SECTION 1: Market outlook
1.1 What is the outlook for US investment into your
jurisdiction over the next 12 months, given the new US
administration's protectionist focus?
Positive, particularly in certain sectors. Official
forecasts show Thailand's economy is expected to grow overall
between three to four percent in 2017. In addition to existing
Board of Investment of Thailand (BOI) promotions, important new
initiatives have recently been introduced aimed at developing
Thailand into a high-income 'value-based economy'. Under key
government initiative Thailand 4.0 (January 2017) the focus is
placed on innovation, technology and creativity and trade in
services. These can be categorised into core technologies
including biotechnology and digital technology, and enabling
services including research in science, technology and design.
The BOI benefits offered to potential investors in these
sectors will be eligible for a 10-year corporate income tax
(CIT) exemption and additional incentives for one to three
years, altogether lasting no more than 13 years. Additionally,
Thailand also aims to establish an Aeropolis for supporting the
aircraft maintenance, repair, and overhaul (MRO).
Given that many US corporations are leaders in the fields of
technology, digital technology and biotechnology, they should
be well placed to take advantage of such promotions.
1.2 Are there any industries in particular that you think
are more likely to be affected by the US's new economic
It is probably too early to assess what new policies the new
US administration may adopt and their impact. As at the time of
writing, our understanding is that the US Department of
Commerce and the United States Trade Representative (USTR) are
yet to reach a conclusion in their investigation based on
Presidential Executive Order 13786. The order identified
Thailand as one of 13 trading partners which had a significant
trade deficit in goods with US in 2016.
SECTION 2: Approving foreign investments
2.1 Explain the foreign investment approval process and
Investors can apply for Thai governmental
incentives/privileges for undertaking certain
businesses/activities in Thailand considered important and
beneficial to Thailand's economic and social development.
Historically such promoted activities focused on manufacturing
boosting employment which helped fuel Thailand's
automobile/electronics sectors. Under Thailand 4.0, the focus
has moved to promoting high-value industries offering new
technology and/or environmentally friendly activities.
The agencies charged with promoting new investment are the
BOI and Industrial Estate Authority of Thailand (IEAT).
BOI privileges – To be eligible
the promoted entity must be Thai (incorporated limited company,
foundation or cooperative). Foreign investors can own
all/majority of the shares in such Thai entity where the BOI
permits (for example manufacturing). For other activities
(including agriculture, fisheries, mining, and certain types of
services) the foreign ownership limit is generally 49% of the
total shares (see possible exemption for US investors in 2.4).
Other available privileges vary depending on the nature of the
underlying activity (activity-based incentives) and certain
targeted locations (area-based incentives) but include tax
privileges; non-tax privileges (permission to own land; relaxed
visa/work permits quota for foreign employees) and certain
The application process involves submitting a standard form
application with supporting documents to the BOI. Consideration
takes between 40-90 working days following submission. If the
project is approved, the BOI will issue a promotion certificate
to the promoted investor subject to compliance with any
Before applying, applicants are advised to meet with a BOI
officer to discuss the proposed application. Permission to own
land will usually be considered post-approval.
IEAT privileges – IEAT incentives
are available for projects located in specifically approved
industrial estates. Estates include IEAT managed industrial
estates as well as certain industrial estates owned/managed by
private developers. Non-tax incentives include permission to
own land in the estate; relaxed visa/work permits for foreign
technicians/families; ability to repatriate foreign currency.
Tax privileges for investors operating in the Freezone include
exemption from import and export duty, excise tax/VAT on
machinery/raw materials. For investors looking to construct
/operate their own factory, IEAT can assist with requisite
2.2 Are there any investment restrictions in specially
regulated sectors and is the government entitled to any special
rights in these sectors?
Yes. Certain sectors including the energy,
telecommunications and natural resources are either reserved
for, or undertaken by, a state-owned enterprise or are
regulated by a government regulator/body appointed by virtue of
specific enabling legislation and with the authority to grant
concessions/licences to the private sector. For example, in the
telecoms sector, the National Broadcasting Commission was set
up under the NRA Organization Act with responsibility for
spectrum allocation, as well as authority for introducing
takeover and ownership restrictions in the telecom sector.
In addition to the general provisions of the FBA (see 2.4
below), which impose foreign investment restrictions in
specified sectors, there are numerous other industry/sector
specific laws which may or may not also include foreign
ownership restrictions. Potential investors would be wise to
seek advice from a locally qualified law practice regarding the
existence of any applicable restrictions early in the
investment decision process.
2.3 Which authority oversees competition clearance and give
a brief overview of the merger clearance process?
