FRANK Legal & Tax

Thailand Launches New Incentives to Attract Hybrid Vehicle Manufacturers Thailand is currently hosting global carmakers like Toyota and Honda, now introducing new investment incentives for manufacturers of hybrid vehicles. Announced by the Board of Investment (BOI) on Friday, these measures include lowering excise taxes for hybrids from 2028 to 2032, aiming to enhance Thailand’s competitiveness in the rapidly evolving automotive industry. The BOI’s incentives target hybrid vehicle manufacturers investing at least 3 billion baht (approximately $90 million) over the next four years. These investments must incorporate the use of local parts, promoting domestic industry growth. Additionally, eligible vehicles must feature advanced driver-assistance systems (ADAS). For decades, Thailand has tried to achieve a status for auto production and export in Southeast Asia, attracting top carmakers worldwide. Recent investments by Chinese electric vehicle (EV) manufacturers, such as BYD and Great Wall Motor, have impacted the industry. In response, Thailand is actively offering incentives to attract more firms and bolster its position as a leader in the automotive sector. Currently, seven automakers benefit from the BOI’s incentives, with four from Japan and three from China. These incentives have attracted investments and have been essential for establishing Thailand as a key player in the global automotive market. In addition to the new incentives for hybrid vehicles, the BOI has been actively promoting investments in EV manufacturing. This includes offering tax breaks, subsidies, and support for developing EV infrastructure, such as charging stations and battery manufacturing facilities. On the other hand, manufacturers face challenges such as ensuring a steady supply of local parts and meeting the requirements for advanced driver-assistance systems. However, the long-term benefits, including reduced excise taxes and enhanced market competitiveness, make these investments attractive. Thailand’s introduction of investment incentives for hybrid vehicle manufacturers shows the country’s commitment to fostering sustainable automotive technologies. By supporting the transition to electric vehicles and promoting advanced automotive innovations, Thailand aims to maintain its status as a regional auto-making hub and a global leader in the automotive industry. If you have any questions regarding BOI incentives for your company, please contact us at [email protected] or via +66 (0)2 026 3284.  

Thailand’s position as a gateway to Southeast Asia and its growing economy make it an attractive destination for foreign investment. As the region’s second-largest economy, Thailand offers numerous opportunities for businesses looking to expand their presence in Asia. However, entering the Thai market involves navigating a complex legal landscape designed to protect domestic industries while promoting national development. The cornerstone of this regulatory framework is the Foreign Business Act (FBA) of 1999, which governs the activities of foreign entities in the country. To engage in certain business activities in Thailand, foreign investors must obtain a Foreign Business License (FBL). This license is not only a legal requirement but also a tool for ensuring that foreign business activities contribute positively to Thailand’s economic, social, and environmental goals. This guide provides a detailed overview of the FBL process, including eligibility requirements, application procedures, and strategic considerations for investors. What is the Foreign Business Act (FBA)? The Foreign Business Act (FBA) is the principal legislation that regulates foreign business activities in Thailand. The Act was established to protect domestic industries, maintain national security, and promote sustainable economic development. The FBA categorizes business activities into three lists, each with specific restrictions on foreign participation: List 1: Activities Prohibited to Foreigners This list includes sectors that are deemed critical to national identity and security, such as media, agriculture, and traditional arts. Foreign entities are entirely prohibited from participating in these sectors to preserve Thai culture and protect national interests. For instance, activities like rice farming, newspaper publication, and land trading fall under this category. List 2: Activities Restricted to Thai Nationals List 2 covers industries related to national safety, security, and the preservation of Thailand’s natural resources. Foreign ownership in these sectors is allowed only under special conditions, typically requiring a partnership with Thai nationals or explicit approval from the Thai Cabinet. Examples include the production of firearms, the mining industry, and certain types of infrastructure development. List 3: Activities Requiring a Foreign Business License This list includes business activities in which Thai nationals are not yet competitive. To operate in these sectors, foreign businesses must obtain a Foreign Business License. This list is broad and encompasses many service industries such as legal and accounting services, architecture, engineering, and retail. The government’s intent is to protect nascent Thai industries