The US-Thai Treaty of Amity is the cornerstone of the economic relationship between the two countries. It allows American citizens and businesses to register companies with majority or wholly US ownership, which are exempt from most of the restrictions in Thailand’s Foreign Business Act.
However, the US-Thai Treaty of Amity does not allow US companies to directly purchase land in Thailand. In this article, we will explore the steps to register a company under the US-Thai Treaty ofAmity.
Ownership Rights
In most cases, having a Thai shareholder or director is not a requirement for registering a company under the Treaty of Amity. However, it can be beneficial to have a local presence in order to facilitate interactions with local government agencies and business partners. Additionally, certain investment promotion programs in Thailand might require that a company have Thai ownership or participation to qualify for the incentives.
Companies incorporated in the United States and majority-owned by American citizens are able to register as an Amity Treaty company and receive national treatment, which exempts them from many of the restrictions under the Foreign Business Act. This includes the ability to own land; engage in telecommunications business; banking involving fiduciary functions; and domestic trade in indigenous agricultural products.
Despite the benefits of having an Amity Treaty company, US investors are still advised to seek qualified legal advice regarding the specifics of local business regulations in Thailand. Penalties for violating Thai business laws can be heavy.
National Treatment
The US-Thai Treaty of Amity allows for American citizens to own a full 100% company in Thailand. This eliminates foreign business restrictions and gives you the same rights as any Thai-owned company under Thailand law. Additionally, it grants you access to special incentives and privileges with the Board of Investment (BOI).
In order to register under this treaty, your company must adhere to a structure of majority American ownership either through direct ownership by American citizens or through a US-owned holding company. This does make registration more complex and requires professional legal assistance.
Moreover, you must submit notarized proof that the majority of the owners and directors of your company are American citizens by birth or naturalization. This will be submitted to the Commercial Service Office (CSO) for certification. Upon certification, the CSO will notify the Department of Commercial Registration to complete the process of registering a Treaty of Amity Company with the country. Typically, this is completed in 4-6 weeks.
Joint Ventures
In joint ventures under the US-Thai Treaty of Amity, American citizens and companies can maintain majority shares in their Thai-located businesses. This provides significant advantages over foreign-owned companies operating under Thailand’s Foreign Business Act, which requires a work permit and minimum capital of two million baht.
JVs are typically established to achieve a specific goal, such as building a new plant, entering a new market or merging similar business units. Each partner contributes resources to the partnership, giving them a share in assets, liabilities, expenses, profits and losses based on their ownership stake.
JVs can last at will or for a fixed term, but usually operate until the object of the undertaking has been achieved. Imbalances in the levels of expertise, investment and assets brought to the partnership may cause disagreements between the parties or lead to a breakdown in the relationship. However, frank discussions and clear communication can prevent such issues. In such cases, the JV can continue until a mutually agreed upon termination date is reached.
Restrictions
The treaty gives American citizens the ability to maintain majority shares of a Thai company, which allows investors to retain control and bypass restrictions imposed by the Foreign Business Act. Profits may be freely remitted and the assets of the company cannot be expropriated by either party.
In addition to ownership rights, the treaty also grants national treatment to American companies operating in Thailand and thus exempts them from restrictions on foreign investment imposed by the Foreign Business Act. However, the companies must follow work permit rules.
While the treaty offers a number of advantages, it also includes restrictions and costs that should be considered before proceeding. For instance, a company registered under the treaty cannot buy land directly in Thailand and is restricted to certain activities including banking involving depository functions and domestic trade of indigenous agricultural products. These limitations could prove to be a hindrance to the company’s growth. For this reason, it might be best to apply for an exemption and register under the BOI program instead.