Chapter 5 Legal Issues for Foreign Investors

Foreigners in Thailand derive their legal rights primarily from the domestic laws of Thailand. In general, foreigners enjoy the same basic rights as Thai nationals.

Restrictions on foreign ownership in commercial banks, insurance companies, commercial fishing, aviation business, commercial transportation, commodity export, mining and other enterprises exist under various laws. In addition, Thai participation will frequently be required in those activities seeking promotion from the BOI

B : The Foreign Business Act (FBA)

The Foreign Business Act (the Act) was approved on 15 October 1999 by the Senate and on 20 October 1999 by the House of Representatives. The final version of the Act was the version considered and proposed by the Joint Committee of the House of Representatives and the Senate. The Prime Minister subsequently presented the Act to His Majesty King Bhumibol Adulyadej for his Royal signature. The Act was published in the Government Gazette on December 4 1999 and it has been in force since March 3, 2000. The Act repealed and replaced the 1972 National Executive Council Announcement No. 281 (or Alien Business Law).

Major features of the Foreign Business Act compared to the Alien Business Law

Definition

of “Alien”

“ f o re i g n e r ”

Share-

holding

limit in

other

business

Minimum

Capital

List of

Prohibited

and

Restricted

Businesses

Alien Business Law

1. A natural person or a juristic person who is not of Thai nationality;

2 A juristic entity of which foreigners hold one-half or more of either the number of the shares or the value of the shares;

3 A juristic entity of which foreigners account for one-half or more of the shareholders;

4 A limited partnership or a registered

ordinary partnership with a foreign

managing partner or a foreign manager.

Bearer (no name) certificate shares of a limited company shall be considered shares owned by aliens, unless otherwise prescribed by Ministerial Regulation.

An alien as a permit holder or shareholder or partner of a juristic entity under the alien definition, shall not become a partner or shareholder in any other partnership or company with more than one-third of the total shares of the company or with more than one-third of the total capital of the partnership, or buy out such businesses, unless permission has been granted by the Director-General, who may prescribe certain conditions.

None

Businesses subject to the Act are classified into three categories – Annex A, Annex B, and Annex C.

• Any businesses specified in Annex A are strictly prohibited to aliens.

Foreign Business Act

1 A natural person who is not of Thai nationality; 2 A juristic entity which is not registered in Thailand;

3 A juristic entity incorporated in Thailand with foreign shareholding accounting for one-half or more of the total number or value of shares;

4 A limited partnership or registered ordinary partnership whose managing partner or manager is a foreigner. Bearer (no-name) certificate shares of a limited

company shall be considered shares owned by for

eigners, unless otherwise prescribed by Ministerial

Regulation.

None

The minimum capital is three million baht for businesses listed in the Act, and two million baht for businesses not listed in the Act. However, the minimum capital requirement shall not be imposed in case of rei n v e s t m e n t .

Businesses subject to the Act are classified into three categories – List 1, List 2, and List 3.

• List 1 consists of businesses strictly prohibited to foreigners.

Changes in Business Categories Attached Alien Business Law

•

An alien cannot engage in any businesses in Annex B and/or Annex C unless he is granted investment promotion by the Board of Investment.

•

An alien cannot engage in any businesses in Annex C unless he is granted permission by the Director- General.

Wholesales of all kinds of products (Annex C) except those specified in Annex A, and retailing of all products (Annex B and Annex C), require investment promotion by the Board of Investment, or permission from the Director-General of the Department of Commercial Registration, Ministry of Commerce.

Broker or agent business (Annex A) is prohibited to foreigners.

All kinds of businesses in services are specified in Annex A, Annex B, and Annex C, particularly, accounting, legal, and architectural services are under Annex A, while engineering services are under Annex C.

Foreign Business Act

•

List 2 is prohibited to foreigners unless permission is granted by the Commerce Minister by and with an appropriate Cabinet resolution. Foreign juristic entities allowed to engage in the businesses in List 2 must meet the following two conditions:

(1)

At least 40 percent of all the shares are held by Thai persons or non-foreign juristic entities. (The minimum threshold may be lowered to 25 percent given reasonable grounds.)

(2)

Two-fifths of the members of the Board of Directors are Thai.

•

List 3 is prohibited to foreigners unless permission is granted by the Director-General of the Department of Commercial Registration, Ministry of Commerce, by and with the approval of the Foreign Business Board.(1)

A foreigner can engage in businesses in List 2 and/or List 3 if he is a promoted investor in accordance with either the Investment Promotion Act, the Industrial Estate Authority of Thailand Act, or other laws.

The businesses of wholesale and retail of all kinds of goods still require licensing under List 3, except a wholesale business where the minimum capital of each store is 100 million baht or more, and a retail business where the total minimum capital is 100 million baht or more, or the minimum capital of each store is 20 million baht or more.

The business of brokers or agents falls under List 3, and may be undertaken by foreigners if such foreigners obtain a Foreign Business License. However, the following are exempt from the Act:

•

Trading in securities or services concerning futures trading in agricultural commodities, financial instruments or securities;

•

Trading in or the procurement of goods and services needed for production by, or providing the services of, an enterprise in the same group;

•

Trading, purchasing (for others), distributing or finding domestic or overseas markets for selling goods made domestically, or importing as an international trading business. The foreigner must have a minimum capital of at least 100 million baht; and

•

Other lines of business as stipulated in Ministerial Regulations.

