds and a business plan that doesn't sound like nonsense.  

 

Also remember that there is considerable variation between different land offices, depending on who the head of registrations is. I have done transactions in a number of land offices in different provinces and have found big variances in procedures between land offices in adjacent catchment areas in the same province. Some even skip the obligatory interview completely while others give the third degree and ask for a ridiculous level of documentation. 

 

[inThailand]

8 hours ago, DrTuner said:

Not to mention they would be run down in a matter of weeks if not days, full of somchais, karaokes, trash all over and a generic apocalypse. Basically turn them into dump yards. Somchai don't do maintenance.

Every housing estate I know turns to this without this latest alleged crackdown. 

[blackcab]

3 hours ago, Dogmatix said:

One thing that mitigates against this is that the Civil and Commercial Code specifies that buying property is one thing that an "agent" may  not do on behalf of a principle.

 

You are referring to Section 801 that covers General Authorities.

 

Section 800 (below) covers Special Authorities which do allow an agent to Sell or Mortgage immovable property, etc.

 

Section 800. Special Authority

 

The agent who has a special authority may do on behalf of his principal whatever is necessary for the due execution of the matters entrusted to him.

 

This is quite fortunate as my work permit specifically permits me to act as an agent for all real estate transactions.

[blackcab]

An off topic post has been removed.

[GinBoy2]

It stuns me that people are either shocked, or defensive.

We all know, or should know, that the only property farangs can legally own is condo's, within that 49% limit.

Anything else is stretching the law, and if you don't accept that you're pulling the wool aggressively over your eyes.

If it goes tits up and they decide the enforce the strict letter of the law, you know you're sh**t outta luck.

[The manic]

On 8/17/2018 at 7:57 AM, mogandave said:

Beware of low hanging fruit...

First they came for the over stayers and the 'druggies'...and I did nothing because I was a sanctimonious prig....then they came for me and my shell company and my nominees and my property. ...To paraphrase a well known tract...

[The manic]

5 hours ago, GinBoy2 said:

It stuns me that people are either shocked, or defensive.

We all know, or should know, that the only property farangs can legally own is condo's, within that 49% limit.

Anything else is stretching the law, and if you don't accept that you're pulling the wool aggressively over your eyes.

If it goes tits up and they decide the enforce the strict letter of the law, you know you're sh**t outta luck.

As in Spain the whole nominee companies scam  was rumbled and hundreds of people or thousands even lost their property when the authorities decided to apply the letter of the law after decades of fraud overlooked by the authorities and local land owners and others.

[Dogmatix]

7 hours ago, blackcab said:

 

You are referring to Section 801 that covers General Authorities.

 

Section 800 (below) covers Special Authorities which do allow an agent to Sell or Mortgage immovable property, etc.

 

Section 800. Special Authority

 

The agent who has a special authority may do on behalf of his principal whatever is necessary for the due execution of the matters entrusted to him.

 

This is quite fortunate as my work permit specifically permits me to act as an agent for all real estate transactions.

 

At any rate I am unconvinced that either the Land Department or the criminal court would feel obliged to take the Civil and Commercial Code definitions of “agent” and “principal” into account in pursuing a criminal action under the Land Code which unfortunately provides no definition of the word “agent”, implying that it is ultimately up to the criminal court to interpret it in this context. 

 

The Land Code proscribes a fine of B20,000 or 2 years in prison or both for a “tuathaen” who purchases land on behalf of an alien. “tuathaen” is a word that has a dictionary definition of “agent” or “representative” and is also commonly used to mean a “nominee” in discussions about Thais buying land or guns or other things they are not supposed to have for foreigners. So let’s take an example of a farang who has used a shell company to buy his desirable infinity pool villa in Samui. On the day of the transfer, it was not convenient for the Thai nominee authorized director to go to the Land Department. So the farang had him sign a power of attorney authorizing his driver to act as his agent in signing the transfer documents. Finally the farang’s luck runs out and he finds himself on a sh*tlist of foreigners suspected by the DSI amongst a great deal of publicity of using nominees to buy land in violation of the Land Code. 

