Integrity Legal

Archive for November, 2019

21st November 2019

As the US-China trade tensions continue (notwithstanding some hope that a trade deal may soon be reached) many foreign businesses in China are looking to relocate to other jurisdictions. For example, in a recent article is was noted that German businesses in China are seeking alternatives to China for certain types of manufacturing. Meanwhile, American businesses, which are presumably the most impacted by the trade war, are also taking steps to alter their supply chains in order to optimize their business structures under current circumstances.

While there are many jurisdictions in Asia which may appear accommodating to American business, this blogger would argue that Thailand is the best jurisdiction for American business in Asia. First, Thailand boasts a long history of friendly relations with the United States. As America’s oldest ally in Asia Thailand has been conducting business with the United States for years. Concurrently, the United States and Thailand share a multitude of bilateral agreements which can operate to the benefit of American businesses in the Kingdom. Most notably, the US-Thai Treaty of Amity provides “national treatment” to American businesses in Thailand. This allows American business to be treated in the same manner as Thai businesses operating in Thailand. As a practical matter this can provide substantial benefits to American businesses in Thailand. For example, such enterprises are not subject to the provisions of the Foreign Business Act in Thailand as such operations are treated as Thai. Therefore, those companies do not need to have the same type of Thai majority shareholding structure that other similar operations need that are of different nationality.

Another substantial benefit of conducting business in Thailand under a Thai Amity Treaty Company is an interpretation of relevant American law which argues that Thai Amity Treaty companies are not “controlled foreign corporations” and therefore not subject to the new tax liabilities created under the legislation colloquially referred to as Trump Tax. Due to the domestic nature of American Treaty laws, the organization and certification of an American company under the Amity Treaty in Thailand could be construed as a the creation of a domestic corporation thereby negating the enforcement of laws creating liabilities for Americans owning foreign corporations.

If an Amity company is deemed to be “domestic” rather than “foreign” this, in and of itself, could be very beneficial for an American company in Thailand. This benefit could be compounded by the exemptions regarding taxation created under the Double tax agreement between the United States and Thailand. Furthermore, those companies operating in Thailand that receive benefits, including tax holidays, from the Thai Board of Investment (BOI) could see themselves in a very advantageous position overall. In summation, for the reasons noted above and many more it should be noted that Thailand is a jurisdiction which should not be overlooked when making a decision as to which jurisdiction a corporation should shift to for logistical and operational purposes.

TO COMPLY WITH U.S. TREASURY REGULATIONS, WE ADVISE YOU THAT ANY U.S. FEDERAL TAX ADVICE INCLUDED IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, TO AVOID ANY U.S. FEDERAL TAX PENALTIES OR TO PROMOTE, MARKET, OR RECOMMEND TO ANOTHER PARTY ANY TRANSACTION OR MATTER.

THE ABOVE INFORMATION SHOULD NOT BE CONSTRUED AS SPECIFIC LEGAL ADVICE NOR RELIED UPON AS SUCH. THOSE INTERESTED IN THIS TOPIC SHOULD OBTAIN PROFESSIONAL ADVICE REGARDING THEIR SPECIFIC SITUATION.

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