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.

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.

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.

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.

When assets or spare parts were damaged in accidents, their salvage value can be treated as deductible expenses upon sale or disposal. If they are sold, the seller is responsible to collect VAT from the buyer based on the actual selling price, and include the VAT in the monthly VAT computation.

In the event that assets or spare parts are lost and such loss is not covered by insurance or a protection agreement, a company can claim the remaining book value of the lost assets or spare parts as an operational loss. The full amount of the claimed loss can be treated as deductible expenses only if the company is able to provide credible proof of the loss. However, any displacement of assets or spare parts is considered equivalent to a sale of such asset or spare parts, and therefore, VAT must be paid based on market value.

Contact MSNA, Thailand Accounting firm for your accounting and tax questions.

In order to improve the work permit and immigration processes, the Board of Investment (BOI) has recently introduced the e-Expert System. This system allows for online processing of expatriate work permits and immigration formalities, including review and approval, through the Thailand BOI’s website whereas a user ID and password will be provided to BOI promoted companies for access and uploading of supporting documents.

This initiative towards an online environment is aimed to lessen the lead time at the One Stop Service Center and minimize paperwork. However, once approval is granted, the expatriate is still required to be physically present at the One Stop Service Center to collect and sign for the work permit and attend a short interview with the Immigration officer.

Furthermore, the benefits of this initiative can be summarized as follows:

1. Greater transparency in the consideration process for work permit and visa extension
2. Real time tracking of the status of applications
3. Reduced time spent by expatriates at the One Stop Service Center

The twist is that users will need to have knowledge of the relevant BOI, work permit and immigration regulations.

MSNA team has broad range of experience assisting clients to understand the complex rules and regulations involved as well as dealing with the relevant officials. Contact us for more information and expert advice.

Today, we answer some questions concerning employee benefits in Thailand.

Questions:

We are about to start our business operation so we would like to know your comments on our proposed compensation and benefits that we will give to our employees:

1. Probation period: For all positions, we will allot 3 months probation which either party should give 7 days notice for resignation or termination.
2. Working hours, 48 hours per week Mondays to Fridays 8AM to 5PM and Saturdays 8AM to 12 noon. For Operations Technicians and Supervisors, shifting schedules will be Mondays to Sundays 7 AM to 4 PM and 2 PM to 11 PM whereas shift allowances will be given and those who worked on Sundays or public holidays will be given a day off in lieu.
3. Annual bonus, variable depending on company’s performance.
4. Vacation or annual leave, depending on position and length of stay with the company
5. Sick leave, maximum 30 days per year
6. What about medical benefits?

Answer:

Below are our comments:

1. For probation period, what you suggested is OK. However, many companies usually use 119 days because once an employee completes 120 days, (or 4 calendar months) you will have to pay him the severance pay (1 month’s salary) and payment in lieu of advance notice (if you want the employee to stop coming to work right away). Please read this article: Severance pay – tax implication. However, please note that actually the employees can just quit right away and they will not have to pay you if they don’t tell you in advance even if they signed a contract saying that they will tell you 7 days in advance. Only if you can prove that their leaving the company without the advance notice caused you damage can you take the case to court.
2. For working hours, if you will make admin staff or managers work on Saturdays, you will not be an attractive employer. Even our companies, we don’t work on Saturdays unless we pay them OT rate per law. From our experience, when people know that a company works on Saturday, they don’t want to work there unless the pay is really high. The way to do it is that you can assign some of the employees to work on Saturday and have another day during the week off in addition to Sunday. However, it should be preset each month.

For shifts, also you want to assign the holidays for the shift employees each month in advance. We do not know if you have a lot of competitor employers because you may want to give these employees 2 days off per week too. The day that they are off, and they come to work during their normal work time, they will get 1 time their usual hourly rate (salary/30days/8hrs) extra for OT pay (because they already got 1 time in their normal monthly salary on their holidays). However, if you make them work before or after their usual hours, you will have to pay 1.5 times the usual rate on the normal work days and 3 times on their holidays.

3. For bonus, please do not tie bonus to company’s performance in sales or profit because it will be a non-tax deductible expense for the company. If you want to be an attractive employer, you want to tell your employees they will get a bonus according to their work performance.
4. For vacation, the law says at least 6 days per year, but you can choose to give them more. We see many of our multi-national clients use their global policy in giving bonus and vacation to the employees, which makes the employees feel very good because they feel they are part of the global company. Manufacturing companies in Thailand usually follow Thai labour law in terms of vacation they give to their employees. Some companies have provident fund so as to make the employees want to stay longer. If you want, we can refer you to some provident fund companies so you can see different structures that may be useful to your benefit scheme.
5. For sick leave, if an employee gets sick too much, the law does not say you can let him go without severance pay. (But if he disappears 3 days in a row without a doctor certificate saying that he is sick and has to take those days off, you can let him go immediately without severance pay). So you will have to use other means to discourage the employees from taking too many sick days. Some companies use a rewarding system like if they do not take days off as sick or to take care of their personal business at all in a month, they will get extra money, like Baht 500 or 1,000.
6. For medical benefits, the employees can get most hospital treatment for free because they contribute monthly into the social security system. However, it is up to your company’s policy if you are to provide allowance for medical expenses or health insurance.

Contact MSNA for your questions and more information on Thailand labour law.

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.

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.

Yesterday, the company owners decided to terminate one of our Thai company’s employees. He started working with us in April 2010. Consulting our company lawyers, we thought he is entitled to receive a compensation payment of 3 months. However, he talked to his own lawyer who told him that he is entitled to receive 5 months’ monthly salary. Being in-between chairs, I would highly appreciate if you could find time to drop me a mail with a clear written step-by-step procedure regarding contract termination and payment of compensation.

Answer:

When an employer company in Thailand wants to terminate an employee, they need to give an advance notice in writing before or on the date the salary payment is due for the termination to take effect on the next salary payment due date. In your case, you normally pay your employees on the 28^th of the month, so the salary is due on 28^th. You need to give him the advance notice within 28 June to take effect on the following salary payment due date, 28 July. If the employer terminates an employee and wants the termination to take effect right away, the employer has to pay the employee all the wages/salary that should have been owed if the termination would take effect on the following wage/salary payment due date. This is called payment in lieu of advance notice. In your employee’s case, you will have to pay him June and July salaries, plus 3 months’ severance payment. The total you have to pay him is 5 months. You can make him come to work until 31 July if you want but you need to give him the termination notice by 28 June which is today.

Need expert advice on Thai Labour Law? Contact MSNA for consultation.