 

The question is this. Would the DSI feel constrained by the definition of “agent” in the Civil and Commercial Code, which has nothing to do with criminal law, and decide to press criminal charges against only the driver who unknowingly acted as an agent?  Or would they press charges against the directors of the company who knowingly acted as nominees or representatives in order to facilitate the illegal perchase of land on behalf of an alien? When the case got to the Samui court, would the judges put aside what they know to be the intent behind the clause in the Land Code and the obvious intent of the nominees and just convict the driver who was ordered by his boss to sign some documents?

 

At the end of the day you cannot get away from the fact that it is illegal for aliens to own land through nominees and there are criminal penalties involved. That is the intent behind the wording in the Land Code and resorting to definitions found in laws intended for use in civil courts only to avoid this reality is just wishful thinking.

[inThailand]

19 hours ago, Dogmatix said:

 

A lot of farang  housing estates in tourist resorts would turn into slums quite quickly too.  It wouldn't take that many houses to be abandoned or sold off cheap to Thais to turn estates into nightmares for legitimate owners who try to stay on. Non payment of the central services charges would mean the end of maintenance and security services.

I have never seen a housing estate Not look like a slum after a couple of years. 

[Dogmatix]

3 hours ago, The manic said:

As in Spain the whole nominee companies scam  was rumbled and hundreds of people or thousands even lost their property when the authorities decided to apply the letter of the law after decades of fraud overlooked by the authorities and local land owners and others.

 

In Spain, where there is no restriction on foreign land ownership, the houses of foreigners (mainly Brits) got bulldozed not because they had used shell companies or nominees but because they had been deceived by developers (also mainly Brits) with connivance from local officials to buy houses in areas not zones permitted for residential development.  In most cases they were blocking the view of the sea or causing other undesirable environmental impact. The parallel with Thailand is the connivance of local or government officials in allowing the illegal foreign ghettos to be planned, marketed, sold and built.

 

Mexico is a closer parallel to what has happened and might happen in future.  Foreign land ownership is permitted only if it more than 50km from the ocean or 100km from the borders.  However, many foreigners (mainly Americans) have been lured into using nominee structures such as trusts and companies to illegally buy beachfront property.  There have been cases where dawn raids by hired security guards were ordered by judges to evict gringos from their illegally owned beach front homes and hotels with police standing by enjoying the show.  

[inThailand]

Whats there to debate? Holding a property by a foreigner is illegal. I am waiting for a bargain and will take a 30 yr lease. Twice as long as I will live. The only idiots debating this issue are the yellow book and pink card advocates. Two worthless documents. 

[Chua]

The simple solution is just to avoid using nominees. DFDL normally does very thorough, safe work for foreigners over many years, so it would be surprising if they didn't actually the structure these deals correctly.  At this point the DSI raids were only to gather evidence based on suspicion of an issue. There may actually be no crime if the deal was structured correctly.

 

Not all Thai people are nominees. AThai person who has the financial wherewithal to be a true partner and investor in the property project and who receives a dividend for their investment can be a  perfectly legitimate majority shareholder in a Thai land-owning company. Even if a minority of the shares are held by Foreign interests, the company is still perfectly legal. Furthermore, the managing director and sole signer of the company can be a foreigner. Furthmore, the Foreigner can have veto rights such that no changes can occur to the company without their approval. A quorum can be defined such that no meeting of the company is valid unless the foreign shareholders are present.  With this proper type of structure Thai land-owning companies can be legitimate according to Thai laws and yet offer a suitable degree of protection and peace of mind for the foreign shareholders.

[Horace]

16 hours ago, Destiny1990 said:

Since everyone knows for decades  abouts these company formations Why first allowing it for 30 years?

 

Excellent question.  Why the change? 

 

How can you take a government seriously when its officials came out and assured foreigners that these structures were legal and legitimate, and then change come out and say the opposite?

 

And remember the Department of Business Development continues to review and approve companies that will either own land or engage in activities restricted under the FBA where shares held by a foreigners will have ownership control and superior economic rights.  The government is approving these structures and then saying they are illegal?  That is great for investor confidence.

 

HSBC was giving out loans to foreigners to buy property based on these structures in the 2000s.  They were doing so based on express approval of the the government.

 

If the government is now changing its position, and intends to take away ownership, that is an expropriation of assets.  If they are going to jail anyone, they are basically unilaterally, without any notice, changing the law and then taking away the property and liberty of foreigners based on a unilateral change in the law.