Integrity Legal

It recently came to the attention of the administration of this web log that the subject of the Value Added Tax (VAT) has been a hot news item in Thailand in recent days as the current Prime Minister was noted speculating about the advantages to be gained by the Thai government if the VAT were to be raised one percentage point from the current level of 7% to 8%. To quote directly from The Nation’s website:

Prime Minister Prayut Chan-o-cha has floated the idea of raising the value-added tax (VAT) rate by one percentage point from the current 7 per cent to 8 per cent to raise an additional Bt100 billion in annual tax revenues to finance various public projects.

Meanwhile, it became unclear from further reports whether the Prime Minister was simply expounding upon the advantages to be gained by an increase in VAT or if a change of policy was being discussed. To quote from the official website of the Bangkok Post:

Finance Minister Apisak Tantivorawong said the government plans to keep VAT unchanged at 7% for another year when the previous extension of the last period for keeping VAT at 7% ends on Sept 30. VAT would not increase during the term of this government, he added.

Setting aside the issue of what the Prime Minister’s intentions were with respect to his comments regarding VAT increase (and it would appear from this writer’s perspective that he was indeed simply commenting upon the benefits to be garnered by the government should VAT be increased to 8%) it appears that at least for the foreseeable future the VAT in Thailand will not be increased.

For those who have had experience doing business in Thailand VAT is known as a fact of business-life. In fact, those foreign nationals wishing to setup a Company in Thailand are well advised to note that in order to get a Thai work permit associated with such companies the relevant corporate entity oftentimes must be registered for VAT. Therefore, unlike Thai businesses which may or may not require VAT registration, foreign companies in Thailand will often be VAT registered and therefore an increase in VAT will have a substantial impact upon such enterprises.

Meanwhile, in the aftermath of recent changes to American policy with respect to US Immigration it appears that a number of new Immigration Judges have been impaneled to deal with the staggering backlog of United States Immigration cases in the Immigration Courts. To quote directly from Reuters News Service:

The Department of Justice is deploying 50 judges to immigration detention facilities across the United States, according to two sources and a letter seen by Reuters and sent to judges on Thursday. The department is also considering asking judges to sit from 6 a.m. to 10 p.m., split between two rotating shifts, to adjudicate more cases, the sources said. A notice about shift times was not included in the letter.

Clearly, the new Administration in the USA is stringently enforcing immigration laws as evidenced by the recent stories of increased deportations, travel bans, and heightened scrutiny of immigrants (both Green Card holders and other immigrants) at ports of entry in the USA. It seems rather reasonable to infer that US Immigration matters are likely to be more difficult and time consuming to process in coming weeks and months.

Tags: Green Card, Thai Company Registration, Thai VAT, Thai Work Permit, Thailand Business Registration, Thailand VAT, Thailand Work Permit, US Immigration, US Immigration Court, US Immigration Judge, Value Added Tax, VAT
Posted in Thailand Business, US Visa and Immigration | No Comments »

In a recent article in the Bangkok Post it was reported that the current government in Thailand is taking measures to foster growth for small to medium sized enterprises (SMEs) in Thailand. It would appear that the present government is eager to provide encouragement for small and medium sized businesses in Thailand. Furthermore it seems as though Thai officials are attempting to position the country as a location of choice for small business start-ups within the greater framework of the Association of Southeast Asian Nations (ASEAN) and the ASEAN Economic Community (AEC). However, of particular interest to this blogger was the mention of possible rule changes with regard to Thai corporate regulations pertaining to Thai Company registration and the shareholdings thereof. To quote the aforementioned article directly:

Mr Pongpun said the authorities were improving regulations on the incorporation of private companies to allow the incorporation of a juristic person registered by only one person.

At present, corporations (also referred to as juristic persons) in Thailand must have a minimum of three (3) shareholders in order to incorporate under Thai law. It should be noted that prior to an amendment to Thai corporate law at approximately the turn of the century it was required that all companies registered in Thailand have a minimum of 7 shareholders in order to incorporate pursuant to Thai law. Many at the time felt that the 7 shareholders requirement was too cumbersome and for that reason the statutorily required number of shareholders was reduced to 3. Since then, there have been those who have noted their belief that allowing Thai corporate structures with only one shareholder would bring Thai corporate law more in line with similar bodies of law globally. For example, in many American jurisdictions Limited Liability Companies or LLCs are only required to have one member/shareholder, while similar Limited Company (Ltd.) structures are allowed in Britain and the Commonwealth nations and many European jurisdictions allow for similar corporate structures as well.

It remains to be seen whether Thai corporate law will be amended to allow for single shareholder corporations in Thailand. It is a good sign that such structures are being considered by Thai officials especially since such structures would be especially beneficial to small business owners in Thailand. Of special note to American readers, pursuant to the provisions of the US-Thai Treaty of Amity it is possible for American Citizens to own 100% of an Amity company registered in Thailand. Should the aforementioned changes take place it could result in Americans being able to own their small business singularly without any Thai shareholders.

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Posted in Amity Treaty, Thailand Business, Thailand company, Thailand Legal News | No Comments »

Those researching business and corporate entities in Thailand (sometimes referred to as Thai juristic persons) often come upon information pertaining to Thai partnerships. Partnerships in the Kingdom of Thailand are different from Thai limited companies and Thai sole proprietorships for a number of reasons. For example, Thai limited companies provide the shareholders with limited liability. This means that liabilities incurred by a Thai limited company do not generally flow through to the individual shareholders (that said, under some circumstances, directors of Thai companies may have some legal liability to the company itself). Depending upon the type of Thai partnership, the partners may or may not have limited liability. Thai Partnerships differ from Thai Sole Proprietorships for a number of reasons, but the most obvious difference is that Thai Sole Proprietorships, as the name suggests, are operated by one natural person.

