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ResourcesCorporate and Tax AdvisoryUS Corporate LawThailand Company Set Up: Foreign Business Licensing Under the US Thai-Treaty of Amity

Thailand Company Set Up: Foreign Business Licensing Under the US Thai-Treaty of Amity

Transcript of the above video:

I am very briefly going to do an overview of the US-Thai Treaty of Amity and the benefits for Thai Corporations or should I say, American Corporations in Thailand.

The reason for the confusion regarding how to label such a company is, pursuant to the provisions of the US-Thai Treaty of Amity, Thai Corporations which are 100% owned by an American entity or individuals, can receive what's called Thai National status pursuant to the provisions of the treaty itself.  There are some formalities which have to be undertaken in order to get such benefits, in order to attach treaty or foreign license under the treaty, but that being said it is possible for an American or Americans or an American company or group of companies to wholly own a Thai entity in the Kingdom of Thailand notwithstanding the provisions of the Foreign Business Act which prohibits certain activities and certain types of business to be owned by foreigners. Now to be clear, notwithstanding the fact the treaty does allow a great deal a flexibility for Americans doing business in Thailand, and by a great deal of flexibility I mean essentially  Americans are the only foreign nationals that are accorded such benefits as virtually every other nation is either required to operate pursuant to the provisions of the Foreign Business Act and thereby be extremely restricted in the amount of shares that they can own in a Thai Corporation, depending on the type of business activity, or they're curtailed to say 60% or some lower amount of equity held in the Thai Company. With Americans, we can virtually own our companies 100%. There are certain formalities under Thai Law for instance, one has to have 3 shareholders on a foreign corporation in Thailand or on any corporation for that matter in Thailand but that being said, all 3 of those shareholders can be American citizens or entities in the United States for example, American LLCs or American incorporated entities of another type.  Again there are certain provisions and there are certain formalities which have to be adhered to, to get this benefit, most notably one has to actually prove their American citizenship in order for the foreign office under the Ministry of Commerce in Thailand to even consider granting such a license but it can be done. A couple of things that should be kept in mind regarding the US-Thai Treaty of Amity and companies formed thereunder. Notwithstanding these provisions and notwithstanding the fact that the Amity Treaty may overcome certain aspects of the Foreign Business Act, within the Treaty itself there are still restrictions with respect to certain types of business activities that cannot be undertaken notwithstanding the provisions of the treaty. So basically, things like National Defense and Mass Communication that are otherwise restricted only to foreign nationals; those restrictions still apply under the treaty. The nice thing about the Treaty of Amity, especially for an American looking to do business in Thailand, especially for a small business owner or prospective small business owner in Thailand who has an American nationality, it allows for that individual to own their company, the equity in their company, i.e. the shares in their company, at virtually 100%. Again there are rules regarding minimum shareholders that have to be 3 pursuant to Thai law which is currently 6, but that being said, those 3 individuals could all three be Americans. 

One other final thing to bring up with respect to the US-Thai Treaty of Amity, there are other third party nationals that sometimes will try to get an American to set up a company with them thinking they can get the Treaty benefits. Unfortunately for those third country nationals only an American citizen or a Thai citizen or citizens or American entities or Thai entities can come together to form a company in Thailand using the Treaty of Amity protections. So what I am trying to say here is, you can’t have a Thai, an American and say a Dutch person as shareholders on an Amity Treaty Company; that’s not permitted.  That has been tried in the past and it is pretty explicit from the way in which the regulators who oversee Amity Treaty Certification adjudicate such matters, that it is impossible to have a Third Country national on an Amity Treaty company. That being said, because Amity Treaty companies are accorded Thai National status, national treatment, i.e. those companies are treated in the same way that Thai companies are treated, a company that is owned 100% by Thais, in theory I guess an Amity Treaty company could hire a third country foreign national to work for it; that might be subject to some intense, let’s say some further scrutiny from those that make the decision regarding the permit itself. Finally, it should be noted that even though one owns or has an authority ownership or directorship on a Thai Treaty of Amity company that does not negate the need for that individual to have a work permit in the Kingdom of Thailand. Just because one owns or is a director on a Treaty of Amity Company, that company is considered a separate entity for purposes of Thai Law from the individual themselves so even though as we set up a company with Amity protection, still if they are a director or just a shareholder or just working in that company, that individual, if they are not a Thai national, will still need a work permit. All things being equal, the US-Thai Treaty of Amity provides significant benefits for American citizens wishing to do business in Thailand and those Americans looking at doing business in Thailand should definitely explore the Treaty of Amity and its implications.