Integrity Legal

Thailand has become a major epicenter of trade in Southeast Asia. The Kingdom also remains one of the most important trading partners of the United States of America, the European Union, and the United Kingdom. Many businesspeople who do business in Thailand must deal with restrictions imposed upon foreigners under the Thai Foreign Business Act. American Citizens enjoy some benefits under the provisions of the US-Thai Amity Treaty. This Treaty was promulgated in the mid-60′s. In Thailand, Treaties are considered the “law of the land,” and are considered superior to locally drafted legislation (this notion is similar to many of the ideas codified in the American Constitution, specifically the Supremacy Clause).  As the Amity Treaty is the “law of the land,” it supersedes the Foreign Business Act.

A Thai Limited Company certified under the provisions of the Treaty of Amity is a good vehicle for conducting business in Thailand, but the Treaty does have caveats and Companies conducting certain types of business cannot obtain Treaty Certification. Most importantly for some, Amity Treaty Companies cannot own land. Even though an Amity Company is accorded “National Treatment,” the company is barred from holding property in the form of Thai Real Estate. Although, technically it may be possible for an Amity company to purchase a Condo in Thailand.

Aside from ownership of Thai property, there are other activities which an Amity Company cannot engage in, such as: Inland Transportation, Communications, Fiduciary Functions, and the Practice of Professions. Each of these types of activity are reserved to Thai nationals and/or Thai Companies. Even still, the Amity Treaty provides American Citizens with the opportunity to own virtually 100% of a Thai company. For many types of businesses the Amity Treaty is a perfect solution to the problems imposed upon foreigners by the Foreign Business Act.

Some have postulated regarding the possibility of using American Citizens as nominees in order to obtain Amity Treaty benefits. This is basically impossible as nominee shareholders are illegal under current Thai law. That being said, delineating whether or not an American Company is “American,” could be difficult. The relevant agencies of the Thai Ministry of Commerce adjudicate Amity Treaty Certification applications on a case by case basis and come to a decision based upon the makeup of the corporate shareholders in question.

An Amity Treaty Certificate is somewhat similar to a Foreign Business License. However, the two documents are issued based upon different legal foundations. There are some US Immigration benefits accorded to Thai nationals under the US-Thai Treaty of Amity in the form of E visas, but there is not a direct counterpart found under Thai Immigration law.

Tags: Amity Treaty, Amity Treaty Company, Thai Company, Thai Limited Company, Thailand company, Thailand limited company, Treaty of Amity, Treaty of Amity Company, US-Thai Amity Treaty, US-Thai Treaty of Amity
Posted in General Legal Information, Thailand Business, Thailand company, Thailand Condo, Thailand Property, Thailand Real Estate, US Visa and Immigration | 5 Comments »

The Thai Ministry of Labour seems to be preparing for a major overhaul of the Thai work permit rules. Currently, Thai work permit regulations are relatively straightforward and the process is not particularly cumbersome. However, it would appear that new rules will be put into effect in the beginning of 2010. The following is a brief overview of the proposed rules and requirements.

Currently, there is a list of jobs that foreigners can and cannot engage in, an updated list of the types of employment which foreign nationals will be permitted to engage in will be promulgated on or before February 23, 2010. Pursuant to recent drafts of the updated Ministerial Regulations on the kinds of work that foreign nationals are permitted to engage in, these updated rules and will impact on currently valid work permits as they will be reevaluated upon extension.

The new protocols will force foreign nationals, when submitting a request for a work permit to be issued or renewed, to explain both the type of work (apparently, there will be between six and eight employment categories) and the actual job title that the foreign national will apply for.

Information regarding Ministry approved positions will not be available to the public as only officers at the Thai Ministry of Labour will have the list of approved positions. This list will be in an “internal guidebook,” which will only be distributed within the Ministry.

If a foreigner applies for a position that is not listed in the Ministry’s “internal guidebook,” the application will likely be denied. The foreign national may submit a new application but it will be placed under heavy scrutiny by the officers.

The sponsoring company’s business plan will also be required as well evidence showing that the company attempted to employ a Thai national in the position, but was unsuccessful in finding anyone to fill the role.

It should be noted that although these new rules will not have a direct affect upon one’s Thailand visa, failure to obtain a Thai work permit before one’s visa extension application is due could result in an inability to obtain a new visa extension and thereby cause the foreigner to fall out of status. For those staying in Thailand on a business visa, it may be wise to keep an eye upon the work permit rules as these rule changes will likely affect a foreigner’s ability to remain in the Kingdom in their current position. Those who own a company in Thailand should stay abreast of the rules as they could have a major impact upon a company’s human resources department.

