Nominee structures thrust into the spotlight

The recent crackdown on alleged nominee structures linked to foreign land ownership on Koh Phangan has reignited debate over long-standing concerns in Thailand's property sector, particularly in resort destinations popular with overseas buyers.

According to Surachet Kongcheep, head of research at property consultancy Cushman & Wakefield Thailand, the issue extends far beyond a single island or nationality.

"Several legal structures, loopholes and informal arrangements have existed for years in markets such as Phuket, Pattaya, Samui and Bangkok, often involving both foreign investors and Thai facilitators," he said.

WHAT TYPES OF OWNERSHIP STRUCTURES ARE COMMONLY USED?

Mr Surachet said the most common method remains the use of Thai-registered companies to hold land or property on behalf of foreigners.

Although foreigners are legally limited to owning no more than 49% of shares in a Thai company, some structures allegedly rely on Thai nominees with little real financial involvement or decision-making power.

In many cases, Thai shareholders may be relatives, acquaintances or individuals sourced through legal or accounting firms that assist with company registration.

Some arrangements also involve loan agreements requiring Thai shareholders to pledge their shares to foreign investors, effectively transferring control if conditions are breached.

Power-of-attorney documents are another common mechanism, allowing foreigners to exercise full authority over company operations despite legal ownership appearing Thai on paper.

Mr Surachet said such structures are not new and remain widespread because investigations are complex, document-heavy and time-consuming.

He said nominee structures often involve a broader system beyond the foreign buyer alone.

Law firms, accounting firms, local brokers and intermediaries may help establish companies, source Thai shareholders or facilitate documentation.

Some Thais might be lured by financial incentives, while others may simply act as passive shareholders without understanding the legal implications.

"The problem is not only the foreign investors," Mr Surachet said. "There are Thai parties helping them throughout the process."

WHAT LEGAL OPTIONS EXIST FOR FOREIGNERS?

Foreigners already have several lawful pathways to use or control property in Thailand without directly owning land. The most common is long-term leasehold, typically for 30 years, sometimes marketed as 30+30-year arrangements.

However, renewal beyond the initial 30 years is not guaranteed under Thai law, making some foreign buyers reluctant to rely on leasehold alone.

Another legal mechanism is superficies rights, where the land is owned by a Thai national while the building belongs to the foreigner. This structure is common among foreigners with Thai spouses, allowing them to retain ownership of the house even if the land itself remains under Thai ownership.

Foreigners can also obtain usufruct rights, granting them the right to use land, live on it or receive benefits from it for a defined period or until death.

Some foreign-owned businesses approved by the Board of Investment may legally hold land for operational purposes, though the land must be tied directly to the promoted business activity.

Thailand previously introduced schemes allowing foreigners investing at least 40 million baht in approved assets to own up to one rai for residential purposes.

However, Mr Surachet said this mechanism has rarely been used due to complicated procedures and cabinet approval requirements.

WHY DO SOME FOREIGNERS STILL CHOOSE RISKIER ARRANGEMENTS?

He said some investors prefer structures that provide effective control or perceived ownership rather than temporary usage rights.

Leasehold arrangements may be viewed as unattractive because they do not provide full ownership benefits or long-term certainty.

At the same time, some Thai intermediaries market alternative structures as easier ways to control land or operate businesses.

For certain investors, especially those focused on speculation or long-term residency, the perceived commercial upside outweighs legal risks.

WHICH FOREIGN GROUPS ARE MOST ACTIVE?

Mr Surachet said different nationalities tend to display varying investment patterns.

European buyers have long favoured beachfront condo units and smaller residential properties in resort destinations.

Where condominium foreign ownership quotas are full, some may turn to company structures to acquire other types of real estate.

Russian investors sometimes establish businesses alongside property ownership. Mr Surachet said some Russian capital entering Thailand may also involve grey market activities or efforts to move money offshore.

Chinese buyers have become one of the most influential groups in Thailand's condo market over the past decade. Unlike earlier generations of Chinese migrants, many newer arrivals operate within largely self-contained systems using Chinese-language brokers, payment systems, rental platforms and marketing channels.

