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News/ Business Advisory/ TAFTA: Doing Business in Thailand with the Thailand–Australia Free Trade Agreement

TAFTA: Doing Business in Thailand with the Thailand–Australia Free Trade Agreement

Marisa Chicarelli

15/10/2020

Australian citizens and business entities may find an easier path to doing business in Thailand through the Thailand-Australia Free Trade Agreement (TAFTA). While TAFTA has more restrictions than the US-Thai Treaty of Amity, it does allow the establishment of majority Australian-owned companies, under certain conditions.

What is TAFTA?

The Thailand-Australia Free Trade Agreement has been in force since 2005. TAFTA relaxes and, in many cases, eliminates tariffs and quotas between Thailand and Australia. It also provides special privileges to Australian investors in Thailand. For the purposes of this article, we will focus on doing business in Thailand.

How are TAFTA companies different?

Most other majority-foreign owned businesses must comply with the Foreign Business Act (FBA). The FBA limits foreign companies as to what types of businesses they can operate, either prohibiting out right or requiring a Foreign Business License (FBL). Companies applying for an FBL will find themselves under a great deal of scrutiny, with a risk of the Department of Business Development (DBD) denying their application.

However, the DBD will be more likely to approve an Australian company applying for a Foreign Business Certificate (FBC) under TAFTA. The main caveat would be the restrictions depending on the sector (please see following section on criteria).

Can TAFTA companies be 100% Australian owned?

Unlike the Thai-US Amity Treaty, which allows 100% US ownership, TAFTA only allows 100% Australian ownership in two sectors. The others are mainly limited to 60% majority Australian ownership.

A 100% fully Australian-owned company in those sectors are possible, but not under TAFTA. This would require applying for an FBL under greater scrutiny by the DBD as mentioned above.

Sectors covered by TAFTA

As of the publication of this article, businesses can apply for an FBC under TAFTA if they plan to operate in the following sectors:


Eligible businesses sectors	Requirements	Maximum Australian shareholding
Mining, on land or underwater (not including operations using individual manual labor)	Ministry of Industry approval Two-fifths of directors are Thai	60 %
Construction of public utilities or transportation that requires special equipment, machinery, technology, or expertise	Must require special equipment, machinery, technology, or expertise Minimum paid-up capital: THB 1 billion	100 %
Luxury hotel or resort services, including hotel management	Minimum rooms: 100 Minimum paid-up capital: THB 800 million	60 %
Full restaurant services	Minimum total area: 450 sqm Minimum paid-up capital: THB 50 million	60 %
General management consulting only for a Regional Operating Headquarters (ROH), ROH’s associated company, or foreign branch	Services must be exclusively for ROH and ROH-related companies	100 %
Convention services, not including F&B services	Minimum total area (interior + exterior): 4,000 sqm Minimum interior: 3,000 sqm	60 %
International exhibition center and services	Minimum total area (interior + exterior): 50 rai (80,000 sqm) Minimum interior: 25,000 sqm	60 %
Wholesale and retail services supporting a TAFTA registered company’s manufactured products	Sales and installation support services only Products must be manufactured in Thailand by TAFTA company	100%
Post-secondary science and technology educational institute	Specializing in life science, biotechnology, nanotechnology, and related areas Located outside Bangkok and its metropolitan areas At least 50% of the institution’s council directors are Thai	60 %
Theme park or zoo	Minimum total area: 200 rai (32 hectares) Minimum paid-up capital: THB 1 billion	60 %
Aquatic animal park	Minimum total area: 10 rai (16,000 sqm) Minimum paid-up capital: THB 200 million	60 %
Maritime support services (pier and anchorage for tourism-related transport)	Must have ship-lifting equipment, pier, and maintenance service shipyard	60 %

Who qualifies to apply for TAFTA?

To be able to apply for an FBC under TAFTA, your company must meet the following criteria:

Nationality

A juristic person set up as a partnership or a private limited company under Thai law.
The authorized director(s) are Australian or Thai. If the entity is a partnership, the managing partner must be Thai.
Shareholding:
1. All Australian or Australian and Thai, as the case may be.
2. Shareholding percentages comply with TAFTA (see Sectors covered by TAFTA above).
3. Australian juristic persons must comprise over 50% Australian shareholding.

Minimum Capital

TAFTA companies must follow capital restrictions under the FBA as well as those specified in the Sectors covered by TAFTA section. Otherwise, the basic minimum capital needed is THB 2 million.