While all types of service businesses (except as prescribed in Ministerial Regulations) are contained in List 3 and can be licensed, a major change has been to allow accounting, legal, and architectural services (previously not capable of licensing), and engineering services to be licensed.

.( 1 ) The 19 committee members will come from both government (including the BOI) and private agencies. The private agencies include

the Thai Chamber of Commerce, the Federation of Thai Industries and the Bankers Association.

Amaximum of five experts can also sit on the committee.

2 2 A Business Guide to Thailand

Major features of the Foreign Business Act compared to the Alien Business Law

Revision of Prohibited and Restricted Businesses

Penalties

Alien Business Law Building construction business is under Annex A, and other construction businesses are under Annex C. Foreign Business Act Construction business can be licensed in List 3; however, it is exempt from the Act in certain cases: • Construction that provides basic services to the public with respect to public utilities or communications and which requires the use of special instruments, machinery, technology, or expertise in the construction process, and where the minimum capital of the foreigner is at least 500 million baht; • Other categories of construction as stipulated in Ministerial Regulations.

The business of internal trade concerning local agricultural products and advertising is under Annex A. Domestic trade involving indigenous agricultural produce or products not prohibited by any other law, and advertising are in List 3 and may be undertaken by foreigners if they obtain a Foreign Business License.

An alien can engage in any businesses listed in Annex A or Annex B if permitted by a Royal Decree. An amendment of Annex C can only be made by a Royal Decree. An amendment of List 1 and Group 1 of List 2 can only be made by an Act. Other amendments will require a Royal Decree. The Foreign Business Board is required to review and revise the business listed at least once a year and to present an opinion as to any changes to the Commerce Minister.

A fine of 30,000-500,000 baht A fine of 100,000-1,000,000 baht and imprisonment of no more than three years.

While Thai law is silent on foreign participation limits, the Foreign Business Act restricts the right of foreigners in the sense that they are required to have a license prior to the operation or even before the establishment of a corporate vehicle in the country.

The FBAdefines a foreigner as:

A natural person (as opposed to a corporate entity or juristic person) who does not have Thai nationality.

Juristic persons not registered in T h a i l a n d

Juristic persons registered in Thailand with the following character:

a . Half or more than half of their capital shares is held by the person in 1. or 2. above.

Half or more than half of their capital fund is derived from the investment of the persons in 1. and 2. above. Being limited partnerships or registered ordinary partnerships whose managing partner or manager is a person not of Thai nationality.

4. Juristic persons registered in Thailand having half of their capital shares held by persons in 1., 2., or 3. or a juristic person having the persons in 1., 2. or 3 above investing with a value of half or more of the total cap-i t a l .

The shares of a limited company represented by bearer share certificates are treated as the shares of foreigners, unless the Ministry of Commerce provides otherwise in ministerial r e g u l a t i o n s .

Where other laws regulate shareholding structure or restrict the rights of foreigners in certain businesses, the laws prevail and the shareholding provisions of the FBA do not a p p l y.

Restricted business activities

Foreign participation in three lists in the FBAare either totally prohibited or restricted by the FBA. The classification of the businesses in the lists must be made by a Royal Decree, except for those in List One and Group 1 of List Two, which have to be amended by an act.

The businesses falling outside the three lists may, subject to restrictions under other laws, be operated freely by foreigners provided the minimum capital at the start of the business operation is at least two million baht.

Acommittee set up under the FBAis assigned to review the lists once a year, and present its recommendations to the Commerce Minister.

Foreigners operating businesses that are not in any of the three lists and which were in operation before the FBA t o o k e ffect, but which subsequently require a license, must inform the Director-General of the Commercial Registration Department, Ministry of Commerce, to receive a certificate to continue business within one year. While the request is being processed, the foreigner may continue operations.

Note: Where text is underlined it means a new concept has been introduced in the Foreign Business Act.

The word “none” means a new business activity has been introduced in the Foreign Business A c t

List 1

Alien Business Law

Businesses that foreigners are not permitted to do for special re a s o n s :

(1) Newspaper undertakings and radio and television station undertakings Annex B

(2) Lowland farming/upland farming, or horticulture Annex A/Annex B

(3) Raising animals Annex B

(4) Forestry and timber conversions from natural f o r e s t s Annex B

(5) Fishing f o r aquatic animals in Thai waters and T h a i l a n d ’s Exclusive Economic Zone Annex B

(6) Extraction of Thai medical herbs n o n e

(7)

Trade in and auctioning of Thai ancient objects or ancient objects of national historical value Annex A

(8)

Making or casting Buddha images and making monk’s bowls Annex B

(9)

Dealing in land Annex A

List 2 Businesses concerning national security or safety that could have an adverse effect on art and culture, customs,

o r native manufacture/handicrafts, or with an impact on natural re s o u rces and the enviro n m e n t

Group 1 Businesses concerning national security or safety

(1)

Production, disposal (sale), and overhaul of: n o n e

(a)

Fire-arms, ammunition, gunpowder, and explosives

(b)

Components of fire-arms, ammunition and explosives

(c)

Armaments, and military vessels, aircraft, or conveyances

(d)

