On May 29, 1966, the United States of America and the Kingdom of Thailand signed the Treaty of Amity and Economic Relations. This gave the US two substantial commercial advantages. The US-Thailand Amity Treaty allows American companies to own a controlling stake in or entirely own their Thai subsidiary, branch office, or representative office.
American businesses are given national treatment, which means they can do business on the same terms as Thai businesses and are excluded from most of the foreign investment limitations set by the Alien Business Law of 1972.
The “Treaty of Amity and Economic Relations Between the Kingdom of Thailand and the United States of America,” signed in 1833 and revised in 1966/1968, was signed in 1833. Under the Treaty of Amity between the United States and Thailand, U.S.-owned businesses are exempt from most of Thailand’s foreign investment restrictions (FBA).
This permits –
(i) doing business in Thailand with a Thai company that is up to 100% owned by a US company or a branch or representative office of a US company, and
(ii) receiving national treatment, which means doing business on the same terms as Thai companies and being exempt from most foreign investment restrictions.
Validity of the US-Thailand Amity Treaty
The deal expired in 2005, and there is no formal extension planning because it would be in violation of the World Trade Organization’s most favoured nation standards (WTO). Old structures, on the other hand, are grandfathered in the event of policy changes. It is still feasible to use the Treaty of Amity between Thailand and the United States to form new “treaty businesses” today. However, U.S. nationals must apply for work permits and visas without privileged status, at least for a Thai company.
Steps to form a US-Thai Amity Treaty Company
Know the Permissible Business Activities
There are strict prohibitions on the following business activities:
(i) Land ownership.
(ii) Working in the transportation and communication businesses inland.
(iii) Performing fiduciary duties.
(iv) Participating in depository functions in banking.
(v) Importing and exporting indigenous agricultural products within the country.
(vi) Exploitation of natural resources such as land.
As a result, treaty firms never identifies as real estate acquisition entities.
Set up a Thai Corporation
A Thai corporation, usually a company limited (Co., Ltd.), must have legal incorporation. It is not necessary that it is new or that it has never done any non-treaty business. Reformation or alteration of older corporations can be necessary to qualify for treaty benefits and apply for them.
Ascertain Shareholding Proportions
Individuals or companies from the United States or Thailand must make up the majority of shareholders. Furthermore, the percentage (quota) of their shares must be at least 51%. It is not enough to have a green card in the United States to be eligible for the treaty. A U.S. passport holder can qualify under the treaty. But, the same cannot be applicable for a U.S. firm in an international group of companies. Its mention is mandatory in the application letter to the Bangkok Embassy’s Commercial Services Section why the Ultimate Beneficial Owner (UBO) is an American.
Appoint Eligible Directors
The majority of the directors must be American or Thai citizens. Third-country directors must meet additional requirements for acceptance. There is no exemption from the work permit requirement for anyone. Moreover, it includes the director, because the treaty firm does not require a foreign business licence but only a certificate.
Check the Equity
In most cases, a minimum of THB 3 million in paid-in registered capital. A sum of THB 2 million is sufficient if the business does fall under the regulation of the Foreign Business Act.
Confirmation from US Embassy
The American Embassy in Bangkok issues a confirmation letter upon request that the shareholders meet the requirements as U.S. citizens or ultimate beneficial U.S. shareholders. One week or less is required. As a support step during the pandemic, there is a certification fees waiver until September 30, 2020.
Apply for Foreign Business Certificate
A Foreign Business Certificate from the Ministry of Commerce is an essential requirement. The process is comparable to that of applying for a Foreign Business License, but the end result is far more hopeful. The process requires 4 to 10 weeks of tenure for completion.
Please anticipate at least four to five weeks for the entire process to be completed. Obtaining accreditation from the Commercial Service office normally takes less than a week. However, the Thai government’s registration process might take anything from a few weeks to many months. Please note that this approach is on the basis of the Commercial Service’s knowledge of procedures.
Renewal of the “treaty company” is not a mandate after completing these seven processes. The treaty’s benefits apply as long as no structural changes occur that violate the treaty’s terms. Failure to meet Treaty’s obligations any time during the course of business results in civil and criminal liability. Moreover, it is equivalent to a breach of misconduct of the Foreign Business Act.
Because the procedures for applying under the Thailand Treaty of Amity are very complex and time-consuming. Therefore, you must consult with a legal firm in Thailand. Mail us at [email protected] for guidance and assistance on company formation under the US-Thailand Treaty of Amity.