GPS Legal Understands TAFTA

The process for receiving an FBC under TAFTA usually takes around 60 days from start to finish. This is much shorter than applying for an FBL, which can take up to six months or longer. GPS Legal is happy to discuss your options for establishing a business in Thailand, whether through TAFTA or other structures. Contact us today for your free 30-minute initial consultation.

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News/ Corporate & Finance/ The US-Thai Treaty of Amity for Doing Business in Thailand

The US-Thai Treaty of Amity for Doing Business in Thailand

Marisa Chicarelli

12/08/2020

United States citizens seeking to do business in Thailand have had special privileges available to them since 1833. The Treaty of Amity allows US nationals, as individuals or as businesses, to establish a 100% foreign-owned company with the same legal status as a local Thai entity, with very few restrictions.

What is the Treaty of Amity?

The Treaty of Amity and Economic Relations between the United States of America and the Kingdom of Thailand (the Treaty of Amity) was signed almost 200 years ago and reaffirmed on May 29, 1966. Under the treaty, US citizens and businesses can wholly own their businesses incorporated in Thailand. Furthermore, these businesses are treated as a Thai-owned business under most circumstances.

How is a Treaty of Amity company different from a foreign-owned company in Thailand?

Foreign-owned businesses in Thailand must comply with the Foreign Business Act (FBA). The FBA prohibits foreign businesses from certain business sectors and requires a Foreign Business License (FBL) for others. There are also different minimum capital requirements for foreign-owned businesses. Treaty of Amity companies go through a simplified and more streamlined process, receiving a Foreign Business Certificate from the Ministry certifying their status to operate in Thailand.

How are Treaty of Amity companies restricted?

Treaty of Amity companies receive preferential treatment compared to other foreign businesses, but there are certain constraints. While Treaty of Amity companies are exempt from the standard FBL industry restrictions, there are six sectors that Amity companies are prohibited from operating in:

Communications.
Inland or domestic transportation.
Fiduciary functions (Money or property management for another party, e.g. investment adviser).
Banking involving depository functions.
Exploiting lands or natural resources.
Domestic trade in local agricultural products (international/export trade is allowed).

Although Amity companies technically have the same status as majority Thai-owned companies, they cannot own land. And like all companies, they must comply with work permit rules.

Who qualifies for Treaty of Amity status?

To qualify for an FBC under the US-Thai Treaty of Amity, you must fulfil the following nationality and minimum capital requirements:

Nationality

A natural person who is a US citizen either by birth or naturalization.
OR
A juristic person meeting the following criteria:
1. Incorporated under US or Thai law.
2. Shareholding:
  1. A majority of shares held by US citizens, either by birth or naturalization, and
  2. If a US shareholder is a juristic person, the majority of the juristic person’s directors and shareholders must be US persons.
3. Directors
  1. A majority of directors must be US or Thai citizens, either by birth or naturalization.

Minimum Capital

If the Amity company plans to operate in one of FBA’s restricted industries (and not one of the six sectors listed above), the minimum capital required is Baht 3 million. Otherwise, the minimum capital requirement is Baht 2 million.

If a US citizen or business uses revenue from an already established Amity company or Thai business to establish a new Amity company, these minimums do not apply. However, statutory minimums still apply, and regulators retain their ordinary discretion in both cases, as it would apply to a Thai company.

An additional perk for Amity companies is that under Ministerial Regulation “Minimum Capital and the Period to Bring or Remit Minimum Capital to Thailand B.E. 2562 (2019),” they have until August 29, 2029, to pay up their minimum capital.

GPS Legal knows the Treaty of Amity

Establishing a company under the US-Thai Treaty of Amity is a quick, streamlined process. For those that qualify, the application process takes around 90 days from preparation to approval. This is fast compared to the FBL process, which takes at least four to six months, often longer. GPS Legal has experience in applying for Treaty of Amity status and for FBLs. If you are not sure what is the best course of action is for you, contact us today for your free 30-minute initial consultation.

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News/ Business Advisory/ There’s no “Business Security License” requirement in Thailand

There’s no “Business Security License” requirement in Thailand

Marisa Chicarelli

10/04/2020

Since posting a warning in September 2019 on Facebook and LinkedIn about this business security license scam, we’ve received a steady flow of inquiries about obtaining a “business project security license” or “project registration certificate”. We would like to reiterate that there is no such license requirement under Thai law.

“Thai investors” claim “business security license” required

Apparently, “Thai investors” approach businesses overseas offering to make a sizeable investment. But they claim that the overseas business needed a “business project security license”, or something similar, to be approved to receive the funds. Of course, it costs thousands of dollars, and the Thai investors will put them in touch with a contact. There is no “business project security license” or “foreign investment authorization certificate” or “foreign investment approval license” or “project registration certificate” .

