Nominee Land Ownership in Thailand: Why It Is Illegal and What Risks It Carries

What 'Nominee Ownership' Means

As a general rule, a foreign national cannot hold land in Thailand on a freehold basis. To circumvent this prohibition, the market has for decades offered so-called 'nominee' arrangements: land is registered in the name of a Thai citizen or a Thai company, yet the foreign national effectively controls the plot and receives the benefit from it. The Thai titleholder in such a structure is nothing more than a formal figurehead, a 'straw man'.

The operative word here is 'effectively'. The law looks not at whose name appears on the chanote (title deed), but at who actually controls the plot and whose funds were used to acquire it. If it is established that a Thai citizen is holding land 'on behalf of a foreigner', Thai law treats the foreigner as the true owner, which means there is unlawful foreign land ownership on its face.

What the Law Expressly Prohibits

The prohibition is directed at both parties, the foreign national and the Thai nominee alike.

• Section 96 of the Land Code Act. Where land has been acquired by a person (including a legal entity) on behalf of a foreigner, the Director-General of the Land Department is empowered to dispose of that plot compulsorily, effectively compelling a sale.
• Section 113 of the Land Code Act. A person who acquires land as an agent of a foreigner is liable to a fine of up to 20,000 Baht, or imprisonment of up to 2 years, or both.
• Section 111 of the Land Code Act. The foreign national is prosecuted as an accomplice, with liability set at approximately two-thirds of the penalty applicable to the nominee.
• Section 74 of the Land Code Act. A Land Office is entitled to question the parties at the time of registration and to refuse to transfer title if it suspects a nominee arrangement.

Where false information was given to an official in the course of the transaction, provisions of the Criminal Code are added: Section 137 (false statements to a public official, up to 6 months) and Section 267 (entry of false information in an official document, up to 3 years). In other words, a separate criminal prosecution may be layered on top of the land-specific sanctions.

The Shell Company - The Same Problem

A nominee arrangement is often disguised through a Thai company: the foreigner acquires 49% of the shares, while 51% is distributed among Thai 'partners' who have in reality contributed no capital and make no decisions. The logic is identical to that applying to an individual: if the Thai shareholders hold their stakes 'on behalf of the foreigner', the foreigner is treated as the true owner of those stakes, the company is deemed effectively foreign, and land ownership once again becomes unlawful.

Indicators that a company will be regarded as a nominee vehicle:

• the Thai shareholders contributed no actual funds for their shares;
• the foreigner holds preference shares or veto rights that give control despite a formal minority interest;
• the company conducts no independent commercial activity and exists solely to hold the plot;
• loan arrangements and 'leaseback' structures are constructed so that all economic benefit flows to the foreigner.

How a Nominee Differs from a Lawful Lease

This is where the critical line is drawn. A lease for a term of up to 30 years under the Civil and Commercial Code (CCC Section 540) is a lawful instrument. It becomes unlawful only when the Thai titleholder ceases to be a genuine owner.

The Thai owner must hold title 'to the exclusion of the foreigner': it is the Thai owner alone who has the right to deal with the plot. A foreigner may hold a lawful interest in land through a lease, usufruct or superficies, but title does not pass to the foreigner.

Lawful Alternatives

• Lease of up to 30 years (CCC Section 540) registered with the Land Office. The Thai lessor incurs an obligation to pay income tax on the rental payments received.
• Usufruct - a lifetime right to use and derive income from land without acquiring title.
• Superficies - the right to own a structure built on another person's land, with the building and the land being legally separated.
• Condominium. Under the Condominium Act, foreign nationals may own condominium units on a freehold basis within a quota not exceeding 49% of the total floor area of the building. Purchase funds must be remitted from abroad, as evidenced by a FET form (formerly known as Tor.Tor.3).
• Purchase through a Thai spouse - provided the required procedure is followed and it is confirmed that the funds belong to the Thai party; otherwise the transaction may equally be treated as a nominee arrangement.

Consequences if the Arrangement Is Uncovered

The Land Department may order the plot to be sold within a period of between 180 days and one year. If the titleholder fails to comply within that period, a forced sale is conducted and the Department retains a portion of the proceeds. Criminal proceedings against both parties may run in parallel. In short, a 'nominee' arrangement is not a grey area: it carries the direct risk of losing both the land and the money invested in it.

What to Check and What to Watch Out For

• Who is actually named in the chanote, and whether that person is the same one making decisions about the plot.
• If a Thai company is being proposed, whether the Thai shareholders contributed their own funds and whether the company has genuine business operations.
• Whether the foreigner has any covert control: preference shares, veto rights or a general power of attorney over the nominee.
• Whether the lease is formally registered and whether it is in fact concealing a transfer of title.
• Where the funds for a condominium purchase originated, whether a FET form exists and whether the 49% quota has been observed.
• Whether a loan agreement or 'leaseback' arrangement is structured in such a way that the Thai party ceases to be a genuine owner, because that is precisely where the line of illegality lies.