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MSNA Group 65/62 Chamnan Phenjati Business Center, 6/F, Rama 9 Road, Bangkok.
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Archives for Doing Business in Thailand

Enforcement and punishment measures in land holding as an agent for a foreigner

If it happens that there is the treat of land holding as an agent for an alien, the measures to the land disposal and the offender punishment shall be enforced as follows:

1) Measures on land by enforcement to dispose of the land in accordance with legal procedures.

Under Section 94 and 96 of the Land Code, stipulate the regulation when it appears that person who obtained the land as an agent for an alien or alien entity or alien who obtained the land illegitimately, he/she shall dispose of such land in the portion of his/her possession within the period of time specified by the Director-General of the Department of Lands which shall be not less than one hundred eighty days and not more than one year. The Director-General shall have the power to dispose of such land if time limit elapses.

2) Measures on individuals with criminal offense and to be punished in accordance with laws.

In the case of applying for land registration as an agent for an alien, there will be a criminal offense as follows:

2.1 Offenses against the Criminal Code Section 267 due to information the competent official to recode false statement in the official documents shall be subject to punishment with an imprisonment of not exceeding three years or a fine of not exceeding 6,000 Baht or both.

2.2 Offenses against the Land Code. The alien who commits the offenses under the Land Code Section 111, due to the acquisition of land illegitimately; shall be subject to punishment with a fine of not exceeding 20,000 Baht or an imprisonment of not exceeding two years or both. Juristic person who commits the offense under the Land Code Section 112, or Section 113 in case of Thai people; due to the acquisition of land as the agent for an alien or alien entity shall be subject to punishment with a fine of not exceeding 20,000 Baht or imprisonment of not exceeding two years or both.

Questions on enforcement and punishment of these measures, contact MSNA for consultation.

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Purchase of Land by foreigners in Thailand

According to Section 86 of the Land Code, a foreigner may purchase land in Thailand only by virtue of the provision of a treaty providing him with the right to own immovable property. Obtaining such acquisition is subject to the provision of the Land Code and the Ministerial Regulations issued under the Code, and the permission must be obtained from the Ministry of Interior. Before the termination of the treaty which was made on February 27th, 1970, there were 16 countries bided to the treaty ; USA, England, Switzerland, Germany, Denmark, Norway, the Netherlands, France, India, Belgium, Sweden, Italy, Japan, Burma, Portuguese, and Pakistan. Since then, Thailand has no longer made any treaty with any country to allow an alien to acquire land in Thailand by virtue of a treaty.

However, the Land Code has been amended with Section 96 bis providing that since January 19, 2002, a foreigner is allowed to purchase land in Thailand for residential purpose and the land to be purchased shall be not more than one rai in area, and the following rules and conditions must be met:

1. Bringing money not less than Baht forty million into the Kingdom for investment and maintaining the investment not less than five years;

2. Permission must be obtained from the Minister of Ministry of Interior;

3. Money brought into the Kingdom shall be invested in one of the following businesses or activities;

3.1 To purchase bonds of Thai Government, bonds of Thai National Bank, bonds of State Enterprise or bonds which the Ministry of Finance secures the capital or interest,

3.2 An investment in a property mutual fund, a property mutual fund or a mutual fund for resolving financial institution problems established under the law on Securities and Stock Exchange,

3.3 An investment in share capital of a juristic person, who is granted permission of investment under the law on promotion of investment,

3.4 An investment in an activity as declared by the Board of Investment to be an activity eligible to be granted promotion of investment under the law on promotion of investment;

4. The land to be purchased shall be located in Bangkok Metropolis, Pattaya City, or Tessaban (Municipality), or in the area specified as residential zone according to the law on Town and Country Planning and shall not be located in a military safety zone according to the law on Military Safety Zone;

5. A foreigner, who is granted permission, shall utilize the land only for residence for his/herself and the family in a way that is not contrary to the local custom or good living of the local community;

6. If a foreigner, who is granted permission to purchase such land, does not comply with the rules and conditions specified, he/she shall disposes of such land in the portion of his/her possession within the period of time specified by the Director General of the Department of Lands which shall be not less than one hundred eighty days and not more than one year. If the time limit elapses, the Director General shall have the power to dispose of such land;

7. If a foreigner, who is granted permission to purchase such land, does not utilize the land for residence within two years as from the day the registration for land acquisition is made, the Director General shall have the power to dispose of such land.