There are laws regulating money transfers from accounts in Thailand to overseas recipients, but that process is between the Thai account holder, their financial institution, and the Bank of Thailand. For certain transactions, there may be KYC checks, but again, that is not the overseas business’s obligation.

Not sure if an inquiry is legitimate? Ask GPS Legal

If you are approached by a potential investor who demands any of these licenses mentioned above, a scam may be afoot. Another red flag is if they require any license or documentation that costs a hefty sum. We urge you to contact local authorities in your country or Thailand’s Anti Money Laundering Office (AMLO) or Technology Crime Suppression Division. Or, let GPS Legal assist. We can help you with reporting any potential fraud to the proper authorities, or we can conduct thorough due diligence if you believe that the parties are well-intentioned but perhaps mis-informed about these licenses. Contact GPS Legal today to discuss the various options available to you.

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Myths about Foreign Business in Thailand: 1 Thai Director, 4 Thai Staff

Marisa Chicarelli

14/01/2020

At GPS Legal, we get many inquiries about starting a business in Thailand. We often find that these entrepreneurs have received misleading or even completely erroneous information. Here, we would like to address some misconceptions about the need for a Thai director and staff.

A Foreign Business in Thailand Does Not Always Need a Thai Director

There have been cases where foreign investors have been misled into creating a convoluted nominee structure, mainly to the benefit of an unscrupulous advisor. Part of this “advice” may also include that the business must have one Thai director registered with the new company, which the advisor can help identify, for an additional fee.

There are only a few situations where a company needs one or more directors to be a Thai national, such as a foreign business conducting operations that fall under List 2 of the Foreign Business Act. There are other circumstances as well, but these are more the exception and not the rule. While it may make sense to have a locally resident Thai or foreign director for expediency, the Civil and Commercial Code does not stipulate the need for a locally resident director, or that a director must be Thai. Only that a company must have at least one authorized director.

A Foreign Business in Thailand Does Not Always Need 4 Thai Staff Per Work Permit

Another misconception that is frequently repeated is that a company must have a ratio of four Thai staff to one foreigner to qualify for a work permit for that foreigner. This is wholly incorrect. The employee ratio requirement is actually related to Immigration regulations for the 1-year extension and renewal of a Non-B visa application and not to the 90-day “B” visa or to the Labor Department’s work permit requirements. To be clear, the Labor Department only requires that a company meets the minimum capitalization of THB 2M per work permit holder, with little to no emphasis on local staffing levels.

Further, the ratio depends on the entity type. A standard company limited (foreign or Thai majority owned) must employ four Thai staff to one foreigner employee’s visa, while a branch, foreign representative office, or regional office need only employ a one to one ratio per visa holder for their authorized representatives, though any other foreign staff must adhere to the 4:1 ratio. Also, there are other options available that rely on certain business and employment structures.

Furthermore, there are exemptions from the employee ratio requirement for businesses with Board of Investment certification.

GPS Legal Knows How to Structure a Foreign Business in Thailand

GPS Legal wants to help you establish your business in Thailand in the most efficient, effective, and affordable way possible. There is no need to try to make your situation more complex with nominee structures or unnecessary local staff hires to fulfill a ratio. Want to learn how? Contact us for a free initial consultation.

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Myths about Foreign Business in Thailand: Say No to Nominees

Marisa Chicarelli

13/01/2020

At GPS Legal, we get many inquiries about starting a business in Thailand. We often find that these entrepreneurs have received misleading or even completely erroneous information. We would like to take this opportunity to address these misconceptions.

Nominee Structures are NOT LEGAL for a Foreign Business in Thailand

Section 35 of the Foreign Business Act explicitly states:

A Thai national or a juristic person [i.e. an individual or registered entity], not being a foreigner under this Act, who assists in or aids and abets or participates in the operation of a foreigner’s business … where such foreigner is not permitted to operate that business or [where said Thai person] operates the business jointly with a foreigner in the manner holding it out as the [Thai person’s] sole business or who acts as a foreigner’s nominee in holding shares in a partnership [or] limited company or any juristic person with a view to enabling the foreigner to operate the business in circumvention or violation of the provisions of this Act, or a foreigner who allows such act to be committed by a Thai national or a juristic person that is not a foreigner under this Act, shall be liable to imprisonment for a term not exceeding three years or to a fine of one hundred thousand Baht to one million Baht or to both, and the Court shall order the cessation of the assistance…the aiding and abetting, … [or] the joint operation of the business, or [the] shareholding or partnership, as the case may be. In the case of violation of the order of the Court, the violator shall be liable to a fine at the daily rate of ten thousand Baht to fifty thousand Baht throughout the period of the violation.

