Seven steps: The U.S. Thai Treaty of Amity company

Treaty benefits are still available as of today

The “Treaty of Amity and Economic Relations Between the Kingdom of Thailand and the United States of America” had been signed in 1833 and amended in 1966/1968. Under this U.S. Thai Treaty of Amity, U.S.-owned companies are exempted from most of the restrictions on foreign investment imposed by Thailand’s Foreign Business Act (FBA). This allows

  • to do business in Thailand with an up to 100% U.S. owned Thai company or the branch or representative office of a U.S. company.
  • to receive national treatment, meaning to engage in business on the same basis as Thai companies, and being exempted from most of the restrictions on foreign investment.

The treaty elapsed in 2005 and there is no formal extension because that would be in conflict with most favored nation rules by the World Trade Organization (WTO). However, in case of policy changes, old structures are grandfathered.

As of today, it is still possible to utilize the Thai U.S. Treaty of Amity to set-up new “treaty companies”. However, U.S. citizens need to apply for work permits and visa without privileged status.

Seven steps to U.S. Thai Treaty of Amity benefits

1. Privileged business activities: The company’s business has to carefully avoid the following excluded activities: 

  • Owning land
  • 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.

As a consequence, treaty companies can’t be used for real estate acquisition structures.

2. Thai corporation: A Thai company, typically a company limited (Co., Ltd.) has to be validly set-up. Details are described as “Company formation in Thailand”. There is no requirement that it is new or did not do any non-treaty business before. Even an aged Co., Ltd. can be restructured or adjusted to qualify as and apply for treaty benefits.

PUGNATORIUS Ltd. does not offer legal support to use the treaty of amity as a sole proprietor (sole trader) and does not provide a legal opinion whether this is in compliance with the laws of Thailand.

3. Shareholding: The majority number of shareholders have to be U.S. or Thai individuals or U.S. or Thai companies. In addition, the percentage (quota) of their shares have to be 51% or more. To hold a U.S. greencard is not sufficient to qualify under the treaty.

While it is pretty obvious that a U.S. passport holder qualifies for the treaty, this is not the case for the U.S. corporation in an international group of companies. In the application letter to the Bangkok Embassy, it has to be explained, why the ultimate beneficial owner (UBO) is American.

4. Directors: The majority of the directors has to be U.S. citizen or Thai. Third country directors have to fulfill additional conditions to be acceptable.

5. Equity: Generally, a registered capital of at least THB 3 million has to be paid in. If the business is not restricted by the Foreign Business Act, an amount of THB 2 million is sufficient.

6.  U.S. Embassy: The American Embassy (Commercial Counselor) in Bangkok (Wireless Road) issues on request a confirmation letter that the shareholders qualify the requirements as U.S. citizen or ultimate beneficial U.S. shareholders. Required time: one week or less.

2016_09_26_18_34_33

7. FBC: A Foreign Business Certificate has to be applied from the Ministry of Commerce. The procedure is similar to the application for a Foreign Business License, although the outcome is much more promising. Required time: 4 to 10 weeks.

After accomplishing these seven steps, the “treaty company” needs no further renewal of its status. The benefits under the treaty apply as long as no structural change occurs which infringes the treaty conditions. If the requirements under the Treaty had not been fulfilled from the beginning, or if they cease to apply, it has to be considered whether this leads to civil or even criminal liability for failure to comport with the Foreign Business Act.

Professional service offer from Bangkok 

Corporate and investment structures are one of the law firm’s areas of competence, long-standing experience, and unique market reputation. Typical assignments cover these seven areas:

  • Advice on corporate structuring
  • Company formation services
  • Special business licensing
  • Company acquisitions and disinvestments
  • Corporate due diligence examination
  • Corporate restructuring
  • Legal opinions and professional statements

The terms for assigning PUGNATORIUS Ltd. are described at “Legal advice and assistance on corporate and investment laws.”


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

Comments are now closed for this article.