Tags: new work permit rules Thailand, Thai Business Visa, Thai Company, Thai Visa, Thai Work Permit, Thailand Business, Thailand Business Law, Thailand Business Visa, Thailand company, Thailand Visa, Thailand Work Permit
Posted in General Legal Information, Legal Opinion, Miscellaneous, Thailand Business, Thailand company, Thailand Visa | No Comments »

Thailand is one of the major trading centers in Southeast Asia. As a result, many foreign nationals wish to conduct business in the Kingdom of Thailand. However, the Thailand Foreign Business Act precludes foreign ownership of Thai companies. Strictly speaking, foreign ownership is not technically illegal, but operating such a company for profit is against the law.

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.

Tags: Amity Company, Amity Treaty, Amity Treaty Company, Board of Investment Company, Board of Investment Thailand, BOI Company, Foreign Business License Thailand, Thai Company, Thai Foreign Business License, Thailand company, Thailand Company Incorporation, Thailand Company Setup, Thailand Foreign Business License, US-Thai Amity Treaty, US-Thai Treaty of Amity
Posted in Legal Opinion, Miscellaneous, Thailand Business, Thailand company, Thailand Condo, Thailand Property, Thailand Real Estate, Thailand Visa | No Comments »

The law of trusts has been a component of the common law system for many years. Under the common law system the idea of title was bifurcated into legal title and equitable title. Under this system, one could hold legal title to real estate or property while equitable title was held by another. This made it possible to circumvent legal mechanisms such as probate or avoid certain types of taxation. Many Expats who originate in common law countries mistakenly believe that this concept can be applied in Thailand. Unfortunately, Thai law does not codify the idea of trust law and as a result business and property structures should probably not be based upon such concepts.

In England many years ago, two courts came about to deal with civil and criminal issues. At first there were the courts of law where cases could be heard. However, there were many instances where the courts of law could not effectively deal with some matters. Therefore, a Court of the King’s Conscience was established and certain cases were resolved in this “court of equity.” Trust law evolved from this bifurcation of equity and law. One could hold equitable title in the court of equity, but not hold legal title in the court of law. Often, the result was to the advantage of the holder of equitable title because it allowed him to enjoy the benefits of the property without the burdens of legal ownership (most notably taxation). In countries where the common law system became the law of the land, these principles of equitable and legal title were passed on. As a result, in many common law countries today, the idea of nominee shareholders is a commonly accepted method of maintaining control of a business or property interest. Also, controlling a trust that owns land is a common method of lawfully avoiding taxes.

In countries that did not adhere to common law principles, the notion of equitable and legal title is somewhat foreign and often not recogized as a legitimate method of property ownership. In Thailand, which utilizes a civil code legal system, trusts and equity are not regarded as mutually exclusive methods of property ownership. Although similar concepts such as usufructs, superficies, and escrows exist, for the most part Thailand does not recognize many equitable concepts. A case in point is the Thai view of nominee shareholders. Nominees are strictly forbidden under statutes passed by the Thai parliament (while the definition of nominee is left somewhat vague). Further, nominees are viewed with extra hostility where they are being utilized for the purpose of maintaining control of a Thai company to own land.

Tags: Civil Code, Common Law, Thai Company, Thai Property, Thai Real Estate, Thailand Nominee Shareholders, Trust Law, Trusts, Trusts in Thailand
Posted in General Legal Information, Legal Opinion, Miscellaneous, Thailand Business, Thailand Property, Thailand Real Estate | No Comments »

In Thailand, a major concern for expatriates, tourists, and permanent residents is banking. Many people need to set up Thai bank accounts in order to transact personal business in the Kingdom or for international financial purposes. Unfortunately, like many things in Thailand, setting up a Thai bank account can be somewhat difficult, especially for a new arrival trying to establish themselves. In Thailand, each financial institution has its own unique set of rules and regulations imposed upon those who wish to set up an account. Compounding this byzantine situation is the fact that rules and requirements depend upon the type of account one wishes to set up. Business accounts, Foreign Currency accounts, personal savings accounts, and checking accounts all have differing documentation requirements.

For those entering the Kingdom on a Thai visa exemption, opening a bank account in Thailand may prove difficult as many banks are now requiring that an applicant have at least a long term non-immigrant Thailand visa. Some banks take their due diligence efforts one step further and require that a prospective account holder provide a Thai work permit. The practice of requiring a Thai work permit seems to have become a common requirement for nearly all Thai banks in recent months.

