Many U.S. businesses enjoy investment benefits through the U.S.-Thailand Treaty of Amity and Economic Relations (AER), originally signed in 1833.
The 1966 iteration of the Treaty allows U.S. citizens and businesses incorporated in the U.S., or in Thailand that are majority-owned by U.S. citizens, to engage in business on the same basis as Thai companies (national treatment), exempting them from most restrictions on foreign investment imposed by the Foreign Business Act. The 1966 amendment provides two major benefits:
– American companies are permitted to maintain a majority shareholding or to wholly own their company, branch office or representative office located in Thailand.
– American companies receive national treatment, meaning U.S. firms may engage in business on the same basis as Thai companies, and are exempt from most of the restrictions on foreign investment imposed by the Alien Business Law of 1972.
Under the Treaty, there are still certain restrictions on U.S. investment as follows:
- 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
Prospective U.S. investors who would like to benefit from the Treaty must first verify their nationality by obtaining a certified letter from the U.S. Embassy in Bangkok. The investor must then present the letter to the Ministry of Commerce, along with an application form for a business operation certificate. This process typically takes less than one month. Notwithstanding their Treaty rights, many Americans choose to form joint ventures with Thai partners, allowing the Thai side to hold the majority stake because of the advantages that come from familiarity with the Thai economy and local regulations.
We provide qualified legal advice to Americans planning to invest in Thailand. Such advice is particularly important given the fact that Thai business regulations are governed predominantly by criminal law, not civil law. While foreigners rarely are jailed for improper business activities, violation of Thai business regulations can carry heavy criminal penalties.