Foreign Ownership of Land

The rules regarding foreign ownership of land in Thailand are actually quite straightforward. Foreign individuals or foreign owned companies are not allowed to own any direct interest in land, unless an exception to the rules applies. Thai law may restrict foreigners from buying or owning land, however it is currently possible in the following circumstances:

The Board of Investment (BOI) and the Industrial Estates Authority has the power to permit promoted companies to own land for the purpose of the promoted business.

Permission can also be granted under the Petroleum Act for use in approved projects.

Banks and financial institutes that have become foreign owned.

A foreigner who invests at least 40 million Baht in authorized securities in Thailand may buy up to 1 rai (1,600 sqm) of land for residential purposes.

These exceptions do not cater for the majority of foreign people that are looking to invest in Thailand. The following are legitimate exceptions to the rules and therefore legal ways in which a foreigner can purchase land or property.

Buying Leasehold Property

Foreigners are allowed to lease land on short or long term contracts. The leases may be registered for up to 30 years. This is completely acceptable and the foreigner may have a very broad rights to the land throughout the duration of the lease. However, it is important to note that the renewal will, quite possibly, not be enforceable, in law, against a transferee lessor.

It is important to understand that, however broad these rights may be, the foreigner will at no time own any interest in the actual land.

For long term leases (over 3 years) the lease agreement is then shown on the land title papers. And it protects the terms of the lease and the rights of the tenant for the length of that lease (even if the land is sold to a third party). Failure to register the agreement will result in the terms of the lease only being valid for the initial 3 year period.

A recent change in the law now allows leases for industrial or commercial purposes to be for a term of up to 50 years. This again can be renewable for further periods of 50 years.

Buying Freehold Property through Company Ownership

A Thai Limited Company can purchase land as a juristic person. Therefore, if a foreigner is a director and a shareholder of a Thai Limited Company, they can control land through the company. The company must be allowed to own land and invest in land in accordance with its objectives and Articles of Association. Foreigners can hold a maximum of 49% of the shares in a Thai Limited Company, the balance must be owned by Thai shareholders (each company must have a minimum of 7 shareholders). The foreigner can, however, be issued with a different category of shares from the Thai shareholders giving the foreigner superior voting power, allowing them to have control of the company and therefore control of the land. In order to be commercially legitimate, the Thai shares ought to be given some professional right, such as a preferential dividend payout right, in return for their weaker voting power.

If the company is set up for the sole purpose of holding land then there is a risk of it being closed down if it is considered dormant. But if the company is trading and paying taxes, then it is contributing to the Thai economy and that risk is greatly reduced. It is therefore important that annual accounts are completed and all the required taxes are paid on time. “However, recent regulatory changes have had on impact and currently proposed legislation may also affect how companies with non-Thai shareholders and/or directors are structured. As always, competent legal counsel should be sought prios to investing in any Thai company.”

Building Regulations on Koh Samui

In order to build on Koh Samui you must first obtain a building permit from the municipality office and your building must meet certain requirements, depending on the location of the land on which you wish to build.

There are 4 defined areas for land depending on its distance from the beach.

Stage 1
Land up to 10 Metres from the beach. The law states that no construction is permitted within this area.

Stage 2
Land up to 50 Metres from the beach. Within this area you are permitted to construct a single storey building only its height cannot exceed 6 Metres (incl. the roof) and the building cannot exceed the maximum allowed area of 75 sqm.

Stage 3
Land up to 200 Metres from the beach. Within this area you are permitted to build up to a maximum height of 12 Metres (including the roof). The maximum allowed size is 2000 sqm.

Stage 4
Land located more than 200 Metres from the beach. Within this area, buildings of up to 12 Metres in height (including the roof) can be constructed.

In addition, all buildings must now be constructed with peaked roofs, flat roofs are no longer permitted.

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