In the Kingdom of Thailand, there are different types of partnerships: Thai Ordinary Partnerships, Thai Registered Ordinary Partnerships, and Thai Limited Partnerships. In this posting only ordinary partnerships and registered ordinary partnerships will be discussed as Thai limited partnerships will be discussed in a later posting.

Thai Ordinary Partnerships

Thai ordinary partnerships are sometimes referred to as unregistered partnerships. The name “unregistered partnership” may stem from the fact that Thai ordinary partnerships are not required to have a written partnership agreement and even where a written partnership agreement exists it is not required that the aforementioned agreement be registered. That being stated, ordinary partnerships are still required to register their existence as a business entity with the Thai Ministry of Commerce. However, notwithstanding the fact that an ordinary partnership has registered with the Ministry of Commerce, this type of registration should not be construed to mean that the partnership is a Thai registered ordinary partnership. All partners in a Thai ordinary partnership have unlimited liability for the acts of any of the other partners which occur in the course of the partnership’s business. Creditors of an ordinary partnership may make claims against the property of any of the partners and do not need to first make a claim against the assets of the partnership.

Thai Registered Ordinary Partnerships

Thai Registered Ordinary Partnerships must be registered with the Ministry of Commerce in the Kingdom of Thailand. When registering this type of partnership a copy of the written partnership agreement, information regarding capital contributions as well as managerial duties of the partners, and objectives of the partnership must be included in the application for registration. In the eyes of Thai law, a registered ordinary partership is viewed as a distinct entity separate and apart from the partners. However, the legal distinction between the registered ordinary partnership and the partners as individuals should not be construed to mean that the partners have limited liability. That stated, if a claim is to be made by a creditor against a Registered Ordinary Parntership, then the creditor must first seek to make their claim against the assets of the Registered Ordinary Partnership before making a claim against either of the individual partner’s assets.

There are significant differences in the way in which registered ordinary partnerships and ordinary partnerships are taxed in the Kingdom of Thailand. Therefore, those interested in establishing either of these types of partnerships are encouraged to contact a legal professional in Thailand to ascertain whether either of these types of structures are suitable.

It should also be noted that foreign nationals wishing to set-up a Thai Registered Ordinary Partnership or a Thai Ordinary Partnership may be barred from doing so pursuant to the provisions of the Thai Foreign Business Act. In some cases, a Thai Foreign Business License may be obtained depending upon the type of business the foreign nationals wish to undertake through use of a Thai partnership. American citizens wishing to set-up a Thai partnership (either a registered ordinary partnership or simply an ordinary partnership) may obtain certification for their proposed partnership pursuant to the terms of the US-Thai Treaty of Amity, provided that the proposed business activity is not restricted under the terms of the Treaty; and, upon being approved for a Treaty certificate, operate their partnership notwithstanding the provisions of the Foreign Business Act.

For related information please see: Thailand Company Registration.

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Posted in 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 »

Many people come to Thailand and make the decision to start a small (or not so small) business. Thailand has a very relaxed way of life, but when it comes to Thai company registration, the pitfalls can be many. Incorporating a Thai company can take a great deal of time and cause a great deal of frustration, but with the proper legal advice the process can be quite smooth, if not pleasant.

Types of Thai Company Structures

There are many different types of Thai corporate structures: Thai Limited Partnerships, Thai Unregistered Partnerships, Thai Public Limited Companies, and many others. We will mainly focus this piece on the Thai Limited Company. A Thai limited Company is very similar to incorporated entities in the USA. A Thai limited Company has one or more directors and a Managing Director, Thai limited Companies also have shareholders, but the Thai shares are not publicly traded and generally Thai shares are held by relatively few people. As the name suggests, Thai limited Companies have limited liability and are legal entities under Thai law. This means that in the eyes of the Thai legal system the Thai limited company is a person and will only be held liable for funds held in the company name.

Thai vs. Foreign Companies

Under Thai law, a Thai company must be 51% Thai owned in order to engage in most types of business. Otherwise, the Foreign owned company must obtain a foreign business license in order to conduct most types of business in Thailand. There are exceptions to this rule, the main exception being that a Thai company with a majority of American shareholders can petition for protection as a Thai Treaty of Amity Company.

Use of preferred voting shares to control a Thai company

Even if the majority of a company is owned by a Thai, it is possible for a foreigner to retain control of the Thai company through the use of voting stock, or preferred shares. This means that the shares of the company that the foreigner holds would have a disproportionate amount of voting rights and therefore the foreigner could annually vote himself into a Managing Directorship and thereby control the Thai company.

When doing business and registering Companies in Thailand it is often necessary to retain the services of a Bangkok Lawyer especially where sophisticated Thai corporate structures are being sought.

Thanks for reading the Integrity Legal Blog

Note: None of the above content should be used in lieu of legal advice from a competent Attorney in the jurisdiction one wishes to conduct business

Tags: Doing Business in Thailand, Thai Company Registration, Thai Company Setup, Thailand Business
Posted in Thailand Business | 2 Comments »