The Treaty of Amity and Economic Relations Between the Kingdom of Thailand and the United States of America (commonly known as the “US-Thai Treaty of Amity”) was initially signed

and amended in year 1833 and 1966 respectively. It is the treaty that promotes economic cooperation between Thailand and US. This article will provide the legal guideline for those US citizens or entities that wish to expand their businesses into Thailand.

ESSENTIAL LEGAL BENEFIT

Subject to the Restricted Activities as set out below, the key legal benefit under US-Thai Treaty of Amity is that US Individuals and/or entities are permitted to establish a company (“NewCo”) and conduct their business activities without having to:

(a) apply for the Foreign Business License (so-call “FBL”) under the Foreign Business Act B.E. 2542 (“FBA”); or

(b) partner up with a local Thai partner(s) to hold 51% shares of the NewCo. This would eliminate the potential risk, legal exposure, and issue pertaining to the nominee shareholder, which is illegal in Thailand.

But it is required to apply for the Foreign Business Certificate (so-call “FBC”) under the FBA to conduct business activities in Thailand. For business types defined in US-Thai Treaty of Amity, compliance with the conditions stipulated in the US-Thai Treaty of Amity is necessary.

RESTRICTED ACTIVITIES

Nevertheless, there are 6 following fields of business that are restricted:

QUALIFICATIONS

In order that US company to qualify for the criteria under US-Thai Treaty of Amity, the following conditions must be met:

1)   The (ultimate) shareholder(s) must be a US citizen(s);

2)   More than half of the directors must be US citizens; and

3)   The authorized signatory director(s) must be a US citizen(s). 

MINIMUM CAPITAL REQUIREMENT

Subject to the type of business activity to be carried by the NewCo, in general, the minimum capital to be injected into Thailand is THB 3 million for each applied business activity.

ANY OTHER TREATIES OR AGREEMENTS?

In addition to the US-Thai Treaty of Amity, there are international agreements to which Thailand is a party that allow other nationalities to invest in Thailand. For instance:

a)  Thailand-Australia Free Trade Agreement (“TAFTA”): TAFTA has been in effect since 2005, encompassing a total of 18 activities. When considering the percentage of shares that Australian investors can hold under this agreement. For example, the Australian shareholders can own 100% in the NewCo which conducts the following activities:

b)  Thailand-Japan Economic Partnership Agreement (“JTEPA”): JTEPA has been in effect since 2007, and includes 15 activities that have been liberalized under the agreement. For example, the Japanese shareholders can own 100% shares of the NewCo, if it carries consulting services on general management.

For further information, please contact the author:

Mr. Noppawee Lhaipanich

Associate

+66 86-563-4229

Email: [email protected]

Ms. Natprapas Aujanasarun

Associate

+66 99-415-7416

Email: [email protected]