The US-Thai Treaty of Amity streamlines business ventures for American investors in Thailand. However, obtaining the benefits requires strategic planning and regulatory compliance.
American firms enjoy unique privileges that provide a competitive edge in the Thai market. These include equal access to the country’s many sectors and exemption from the foreign investment restrictions of the Foreign Business Act.
Signed in 1966
The US-Thai Treaty of Amity, formally the “Treaty of Amity and Economic Relations between the United States of America and the Kingdom of Thailand”, aims to improve business and investment opportunities for American companies in Thailand. It offers benefits like allowing American businesses to maintain majority ownership in their Thai-located companies, bypassing restrictions of the Foreign Business Act that limit foreign ownership to 49%.
It also facilitates cultural exchange and strengthens diplomatic ties between the two nations. Since its inception, it has contributed to the growth of trade and investments in Thailand, making it one of the top trading partners of the U.S.
The treaty is effective indefinitely, but can be renegotiated or amended on mutual consent. Regular reviews ensure that it aligns with the changing economies of both nations and reflects emerging challenges.
While the US-Thai Treaty of Amity provides numerous advantages for businesses entering the Thai market, there are still several factors to consider before establishing a company under the treaty. For example, the process to obtain an FBC can be lengthy and complicated, and there are still a number of restrictions on land ownership and work permit rules that must be considered. In addition, the treaty does not exempt businesses from Thailand’s immigration laws or from adherence to labor regulations. For this reason, it’s important to consult with a local firm that understands the Thai market and can provide guidance on the best business structure for your specific situation.
Benefits
The US – Thailand Amity Treaty promotes economic and trade relations between the two countries. The treaty gives American companies the right to maintain a majority shareholding or wholly own its company, branch office, or representative office in Thailand. These companies are also exempt from most foreign investment restrictions outlined in the Alien Business Act of 1972. However, some restrictions remain in place for certain sectors, including telecommunications, banking and financial institutions, and insurance.
The treaty also protects companies against the nationalization or expropriation of their assets by the Thai government. This provides a sense of security for investors who are looking to establish a long-term presence in Thailand. Additionally, the treaty allows Americans to set up sole proprietorships in Thailand. However, setting up a business in this manner can have significant legal implications. It is best to seek the assistance of a knowledgeable attorney.
In addition to protecting investments, the treaty also enables US businesses to transfer technology and know-how to their Thai counterparts. This can help develop the Thai economy and improve the country’s overall competitiveness. In fact, many US companies choose to form joint ventures with Thai partners, allowing the Thai side to hold the majority stake in their company. This allows them to leverage the Thai partner’s familiarity with the local economy and regulations.
Requirements
A US company operating under the Treaty of Amity needs to adhere to strict structural requirements. It must be legally incorporated in either Thailand or the United States, with majority ownership by American shareholders. It must also be a separate entity that maintains its own finances and activities independent from its owners’ personal assets. It also must be registered as a foreign business in Thailand and comply with Thai regulations. In addition, the company may not engage in certain sectors, including telecommunications, transportation, domestic trade of indigenous agricultural products, and fiduciary and depository banking functions.
Before registering an Amity Treaty company in Thailand, a business must submit a number of documents to the U.S. Commercial Service office at the Embassy in Bangkok. These include notarized proof that the majority of directors and owners of both the applying company and the company to be incorporated are (or will be) American citizens by birth or naturalization.
Afterward, the Commercial Service will prepare a document that certifies that the company is an American-owned and managed company eligible for national treatment under the Treaty of Amity. The company must then submit this certificate and all original copies of the required supporting documents to the Department of Business Development, a division of the Ministry of Commerce. The process can take several weeks to a few months, depending on the complexity of the documentation and circumstances. Professional legal and accounting assistance is often necessary, adding to costs.
Registration
If your company is seeking to do business in Thailand, you may want to consider registering it under the Treaty of Amity. This agreement provides a unique registration advantage for US companies. However, it also comes with a few restrictions. To ensure that your company can benefit from this treaty, you should seek the guidance of professional legal and tax advisors.
A company that wishes to be registered under the Treaty of Amity must adhere to a structure of majority US ownership. This can be in the form of direct ownership by shareholders or by a US-owned holding company. Additionally, the company must have notarized proof that the majority of its owners and directors are American citizens by birth or naturalization. It must also be an American sole proprietorship, partnership, representative office, branch office, joint venture or limited company.
Once you have met these requirements, you must submit an application to the Commercial Service office at the Embassy in Bangkok. The process can take up to a month. Once your company is approved by the Ministry of Commerce, it can start operations in Thailand with the rights provided by the Treaty of Amity. You must be aware that the company can not engage in telecommunications, transportation, domestic trade of indigenous agricultural products, land and natural resource exploitation, or fiduciary and depository banking.