Thailand Strengthens efforts to Dismantle Foreign Nominee Schemes

Thailand is tightening regulations on foreign investments, especially nominee arrangements, creating uncertainty. Stricter enforcement targets illegal holdings, particularly affecting regions like Phuket, amid economic protectionism.

This move aims to safeguard national interests and ensure fair competition, but it has sparked concerns among foreign investors. Many fear the new measures could deter legitimate investments and complicate business operations. Industries reliant on foreign capital, such as real estate and tourism, may face significant challenges as they navigate the evolving regulatory landscape.

Key Points

• Thailand is experiencing significant legal and economic changes, leading to uncertainty for foreign investors as the government intensifies a crackdown on nominee arrangements and clarifies property lease laws. Phuket, a prime destination for foreign residents and investors, feels the impact on its real estate and tourism sectors amidst conflicting protectionist laws.
• Enforcement of the Foreign Business Act (FBA) has surged since 2015, with a multi-agency task force prosecuting illegal nominee businesses, resulting in substantial financial damages. New regulations and inspections focus on ensuring genuine Thai participation, particularly targeting regions like Phuket and Koh Samui, which attract Russian luxury buyers.
• The government is addressing concerns over economic and national security related to foreign-owned properties used for illegal rentals. Severe penalties for FBA violations are in place, including imprisonment and substantial fines. Further amendments to laws could allow asset seizures, underscoring the seriousness of nominee arrangements as threats to national stability.

Thailand Intensifies Crackdown on Foreign Nominee Arrangements, Impacting Investors

Thailand has escalated its efforts to clamp down on foreign nominee arrangements, a move that affects numerous international investors operating within its borders. The announcement came as part of a broader initiative to ensure compliance with Thai laws and protect domestic business interests, with targeted enforcement activities intensifying since October 2023.

The Thai government has long grappled with the issue of foreign businesses using Thai nominees to circumvent laws pertaining to foreign ownership. Under Thai law, foreign entities cannot own more than 49% of a Thai company unless specifically exempted. This has led many to exploit nominee structures, posing competitive disadvantages for local businesses, said Finance Minister Arkhom Termpitayapaisit. “We must create a level playing field for all enterprises operating in Thailand,” he added.

The crackdown includes increased scrutiny on company registrations and audits of existing businesses suspected of employing nominee arrangements. The Department of Business Development reported an uptick in investigations, with over 200 cases reviewed in the past month alone. Experts caution that the intensified enforcement may deter foreign investment, particularly from those seeking to navigate the complex business landscape.

“While the move aims to strengthen regulatory compliance, it also raises concerns over potential repercussions for genuine investors,” noted Dr. Sujit Wattanapong, a business law expert at Chulalongkorn University. The ramifications of this crackdown are likely to unfold in the coming months, leading investors to reassess their operations in Thailand.

As the government seeks to tighten regulations and foster fairness in the market, observers will closely monitor how these changes affect Thailand’s attractiveness as a destination for foreign capital.

Sources: Thai Department of Business Development, Reuters, Financial Times.