Thailand’s outbound investments
IN A NUTSHELL: To enter into a joint venture or finance agreement with a Thai company outside of Thailand needs specific Tha legal and tax advice. Ask us for a consultancy and assistance proposal.
Joint ventures and financings with Thai companies abroad
Thailand goes outbound. Thai investments abroad, also known as “Outward Foreign Direct Investments (OFDI),” have come in the focus while the domestic industry lags behind the stated targets. However, Thai-foreign business project registration clearance papers and requirements should be carefully observed.
Not only Thailand’s well-known public companies act as a global player when investing in foreign companies as joint venture partner or financial investor. Even international conglomerates use their Thai affiliate company as the perfect vehicle for outward foreign direct investments. External business partners should, therefore, know the legal and regulatory requirements and tax structuring aspects of a Thai outbound investment.
The government is marketing Thailand as an emerging investor in business abroad via outbound direct investment and quickly follow words with deeds: With the introduction of investment promotion for outbound projects in 2015, the attractiveness of foreign investments has risen for Thais. While the rules and policies are generally designed for Thai companies, foreign investors with a Thai corporation or multi-national enterprises with an affiliate in Thailand should seriously consider investing abroad through their Thai entity.
Legal and tax aspects of a Thai outbound investment
Thailand’s corporate laws allow outbound investments. That can be accomplished in the form of an independent affiliate (foreign company), as a branch of the Thai legal entity or by a financial investment abroad from a Thai company. Typically, legal hurdles abroad are (i) foreign ownership restrictions and restrictions to acquire land, (ii) minimum capital requirements and exchange control regulations, (iii) business license limitations. However, Thai outbound investments have to take into considerations the Thai legal and regulatory framework as well.
Under Thai tax legislation, outbound income is subject to Thai taxation. This generally includes dividends from foreign companies, branch profits, capital gains and even unrealized foreign exchange gains. However, dividends from foreign shareholdings are tax exempted under certain conditions (Royal Decree 442: 25% voting rights and six months shareholding, 15% minimum taxation in the foreign jurisdiction).
It is nowadays a merely international standard to grant tax exemption on dividends from offshore investments. This general approach has certain terms and conditions which should be analyzed on a case-by-case basis. Other relevant tax aspects for outbound investments are the taxation of capital gains, the residence of foreign subsidiaries depending on the place of effective management, CFC (controlled foreign company) rules, the taxation of interests on borrowings to finance overseas investments and other issues which require an experienced tax advisor.
Outward direct investment and lending abroad
A Thai company is allowed to invest in an overseas business entity whose shares are held by the Thai company by not less than 10%, or to invest or lend to affiliated business entities abroad as necessary. A Thai company is allowed to lend to non-affiliated business entities abroad up to USD 50 million per year. A Thai natural person is authorized to invest in an overseas business entity whose shares are held by that person by not less than 10% or to invest or lend to its affiliated business entities abroad as necessary.
Fund transfers for such investment or lending to business entities abroad must be in foreign currencies only, whereas fund transfers for investment or lending to business entities in Vietnam or Thailand’s neighboring countries for trade and investment in Thailand or those countries can be in foreign currencies or Thai Baht.
Frequently raised aspects are foreign investment authorization certificate (FIAC) respectively foreign investment approval license (FIAL), legal hurdles under Thailand’s foreign investment regulatory legislation and money laundering clearance as pre-commercial regulatory steps for a joint venture or financial closing. The law firm possesses a wealth of experiences and broad knowledge to advise and assist on these matters.
Professional advice on business dealings with Thai companies
PUGNATORIUS advises international investors how
- to structure, set-up and maintain a joint-venture or other business cooperation with Thai companies, banks, and investors,
- to fulfill the documentation and reporting requirements for Thai outbounds financings and money transfers,
- to acquire the required investment licenses, permissions and clearance papers under Thai laws,
- to participate in the BOI outbound investment promotion schemes, and
- to tax-efficiently structure the joint venture or investment venture in Thailand and abroad.
The law firm is an experienced partner for foreign companies looking for international counsel for their complex business transactions with Thai companies. Secure your financing in paradise.