More than Cannabis: Update on Thailand’s agribusiness legislation

agriculture thailand

agriculture thailand

November 2019: Thailand’s BOI approves five more food innovation sites for investment promotion

Five new foodopolis sites: BOI approved five more Food Innopolis sites as science and technology zones, as proposed by the Ministry of Higher Education, Science, Research and Innovation.  The additional sites are located at Thammasat University, King Mongkut University of Technology Ladkrabang, Ubon Ratchathani University, Walailak University and Naresuan University.

Eight existing sites: This move will further enhance the network of Food Innopolis previously approved namely Thailand Science Park in Pathum Thani province, Chiang Mai University, Khon Kaen University, Prince of Songkhla University, Kasetsart University, Chulalongkorn University, Mahidol University, and King Mongkut University of Technology Thonburi.

Special BOI-promotion: Investment projects in the targeted industries and located in any of the 13 Food Innopolis locations will receive additional privileges on top of the normal package of 5-10 years of corporate income tax exemption depending on the type of business. These top-up privileges comprise a 50% corporate income tax deduction for five years or an additional two years of corporate income tax exemption. The target activities qualifying for investment promotion include plant and animal breeding, research and development, and scientific testing services, among others.

2019/2020: Liberalization of Thailand’s cannabis industry

Thailand’s cannabis legislation: Cannabis, marijuana, ganja, and hemp are just a few buzzwords for a weed-based business opportunity that fires the imagination of foreign investors of a development from an illegal substance to a magical elixir.  Reports seem to predict that the psychoactive substance might be sooner or later fully decriminalized in the land of smile. However, the Thai Food and Drug Administration’s decision to approve cannabis oil for medicinal use is just one step in the overall resurrection of the nation’s agrarian grassroots.

Recreational marijuana: The recreational use of Cannabis THC and CBD substances is obviously the most profitable business and foreign investors should be aware of the complexity and unpredictability of decision-making processes in this industry. An up-to-date overview of announcements, regulations and draft legislation is of high importance to utilize foreign investment opportunities.

Legal updates: Nevertheless, PUGNATORIUS Ltd. decided not to report the latest developments regarding this pretty sensitive topic on its highly frequented and well-established website. In the cannabis industry, more important than doing things right is doing the right things. Information regarding the law firm’s viewpoints, policy, and its recommended business approach are available under a client-attorney relationship only.

September 2018: New contract farming legislation

New legislation: In September 2018, the “Contract Farming Promotion and Development Act” has been enforced and provides specific rules on the formulation of contracts, determining factors, rules and procedures for contract farming agreements, and more. The act is divided into the main parts, (i) contract farming promotion and development commission, agricultural business operators, the conclusion of contract farming agreements, dispute mediation,  penalties, and transitory provisions.

Contractual framework: Contract farming between huge agribusinesses and farmers is a means to assist small growers in gaining market access and reducing price risk, and as such it has attracted attention from development agencies and governments in Thailand. Relevant aspects are (i) quality specifications, (ii) conditions of the production, (iii) predetermined price, (iv) equipment and products provided by the agribusiness, (v) assistance, advice, know-how transfer and IP rights, (vi) risk allocation between the parties and (vii) financing aspects. 

Professional services to successfully realize an agribusiness venture in the land of smile:

PUGNATORIUS Ltd. is the Bangkok-based specialist provider of transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property developments and acquisitions. The law firm has a particular interest, know-how, and experience with respect to agriculture, including livestock investments and fishery ventures.

The law firm offers, in particular, the following agribusiness services: 

  • Design and set-up of a robust corporate structure to protect the foreign investor’s investment.
  • Advice and support on compliance with Thailand’s foreigner legislation.
  • Investment promotion by Thailand’s Board of Investment, including tax holidays for three to five years,
  • Acquisition of licenses and permissions for the intended IVF venture.
  • Preparation and negotiation of commercial contracts, especially with suppliers and distributors.
  • Ongoing corporate maintenance support.

Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice nor an attorney-client relationship.

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