All kinds of war equipment or their components

(2)

Domestic transport by land, water, or air inclusive of the undertaking of domestic aviation Annex B

Group 2 Businesses that could have an adverse effect on art and culture, customs, and native m a n u f a c t u r i n g / h a n d i c r a f t s

(1)

Dealing in antiques or objects of art and works of art, and Thai handicrafts Annex B

(2)

Production of wood carvings Annex B

(3)

Raising silkworms, producing Thai silk thread and weaving, or printing patterns on Thai silk textiles Annex B

(4)

Production of Thai musical instruments n o n e

(5)

Production of articles of gold or silver, niellowares, nickel-bronze ware or lacquer ware Annex B

(6)

Production of crockery and terra cotta ware that is Thai art or culture n o n e

Group 3 Businesses concerning natural resources and the environment

(1)

Production of sugar from sugarcane Annex B

(2)

Salt farming inclusive of making salt from salty earth Annex A

(3)

Making rock salt Annex C

(4)

Mining/inclusive of stone blasting or crushing Annex C/Annex B

(5)

Timber conversions to make furniture and articles of wood Annex B

List 3 Businesses which Thais are not ready to compete in undertakings with fore i g n e r s

(1)

Rice milling and production of flour from rice and farm crops Annex B

(2)

Fishery, limited to propagation of aquatic animals Annex B

(3)

Forestry from replanted forests Annex B

(4)

Production of plywood, wood veneer, chipboard, or hardboard Annex B

(5)

Production of natural lime Annex B

(6)

Accounting service undertakings Annex A

(7)

Legal service undertakings Annex A

(8)

Architectural service undertakings Annex A

(9)

Engineering service undertakings Annex C

(10)

Construction e x c e p t new concept/Annex A and Annex C

(a)

Construction of things that provide basic services to the public with respect to public utilities or communications and which require the use of special instruments, machinery, technology or expertise in construction and a minimum capital of the foreigner of at least 500 million baht

(b)

Other categories of construction as stipulated in Ministerial Regulations

List 3 Alien Business Law

( 11) Brokerage or agency undertakings e x c e p t new concept/Annex A

(a)

Trading in securities or services concerning futures trading in agricultural

commodities, financial instruments or securities

(b)

Trading in or the procurement of goods or services needed for production by, or

providing the services of, an enterprise in the same group

(c)

Trading, purchasing (for others) or distributing or finding domestic or overseas

markets for selling goods made domestically or imports as an international trading business,

with a minimum capital of the foreigner of at least 100 million baht

(d)

Other lines of business stipulated in Ministerial Regulations

(12)

Auctioning, e x c e p t new concept/Annex A

(a)

International bidding that is not bidding in antiques, ancient objects or objects of

art that are Thai works of art, handicraft or ancient objects, or of national historical value

(b)

Other types of auctions as stipulated in Ministerial Regulations

(13)

Domestic trade concerning indigenous agricultural produce or products not prohibited by any present law Annex A

(14)

Retail trade in all kinds of goods with an aggregated minimum capital of less than 100 new concept/Annex million baht or having the minimum capital of each shop less than 20 million baht B and Annex C

(15)

Wholesale trade in all kinds of goods with a minimum capital for each store of less than 100 million baht new concept/Annex C

(16)

Advertising undertakings Annex A

(17)

Hotel undertakings, except for hotel management services Annex B

(18)

Guided tours Annex B

(19)

Sale of food or beverages Annex C

(20)

Plant breeding and propagating, or plant improvement undertakings n o n e

(21)

Doing other service businesses except for service businesses prescribed in Ministerial Regulations Annex C

List One businesses are closed to foreigners for special reasons. They may operate a business in List Two only when they have acquired permission from the Minister of Commerce, with the approval of the Cabinet. Foreigners may operate businesses in List Three only after obtaining permission from the Director-General of the Commercial Registration Department, with the approval of the Committee.

In permitting foreigners to operate businesses under the FBA, the advantages and disadvantages to the nation’s safety and security, economic and social development, public order and good morals, art, culture and traditions of the country, natural resource conservation, energy and environment, consumer protection, size of enterprise, employment, technology transfer and research and development opportunities are taken into a c c o u n t .

Licenses

Aforeigner wishing to engage in any business in Lists Two and Three must submit an application to the Minister of Commerce (List Two) or the Director-General of the Commercial Registration Department (List Three). The Cabinet in the case of List Two and the Director General in the case of List Three will review and make a decision within 60 days of the application filing date.The Cabinet may postpone a decision for another 60 days at the most.

Once approved, a license will be issued within 15 days. If a license is not approved, written notification must be given within 30 days stating the reason in the case of List Two, and within 15 days in the case of List Three. In the latter case, an appeal can be made to the Minister, who must respond within 30 days. His decision is then final.

The licenses have a perpetual life, but expire once the business no longer performs as licensed. The license must be displayed in a prominent place on the business premises.

Licenses for both Lists Two and Three might be issued with ministerial regulations attached, such as total debt financing ratio to capital, technology transfer, minimum investment capital or the minimum number of foreign directors requested to reside in T h a i l a n d .

Alicense can be revoked if a business does not comply with its conditions, does not meet the Thai participation ratio requirement or engages in other businesses or assists other foreigners in doing business with a view to violating the FBA. Once issued with a warning l e t t e r, and if the violation persists, the license can be revoked.