while allowing foreign expertise and investment to contribute to their development. Defining a “Foreigner” Under the FBA The FBA defines a “foreigner” in several ways, encompassing a wide range of individuals and entities: Natural Persons: Any individual who is not a Thai national Juristic Persons Registered Outside of Thailand:This includes companies, partnerships, or other entities registered in foreign countries Juristic Persons Registered in Thailand:If 50% or more of the capital shares are held by non-Thai nationals or foreign entities, the company is considered foreign. This also applies to public limited companies where bearer shares are deemed foreign-held Partnerships:If a partnership is registered in Thailand, it is considered foreign if the managing partner or manager is a non-Thai national. Capital Requirements for Foreign Business License Applicants One of the critical aspects of obtaining a Foreign Business License is meeting the minimum capital requirements outlined in the FBA. The capital requirements are designed to ensure that foreign businesses have sufficient financial resources to operate sustainably within Thailand. They also serve as a safeguard against businesses that might otherwise lack the necessary resources to operate sustainably. Minimum Capital for General Business Activities: For most business operations, the minimum capital requirement is THB 2 million. This applies to businesses that are not listed under List 2 or List 3 of the FBA. The capital must be fully paid up before commencing operations. Capital for Restricted Businesses (List 2 and List 3): For businesses that fall under List 2 and List 3, the minimum capital requirement increases to THB 3 million. This higher threshold reflects the greater level of scrutiny and the strategic importance of these sectors to the Thai economy. Application Process for a Foreign Business License The process of obtaining a Foreign Business License is detailed and requires thorough preparation. The steps involved in the application process are as follows: Step 1: Initial Consultation and Strategy Development Before applying, it is advisable to consult with legal experts who can assess your business objectives and provide tailored advice on the best approach to securing an FBL. This stage is crucial for understanding the specific requirements and potential challenges of operating in your chosen sector. Step 2: Preparation of Documentation The application for an FBL requires extensive documentation, including details of the business plan, financial statements, proof of capital, and evidence of how the business will benefit Thailand. This documentation must be prepared meticulously to meet the stringent requirements set by Thai authorities. Step 3: Submission to the Ministry of Commerce (MOC) Once all documents are in order, the application is submitted to the Ministry of Commerce’s Department of Business Development. The presiding official will conduct a preliminary review to ensure the application is complete. Any missing information or documentation can delay the process, so it is essential to address any issues promptly. Step 4: Committee Review and Decision After the initial review, the application is forwarded to the Foreign Business Committee. The Committee has 60 days to review the application and make a decision. During this period, the Committee evaluates the application based on several criteria, including national security, economic impact, and potential for technology transfer. Step 5: Appeal Process in Case of Rejection If the Committee rejects the application, the applicant will receive a written notification detailing the reasons for the rejection. The applicant has the right to appeal this decision within 30 days. The appeal is reviewed by the Minister of Commerce, who must issue a decision within 30 days of receiving the appeal. Key Considerations in the Evaluation of FBL Applications The Thai government evaluates FBL applications based on a range of criteria aimed at ensuring that foreign investments align with national interests. The key considerations include: National Security and Public Order: The business should not pose any threat to Thailand’s national security or public This is particularly important for businesses involved in sectors related to defense, critical infrastructure, or public safety. Economic and Social Contributions:The potential economic benefits of the business are carefully assessed. This includes job creation, contribution to GDP, and the development of local industries. Businesses that can demonstrate significant contributions to Thailand’s economic and social development are more likely to receive approval. Technology Transfer and Innovation:The Thai government places a strong emphasis on technology transfer and the introduction of new skills and expertise. Applications that include plans for research and development (R&D), collaboration with local universities, or the training of Thai nationals are viewed favorably. Environmental Impact and Sustainability:The environmental impact of the business is another critical factor. Businesses that engage in environmentally sustainable practices or contribute to the conservation of natural resources are preferred. Cultural and Ethical