The Trade Competition Commission (TCC) is authorised under
the Trade Competition Act (1999) (TCA) to oversee all mergers
and acquisitions in Thailand. The TCC can suspend the merger of
businesses involving a Thai or foreign business operator that
may result in monopoly or unfair competition in Thailand. A
pre-merger notification is provided which states that a merger
(whether horizontal, vertical or conglomerate) falling within
certain minimum thresholds as prescribed in a notification
issued by the TCC will need the approval of the TCC. To date,
no notification has been issued specifying the minimum
thresholds or the underlying process. Consequently, no approval
is currently required from the TCC.
However, amendments to the TCA have recently been approved
by the Thai National Legislative Assembly and are scheduled to
become effective sometime in August or September 2017 (90 days
from the date of publication of the amended TCA in the
Under the amended TCA, a pre-merger approval by the Trade
Competition Board (TCB) will be required for any merger that
may result in a monopoly or which involves a business operator
having market dominance. A post-merger notification is also
required for business operators who have merged their business
in a manner which may cause a significant reduction of
competition in the market in accordance with criteria yet to be
prescribed by the TCC.
2.4 Are there further approval requirements that foreign
investors should be aware of?
The Foreign Business Act (FBA) is the main Act that
determines which business activities foreigners can undertake
in Thailand. The FBA categorises activities into three lists
which 'foreigners' are prohibited from undertaking or are
entitled to undertake subject to first obtaining either an
exemption or a licence/certificate. The term 'foreigner',
includes local Thai incorporated entities where 50% or more of
the total shares are owned by non-Thais.
List 1 activities are absolutely prohibited for foreigners
to engage in (for example publishing, trading in real estate,
List 2 activities require Cabinet approval for foreigners to
undertake (for example transportation, arts and culture,
activities affecting the environment/natural resources).
List 3 activities include acting as an agent/ broker,
wholesaling, retailing, conducting services and are deemed
activities that Thais are not yet ready to compete against
foreigners. Foreigners can undertake List 3 activities only
where an exemption/permission has been granted.
There is however a specific and unique exception which is
only available to US nationals and US owned companies under the
Thai – US Treaty of Amity 1966 (Treaty). Subject to
six exceptions, namely communications, transportation,
fiduciary functions, banking involving depository functions,
the exploitation of natural resources and land, and domestic
trade in indigenous agricultural product, qualifying US-owned
businesses operating in Thailand can apply for National
Treatment. This broadly means that a qualifying US business
will be afforded the same rights normally reserved for Thais
(in other words, the restrictions in the FBA do not apply).
This means qualified US nationals/qualified US entities are
thereafter able to own all or a majority of the shares in the
Thai entity and can engage in business on the same basis as
Thai nationals, subject to a Foreign Business Certificate (FBC)
Privileges under the Treaty do not extend to permit land
SECTION 3: Investment techniques
3.1 What are the most common legal entities used for US
investment in your jurisdiction?
The most common entity used by US investors to operate a
private business in Thailand is a limited company or juristic
person. A juristic person is a separate legal entity from its
shareholders. In terms of structure and organisation, it is
similar to companies found in Western countries. The liability
of the shareholders of a private limited company is limited to
the unpaid share capital of the shares held by that
shareholder. The directors authorised to bind the company are
listed in the publicly available affidavit which states the
company's registered capital and permitted objectives.
Thai law also recognises branch offices,
representative/regional offices, treasury centres, partnerships
and sole proprietorships. Branch offices are sometimes used to
undertake government contracts. A branch office is treated as
an extension of its head office, which is responsible for the
branch's liabilities. Further, if the activities being carried
out by the branch are restricted activities (see 2.4 above), an
FBL or FBC or other exemption would be needed. A representative
office or regional office are both treated as non-trading
offices and are not permitted to generate income. Each has
limited activities which it can undertake which can make them
restrictive in practice.
Large infrastructure projects/private investment in state
undertakings will use public-private partnerships (PPPs).
3.2 What are the key requirements for establishment and
operation of these legal entities?
For US nationals/US qualifying entities looking to take
advantage of the Treaty, the first step is to establish a local
entity which typically would take the form of a local private
limited company. The incorporation process is relatively simple
and straight forward. Once the local entity has been
incorporated, the next step is to apply to seek privileges
under the Treaty. This involves the local entity applying to
the US Commercial Service at the US Embassy in Bangkok for
written confirmation that the majority of the business's shares
are held by US nationals/businesses, who in turn meet the US
nationality requirements (see below). Upon the US Commercial
Service issuing a letter confirming US nationality, the
applicant can then apply to the Ministry of Commerce (MOC) for
the issuance of a FBC.