Besides the aforementioned rules and conditions, a foreigner may purchase land by inheritance as statutory heir, in this instance, the land devolved when combined with the land already purchased shall not exceed that specified by law, for examples, land for residential purpose not exceeding 1 rai per household, land for commercial purpose not exceeding 1 rai, land for industrial purpose not exceeding 10 rais, and land for agricultural purpose not exceeding 10 rai per household.

A foreigner whose spouse is a Thai national either legitimate or illegitimate, that Thai national can purchase land but the foreigner spouse of that Thai national must give a joint written confirmation that the money which that Thai national will expend on purchasing the land is wholly the separate property or personal effects of that Thai national and not the Sin Somros or jointly acquired property.

Contact MSNA for land acquisition in Thailand questions.

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Factory business in Thailand

A factory means a building, place or vehicle which uses a machine from five horse powers or an equivalent thereof or more or which employs seven workers or more with or without any machine for manufacturing, producing, assembling, filling, repairing, maintaining, testing, improving, altering, transporting, keeping, or destroying anything in accordance with the type or kind of factory as provided for in a ministerial rule.

Establishing a factory in Thailand is governed by Factory Act, B.E. 2535 (1992). Under this Act, factory is categorized into 3 types:

  1. The first type of factory can operate or manufacture any time upon desire of the manufacturer. However, the manufacturer has to follow the regulation under ministerial regulations.
  2. The second type of factory can start manufacturing after the manufacturer has notified to the officer. The manufacturer has to follow the regulation under ministerial regulations.
  3. The third type of factory has to get an approval or permit from the officer before operating a factory.

Eventually, the total amount of horse power and the total amount of employees are all required in order to be able to determine the type of factory business in Thailand.

All types of factory can be established anywhere except in the restricted places such as residential areas and near public places such as schools, temples, hospitals, etc.

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Can foreigners own or buy a condominium in Thailand?

Under the Thai laws, the aliens or foreigners who may own or buy a condominium in Thailand are as follows:

  1. Aliens permitted to have residence in the Kingdom under the immigration law;
  2. Aliens permitted to enter into the Kingdom under the investment promotion law;
  3. Juristic persons as provided in Section 97 and 98 of the Land Code and registered as juristic persons under Thai law;
  4. Juristic persons which are aliens under the Announcement of the National Executive Council No.281 dated November 24, B.E. 2515 and have obtained promotion certificate under investment promotion law;
  5. Aliens or juristic persons regarded by law as aliens who have brought in foreign currency into the Kingdom or withdraw money from Thai baht account of the person who has residence outside the Kingdom or withdraw money from a foreign currency account.
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Payment of goods with Foreign Currency

Question:

We have previously sold our products in USD to a Thai customer. Now that we have incorporated our Thai company, is there any legal restriction on the local customers to continue paying us in USD because we need to pay USD overseas to import the products. Our Thai company hopes to avoid USD exchange rate risk. If it is in USD, how do we convert the exchange rate to calculate the withholding tax amount in Thai Baht?

Answer:

Please make sure you let the customers know that the price and payment will only be in USD even though they will pay you in THB (using the exchange rate on the day they pay the USD amount owed).

The invoice and tax invoice to issue will show the amount in USD in parenthesis only, the THB amount has to be shown on the tax invoice using the rate of the day before. When the customer pays, they will pay in THB (using the USD amount appeared on the tax invoice with the rate of the day). The difference in the Baht amounts on the day they pay and on the tax invoice will be gain/loss from exchange rate.

There is no withholding tax involved when it is sale of goods. Only when it is service fee will there be withholding tax.

Contact MSNA for your Thai accounting and tax questions.

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Tax measures for SMEs

To help improve the performance of small and medium enterprises (SMEs), which are defined as entities with no more than Baht 5 million of paid-up capital and sales revenues of no more than Baht 30 million per annum, the Thai government has approved the following tax measures:

– Corporate income tax exemption on income derived between 1 January 2012 and 31 December 2012 from the sale of machinery used in the manufacturing process or for manufacturing services, in order to purchase replacement machinery.

– The Revenue Department will provide special conditions and rates relating to amortization and depreciation of machinery used in the manufacturing process or for manufacturing services, for the period 1 January 2012 to 31 December 2012.

