Doing Business in Thailand

Today I’m commenting on another point raised by Pattaya Times Drew Noyes in his letter to Prime Minister Yingluck Shinawatra on Updating Laws Affecting Foreigners. Mr. Noyes ask the Prime Minister if possible to allow all foreigners to buy up to one rai (1,600 square meters) of land for their Thailand residential home.

Firstly this privilege already exists but is limited to foreign investors who have invested 40,000,000 THB in Thailand (cost of land purchase and house not included) in a sector that is of interest for Thailand and Thai people and the privilege is valid only for as long as the investment remain in Thailand. Not a lot of foreign investors have applied for it.

The problem with Mr. Noyes request is not that it does not make sense, to the contrary it does make a lot of sense but it touch to a sector which is politically very sensitive and I don’t see any Thai Government burning its political credit on such an issue.

If I had to ask a land related legal update to the Prime Minister it would be to find a solution that offers to all the foreign investors that have circumvented Thai Laws and purchased land through a Thai company with Thai shareholders that may deemed nominees a way out without sanctions and

• Return the land into Thai hands; and
• Preserve the rights of the foreign owners; and
• Preserve Thailand reputation overseas

I thought a lot about it and the only solution that would permit to fulfill those three objectives would be a solution I already presented roughly in a previous post. I added a few features to my first draft. I’m aware that my solution is far from perfect but I don’t see any other that could permit to fulfill the three objectives above.

The proposed solution which I presented in a post in 2009 would be as follows:

• The law is changed to extend the  lease duration and right of superficies to 60 or 90 years; and
• The government issue a bill that offers amnesty to foreign buyers that have used “companies that own land with Thai Shareholders that may be deemed nominees” or “Thai individuals” to purchase land that would be subjected to the following conditions:

(1)  The foreign buyers must notify the land department within 12 months after the enactment of the bill, and

(2)  The foreign buyers must either:

(i)                Sell the property within 3 years to a Thai Buyer, or

(ii)             Surrender and transfer the ownership of land title deed to the Government that would for good consideration grants to the foreign buyer either

• If the company or Thai individual own the land and the house

-          A 6o year’s lease agreement on the land and house + a renewal option of 30 year.

-          A 90 years lease agreement of the land and house with no renewal option.

If the company or Thai individual only own the land and the foreigner owns the rights on the house

-          A 6o year’s lease agreement on the land + a renewal option of 30 year.

-          A 90 years lease agreement of the land with no renewal option.

-          The foreign investor would remain the owner of the house for the duration of the 60 years lease + period of renewal or for the 90 years lease duration.

(3)  During the lease period (60 years + 30 or 90 years) the foreign investor could

(i)                Assign the lease and sale the house to another foreign investor but the lease would be assigned and the ownership of the house would be transferred to the third party foreign buyer only for the remaining duration of the lease originally granted by the Government to the foreign investor

(ii)             Sell the lease and house to a Thai Buyer

(4)  The foreign buyer would pay the cost of registration of the lease agreement and be liable of any tax applicable on the property (land & house tax or the new property tax)

(5)  At the time when reselling the property the foreign investors would pay the normal taxes due in case of resale of a property

(6)  If at the end of the entire lease period the foreign investors was not able to sell the property said property would be auctioned. The foreign investor would receive the auction payment after deduction of taxes applicable and auction fees.

I did not provide for fine or punishment into my proposed solution because as I was explaining in my post “Buying Land: The Nominees Witch Hunt (3): The Scapegoat” the responsibility for what happened was collective and to punish only the foreign investor would be unfair.

Furthermore the objective of the solution is to have as many of the foreign investors that have used “companies that own land with Thai Shareholders that may be deemed nominees” or “Thai individuals” to purchase land to willingly participate. Adding sanctions would simply dissuade many people to participate.

Also exchanging a quasi freehold ownership against leasehold is punishment enough.

Finally, the main purpose is the restoration of a situation where residential land would be back into Thai hands.

As I was saying above, I’m totally aware that there are still flaws in what I’m proposing above. But the point is that this issue has to be solved and that we have to start from somewhere and the other alternative viable that is to say allow foreign residential ownership is not an option that may become available for years.

Originally posted 2012-02-15 16:49:31.