by Julio Pingarrón
Smart Legal Solutions is a Thai law firm specialized in assisting foreign clients to conduct their business and protect their investment in Thailand in a wide array of legal cases.
Since we are aware that one of the main concerns of foreign investors is the adoption of appropriate legal measures to maintain the full control over their investment, we advise our clients accordingly on the best solutions to conduct their business project in Thailand.
The Foreign Business Act B.E. 2542 is the main governing law related with foreign investment in Thailand, which limits the ability of foreigners to engage in certain activities reserved only for Thai nationals. During the past years, the Thai government has implemented some legal amendments to attract the foreign investors into Thailand. However, some legal aspects and restrictions may still represent a difficulty for foreign nationals to manage their business and/or investment in Thailand.
In this regard, we would like to show a brief overview of the main legal structures according with Thai business law for setting up a company in Thailand formed by 100% foreign ownership:
Investment Promotion Act
Under the Investment Promotion Act B.E. 2520, it was established the Board of Investment (BOI). This Thai government body is aimed to attract investment from both foreign and local entrepreneurs to conduct certain business activities eligible for promotion, which are considered as beneficial for the social and economic development of the country and the protection of the it’s natural environment.
The major advantages of registering a company in Thailand under BOI promotion include, but are not limited to: 100% foreign ownership (regardless it’s nationality), exemptions or reductions on corporate taxes, multiple work permits without the requirement of hiring four Thai employees, own a land by the company in connection with its business activity etc.
US-Thai Amity Treaty
The US-Thai Amity Treaty provides especial benefits to American nationals who wish to establish a business in Thailand. Under this Treaty, those companies registered in Thailand which are owned by US nationals, whether corporate or individual persons, can be exempted from most of the foreign investment’s restrictions from the Foreign Business Act. That is why nowadays, the Amity Treaty is the preferred way for most American nationals, who are intended to set up a new company in Thailand.
The Treaty allows US nationals to form a company in Thailand by 100% US ownership, since according with the Treaty, at least the 51% of the company shares must be held by American nationals and the majority of directors with authorized signature must be American citizens. However, it should be noted there are still certain activities which are restricted, such as fiduciary functions, operating in the field of banking, land ownership etc.