– A corporate tax exemption equal to 50% of the difference between wage expenses under the previous minimum wage rate and those under the current minimum wage rate (i.e. Baht 300) for the period from 1 April 2012 to 31 December 2012.

Further details on the implementation of these measures and associated regulations have yet to be announced. Contact MSNA for more updates.

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Import taxes

Today, we got a question from one of our accounting clients regarding the import duties in Thailand.

Question:

I have a question that needs your expertise. We are selling a product to a client in Thailand that needs to be imported from the United States from our supplier there, who will issue an invoice to us. We would therefore like to know if there are any import taxes and what they amount to. If there are no such taxes, then the supplier can send directly the invoice to our Thailand Company but if there are, we are considering making the financial transactions via Head Office in Hong Kong, who would then be issuing the invoice to Thailand. Do you have any advice you could give us on this matter?

Answer:

Most likely there will be import duties and VAT to be paid at Customs. You need to consult with the company that provides customs clearance service (the Thai people like call “shipping company”). Some goods may be import duty exempted or even VAT exempted. However, in general, most products are subject to import duties and VAT. Whether you import directly or use Head Office to do it and invoice your Thai company, if the products are subject to import duties and VAT, you cannot avoid it.

The customer can import it themselves too, which bypasses your Thai company on the import duties and VAT because they will have to pay for them at the Customs. If your Thai company does the import, you will have to pass on the import duties and VAT to customer anyway, won’t you?.

Contact MSNA for your questions on Thai accounting and tax.

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Thailand BOI extends measures to support production capacity

In addition to the recent implemented measures by the BOI of Thailand, it has been approved that incentives for machinery and technology improvement for increased production capacity will also be extended until the end of this year, 31 December 2012.

This is a part of the government’s efforts to help manufacturers affected by the massive flood last year. Since it will promote machinery and technology improvement to boost production capacity, this policy is viewed as a significant step in enhancing the country’s competitiveness and investment.

With the aim of encouraging entrepreneurs to invest in new machinery for production improvement – automated production systems, for example – the government offers import duty exemption for machinery imported for this purpose. Additionally, participating investors will be entitled to three-year corporate income tax exemption, which is subject to a 70% cap on total investment (not including land and working capital). The tax exemption is based on existing business revenue and it will be effective until 31 December 2012.

Contact MSNA for your Thailand BOI and its flood relief measures questions.

 

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Foreign Business License in Thailand

A foreign business can operate in Thailand by obtaining a Foreign Business License. Hence, the foreign business applicant that has a good chance to be granted a “Foreign Business License” has to have all these 3 characteristics:

  1. Being a juristic person (company) registered overseas or Thailand (for example, a Thai registered company with majority foreign ownership).
  2. Going to operate business to provide products or services to the private sector, including the private parties that have contracts with government agencies or with other private parties.
  3. Having a service contract or sale contract that specifies the name of the foreign business applicant as the contractual party with another private party and the products or services to be provided must involve high-level technology or require specialized skills.

If the applicant is certain that its business has all the above characteristics, here are some criteria to meet in order to be successful in getting the Foreign Business License:

a. The foreign business products or services should involve high-level technology or require specialized skills, which are beneficial for technology transfer to the Thai people;

b. The foreign business products or services should contribute toThailand’s basic public utilities which are beneficial to its socio-economic development (for example, transportation system, tele-communication system)

c. The foreign business should know what industries will most benefit from its products or services and what industrial sectors will the products or services help to grow and become more competitive and more successful.

d. The foreign business needs to have a sales or service contract with the name of the client as the contractual party with the company, showing the scope of the sales or services, terms and conditions and the length of the sales or service period.

Contact MSNA, your business partner in Thailand to your company a Foreign Business License.

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Thailand tax measures to promote development of capital market in the country

The Thai cabinet approved tax measures to promote the development of the capital market in the country. Details of such tax measures are as follows:

1) The tax rate is to be reduced and personal income tax is to be exempted on dividends received by Thai tax residents from a foreign company or partnership in respect of securities listed on the Stock Exchange of Thailand; and

2) Income tax is to be exempted for income from sales of securities listed on stock exchanges in ASEAN member countries, provided that the sale is made through the system of the Stock Exchange of Thailand.

Contact MSNA for your Thai accounting and tax questions.

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