Considerations:The business must respect and support Thailand’s cultural heritage, traditions, and social norms. Businesses that align with Thailand’s values and contribute positively to the cultural landscape are more likely to be approved. Alternative Options for Foreign Investors For some foreign investors, obtaining an FBL may not be the most practical option. Thailand offers alternative pathways for foreign businesses to operate legally without going through the FBL process: Board of Investment (BOI) Promotion The Thailand Board of Investment (BOI) offers incentives and privileges to foreign businesses that contribute to the country’s economic development. BOI-promoted companies can apply for a Foreign Business Certificate, which allows them to operate without needing an FBL. Benefits of BOI promotion include tax incentives, land ownership rights, and easier visa and work permit processes for foreign employees. Our lawyers can help with your BOI application. US-Thai Amity Treaty Under the US-Thai Amity Treaty, American companies and citizens enjoy special privileges, allowing them to maintain majority ownership or wholly own a business in Thailand. This treaty is an exception to the general restrictions imposed by the FBA and offers a streamlined pathway for American investors. Post-Licensing Compliance: Ensuring Long-Term Success Once a Foreign Business License is granted, businesses must comply with ongoing regulatory requirements to maintain their license. This includes: Equity-to-Debt Ratio The FBL may stipulate a specific equity-to-debt ratio that the business must maintain. This ratio ensures the financial stability of the business and protects against excessive leverage. Director Residency Requirements The license may require that a certain number of foreign directors reside in Thailand. This condition is intended to ensure that the business remains engaged with the local market and is responsive to Thai regulatory requirements. Capital Maintenance Businesses are required to maintain the minimum capital specified in the FBL. This capital must remain within the country to ensure the business can meet its financial obligations. Ongoing Reporting and Compliance Licensed businesses must regularly report to the Ministry of Commerce and other relevant authorities. These reports typically include financial statements, updates on business activities, and proof of compliance with FBL conditions. Failure to comply with these conditions can result in penalties, including fines or the revocation of the Foreign Business License. Therefore, foreign businesses must maintain strict adherence to Thai regulations. Benefits of Obtaining a Foreign Business License While the FBL application process is rigorous, the benefits of securing a Foreign Business License are significant: Legal Compliance: Operating with an FBL ensures that your business complies with Thai laws and regulations, protecting it from legal risks and penalties. Access to Restricted Industries: An FBL allows your business to operate in sectors that are otherwise closed to foreign investors, providing a competitive advantage in the Thai market. Enhanced Credibility: Having an FBL enhances your business’s credibility with local partners, customers, and government authorities. It signals that your business is committed to operating within the legal framework of Thailand. Market Expansion Opportunities: With an FBL, your business can fully participate in the Thai economy, taking advantage of growth opportunities in one of Southeast Asia’s most dynamic markets. Conclusion: The Key Role of a Foreign Business License in Thailand Obtaining a Foreign Business License is a critical step for any foreign investor looking to operate in Thailand’s restricted sectors. While the process can be complex and time-consuming, the rewards are substantial. By securing an FBL, your business gains legal standing, access to key industries, and the opportunity to contribute to Thailand’s economic growth. How Our Firm Can Assist Navigating the complexities of the Foreign Business License application process requires in-depth knowledge of Thai laws and a strategic approach tailored to your business goals. Our firm offers comprehensive services to guide you through every stage of the process: Initial Consultation and Strategic Planning We work with you to understand your business objectives and develop a tailored strategy for obtaining an FBL. This includes evaluating alternative options such as BOI promotion or the US-Thai Amity Treaty. Document Preparation and Submission Our team ensures that all necessary documents are meticulously prepared to meet the stringent requirements of Thai authorities. We manage the entire submission process, minimizing delays and increasing the likelihood of a successful application. Ongoing Support and Compliance After your FBL is granted, we provide ongoing business operations support to ensure that your business remains compliant with Thai regulations. This includes assistance with reporting requirements, renewals, and any changes in your business structure. Appeals and Representation If your application is rejected, we offer expert guidance on appealing and represent your interests throughout the process to achieve the best possible outcome.  