Once the FBC has been granted, the local entity will need to
continue to satisfy the US nationality requirements at all
times. In order to satisfy US national treatment under the
Treaty, the majority of the business's total shares must be
held by US shareholders (individuals or US businesses) and
where such shareholders are businesses, that entity must be US
and the majority of that entity's shares must be majority US
owned and so on at each level in the corporate chain up to the
ultimate individual owners, the majority of which must be US
nationals or to a US listed entity. In addition, the majority
of the directors must also be either Thai or US individuals.
Any failure to satisfy the US nationality treatment will result
in the FBC being automatically cancelled.
Accordingly, it is vital for investors to take legal advice
to ensure that the entity investment is properly structured and
compliant with the nationality requirements.
SECTION 4: Dispute resolution
4.1 How effective are local courts' enforcement and dispute
resolution proceedings, and what should US investors be
particularly aware of?
Court proceedings are commenced by filing a complaint in the
prescribed form and paying the court fee. The complaint is then
served on the defendant by a court officer. The defendant then
has 15-30 days to file its response (extensions are commonly
granted). The court then schedules a hearing to identify issues
in dispute. The court may schedule mediation sessions between
the parties. If unsuccessful, trial hearings will usually be
scheduled about eight to 12 months after the first hearing. On
average, the lower court judgment can be expected between 12-18
months from filing, however, depending on complexity and case
load of the court, it can take longer. All civil court
judgments are subject to appeal. Once a court judgment has
become final (i.e. can no longer be appealed) enforcement
proceedings can commence.
Domestic judgments are enforced by filing an application to
appoint a court execution officer to attach the judgment to the
debtor's assets. The judgment creditor is responsible for
locating the debtor's assets. Thai courts do not actively
compel debtors to disclose details of assets, which can hinder
Arbitration proceedings broadly follow the Uncitral Model
Law. Arbitration proceedings tend to benefit from a generally
quicker procedure than court proceedings. In enforcing an
arbitration award, the party seeking enforcement must petition
to the court within the prescribed period. Enforcement
proceedings can take about 12-18 months from filing the
It is not uncommon for non-governmental commercial
agreements between US and local investors to be governed by
Thai law but subject to arbitration outside of Thailand.
Singapore and Hong Kong are common places designated for
foreign arbitration due to their proximity. Thai governmental
contracts will usually specify resolution through the Thai
courts. US investors should note that limitation periods vary
depending on the type of claim from one month to ten years.
This is a very technical area in Thai law and expert advice
should be sought sooner rather than later. Also proceedings,
particularly labour disputes, can lead to the court requiring
all directors/officers to attend the court in person, including
those based overseas. This should be borne in mind when
4.2 Does your jurisdiction have a bilateral investment
protection treaty with the US and is that commonly used by
The US-Thai Treaty of Amity provides US nationals and US
owned businesses operating in Thailand with fairly extensive
protections on a reciprocal basis. Under the Treaty, US
nationals and US owned businesses are afforded fair and
equitable treatment free from arbitrary or discriminatory
measures which would impair their legally acquired rights.
Additionally, property is entitled to protection from arbitrary
confiscation or expropriation without due process of law or
without payment of just compensation in accordance with the
principles of international law. There are also provisions
affording equal treatment as Thai nationals with regards to
intellectual property rights, as well as the fair and equitable
treatment in respect of government purchase of supply contracts
and the awarding of concessions.
Additionally, projects entitled to BOI promotions are
entitled to specific investment protections under the
investment Promotion Act BE 2520 (1977). These include
guarantees and protections from expropriation, state
competition, state monopoly and imposition of price controls
relating to promoted products.
4.3 Do local courts respect foreign judgments and are
international arbitration awards enforceable?
Thailand is not party to any conventions relating to
enforcing foreign court judgements. Accordingly, foreign court
judgements will not be enforced by a Thai court but can be
admitted for evidentiary purposes.
Thailand is a party to the Geneva Convention for the
Execution of Foreign Optional Awards and the New York
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards. Accordingly, arbitral awards under such
conventions will generally be recognised and enforceable in
Thailand provided proceedings are initiated through the
Administrative Court within the prescribed period.
SECTION 5: Forex controls and local operations
5.1 What foreign currency or exchange restrictions should
foreign investors be aware of?