C e rt i f i c a t e s

Foreigners who were operating a business before the new law came into effect, and which consequently required a license, must apply for a certificate from the Director-General of the Commercial Registration Department, Ministry of Commerce.

Foreigners wishing to operate a business in any of the three lists with the specific permission of the Thai government or with national treatment under a bilateral treaty must inform the D i r e c t o r-General to obtain a business certificate.

Foreigners who have obtained business promotion rights and privileges from the Board of Investment or have written permission from the Industrial Estate Authority of Thailand to operate a business in List Two or List Three must inform the Director General to obtain a business certificate.

Foreigners who have BOI promotion are exempt from the FBA, except for the provisions relating to foreign business certificates, reporting requirements on changes of business premises, and the duty to respond to queries from registrars or competent off i c i a l s .

Minimum capital

The FBA requires that the minimum capital to be used at the start of a foreign business must be in accordance with ministerial regulations but not less than two million baht.

The FBAintroduces for the first time a minimum capital for foreigners. This, as opposed to the registered capital, is defined as the capital in foreign currencies that foreigners bring in or remit into Thailand for the business operation.

Businesses within the lists must have a minimum capital as described in the ministerial regulations, but not less than three million baht.

Thai part i c i p a t i o n

Foreigners may operate businesses in List Two only if at least 40 percent of the capital of the foreign corporate entity is held by Thai nationals or corporate entities and at least two thirds of the directors must be Thai nationals. The Minister of Commerce with the approval of the Cabinet may reduce the percentage, but not lower than 25 percent.

The minimum capital requirement also appears in List Three (10) a, (11) c, (14) and (15). Foreigners may operate the following businesses without a foreign business license if the minimum capital exceeds the specified level:

–

Construction of infrastructure with high technology and with minimum capital of at least 500 million baht.

–

Brokerages and agencies for selling or purchasing or marketing locally-produced goods or imported goods with minimum capital of at least 100 million baht.

–

Retailing of all categories of goods with total minimum capital of at least 100 million baht or where the minimum capital of each shop is at least 20 million baht.

–

Wholesale in all categories of goods with a total minimum capital of each shop of at least 100 million baht.

P e n a l t i e s

The FBA allows for imprisonment for up to three years, in addition to fines, for violators of the act.

2: Work Permits

The Alien Occupation Law, adopted in 1973, requires all aliens working in Thailand to obtain a Work Permit prior to starting work in the Kingdom. An updated version of the Act, adopted in 1978, describes the procedures for issuance and maintenance of Work Permits and lists certain occupations from which foreigners may be excluded.

A . E x e m p t i o n s

The Act grants exemptions from the Work Permit requirement to persons occupying the following professions:

•

Members of the diplomatic corps

•

Members of consular missions

•

Representatives of member countries and officials of the United Nations and its specialized agencies

•

Personal servants coming from abroad to work exclusively for persons listed under the above items

•

Persons who perform duties on missions in the Kingdom under an agreement between the government of T h a i l a n d and a foreign government or international org a n i z a t i o n

•

Persons who enter the Kingdom for the performance of any duty or mission for the benefit of education, culture, arts, or sports

•

Persons who are specially permitted by the Government of Thailand to enter and perform any duty or mission in the Kingdom.

B . Special Cases

While most foreigners must apply for a Work Permit, and may not begin work until the Permit is issued, the A l i e n Employment Act does provide special treatment in the following circumstances:

• U rgent and Essential Wo r k :

Exemption from Work Permit requirements is granted to foreigners who enter the Kingdom temporarily, but in accordance with the immigration law, to perform any work of any “urg e n t and essential nature” for a period not exceeding 15 days. H o w e v e r, such aliens may engage in work only after a written notification on a prescribed form, signed by the foreigner and endorsed by his employer, has been submitted to and accepted by the Director-General or his designee.

Foreigners entitled to this treatment may enter T h a i l a n d with any kind of visa, including a transit visa. The term “urg e n t and essential work” is not explicitly defined and consequently, the issuance of this sort of exemption is a matter of administrative discretion.

• Investment Pro m o t i o n

An alien seeking permission to work in the Kingdom under the Investment Promotion Law must submit his application for a Work Permit within 30 days of notification by the Board of Investment that his position has been approved. An alien in this category may engage in authorized work while the application is being processed.

C . P ro c e d u re s

The Act requires that any alien working in Thailand must obtain a Work Permit before beginning work. Section 8 of the Act stipulates that while a prospective employer may file an application on the alien’s behalf in advance of his commencing work, the actual Work Permit will not be issued until the alien has entered Thailand in accordance with the immigration laws and has presented himself to receive his Work Permit.

The Permit initially will be valid only for the period of the a l i e n ’s Non-Immigrant visa permits him to remain in T h a i l a n d under the Immigration law. The Work Permit will be subject to renewal in accordance with the renewed or extended visa. For aliens who are holders of a Thai Certificate of Residence, the Work Permit can be renewed annually. The Labor Department, subject to subsequent renewal, will in principle grant an initial duration of one year for the Work Permit. AWork Permit must be renewed before its expiry date or it will automatically lapse.