There are others who wish to set up Thai corporate bank accounts in the Kingdom, these people are often either the Managing Director of a Thai company or they are thinking of setting up a Thai company. In either case, a great deal of documentation must be submitted in order to obtain a Thai bank account for a Thai corporation. Even where a corporate account can be established, a personal savings account may be necessary if one wishes to have a debit card. As a general rule in Thailand, banks will not issue debit cards for corporate checking accounts. Credit Cards are also notoriously difficult to obtain for corporations as well as individuals who are not Thai Citizens. It is possible to obtain a Thai Credit card, but in many cases the requirements are extremely stringent.

An issue ancillary to Thai banking is Thai mortgages. Obtaining a Thai mortgage can be very difficult for a foreigner. For those wishing to buy a Thai condo it must be remembered that funds for purchase must be brought into the Kingdom from abroad. How this requirement interacts with issues surrounding the Thai mortgage likely is dependent upon the unique facts of the situation.

Tags: Thai Bank Account, Thai Banking, Thai Company, Thai Condo, Thai Credit Card, Thai Mortgage, Thai Visa, Thai Work Permit, Thailand Bank Account, Thailand Banking, Thailand company, Thailand Credit Card, Thailand Visa
Posted in General Legal Information, Legal Opinion, Miscellaneous, Thailand Business, Thailand Property, Thailand Real Estate | No Comments »

The Bangkok Post is reporting that the World Bank has released a new report regarding the ease of doing business throughout the world. According to the report, Thailand achieved an overall rank of 12 when compared against other countries.

The Bangkok Post was quoted as saying:

“Thailand ranked relatively well in terms of property registration, trade, investor protection and ease in dealing with construction permits… Kirida Bhaopichitr, senior country economist for the World Bank in Bangkok, said Thailand benefited from improvements in the time and procedures needed to register a business and reduced bureaucracy in customs clearance.”

One of the major benefits to those doing business in the Kingdom of Thailand is the improved registration process for setting up a Thai company. At one time, the process of registering a Thai company was extremely time consuming and also required the seven shareholders.

Recently, the corporate laws have been changed to allow companies to have a minimum of three shareholders. If correctly executed, the company registration process can now be completed in as little as one day.

One slightly misleading aspect of this article concerns Thai property registration. Although it is true that Thai property can be registered relatively easily, the article does not go on to mention the fact that foreign nationals are virtually barred from owning land in the Kingdom of Thailand. In theory, it is possible for foreign nationals to own land in Thailand, but they must have the transaction signed off by the Minister of the Interior. Obtaining this signature is considered nearly impossible in some cases.

The Bangkok Post article also said, “Penelope Brook, acting vice-president for financial and private sector development at the World Bank, said Thailand could do more to improve areas such as transparency and investor protection.” There is some truth to this criticism as regulation of Thai investments is enforced less strenuously than in other countries. However, the Thai economy is often more transparent than many countries. That being said, one of the main reasons many people consider it non-transparent is due to the fact that the Thai method of doing business is very different from that of the West. Therefore, a result of these differences is that the economy is viewed as less transparent when the real issue is probably one of culture clash.

This article only dealt with the economic sphere and did not really deal with the political front. That being said, business and politics will always have an impact upon each other.

Tags: Thai Company, Thailand Business, Thailand Property Registration
Posted in Thailand Business, Thailand Property, Thailand Real Estate | 2 Comments »

The government of the Kingdom of Thailand has announced that they will be launching investigations into the buying of agricultural Thai real estate by foreign nationals in the Kingdom of Thailand.  Apparently there have been rumblings among the Thai farming community concerning an influx of foreigners buying land in Thailand in order to grow crops for eventual sale on the open market.

Many individuals are concerned that a foreigner will use a Thai company to own land and thereby circumvent the laws on the books regarding foreign real estate ownership. The Nation Newspaper in conjunction with ThaiVisa.com is reporting on the issue, to quote their article:

“Concerned Thai officials will continue monitoring whether foreigners have violated law on buying or renting farmland to engage in agriculture in the kingdom although initial investigation found that such a practice does not exist, Deputy Commerce Minister Alongkorn Ponlaboot said on Saturday…Farming as an occupation is reserved for Thais only and the probe was conducted following an outcry by some farmers that foreigners have bought numerous plots of farmland here and hired farmers to provide the labour.”