This means that if any Thai person or entity participates in a business in name only to fulfill a legal requirement for a business to be considered Thai, then that party and anyone else involved is breaking the law and could be punished with imprisonment and/or hefty fines.

Nevertheless, there are many out there who will suggest a nominee structure as a perfectly legal way to set up a business in Thailand. It is not. Besides being illegal, you are giving up control of your company, assets, profits, and clients to someone that you must implicitly trust but may ultimately not have your best interests at heart. Do not be lulled into a false sense of security by documents or contracts that presumably legitimize the nominee or protect your interests – since the fact of the nominee itself is illegal, the supporting documents or contracts are in turn void or unenforceable.

If you have a Thai partner who has legitimately invested and partnered with you, then a majority-Thai owned company is a perfectly viable entity. Further, your interests and control of the company can be protected through legally sound shareholding structures and shareholder agreements, including assigning reduced voting rights and a rebalanced share of profits in favor of the minority foreign shareholder. Alternatively, if you do not have the benefit of a local investor, there are a variety of majority-foreign owned structures that you can pursue.

Opening a Majority Foreign Owned Business in Thailand is NOT Difficult

As discussed in a previous article, there are several options for foreigners to start a business in Thailand without needing a Thai partner (or nominee), which are legal, transparent, scalable, and affordable.

Cost center entities include a Foreign Representative Office to fulfill quality control, market research or customer support roles, or a Regional Office to administratively oversee nearby branch office operations around Asia. Revenue generating entities include a Branch Office as a wholly owned extension of an overseas parent company or a full-fledged Foreign Limited Company or Limited Partnership.

Foreign entities that trade and compete in the local marketplace and whose business objectives fall into any of the three lists of restricted businesses, will require a Foreign Business License. While there are some sectors in which foreigners are generally prohibited from pursuing in Thailand, it is not a long list, and furthermore, applying for a Foreign Business License is not an overly arduous process.

Additionally, Thailand’s Board of Investment (BOI) offers various tax and non-tax incentives and privileges to qualifying foreign-owned companies. This is also not an arduous process and is one that many foreign investors overlook—often because their “business advisors” want them to pursue a nominee structure so that these very advisors can profit from being engaged as the nominee.

GPS Legal Can Help You Set Up Your Foreign Business in Thailand

Build your business from the start on a solid foundation, not a house of cards. If you have a friend or an advisor who tries to convince you that a nominee structure is perfectly legitimate, please note that there have been, and will continue to be, crackdowns on both businesses and advisors alike.

GPS Legal will help you decide which structure is best for your business goals in Thailand. Please contact us for more information

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27/06/2019

A Foreign Business in Thailand Does Not Always Need a Thai Director

A Foreign Business in Thailand Does Not Always Need 4 Thai Staff Per Work Permit

Furthermore, there are exemptions from the employee ratio requirement for businesses with Board of Investment certification.

GPS Legal Knows How to Structure a Foreign Business in Thailand

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Myths about Foreign Business in Thailand: Say No to Nominees

Marisa Chicarelli

12/06/2019

At GPS Legal, we get many inquiries about starting a business in Thailand. We often find that these entrepreneurs have received misleading or even completely erroneous information. We would like to take this opportunity to address these misconceptions.

Nominee Structures are NOT LEGAL for a Foreign Business in Thailand

Section 35 of the Foreign Business Act explicitly states:

Opening a Majority Foreign Owned Business in Thailand is NOT Difficult

GPS Legal Can Help You Set Up Your Foreign Business in Thailand

GPS Legal will help you decide which structure is best for your business goals in Thailand. Please contact us for more information.

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News/ Publications/ Foreign Business Licenses and Certain Foreign Entities

Foreign Business Licenses and Certain Foreign Entities

Marisa Chicarelli

28/12/2017

Foreign business licenses are no longer required for certain non-trading foreign entities in Thailand, allowing for easier establishment of representative and regional offices.

Continue reading “Foreign Business Licenses and Certain Foreign Entities”

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News/ Publications/ GPS Guide to Doing Business Featured

GPS Guide to Doing Business Featured

Marisa Chicarelli

05/09/2017

In the June/July issue of Wanderlust, a travel and lifestyle magazine published in Thailand, GPS Legal & Consulting collaborated with the writing team on the “An Expat’s Guide to Starting a Business in Thailand”.

Continue reading “GPS Guide to Doing Business Featured”