Applicants for Work Permits may not enter the Kingdom as tourists or transients.

D . R e q u i red Documentation

The following documents must be attached to a Work Permit application:

•

For non-permanent residents: Avalid passport containing a Non-Immigrant visa (except for W P 3 applications)

•

For permanent residents: Avalid passport, residence permit and foreigner book (except for W P 3 applications)

•

Evidence of applicant’s educational qualifications and letter(s) of recommendation from the former employer, describing in detail the applicant’s past position, duties, performance, and place and length of employment. If the documents are in a language other than English, a T h a i translation certified as correct by a Thai Embassy (if abroad) or Ministry of Foreign A ffairs (if in T h a i l a n d ) must be attached

•

A recent medical certificate from a first-class licensed physician in Thailand stating that the applicant is not of unsound mind and not suffering from leprosy, acute tuberculosis, elephantiasis, narcotic addiction or habitual alcoholism (except for W P 7 applications).

•

Three 5x6 cm. full-faced, bareheaded, black and white or color photographs, taken no more than six months prior to the filing of the application

•

If the application is to be filed by another person, a valid power of attorney in the prescribed form must be attached with a 10 baht duty stamp

•

On the application form, the “job description” entry must be completed with a detailed statement as to what job is expected to be performed, how it is related to other people, and what materials will be used in the work (additional paper to be used if necessary)

•

If the job applied for is subject to a license under a particular law, in addition to the Alien Occupation Law, a photocopy of such license, (e.g. teacher’s license, physician’s license, press card from the Public Relations Department, certificate of missionary status from the Office of Religious A ffairs, etc.) shall be attached

•

If the applicant is married to a Thai national, the original and photocopies of the following must be presented:

– Marriage certificate, spouse’s identity card, birth certificates of children, household registration, and photocopy of every page of applicant's passport

•

If the job being applied for is not in Bangkok, the application should be filed at the relevant province’s Department of Employment, or in the absence of such an

o ffice, at the province’s city hall

•

Additional evidence as requested. It may be necessary to translate any or all documents into T h a i .

E . Permitted A c t i v i t i e s

Thai law prohibits employers from allowing foreigners to perform any function other than that described in the foreigner's Work Permit. Employers must report changes in employment, transfers and termination of all foreigners in their org a n i z a t i o n within 15 days of any such action. In cases of dismissal, foreigners must return their Work Permit to labor authorities in Bangkok at the Alien Occupation division or, if they are in a provincial area, to the province’s Department of Employment. Failure to do so will result in a fine of up to 1,000 baht.

Any foreigner who engages in work without a Wo r k Permit, or in violation of the conditions of his work as stipulated in his Permit, may be punished by a term of imprisonment not exceeding three months or a fine of up to 5,000 baht, or both. Foreigners engaged in work prohibited to them by Royal Decree (see below) shall be liable to imprisonment for a term not exceeding five years or to a fine ranging from 2,000 to 100,000 baht, or both.

An employer who permits a foreigner to work in his org anization without a Work Permit or to act in violation of the nature of the work specified in the Permit may be punished with imprisonment not exceeding three years or fined up to 60,000 baht or both.

Permit holders must obtain prior permission to change their occupation and/or place of work. Change of employer location or the residential address of the permit holder must be properly endorsed in the Work Permit by the labor authorities. The A l i e n Employment Act does not prevent an foreigner from engaging in work in more than one field or for more than one employer.

F. Restricted Occupations

ARoyal Decree in 1973 listed 39 occupations and professions that were then prohibited to foreigners. This list has been amended on several occasions by subsequent Royal Decrees, the latest one in 1979.

•

L a b o r

•

Work in agriculture, animal breeding, forestry, fishery or general farm supervision

•

M a s o n r y, carpentry, or other construction work

•

Wood carving

•

Driving motor vehicles or non-motorized carriers, except for piloting international aircraft

•

Shop attendant

•

A u c t i o n e e r i n g

•

Supervising, auditing or giving services in accounting, except occasional international auditing

•

Gem cutting and polishing

•

Hair cutting, hair dressing and beautician work

•

Hand weaving

•

Mat weaving or making of wares from reed, rattan, kenaf, straw or bamboo pulp

•

Manufacture of manual fibrous paper

•

Manufacture of lacquerware

•

Thai musical instrument production

•

Manufacture of nielloware

•

Goldsmith, silversmith and other precious metal work

•

Manufacture of bronzeware

•

Thai doll making

•

Manufacture of mattresses and padded blankets

•

Alms bowl making

•

Manual silk product making

•

Buddha image making

•

Manufacture of knives

•

Paper and cloth umbrella fabrication

•

S h o e m a k i n g

•

Hat making

•

Brokerage or agency work, except in international business

•

D r e s s m a k i n g

•

Pottery or ceramics

•

Manual cigarette rolling

•

Legal or litigation service

•

Clerical or secretarial work

•

Manual silk reeling and weaving

•

Thai character type-setting

•

Hawking business

•

Tourist guide or tour organizing agency

•

Architectural work

•

Civil engineering work

3: Visas and Immigration Law

All persons, other than those in transit and citizens of certain countries, are required to obtain a visa in order to enter Thailand. Foreign nationals who intend to remain in T h a i l a n d to work or conduct business must comply with visa requirements in addition to obtaining a work permit.