People moving to Thailand or wishing to live part time in the Kingdom should be aware of the somewhat xenophobic attitude of many Thai people when it comes to the subject of Thai property law. Regulations regarding Thai real estate reflect a negative attitude toward foreign ownership of Thai property. Many Thai people consider Thai property ownership to be a right that ought to be held in reserve for Thai citizens. That being said, there are exceptions to this general mood. Most Thai people do not see a problem allowing foreign nationals to own a Thai Condo in freehold. Further, obtaining a Yellow Tabien Baan (foreign house registration booklet) is becoming somewhat commonplace. However, this nonchalance does not extend to feelings regarding ownership of farm land and Thai government policy is a reflection of these feelings.

Evidence of this attitude can be found throughout the Thai foreign business act. A Thai company that is owned by a foreign national is specifically barred from engaging in business activities involving Thai farming. Even the US-Thai Treaty of Amity specifically precludes land ownership and agricultural activity. An Amity Treaty Company, although accorded preferential “national treatment,” is still subject to somewhat stringent regulation regarding Thai agriculture.

With the current global economy still in a somewhat less than optimal condition, it seems logical to assume that these restrictive measures will remain part of the law of the Kingdom of Thailand. It does not seem likely that the Thai government will allow foreigners to engage in farming activities in the near future.

Tags: Amity Company, Amity Treaty Company, Tabien Baan, Thai Company, Thai Farm land, Thailand Property Law, Thailand Real Estate Law, US-Thai Treaty of Amity
Posted in General Legal Information, Legal Opinion, Thailand Business, Thailand Property, Thailand Real Estate | No Comments »

On this blog and in other places on our site we have discussed the US-Thai Amity Treaty and how it can be beneficial for those doing business in the Kingdom of Thailand. However, most of these writings have made the assumption that one would be setting up a Thai Limited Company as an entity certified by the Foreign business office as protected under the Treaty.

One aspect Thai corporate law that is of some interest to American operators in Thailand is the notion of establishing a sole proprietorship and obtaining Amity Treaty certification. In theory, this is possible, although in practice it can be somewhat difficult to arrange and has some drawbacks from a legal viewpoint.

One positive aspect of Treaty Certification on a sole proprietorship is the fact that income garnered by the sole proprietor can be taxed as if it were personal income. Therefore, issues of so-called “double taxation” do not come into play when dealing with some sole proprietorships. Also, with regard to a sole proprietorship the paperwork necessary to establish the entity is far less substantial. In the case of proper Thai limited companies, it may be necessary to promulgate meeting minutes of shareholders and directors. Sole proprietorships generally do not require meeting minutes because the sole proprietor is the only person with authority to make decisions on behalf of the company.

One of the major warnings that any legal professional will give to one seeking to establish a sole proprietorship is to think about the ramifications of a lack of limited liability. Sole proprietorships do not have limited liability and therefore, should an adversely affected party wish to sue the sole proprietorship, then the sole proprietor’s personal assets could be placed in jeopardy. Thai limited companies do not have unlimited liability which means that should one sue the company, then the company would only be liable up to the amount of their registered capital.

Finally, from a practical standpoint there are some professions for which a foreigner cannot obtain a work permit to perform. Therefore, it may be possible to set up a sole proprietorship to engage in the entertainment business, but not be able to get a Thai work permit in order to perform the activities inherent to the business. In some ways setting up a limited company sidesteps this problem because the Thai company is viewed as a separate legal entity in the eyes of the law and therefore, the activities that the company engages in may not be the same as the foreigner’s actual job within the organization. Therefore, the Ministry of Labour might authorize the work permit for one working for a Thai Limited Company with Amity Treaty Certification.

(Nothing contained herein should be acted upon as legal advice. No attorney-client relationship is created between author and reader.)

Tags: Amity Treaty, Amity Treaty Company, Thai Company, Thailand company, Thailand company registration, US-Thai Treaty of Amity
Posted in General Legal Information, Thailand Business | No Comments »

The government of the Kingdom of Thailand has erected many protectionist economic measures. One of the most prevalent legal restrictions imposed upon foreigners in Thailand is the de facto prohibition on land ownership under Thailand Real Estate Law. There is a common misconception that foreigners are not allowed to own land. Technically, this is not the case. In reality, the law states that a foreigner may purchase Thai Real Estate if he or she obtains approval from the Minister of the Interior of Thailand. As a practical matter, obtaining this approval is extremely difficult, if not impossible. The upshot of these restrictions is a virtual bar on foreign ownership of Thai Real Estate.