He said some investors purchase units primarily for speculation or short-term rental income, including rentals that may violate Thailand's hotel laws.

Many Chinese investors now view Thailand not only as an investment destination, but also as a potential long-term living base, said Mr Surachet.

WHY IS THE ISSUE DRAWING GREATER PUBLIC ATTENTION?

Foreign ownership concerns have existed for decades in resort markets such as Koh Phangan, Phuket and Samui. However, the issue intensified recently following viral online discussions and growing public sensitivity regarding foreign influence in local communities.

Once incidents involving foreign behaviour gained traction on social media, more local residents began openly sharing concerns previously discussed only privately.

"People in some areas may have known about these issues for years," he said. "But many stayed quiet because influential groups were benefiting from foreign investment."

Nominee structures are most commonly associated with high-demand tourist provinces, such as Phuket, Surat Thani, Chon Buri and Bangkok, said Mr Surachet.

Some activity is found in Chiang Mai, though to a lesser extent. Popular resort destinations with strong foreign communities remain the most exposed because of sustained overseas demand for both residential and business assets, he noted.

HOW DOES THIS AFFECT LOCAL COMMUNITIES AND THE PROPERTY MARKET?

Mr Surachet said the direct impact on land prices may be less significant than commonly perceived because most investors still seek land at market rates.

However, problems emerge when prime plots become inaccessible to local residents or when foreign-dominated communities begin operating separately from surrounding areas.

He warned that exclusive enclaves could gradually reshape social dynamics and increase tensions between locals and foreign residents. The broader concern is not ownership itself, but whether economic benefits genuinely flow into the Thai economy.

Mr Surachet said major property developers might not be the main drivers behind nominee structures. Most of them simply want to sell units within legal frameworks.

However, brokers and intermediaries play a larger role by connecting foreign buyers with legal advisers, company registration services or nominee arrangements.

"Some agents are not only selling property," he said. "They may also help foreigners find ways to control assets indirectly."

WHAT DOES THAILAND STAND TO LOSE?

According to a property source who requested anonymity, a common method involves setting up a company in which Thai nominees hold 51% of the shares, while the actual foreign buyer holds the remaining 49%.

When the property changes hands, ownership of the real estate itself is not transferred. Instead, the company simply changes the name of the 49% foreign shareholder from the previous owner to the new one.

"This process costs only 1,000-2,000 baht in registration fees, compared with normal property transfers that require a 2% transfer fee based on the property value, as well as income tax," said the source.

As a result, the government loses significant revenue from transfer fees and taxes that would normally be collected through direct property transactions.

Such arrangements can potentially be identified through shareholder verification, as the Commerce Ministry can examine whether the Thai shareholders have the financial capacity to genuinely own shares in companies holding high-value property assets, noted the source.

WHAT SHOULD THE GOVERNMENT DO NEXT?

The source suggested government agencies enhance crackdowns on nominee arrangements, particularly the Department of Business Development, which can investigate Thai shareholders in companies holding property assets to determine whether they are genuine investors or acting on behalf of foreign owners.

"The Land Department can also investigate foreign ownership in condominium projects, as the law limits foreign ownership to a ceiling of 49% of a project's total saleable area. However, many projects, particularly condos in Bangkok's inner-city locations popular among foreign buyers, have been found to exceed the limit," said the source.

Mr Surachet said enforcement must become more systematic, consistent and transparent.

Authorities should strengthen investigations into beneficial ownership, financial flows and suspicious corporate structures, while ensuring enforcement applies equally across all nationalities.

He suggested Thailand could study stricter oversight models used in countries such as Singapore, which closely monitors foreign ownership and anti-money laundering risks.

However, Mr Surachet warned against overreacting in ways that damage legitimate foreign investment.

"The challenge is creating a balance," he said. "Thailand still needs foreign investment, but enforcement must be serious enough to prevent abuse and protect local communities over the long term."