The Importance of Notarization  Notarization is a fundamental process in legal and business transactions that ensures the authenticity of signatures, the accuracy of documents, and the identity of signatories. In Thailand, notarization is often required for various legal documents to be considered valid and enforceable. This process involves a notary public verifying that the individuals signing the documents are who they claim to be and that they are signing willingly. Notarized documents are essential for preventing fraud and ensuring that agreements and statements are recognized by courts and other authorities, both in Thailand and internationally. Legalization of Documents Legalization is the process of certifying a document so that it will be recognized in a foreign country. In Thailand, this often involves having a document notarized and then submitting it to a relevant authority, such as the Thai Ministry of Foreign Affairs (MFA) or a foreign embassy in Thailand, for further authentication. Legalization is particularly important for documents that will be used in jurisdictions that do not have agreements with Thailand, such as the Apostille Convention. It ensures that the document is legally valid and recognized in the destination country. Certification of True Copies Certification of true copies is another crucial service provided by notarial services attorneys. This process involves a notary public or a qualified attorney certifying that a photocopy or reproduction of a document is a true and accurate representation of the original. This certification is often required for official purposes, such as submitting copies of passports, educational certificates, or legal agreements to foreign authorities, courts, or other institutions. In Thailand, having a certified true copy can be critical in situations where the original document cannot be sent or is required to be kept secure. Authentication of Signatures Authentication of signatures is a process where a notary public confirms that the signature on a document belongs to the person whose name is signed. This service is particularly important for documents like powers of attorney, contracts, and affidavits that will be used in legal or business contexts. The authentication process provides assurance that the document has been signed by the correct individual, and it is often a prerequisite for the document to be accepted by foreign authorities or courts. Supplementary Authentication Supplementary authentication refers to additional steps that may be required to ensure that a notarized document is recognized internationally. In cases where a country does not accept notarized documents or certifications directly from Thailand, the document may need to be authenticated further by the Thai Ministry of Foreign Affairs or the relevant foreign embassy in Thailand. This supplementary authentication provides an extra layer of verification, ensuring that the document meets the legal standards of the destination country. This process is crucial for documents involved in cross-border legal matters, such as international marriages, adoptions, or business transactions. Notarial Services by FRANK Legal & Tax in Bangkok FRANK Legal & Tax offers a comprehensive range of notarial services in Bangkok, covering all aspects of notarization, legalization, certification, authentication, and supplementary authentication. Our notarial services attorneys are fully qualified to notarize signatures, certify true copies, and ensure that all documents comply with Thai law. We also provide expert guidance on the necessary steps for legalizing documents at the Thai Ministry of Foreign Affairs or foreign embassies in Thailand, depending on the requirements of the destination country. Whether you are an individual or a corporation, FRANK Legal & Tax is committed to providing reliable and efficient notarial services. We handle your documents with the utmost care, ensuring they are legally recognized and enforceable wherever they are needed. Trust us to navigate the complexities of international legal requirements and to deliver high-quality services that meet your specific needs.  

Order No. 1/2567 Provides New Compliance Rules for Companies with Over 5 Million THB Capital The Central Partnership and Company Registration Office has recently issued a pivotal directive: Order No. 1/2567. This new order, which supersedes the previous Order No. 1/2566, introduces significant changes to the regulatory framework for the establishment, capital increase, and mergers of limited companies in Thailand. By setting forth comprehensive criteria and detailed documentation requirements, Order No. 1/2567 aims to enhance transparency and accountability within the corporate sector.   Aligned with the provisions of the Civil and Commercial Code (CCC), the updated regulations are particularly impactful for companies with registered capital exceeding five million THB, mandating stricter documentation to substantiate capital contributions whether in cash, assets, or labor. These measures are designed to ensure that all financial transactions are thoroughly verified, thereby bolstering investor confidence and promoting a robust business environment.   1. Key Provisions and Documentation Requirements a. Establishment of Partnerships and Limited Companies  For the registration of limited companies with registered capital exceeding five million THB, documents are now required as follows:   Cash Contributions: Previously, only a bank certificate was needed to prove the payment of share capital. The new order requires an additional confirmation letter from the company, stating that the share payment has been received as shown in the bank document.   Asset Contributions: Previously, confirmation from the asset owner was sufficient. The new order mandates a detailed description of the assets. If the assets are registered, a copy of the ownership document must also be submitted.   Labor Contributions: The new regulations require a confirmation letter of the share payment with labor and supporting documents, such as a copy of the employment contract.  B. Increasing Registered Capital If the combined registered capital, both original and newly added, exceeds five million THB, the order mandates additional documentation as follows:   Cash Contributions: A bank certificate confirming the payment of the share capital for the increased amount and a confirmation letter from the company must be submitted.   Asset Contributions:   Registered Assets: A confirmation letter of the share payment and a copy of the ownership document must be submitted. If the assets are for use, a copy of the usage agreement and ownership document must also be submitted.   Unregistered Assets: A confirmation letter of the share payment or asset details and, in the case of assets for use, a copy of the usage agreement must be submitted.   Labor Contributions: A confirmation letter of the share payment with labor and supporting documents, such as a copy of the employment contract, must be submitted.   c. Mergers of Limited Companies Order No. 1/2567 introduces specific requirements for the registration of mergers of limited companies where the combined registered capital exceeds five million THB. These requirements ensure transparency and thorough documentation, similar to the guidelines for the establishment of companies and increasing registered capital, including new regulations of providing a confirmation letter stating that the payment for shares has been received, and the regulations of providing documents as aforementioned for labor contributions.   These measures ensure that mergers are conducted transparently and in compliance with the CCC, enhancing the overall integrity of corporate transactions in Thailand.  2. Implications for Corporate Registration The updated regulations mark a significant shift from the previous framework, where incomplete documentation could lead to the cancellation of registration entries related to capital. Under the new order, the registrar will only note that the required documents have not been submitted in the company’s certificate. If the documents are submitted later by, or the capital is reduced to five million THB or less, or the increased capital that comes along with the merger is reduced, the registrar will remove the note from the company’s certificate.   Through this comprehensive overhaul, Order No. 1/2567 not only modernizes the registration process but also aligns it with international best practices and the CCC. These changes reinforce Thailand’s commitment to fostering a transparent and efficient corporate sector. By ensuring meticulous documentation and validation of capital contributions, the new regulations bolster investor confidence and promote a robust business environment. As businesses navigate these new requirements, they will contribute to a more transparent and accountable corporate landscape in Thailand.    If you have any questions regarding your business registration, taxation matters or corporate compliance matters, please contact us at [email protected] or via  +66 (0)2 026 3284.   