In Thailand, a freehold Title deed is known as a “Chanote.” Due to the aforementioned legal restrictions it is a virtual impossibility for a foreign national to obtain a Chanote for Thai property. That being said, some years ago the Thai government carved out a legal niche whereby a foreigner could obtain a Freehold Title to a Condominium in Thailand. This exemption is subject to certain conditions. First, the Condo must meet the definition of “Condominium” under the act which means that the paperwork for the building must be completely in order. Another very important aspect of this legislation is the fact that a foreign quota is imposed upon a condominium complex. The law states that foreign ownership may only account for 49% of a condominium’s total number of units. The other 51% must be set aside for those of Thai nationality.

This foreign quota provision can lead to a problem because Condos that are highly desired or in desirable areas are not available for foreign purchase. Further, it can be a great disadvantage to Condominium developers in Thailand because there is generally an income discrepancy between foreign and Thai property buyers. As a result, legal devices are sometimes utilized to circumvent the foreign freehold quota on a Thai condo.

For many years, the classic method of providing foreign control of Thai real property was through the use of a Thai Company to own land. In the recent past, the Thai parliament passed legislation which outlawed the use of “nominee shareholders” in ostensibly Thai companies to own real estate. This mechanism has been employed by Condominium developers to get around the freehold quota. Basically, the developer sets up a Thai company, sell the condo to the company, and then sells the company, that now owns an otherwise quota restricted condo, to a foreigner. As a result, the foreigner owns a company which owns a condo in freehold that could not be legally purchased outright. As with any corporate structure involving “nominees,” the use of nominees is prohibited, but the definition of “nominee” is left somewhat vague under Thai law. Specialized legal advice should be sought where corporate structures are utilized for property ownership.

For more on Special Exemptions under Thai law for foreigners please see Amity Company Thailand

(This article is not legal advice. For such advice contact a licensed lawyer. No Lawyer-Client relationship is formed by reading this piece.)

Tags: Property Lawyer Thailand, Real Estate Lawyer Thailand, Thai Company, Thai Company Registration, Thai Company Setup, Thai Condo, Thailand company, Thailand Condo, Thailand Condo Law, Thailand Property, Thailand Property Law, Thailand Real Estate, Thailand Real Estate Law
Posted in Thailand Business, Thailand Property, Thailand Real Estate | No Comments »

For a foreign small business owner in Thailand in order to obtain a Thai visa extension the foreigner must hold a valid Thai work permit, the business must employ 4 Thais per foreign employee, and must get those Thai employees social security benefits. All of this is  fairly straightforward, but a question arises when the non-Thai foreigner is the Managing Director of the company: is the Managing Director entitled to sign up for and receive social security benefits?

Many issues are left to the discretion of the Thai government officers so one of the frustrating aspects of doing business in Thailand is the fact that different offices interpret the Thai laws and internal administrative regulations differently. Case in point, some social security offices view the Managing Director of a Thai company as ineligible to receive social security benefits because he is not “labor,” and therefore is not someone who should be accorded labor protections under Thai law.

This is an odd stance to take particularly when looking at the issue from a common-law perspective because under the jurisprudence of most common law jurisdictions an incorporated entity is viewed as a legal person, separate and distinct from natural persons (even where a natural person is the sole owner or director of a company, or juristic person). Therefore, under the common law, the stance would probably be that the Managing Director works for the company and therefore is entitled to employment benefits like social security.

A counterargument to this position could be that although working on behalf of the company, this role is different than actually working “for” the company. As the Managing Director is, in a sense, the living embodiment of the company. It is a very semantic argument, but not one without at least some merit.

All of this begs the question: How does one  obtain social security benefits for the managing director of a company in Thailand? Where the person seeking the benefit has already enrolled for social security, the benefit can be rolled over when the person becomes managing director. However, the person seeking to roll over the benefit must have left their previous employment no more than 6 month prior to roll over (and this time frame may be left to the discretion of the Social Security legal officer). Another method for obtaining the benefits in this situation is by delineating and distinguishing between Managing Director functions and functions as an employee. In order to do this, one must also show separate pay for the separate endeavors. At the end of the day, it is up to the officer’s discretion and it is always wise to consult a Thai lawyer before making any major business decisions in Thailand.

For more information, please see:

Thailand Visa

Thai Company Incorporation

Note: None of the above should be construed nor used as a substitute for individualized advice from a duly licensed attorney in good standing. No attorney client relationship should be inferred from reading this post

An oddity of Thailand’s Social Security benefits scheme

Tags: Managing Director, Thai Company, Thai Visa Extension, Thai Work Permit, Thailand Business, Thailand Social Security, Thailand Visa
Posted in Thailand Business | 1 Comment »