A . Visa Categories

The Immigration Act of 1979 as amended in 1980 establishes the following visa categories:

•

To u r i s t

•

Visitor transit

•

I m m i g r a n t

•

Non-quota immigrant

•

N o n - i m m i g r a n t

Nationals of most countries will, without applying for a visa from a Thai embassy or consulate in advance, be given a 30 day-visa, except for those who are eligible for 90 day-visas. Nationals of some countries who are entitled to the 30 day-visa may be requested by the immigration officials to produce an onward ticket to establish that they will leave the Kingdom within 30 days.

To u r i s t :

Tourist visas are initially valid for 60 days and are renewable at the discretion of the Immigration Department. Renewals are normally granted for periods of up to 30 days at a time.

Vi s i t o r Tr a n s i t :

Foreigners who have obtained a transit visa from a T h a i embassy or consulate will be granted a 30-day stay in the Kingdom. Extensions of stay are normally granted for periods of 7-10 days.

Note: Transit, visitor transit and tourist visa holders are not authorized to work in Thailand.

Non-quota immigrant:

This category includes, inter alia, former residents who have lost their resident status but who have reapplied to resume their residency and who have been able to demonstrate a convincing reason to support the granting of this type of visa.

Members of the diplomatic or consular corps, foreigners coming to perform their duties in Thailand with the approval of the Thai government, foreigners performing their duties in Thailand under an agreement between the Thai government and a foreign government, heads of international org a n i z a t i o n s or agencies operating in Thailand, and dependents of all the aforementioned persons, including private servants of members of the diplomatic corps, are exempted by the Act from the normal visa requirements.

B . Non-Immigrant Vi s a

Foreigners seeking a prolonged stay, or those coming to work in Thailand, should obtain non-immigrant visas for all family members prior to entering the Kingdom. There are several categories of Non-Immigrant visas which include, among others, business visa category (B); dependent visa category (O); investment subject to the provision of the laws on investment promotion (BOI IB); diplomatic and consular visa category (D); performance of duties with the mass media (M); performance of skilled or expert work (EX); investment (with concurrence of ministries and departments concerned)-(capital investment IM); study or observation (ED).

Advantages of a Non-Immigrant visa include:

•

Entitlement of the holder to apply for a multiple re-entry visa to Thailand from the Immigration Division in B a n g k o k

•

Subject to the regulations of the Immigration A u t h o r i t i e s , entitlement of the holder to apply for permanent residence in T h a i l a n d

•

Eligibility for issuance of a Work Permit to the holder

•

Eligibility for temporary visa renewal while processing issuance of a long-term annual visa.

Foreigners are advised to strictly adhere to the rules governing each visa category. They should report any changes of address or status to local police within 24 hours.

In addition, foreigners residing in Thailand for more than 90 consecutive days are required to register their address with the Immigration Bureau every 90 days. This requirement applies to all foreigners, including holders of work permits and long-term visas. Failure to do so can result in substantial penal-t i e s .

Transit, Visitor Transit, Tourist and Non-Immigrant Vi s a s are issued only for the following purposes and duration:

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Diplomats or consular missions (duration as necessary)

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O fficial missions (duration as necessary)

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Tourism (90 days)

•

Sports (30 days)

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Business purposes (one year)

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An investment which has received authorization from the appropriate government authorities (two years)

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Investment or other business in connection with investment under the Investment Promotion Act (as determined by the Board of Investment)

•

Transit (30 days)

•

The controller or crew of a conveyance entering a port or other locality in the Kingdom (30 days)

•

Work as a skilled laborer or specialist (one year).

In response to feedback from investors, the Board of Investment coordinated the establishment of a One-Stop Service center for Visas and Work Permits, Through joint cooperation with the Immigration Bureau and the Ministry of l a b o r, the center can process applications or renewals of visas and work permits within three hours, upon receipt of proper and complete documentation.

In addition, the center handles other transactions, including the issuance of multiple reentry stamps, changes in class of visa (to non-immigrant from tourist or transit), and payment of f i n e s .

The One-Stop Service Center is located at 207 Rachadapisek Road, 3rd Floor, Bangkok, and it may be reached by phone at (66) (2) 693-9333-9.

Work permits, which are valid for the period of the visa, have to be renewed every year. When an individual applies for a renewal of visa, he or she has to show that taxes for the previous year have been paid.

Foreigners may also apply for permanent residence permits for Thailand under certain conditions, such as investment in a business, or a condominium. Application can either be made to the Board of Investment or the Immigration D e p a r t m e n t .

4: International Banking Facilities

4 : International Banking Facilities

On September 16, 1992 the Ministry of Finance and the Bank of Thailand established rules and conditions for commercial banks to establish international banking facilities in T h a i l a n d . The annual fee is 500,000 baht.

Acommercial bank that receives a license will be able to undertake international banking facilities (IBF) business for:

• O ff s h o re Lending

– Accepting deposits or borrowing from abroad in foreign currencies from foreign natural or juristic persons who have no establishment in or business with Thailand. An exception is made for receiving money from foreign banks that have a branch or representative office in Thailand, from foreign branches of Thai commercial banks, and from the Ministry of Finance, the Bank of Thailand, or the Exchange Equalization Funds. These foreign currencies may be lent abroad, to other IBF businesses, and to the Ministry of Finance, the Bank of Thailand and the Exchange Equalization Funds.

