DSI in collaboration with the Institute of Communication Science and the Board of Investment are currently investigating a group of Law Offices in the Phuket, Suratthani and Bangkok area that seem engaged in ‘camouflaged’ corporate structures acting as nominees on behalf of foreign shareholders.

As per government policy to actively pursue foreign investors using Thai nominee companies to own land in order to protect the nation’s interests.  On the 15^th of August 2018, Police Colonel Paisit Wongsmuang, the head of DSI; and Police Major Suriya Singhokmol, his second in command; in collaboration with The Institute of Communication Science and the Board of Investment obtained a warrant to search 4 offices as follows:

1. The first team led by Piya Watnawarangul (special agent investigating civil embezzlement) searched the premises of the Office’s Phuket Branch located at 393/4-5 Moo 1 Soi Bantao 1 Srisuntorn Rd., Chengtalay Subdistrict Thalang District, Phuket.  The premises appeared to be the work place of the Thai Nominees and a suspected location for falsifying documents for the purpose of camouflaging nominee activities.
2. The second team led by Worapoj Maihom, searched the premises of the Office’s accounting branch located at 123/9 Moo 5 Chengtalay Subdistrict Thlang District, Phuket.  The office appeared to provide accounting services for the Nominee companies.
3. The third team led by Jakrapop Klinhom searched the premises of the firm’s Samui branch office located at 17/10 Moo 1 Taweeratpakdee Borpud Sub district, Koh Samu District, Suratthani .  The premises were apparently the work place of the Thai Nominees and a suspected location for falsifying documents for the purpose of camouflaging nominee activities.
4. The fourth team led by Mr. Taweewat Surasit, searched the premises of the Bangkok Branch located at Rajanakarn Building, 3 Floor AA Sathorn Rd, Yannawa Subdistrict, Sathorn District Bangkok, and the work place of the Foreign Managing Directors.

The search yielded copies of documentation, computer data and hardware that will be used as evidence in court proceedings.

Additional information found at each premises showed that the foreign investors seemingly purchased over 80 plots of real estate, consisting of land, vacation homes and houses.

Sources also reveal that the firms seem engaged in nominee activities that allow a large number of foreign investors to buy and sell land in Southern Thailand such as Surat Thani, Pangna, Phuket and Krabi with such activities grossing over 2 billion baht per year.

The investigation has found that the group has used Thai employees to incorporate Thai companies.  These Thai Corporate Entities in turn are used to hold shares in other companies for the purpose of allowing foreign investors to buy land.  These activities are in violation of the foreign business act (1999).  Using Nominees to hold land on behalf of foreign persons or entities has a negative impact on national interests and the real estate industry.  DSI will continue to actively pursue and shutdown such activities.

Please note that the above translation should not be viewed as a definitive interpretation of the underlying announcement and is solely for informational purposes. It should also be noted that the matter has yet to be fully settled via adjudication and the final outcome of the case remains to be seen.

The reader of this posting should note that Thai authorities are becoming increasingly efficient and sophisticated in their law enforcement endeavors. This is clear from the increasing number of immigration raids and the heightened scrutiny of officers throughout the Thai civil bureaucracy on issues ranging from revenue assessment to traffic ordinances. Clearly, it is a time to be mindful not only of the formalities inherent in the letter of relevant laws, but the policy considerations which embody the spirit of those laws as well.

This brings us to the issue of Thai visa extensions. For many foreign nationals working in the Kingdom of Thailand a visa extension is necessary in order to remain in the Kingdom long term. Some opt to use multiple entry visas, but generally, these visas are not convenient for those who wish to remain uninterrupted or eventually apply for Thai Permanent Residence.

In recent months there has been some discussion among Thai government officers about tightening up the Ministry of Labour regulations regarding foreign workers. Apparently, new rules will go into effect in February 2010 which would make Thai work permit rules more stringent. This will likely have a collateral impact upon those seeking Thai visa extensions as work permit renewal is usually required by Thai Immigration before they will extend a Thai visa. At one time, the One Stop Service could be used by employees of companies with a high registered capital or BOI Companies. One Stop Service allowed foreigners to apply for both a work permit renewal and a visa extension at the same time.

