Investing in Thailand: The US-Thai Amity Treaty

January 6 2012 Categories: Thailand Business, US Thai Amity Treaty No comments yet

What is the Thai-US Treaty of Amity?

A little bit of background. The Thai-US Treaty of Amity between the US and Thailand is actually the second amity treaty between the US and Thailand. It was executed in 1966 and ratified in 1968. Originally the treaty was for a period of 10 years. At the end of the ten years period the parties had the option to terminate it. None of them did and the Amity was in effect until 2005 when it finally expired.

Why then bother to discuss a treaty that expired a few years ago? Because we are in Thailand and things are not always what they seem to be. So bear with me.

Now the reason both parties let the treaty expired was because of Thailand commitment under World Trade Organization rules.

WTO commitments VS Amity Treaty

Thailand is a member of the WTO and as a result of those WTO commitments Thailand had two choices:

(i) Extend the Amity Treaty and grant the favored nation status extended to the US to all other countries members of the WTO;

(ii) Let the Amity Treaty expired.

Thailand and the US agreed to let the Treaty expired. But at the same time they did, Thailand unilaterally announced that in the absence of a FTA between the two countries and during the period of negotiation, Thailand would maintain for the time being the status-quo.

This solution was perfect because in the absence of Treaty Thailand does not have on the one hand to grant the privileges that were granted to US citizens pursuant to the Amity Treaty to nationals of other members of the WTO but on the other hand US citizens are still de-facto entitled to its benefits.

Benefits of the US Amity Treaty

The main benefit of the US amity Treaty is to act as an override in relation to the Foreign Business Act. In a nutshell as a result of the Treaty, American nationals have the same rights as Thai national with regards to owning and operating businesses in Thailand.

Restrictions

There are only seven economical sectors which are restricted to US citizens as follows:

Owning land;
Engaging in the business of inland communication;
Engaging in inland transportation and communication industries;
Engaging in fiduciary functions;
Engaging in banking involving depository functions;
Engaging in domestic trade in indigenous agricultural products;
Exploiting land or other natural resources

In other words, but for the seven sectors listed above American citizens and companies may incorporate and maintain majority shareholding in local companies or register fully owned branch or representative offices without any problems and are exempt of most of the restrictions on foreign investments imposed by the Foreign Business Act.

The Treaty does not bring any particular benefits in terms of immigration and US citizens are to go through the same process than others to obtain, maintain and extend their visas.

How to register for the Treaty of Amity benefits as an American Company?

The application process is straightforward.

(1) Firstly register the legal entity of your choice at the Ministry of Commerce

(2) Secondly obtain a “certification document” (that is to say a supporting letter) from the US Commercial Service in Bangkok

(3) Submit the US embassy certification documents and any other documents requested by the Ministry of Commerce in order to obtain the foreign business certificate that will allows the company to operate as a US owned company

The catches

There are always a few catches:

(1) The company shall have a minimum 3,000,000 THB paid up capital to qualify

(2) The US shareholders will have to have the majority all along

(3) There must be a majority of US or Thai directors. Directors of other nationalities are acceptable but they may not have sole signatory power. In other words either they sign together with a US Director or they are Director without authorized signature.

Note: a director with signatory power may still be a signatory on the company bank account

Note: Formalities are simpler when the US applicant is an individual. For companies the documents requirements are more extensive. Also a US company has to be US majority owned in order to qualify for the benefits of the Amity Treaty.

Note: This post is an excerpt of Rene Philippe Dubout next book: “How to Invest Safely Into Thailand” to be published in January 2010

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

Originally posted 2009-08-09 04:35:41.

Doing Business in Thailand