– Acceptance of deposits or borrowing of off s h o r e baht funds from offshore banks, foreign branches of Thai commercial banks and other IBF. T h e s e funds may be lent to foreign banks, foreign branches of Thai commercial banks, or other IBF b u s i n e s s e s .

•

Local Lending

– Acceptance of deposits, or borrowing from abroad in foreign currencies from foreign natural or juristic persons who have no establishment in or business with Thailand, foreign branches of Thai commercial banks, and other IBFs to lend foreign currencies in Thailand. However, each withdrawal and disbursement must be of an amount not less than US$2,000,000 except in one of the following two cases, where the minimum disbursement is U S $ 5 0 0 , 0 0 0 :

•

An exporter who has income from exports in excess of 50 percent of all income during the last accounting p e r i o d

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An exporter who has goods and services that are sold to an exporter who meets the above condition

•

O t h e r Related Business

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Cross-currency transactions with overseas customers, other IBF businesses, the Bank of Thailand, the Ministry of Finance, the Foreign Equalization Funds, banks licensed under the foreign exchange control laws, or local customers to whom such IBF businesses have lent foreign cur-r e n c i e s

–

Giving acceptance or guarantee against any debts in foreign currencies when either:

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The bank is licensed under the foreign exchange control laws; or

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The parties involved reside outside of T h a i l a n d .

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All matters dealing with letters of credit in cases where the buyer and the seller of goods involved with the letter of credit purchasing agreement both reside abroad and the goods involved in the agreement have not been either exported out of or imported into T h a i l a n d .

–

Procuring, or managing the loan syndication procurement of, foreign currency loans from foreign sources to those requiring loans in foreign currenc i e s .

* Withholding tax paid on interest paid for O-I lent to State Enterprises is exempted. ** Tax on fees of 0-0 loan syndication exempted if:

•

At least three BIBFs participate in the syndication

•

Most of the operations are carried out in Thailand

•

If there is only one arranger, a BIBF is the arranger or if there is more than one arranger, if at least half of the arrangers are BIBFs.

• O t h e rU n related Business

Commercial banks licensed to undertake IBF businesses may a l s o :

–

International banking facilities may invest directly or indirectly in common stocks, preferred stocks or warrants of juristic persons registered abroad that are made according to debt restructuring in accordance with Bank of Thailand regula-t i o n s .

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Provide news, financial and general economic i n f o r m a t i o n

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Prepare or analyze investment projects

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Advise in the purchase, merger or amalgamation of businesses

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Give financial advice; and

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Arrange or underwrite debt instruments issued for sale abroad. If the debt instruments are issued from Thailand, this must be undertaken in conjunction with the IBF business of a commercial bank registered in T h a i l a n d .

H o w e v e r, these activities must be separated from the accounts of the IBF business – as if the commercial bank were a separate juristic person.

B . Conditions for P a rticipating in BIBF

The Bank of Thailand stipulates that IBF must be separate from other banking business – as if it were a separate juristic person. Also, the IBF business in offshore lending must be separate from the IBF business in local lending, and the IBF business in local lending cannot transfer or raise funds to the IBF for offshore accounts. Customers of IBF must provide their actual names, addresses and information for correspondence, and the names on the accounts must be the actual names of customers.

5: Exchange Contro l

The Exchange Control Act, B.E. 2485 (A.D. 1942), as amended, governs all matters involving foreign exchange. As a general rule, all matters involving foreign currency are regulated b y, and require the permission of, the Bank of Thailand. Since May 22, 1990, however, foreign exchange control has been considerably relaxed by the Bank of Thailand. At present, cer

3 0

tain transactions in Thai baht or foreign currency can be performed virtually without restriction, and only a few require approval from the Bank of T h a i l a n d .

A . I m p o rtation of Funds

•

N o n - re s i d e n t s Individuals in transit may normally bring foreign currency and negotiable instruments into Thailand without limit. They may also freely take out of the country all foreign currency they had brought in, without limit. Individuals in transit, however, may not take out Thai currency exceeding 50,000 baht per person, except for trips to countries bordering Thailand (Myanmar, Laos, Cambodia, Malaysia and Vietnam), where an amount of up to 500,000 baht is allowed. There is no restriction on the amount of Thai currency that may be brought into the country.

•

R e s i d e n t s : There are usually no restrictions on the amount of foreign currency a resident may bring into Thailand. However, all such currency must be sold to, or deposited into, a foreign currency account with a commercial bank within seven days from the date of receipt or entry into the country

•

I n v e s t o r s There is no restriction on the import of foreign currency such as investment funds, offshore loans, etc. Such foreign cur-r e n c y, however, must be sold or exchanged into Thai baht, or deposited in a foreign currency account with an authorized bank, within seven days from the date of receipt or entry into the country. An application form F. T. 3 or F. T. 4 must be submitted to an authorized bank for each transaction involving the sale, exchange or deposit of such foreign currency in an amount exceeding US$5,000 or its equivalent.

B . Repatriation of Funds

Repatriation of investment funds, dividends and profits, loan repayments and interest payments thereon, after settlements of all applicable taxes, may be made freely.