However, One Stop’s jurisdiction has been significantly curtailed and the service itself is effectively non-existent for small businesses. Now, most foreigners wishing to renew their work permit and visa must do so by first making a trip to the Ministry of Labour and then traveling to the Royal Thai Immigration Police headquarters to extend the visa after work permit renewal. At this time, the process seems cumbersome, but there is some hope that the system will be streamlined so as to facilitate more efficient processing of work permits and visas.

When we say, “foreign ownership,” we mean foreign majority ownership as foreign nationals are allowed to own a minority stake in a Thai company, up to forty-nine percent. If a Thai owns fifty-one percent of a company in Thailand, then that company is considered to be a “Thai Company.”

There are some who incorporate “Thai companies” that utilize so-called “nominee shareholders.” A nominee is one who owns shares in a Thai company on behalf of another. A nominee is not an “active shareholder,” in a company. Under current Thai corporate law nominee shareholders are illegal. However, defining what constitutes a “nominee shareholder,” can be difficult.

Thai law does provide for a way around the restrictions imposed by the Foreign Business Act. There are ways to license a Thai Company, with majority foreign ownership, to conduct business in Thailand.

On method of facilitating a foreign company to conduct business in Thailand is through a Foreign Business License. These documents can be difficult to obtain and the process for obtaining a Thai foreign business license can be very time consuming. Once granted the license will specify the exact nature of the business and the company will be precluded from conducting any other type of activity, unless another license is obtained.

Another method of facilitating foreign ownership of a Thai company is through the US-Thai Amity Treaty. As the name suggests, the US-Thai Treaty of Amity and Economic Relations is a bilateral agreement between the Kingdom of Thailand and the United States of America. A company certified under the terms of the Treaty is given “national treatment,” allowing it to operate in the same way as a “Thai Company.” The major exception being that an Amity Treaty Company is precluded from owning real estate in Thailand. Other types of Thai property could be owned by an Amity Company, such as a Thai Condo. Also, the provisions of the Treaty grant the aforementioned benefits exclusively to United States Citizens. Therefore, this method of certification is not for everyone.

The Australia-Thai free trade agreement provides some special benefits to Australians in Thailand as Australian Citizen may be allowed to own a majority stake in certain types of Thai companies.

A final method of licensing a foreign company in Thailand is through the Board of Investment or BOI. A BOI company can receive special benefits in the form of rights to operate and some BOI companies can own land. That being said, BOI companies are very difficult to incorporate and require a great deal of legal expertise to set up. BOI Companies are generally not advisable for those thinking of establishing a small Thai business. For large enterprises, such a setup may be advisable due to the fact that a Thailand visa and/or work permit is generally easier to obtain for a BOI company.

A Thai work permit extension is somewhat similar to a Thai visa extension. In both cases, the original document is issued with a short term validity (usually one year, although work permits can be issued for three, six, nine, or twelve months at the individual officer’s discretion). After the permit expires the foreigner will no longer be legally entitled to work in the Kingdom.

In order to obtain a work permit extension, the foreign national must submit an extension application to the Thai Ministry of Labour. Depending upon the makeup and details of the Thai company, it may be possible to submit a work permit extension application to the One Stop Service Center. Upon application approval the work permit will be extended according to the duration approved by the officer.

At each application for extension, the underlying employment will be reexamined to ensure the employment falls in line with the relevant provisions of the Thai foreign business act, the US-Thai Treaty of Amity, and the Thai Civil and Commercial code. There are many protective measures in Thailand which restrict foreigners from certain occupations. Accordingly, non-Thais are not allowed to conduct certain types of activity. Therefore, one must be careful when deciding upon the duties to be undertaken in any type of employment in order to make sure that none of the activities in the work permit are restricted under Thai law. Since work permits must constantly be extended, there is always a possibility that one officer will consider a foreigner’s occupation to be in accordance with Thai law, while another officer will consider the same activity to be in contravention of applicable employment regulations.

Working in Thailand is a daunting proposition for some as the bureaucracy can seem overwhelming. However, it is always a good idea to make sure that one is legally employed in the Kingdom as unlawful employment could lead to civil, criminal, and immigration sanctions. It should also be noted that the Ministry of Labour has proposed an increase in work permit fees. When the fee increase will take effect is still unknown at the time of this writing.