American in Thailand wishing to conduct Business

Are you from the USA and considering conducting business in Thailand?

You my find this article interesting?

Have you considered or do you know about The Thai-US Treaty of Amity and Economic Relations, commonly known as the Treaty of Amity, it is an economic agreement that grants significant rights to American citizens and businesses seeking to establish a presence and conduct business in Thailand, if they meet certain requirements.

The agreement was originally signed in 1833 and later amended in 1966, the Treaty of Amity was the first treaty between the United States and an Asian nation. Its aim was to create a peaceful and friendly relation and facilitate commerce between the two countries, a relationship that has stood the test of time and remained in force up until today.

 Who is this for?

It is for US citizens and businesses,

 What are the requirements for approval, the benefits of incorporating under the treaty, and other important details related to this agreement?

Effect on Business Operations in Thailand

This treaty permits US citizens and businesses incorporated in the US, as well as businesses in Thailand owned by US citizens, the opportunity to operate and partake in business activities under conditions similar to those of local Thai companies. It allows these entities to hold a majority shareholding or wholly own a company in Thailand, which is not normally permitted.

This gives them the ability to operate on an equal basis with Thai nationals. This presents a significant advantage for American companies operating in Thailand as recent legislative changes have increased the difficulty of conducting business for foreigners in Thailand.

Additionally, the treaty offers a competitive advantage as it exempts American companies from the majority of restrictions outlined in the Foreign Business Act concerning foreign investments.

What are the Benefits of the Treaty?

There are two main benefits.

The Right of Ownership and or Majority Shareholding- American companies have the option to hold a majority shareholding or to have complete ownership of their company, branch office, or representative office in Thailand. This permits them to have enhanced control and adaptability in managing business operations.

National Treatment - American companies are able to greatly benefit from national treatment, as it allows them to conduct business activities under equal conditions as Thai companies. This exemption from foreign investment restrictions offers a competitive advantage and gives these companies a diverse array of opportunities across multiple industries.

What are the Rules and Regulations?

Qualifications to be Considered Under the Treaty

To qualify a US company under the provisions of the treaty, specific criteria must be met. These include:

The applicant must be a US citizen, either by birth or through naturalization, or the applicant can be a juristic person incorporated under the laws of either Thailand or the United States of America.

The majority of shares (at least 51%) must be held by  American nationals.

At least 50% of the directors must be American and/or Thai citizens.

If only one director is authorized to sign on behalf of the company, that director must be either Thai or American.

If multiple directors are jointly authorized to sign on behalf of the company, the majority of such directors must be either Thai or American.

If there is a non-American authorized director, they must always co-sign with an American director .

Though treaty-protected companies are already given preferential treatment, they still need to satisfy the minimum capital requirement under the Foreign Business Act (FBA).

If the business does not fall under the restrictions of the FBA, the minimum capital requirement for a treaty-protected company is 2 million THB.

However, if the business falls under the restrictions of the FBA and is required to get a Foreign Business License (FBL), the minimum capital requirement must be 3 million THB for each business activity.

Regarding work permits, companies intending to employ foreign workers must have a fully paid and registered capital of 2 million THB to hire one foreigner. Each additional employee requires an additional 2 million THB in registered capital, with a maximum being up to 10 people. In addition, the company will need to employ 4 Thai staff for every work permit issued to a foreigner.

Application Process

Companies must undergo a three-stage application process to qualify under the Treaty of Amity and leverage the benefits it provides.

Document Filing and Submission

The applicant verifies their nationality by certifying their passport at the US Embassy.

The applicant gathers all relevant documents confirming that the company has been registered in accordance with Thai law. These documents are then submitted to the Commercial Services Office (CSO) at the US Embassy.

Certification by the Commercial Services Office (CSO)

After receiving the required documents, the CSO will verify with the Thai Department of Commercial Registration (under the Ministry of Commerce) that the applicant is a company owned and managed by Americans and therefore entitled to the benefits of the Treaty of Amity.

Application to the Ministry of Commerce

After receiving the certification by the CSO, the original copies of all documents and completed application forms must be submitted to the Thai Department of Commercial Registration to apply for a Foreign Business Certificate.

While the document certification process at the US Embassy may require some time.

Foreign Business Certificate (FBC)

Following the conclusion of the registration process and upon receiving certification from the US Embassy, companies are required to start the application process for the FBC. This is essential because an FBC eliminates the restriction that the Foreign Business Act (FBA) holds over foreign-owned companies. Foreigners or foreign-owned companies are prohibited from engaging in over 50 categories of business activities in Thailand, but an FBC voids this restriction and allows US companies to operate in many more industries than other foreign businesses.

Required Documents

The specific documents needed for the application process vary according to the type of company being registered.

Sole Proprietorship

For sole proprietorships wanting access to the benefits and protection provided by the Treaty of Amity, the only documentation needed is a notarized copy of the owner's passport or birth certificate to prove their US citizenship. For submission, applicants are required to submit this document to the Commercial Service Office in the US Embassy in Bangkok for certification.

Thai Partnership, Thai Branch Office, Joint Venture, Thai Limited Company

The documentation needed for these types of companies are:

Articles of Incorporation

Company Bylaws

Affidavit of the Manager or Corporate Officer, which should include the following details:

Company name, registration number, and registration date

Registered office address

Jurisdiction under which the corporation is registered

Details of each director, including name, address, nationality, age, race, number of shares held, and identification of director(s) with the authority to bind the company

Authorized capital of the company, including the number of shares, par value of each share, and amount of paid-up capital

Total number of shareholders, their nationalities, and the number of shares owned by each

These documents must be notarized by a Notary Public, then sent to the Commercial Service Office in the Bangkok US Embassy for certification.

Subsidiary US Company

US companies operating as subsidiaries of larger parent companies are required to present the same documentation as detailed in the previous section (Thai Partnerships, etc.). However, in addition to this, they must also submit documents related to their parent company and send them to the Commercial Service Office in the Bangkok US Embassy.

US Companies Interested in Investment

US companies who are interested in investing directly into a Thai company to acquire the majority of its shares need to provide notarized proof showing that the majority of owners and directors of both the applying company and the intended company to be incorporated are (or will be) US citizens.

Limitations and Restrictions

While the Treaty of Amity offers numerous advantages, it's important to note its limitations. Companies under the treaty are prohibited from operating in specific sectors, such as:

Communications

Transportation

 (money/property management for other parties)

Banking involving depository functions

Exploitation of land or other natural resources

Domestic trade in local agricultural products

This is very important as many people get this wrong, despite having the same status as majority Thai-owned companies, companies under the treaty are prohibited from owning land and must also adhere to work permit regulations.

Registering a Company Under the US-Thailand Treaty of Amity

This long and complex process requires careful consideration and preparation to ensure approval .

If you are interested in registering a company under the Treaty of Amity should seek the services of www.lawyersforexpatsthailand.com

Lawyers for Expats Thailand are a dedicated law firm for foreigners in Thailand

To arrange a free consultation regarding this or any legal matter call Brian Ramsden General Manger of Foreign Affairs Lawyers for Expats Thailand Tel +66956583038

Reduce your tax liability with a LTR Visa let lawyers for Expats Thailand assist you.

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