Generally, there are no restrictions on the inward
remittance of foreign currency into Thailand provided such
foreign currency is deposited and/or sold within a specified
period. Outward remittances and purchases of foreign currency
generally require the approval of the Bank of Thailand, which
has authorised commercial banks to approve many types of
commercial transactions on its behalf. Such approvals are
routinely given by local commercial banks where the transaction
relates to the repayment of loans, the payment of interest or
the repatriation of investment funds, dividends or profits
provided that the underlying transaction is genuine and such
transactions are supported with appropriate documentation. In
the case of repatriation of loans/funds, this also involves
showing evidence that the funds used to make the
loan/investment were originally remitted into Thailand.
SECTION 6: Tax implications
6.1 Are there tax structures and/or favourable intermediary
tax jurisdictions that are particularly useful for US investors
into the country?
The vast majority of US investors form a Thai limited
company directly owned by US shareholders due to the Treaty.
One of the conditions of the Treaty is that there can be no
non-US business in the corporate shareholding chain. As such
this makes the use of tax haven countries less attractive.
6.2 Has your jurisdiction benefitted from the recent trend
of US companies pursuing inversion structures? If yes, do you
believe this will be threatened under the new
US companies that 'invert' do so mainly by acquiring a
company in a low tax jurisdiction and then merging. No US
company would invert using Thailand as a base due to Thailand's
relatively high tax rate and other restrictions.
6.3 What are the applicable rates of corporate tax and
withholding tax on dividends?
The statutory rate of corporate income tax is 20%. The
withholding tax rate on dividends is 10%. Interest and
royalties are subject to withholding tax of 15%. Capital gains
paid from, or in, Thailand are also subject to withholding tax
6.4 Does the government have any tax incentive schemes in
Tax incentives awarded in connection with the Board of
Investment (BOI) may, depending on the activity and location,
include an exemption from corporate income tax for a stated
period depending on various factors, special tax deductions and
import tax exemptions.
Promoted industries include research and development,
intellectual property licensing and product and packaging
design. The area-based incentives cover industrial zones and
estates; science and technology parks; low income provinces;
southern Thailand border provinces and special economic zones.
The BOI has also established a cluster development program
designating manufacturing areas for targeted industries. These
include automotive, electronic equipment, digital industry and
Corporate income tax incentives are also available for
International Headquarters, International Trading Companies and
Treasury Centres. Personal income tax incentives are also
available for expatriate employees.
6.5 Are there any reciprocal tax arrangements between your
jurisdiction and the US? If so, how can they aid
There is a comprehensive double taxation agreement in place
between the US and Thailand. However, this does not provide any
reduction in withholding tax on dividends, interest or
royalties (with the exception of copyright royalties reduced to
five percent) compared to the rates currently in force in
Thailand under domestic laws. Capital gains derived by
companies in the US also remain subject to tax in Thailand.
6.6 Do you think that the introduction of new rules and
regulations in the US, such as the Bring Jobs Home Act, is
likely to have an impact on investment into your country?
No. US investors into Thailand, in most cases, use Thailand
as a low-cost jurisdiction from which to supply goods and
services to the Asian market and not for export to the US.
Thus, it will likely continue to be more cost effective to do
so from Thailand rather that the US.
Partner, Axis Legal
T: +66 2 670 0140-1
F: +66 2 670 0142
Peter Burke is a partner in Axis Legal and has over
20 years' experience in advising both US and
international clients relating to their businesses in
Thailand. He is recognised as a leading adviser in the
fields of corporate and M&A and has experience in
advising on joint-ventures, disposals, corporate
restructurings and structuring foreign investments as
well as handling general commercial matters, corporate
governance issues and investments in Thailand. Burke
has obtained master's degrees in law from both London
University and Georgetown University.
Associate, Axis Legal
T: +66 2 670 0140-1
F: +66 2 670 0142
Nattha Srisomwong is a qualified Thai lawyer and
notarial services attorney who regularly advises both
Thai and foreign clients on various aspects of Thai
corporate and commercial laws. Srisomwong received a
master's degree in business law (English language
program) from Thammasat University in 2012 and has
eight years' experience of working both as an in-house
counsel and with law firms. Srisomwong specialises in
corporate and M&A matters including advising on
foreign investment, applying for foreign business
licences, advising on the availability of investment
privileges from applicable agencies including the Board
of Investment of Thailand and the Industrial Estate
Authority of Thailand.
US/Thai tax adviser, GA Lamont
Greg Lamont is a recently retired PwC partner living
in Thailand. He has over 30 years of international tax
experience while based in New York and had eight years
of experience in Thai taxation while working in
Bangkok. His primary focus while working in Thailand
was assisting US and European investors into Thailand.
Lamont will continue to reside in Thailand and is
available to advise investors into the country on a