Thailand’s Ministry of Commerce has recently introduced significant changes to its e-commerce regulatory framework through the issuance of,the Notification Re: Business Regulations that Commercial Operators Must Register and Businesses that are Not Subject to the Commercial Registration Act B.E. 2567, effective from June 5, 2024.   The somewhat controversial update is supposed to facilitate a more accessible digital economy by modifying registration requirements for various entities engaged in electronic commerce. Private LLCs Exempted from E-Commerce License Under the new regulations, certain legal entities are now exempt from the mandatory e-commerce registration stipulated by the Commercial Registration Act B.E. 2499 (1956). These include registered ordinary partnerships, limited partnerships, private limited companies under the Thai Civil and Commercial Code, public limited companies established under the Public Limited Companies Act B.E. 2535 (1992), foreign legal entities with branch offices in Thailand, and groups of farmers registered under the Farmer Group Royal Decree B.E. 2547 (2004). Registration Requirement for Natural Persons Conversely, natural persons and specific types of partnerships, such as ordinary partnerships, groups of cooperatives, joint ventures, and similar groups engaged in commercial activities, will now be required to comply with the Commercial Registration Act B.E. 2499 (1956). Types of Businesses to be Registered The Notification also outlines the types of businesses subject to commercial registration. This includes rice mills and sawmills using machinery, sales of goods exceeding a daily sales value of THB 300 or a total value of THB 10,000 (encompassing items like CDs, gemstones, and ivory), commercial agents or sales representatives handling goods with a daily sales value of THB 300 or more, and handicrafts or industries where goods produced and sold in a single day surpass THB 300 or total production exceeds THB 10,000. Additionally, e-commerce transactions involving the sale or purchase of goods or services over the Internet are subject to registration. Currently, the juristic person who registered with the Department of Business Development, Ministry of Commerce (the “DBD”) and received a commercial registration certificate (or so-called “Form PorKor.01”) is not required to apply for a commercial license as it will be equivalent to having an e-commerce license. Therefore, if business owners have registered in the form of Company Limited or Partnership Limited, it is not required to apply for an e-commerce business license again. However, a direct marketing license is still required to operate the e-commerce business legally. Transitional Provisions Entities that were registered under the Commercial Registration Act B.E. 2499 (1956) prior to the Notification’s issuance will continue to adhere to existing registration requirements. Their commercial registration certificates remain valid, and no further updates are necessary unless specified by subsequent regulations. It’s crucial to note that commercial registration certificates issued to entities such as ordinary partnerships, limited partnerships, private companies, and public companies will cease to be valid upon the publication of this Notification in the Royal Gazette. Entities falling under these categories must comply with the updated regulatory framework to ensure they remain compliant with current laws. Conclusion In conclusion, Thailand’s Ministry of Commerce’s adjustment of e-commerce regulations represents a significant move towards supporting a dynamic and well-organized digital marketplace. By exempting certain entities and updating registration requirements, the government aims to streamline regulatory processes while fostering growth and innovation in the e-commerce sector. However, individuals doing business online will, from now on, face additional red tape. Businesses operating in Thailand should stay abreast of these regulatory changes to ensure ongoing compliance and capitalize on new opportunities in the evolving digital economy. If you have any questions regarding your business registration, taxation matters or corporate compliance matters, please contact us at [email protected] or via  +66 (0)2 026 3284. Author: Andreas Seela