Thailand’s crackdown on a loophole that effectively bypasses its restrictions on land ownership by foreigners is causing prospective buyers to delay purchase decisions on luxury villas in resort destinations such as Phuket and Koh Samui, according to agents.

Bangkok has stepped up its scrutiny of business and property ownership in the country, with the Department of Business Development (DBD) flagging 11,426 companies on Koh Phangan and Koh Samui where foreigners hold stakes, accounting for nearly 68 per cent of all registered firms on the two islands, which are districts in the southern Thai province of Surat Thani, according to local media reports.

The DBD has also identified more than 7,000 businesses suspected of using illegal nominee structures, mainly in the real estate, tourism and hospitality sectors.

The crackdown aims to zero in on entities that used a Thai national as a dummy shareholder to comply with the law restricting foreign shareholding to a maximum of 49 per cent. Under such unscrupulous arrangements, the Thai shareholders would claim property ownership on paper but had no tax history to back up the claim.

As of early this year, Thai authorities had prosecuted more than 850 companies for financial damages involving lost revenue of over 15 billion baht (US$458 million).

Although there is a lack of official data on the number of luxury properties held under a nominee structure, property tech group Juwai IQI estimated that in Phuket about three in five transactions in the villa segment involved a foreign buyer or lessee, while in Koh Samui and Koh Phangan, nine in 10 villa buyers were foreigners. This would be the equivalent of 2,400 to 3,000 villas both in Phuket and Koh Samui.