C . F o reign Exchange in Business Tr a n s a c t i o n s

• Foreign Currency Accounts of Thai Residents Thai individuals and juristic persons in Thailand are allowed to maintain foreign currency accounts under the

A Business Guide to Thailand

following conditions:

The accounts are opened with authorized banks in Thailand and deposited with funds that originate from abroad or from foreign currency borrowing from the Bangkok International Banking Facilities.

The depositor must submit evidence showing the obligations to pay in foreign currency to persons abroad, authorized banks, the Export and Import Bank of Thailand, or the Industrial Finance Corporation of Thailand within three months from the date of deposit. The depositor can deposit no more than the amount of the above obligations.

The deposit of foreign currency notes and coins must not exceed US$2,000 per day

Debits to the accounts are permitted for payment of any external obligations upon submission of supporting evidence or for conversion into baht at authorized banks.

The total daily outstanding balances in all accounts must not exceed US$5,000,000 for a juristic person and US$500,000 for an individual.

• F o reign Currency Accounts for Non-Thai Residents

• Non-residents can open and maintain foreign currency accounts with authorized banks in Thailand. The deposits must come from funds originating abroad. Balances on such accounts may be transferred without restriction.

• Non-Resident Baht A c c o u n t Non-residents may open an account with any authorized bank in Thailand provided they show proof of identity, such as a valid passport. They may freely credit the account with:

Proceeds from the sale of foreign currency that originate from abroad or foreign currencies from non-residents’f o reign currency accounts.

Amounts transferred from other non-resident baht a c c o u n t s .

Obligations between residents and non-residents.

• I m p o rt s Importers may freely purchase or draw foreign exchange from their own foreign currency accounts for import payments. Importers need not seek approval from the Bank of Thailand, but must submit form F. T. 2 to customs, together with the Bill of Lading when importing goods valued at more than 500,000 baht or its equivalent per transaction.

• E x p o rt s Exports are free from any foreign exchange restrictions. H o w e v e r, proceeds of exports valued at more than 500,000 baht or its equivalent per transaction must be received within 120 days from the date of export and must be surrendered to an authorized bank or deposited in a foreign currency account with an authorized local bank within seven days from the date of receipt.

• Permitted for items of a non-capital nature, such as service fees, interest, dividends, profits and royalties, provided supporting documents are presented to an authorized bank. Travelling expenses or educational expenses of residents are also freely permitted upon submission of supporting evidence. Proceeds from invisibles must be surrendered to an authorized bank or deposited in a foreign currency account with an authorized bank in T h a i l a n d within seven days of receipt.

6: Stock Exchange of T h a i l a n d

The Stock Exchange of Thailand (SET) is T h a i l a n d ’s stock exchange in Thailand. It was established in 1974, and is supervised by a Board of Governors. The Board consists of 11 Governors, with five appointed by the Securities and Exchange Commission (SEC), five elected by the SET m e mbers companies, and a full time president, who is appointed by the Board and serves as an ex-officio Board member.

The SET considers applications from companies requesting listing on the Exchange, including ensuring applicants meet requirements as well as submit the correct documentation. It has also established information disclosure requirements for listed companies and monitors all trading activities involving listed securities. The Exchange’s regulations strictly prohibit insider trading and price manipulation of listed securities.

Net Clearing and book entry settlement are services handled by the Thailand Securities Depository Co., Ltd. (TSD), a subsidiary of the SET. The SETlists a wide range of equity and debt instruments. Listed securities include ordinary shares, preferred shares, bonds and debentures, warrants, covered warrants, derivative warrants and unit trusts.

A . S E T M e m b e r s

C u r r e n t l y, the SET has 28 broker seats. At present, there are 27 active members at the Exchange. Member companies must be securities companies permitted by the Ministry of Finance to conduct securities business in the category of securities brokerage.

B . S E T Listed Companies

All listed companies are publicly limited firms. Becoming a listed company not only allows a firm to gain access to development capital, but also allows shareholders to benefit from investment liquidity and enjoy dividend income as a result of revenue or profit growth at the companies they invest in.

C . F o reign Shareholding Limits

On 3 March 2000 the Alien Business operations Act B.E. 2542 (1999) came into effect to relax foreign ownership limits in certain industries, including securities industries. As a result, a securities company with foreign investors holding up to 100 percent shareholding may engage in the security brokerage business without any restrictions. However, if the securities company operates any other type of securities business, such as dealing, underwriting, investment advisory services, mutual fund or private fund management and securities lending and borrowing, such company must seek approval from the Director General of Commercial Registration Department, Ministry of Commerce.

D . The Securities and Exchange Commission (SEC)

The SEC was established on the promulgation of the Securities and Exchange Act B.E. 2535 in 1992 with the objective of developing and supervising the Thai capital market in a fair, e fficient and transparent manner. This includes the primary market, the secondary market, securities businesses, market participants and the prevention of unfair securities trading practices. Further information about the SEC is available on its website at w w w. s e c . o r. t h .

« Back

Business Guide to Thailand

Chapter 6 Labor Issues and Important A d d r e s s e s

Patents, Trademarks, Consumer Protection

Chapter 3 Industrial Licensing and Regulations

Chapter 2 Taxation in Thailand

Procedures for Establishing a Company

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