The Thai-U.S. Treaty of Amity: Everything You Need to Know
The Thai-U.S. Treaty of Amity and Economic Relations, commonly referred to as the Treaty of Amity, is a special economic bond between the United States and Thailand. This treaty provides significant benefits and rights to American citizens and businesses looking to establish themselves in Thailand.
In this guide, we will delve into the intricacies of the Treaty of Amity, addressing frequently asked questions and shedding light on the processes involved in establishing a company under this treaty.
- The Treaty of Amity allows American citizens and companies to hold the majority of the shares in a company.
- 50% of the company’s Directors must be American citizens.
- Under the Treaty of Amity, American companies are exempt from most of the restrictions relating to foreign investment set out by the Foreign Business Act and can operate on the same level as Thai companies.
- Documents must be certified at the US Embassy as part of the application process, which can take some time.
What is the Thai-U.S. Treaty of Amity?
The Treaty of Amity, originally signed in 1833 and amended in 1966, allows U.S. citizens and businesses incorporated in the U.S., or those majority-owned by U.S. citizens, to enjoy certain privileges when operating in Thailand. The treaty grants national treatment, enabling American companies to engage in business activities on similar terms as Thai companies and exempting them from most restrictions on foreign investment imposed by the Foreign Business Act of 1999.
What is considered a US Company?
The Ministry Of Commerce in Thailand has established the qualifications for a U.S. company as follows:
- [The applicant is a] Juristic person incorporated under the laws of Thailand or the United States of America;
- The majority of capital must be held by American nationality;
- More than half of the directors must be American and/or Thai persons;
- If one director is authorized to sign on behalf of the company, such director must not be of a third-country nationality;
- If more than one director is jointly authorized to sign on behalf of the company, the majority of such directors must not be of a third-country nationality; and
- If there is any non-US authorized director, he or she must always co-sign with a US authorized director to bind the company).
What are the benefits of the Treaty of Amity for American companies in Thailand?
Under the Treaty of Amity, U.S. companies enjoy two major benefits:
Ownership Rights: American companies can maintain a majority shareholding or wholly own their company, branch office, or representative office in Thailand. This allows for greater control and flexibility in managing business operations.
National Treatment: American companies receive national treatment, which means they can engage in business activities on the same basis as Thai companies. This exemption from restrictions on foreign investment provides a competitive edge and opens doors to a wide range of opportunities in various industries.
Are there any limitations and/or restrictions for Treaty of Amity companies?
While the Treaty of Amity offers numerous advantages, there are certain limitations and restrictions that American investors should be aware of. These restrictions include:
Restricted Activities: A U.S. national or company can rely upon the U.S.-Thai Treaty of Amity & Economic Relations (the “Treaty”) to legally conduct business in Thailand, as the Treaty requires that U.S. companies be treated in the same manner as Thai companies, except in certain prescribed areas, as follows:
- Fiduciary functions;
- Banking involving depository functions;
- Land ownership, exploitation of land or other natural resources; and
- Domestic trade in indigenous agricultural products.
Ownership and Directorship Requirements: To qualify for the benefits of the Treaty of Amity, American citizens must own over 50% of the shares, and at least 50% of the directors must be American citizens.
What is the process for receiving the benefits from the Treaty of Amity?
Companies must undergo the following process to take advantage of the provisions offered by the Treaty of Amity. The proposed company should be properly incorporated with the Department of Business Development first. The common business structure for this situation is a Thai Limited Company.
Stage 1: Document filing
The applicant compiles all the relevant documents verifying that the company has been registered in compliance with Thai law. These documents will be submitted to the Commercial Services Office (CSO) at the US Embassy.
Stage 2: Certification by the Commercial Services Office (CSO)
Upon receiving the required documents, the CSO will confirm to the Thai Department of Commercial Registration (in the Ministry of Commerce) that the applicant is an American-owned and managed company and is therefore entitled to the provisions of the Treaty of Amity.
Stage 3: Application to the Ministry of Commerce
After certification by the CSO, the original copies of all the documents and completed application forms must be submitted to the Thai Department of Commercial Registration to complete the registration process by applying for a Foreign Business Certificate.
Do Treaty of Amity companies require a Foreign Business Certificate?
Companies that have applied for the provisions offered by the Treaty of Amity must apply for a Foreign Business Certificate. Once the company has received certification from the US Embassy, it can apply for a Foreign Business certificate.
In practice, all companies that qualify for the provisions of the Treaty of Amity and have been certified by the US Embassy will be granted a Foreign Business Certificate upon application.
As mentioned, the FBA restricts foreigners or foreign-owned companies from undertaking over 50 categories of business activities in Thailand; however, having a Foreign Business Certificate removes this restriction, and the company can undertake such activities.
What are the minimum capital requirements?
In general, although treaty-protected companies are given special treatment under the Treaty, they still need to satisfy the minimum capital requirement under the FBA. If the business is not restricted under the FBA, the minimum capital requirement for a treaty-protected company is THB 2 million. On the other hand, if the business is required to obtain a Foreign Business Licence under the FBA, the minimum capital requirement must be THB 3 million for each business activity.
Concerning work permits, if a company wishes to hire a foreign worker, the company must have a fully paid-up registered capital of THB 2 million to hire one foreigner; every additional employee will require a further THB 2 million in registered capital (up to a maximum of 10 people).
The company can hire one foreign worker per THB 2 million in capital and one foreign worker per four full-time Thai employees.
Can U.S. nationals and companies operate businesses under the Treaty of Amity restricted by special laws?
No, they cannot. The enforcement of the Treaty of Amity falls under the jurisdiction of the Foreign Business Act. Section 13 of this Act stipulates that if specific laws govern foreign ownership in a particular business, those laws take precedence over the Act itself. Consequently, any specific laws regulating restricted business activities override the provisions of the Treaty of Amity.
For instance, while the treaty does not explicitly prohibit Americans from engaging in tourism businesses, the Tourism and Tour Guide Act of 2008 is a specific law restricting foreign investment in the tourism sector. Consequently, the Tourism and Tour Guide Act would prevail over the provisions of the Treaty of Amity in this context.
Can non-American citizens apply for the Treaty of Amity provisions?
To be eligible for protection under the Treaty of Amity, the Department of Business Development (DBD) mandates that only legal entities:
- possessing majority American ownership (over 50%)
- registered in the United States, and
- having authorized American directors can qualify.
However, if the non-American shareholder is a minority shareholder and the majority shareholders are American citizens (with over 50% of the directors being American citizens), then the company can still be eligible for the provisions of the Treaty of Amity.
Please note, if the majority owners of a U.S. company are themselves a legal entity, that particular legal entity must meet the eligibility criteria to independently register a Treaty of Amity company for the company to obtain protection under the treaty.
How can Belaws help?
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Frequently asked questions
What is the Treaty of Amity between US and Thailand?
The Treaty of Amity between the United States and Thailand is a special economic bond that grants certain privileges to American citizens and businesses operating in Thailand.
What did the Treaty of Amity do?
The Treaty of Amity allows American citizens and companies to enjoy benefits and rights when establishing and operating businesses in Thailand. It grants national treatment and exemption from many restrictions on foreign investment.
What was the Treaty of Amity and Commerce Thailand 1833?
The Treaty of Amity and Commerce signed in 1833 between the United States and Thailand established a special economic relationship. It provided favorable treatment to American citizens and companies operating in Thailand.
Can Americans own 100% of a Thai company?
Yes, under the Treaty of Amity, American citizens and companies are allowed to hold the majority of shares or wholly own a Thai company. This provides them with greater control and flexibility in managing their business operations.
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