In 1966 Thailand and the United States signed the Treaty of Amity. This allows American citizens to incorporate businesses in Thailand where the majority of shareholders are Americans.
These companies get national treatment which removes many restrictions on foreign investment.
However, to receive these benefits there are certain administrative procedures that must be followed.
Under the US-Thai Treaty of Amity, Americans are allowed to manage companies in Thailand without having a majority Thai partner. This allows American citizens to leverage their business expertise with a local partner in order to operate successfully within the country. This is different from countries which do not have a US-Thai Treaty of Amity and require majority Thai shareholders.
To qualify as an Amity treaty company, a US-based legal entity must be incorporated and have authorized American directors. The company must also submit evidence of its US incorporation, and documentation from the US Commercial Service verifying that a majority of the company’s shareholders are American.
After registering the company, it takes about a month for the Ministry of Commerce to issue a Certificate of Business Operation. Amity treaty companies can engage in all businesses that Thai companies are allowed to do and are exempt from most of the restrictions imposed by the Foreign Business Act.
While the Treaty of Amity gives American citizens and businesses special privileges when doing business in Thailand, there are certain administrative requirements to qualify. To gain the benefits of the treaty, a company or partnership must submit documentation to the Ministry of Commerce that proves a majority of its shareholders or partners are US citizens. Once approved by the Ministry of Commerce, the entity will receive a Treaty Protection Letter that is recognized by other Thai government offices.
The applying business organization must be registered as an American sole proprietorship, partnership, representative office, branch office or limited company. In addition, a majority of the shareholders and directors must be U.S. citizens by birth or naturalization.
In addition, the company may not engage in activities reserved for companies that are majority Thai-owned, such as domestic trade in indigenous agricultural products or exploitation of land. The business must also comply with work permit rules and submit tax information.
With the exception of businesses that are restricted under Thailand’s Foreign Business Act, American companies operating under the Treaty of Amity benefit from “national treatment,” allowing them to maintain a majority shareholding or wholly own their company, branch office, or representative office located in Thailand. This allows for a level of ownership that is not permitted in other parts of the world, providing a competitive advantage to those Americans looking to expand their business in the Kingdom.
As such, many U.S. citizens choose to form joint ventures with Thai partners, leveraging their partner’s knowledge of the local economy and local regulations. In order to establish a company under the Treaty, a certified letter from the U.S. Embassy in Bangkok is required. Sunbelt can facilitate this process, which typically takes less than one month, in partnership with the U.S. Commercial Department. Then, the company is eligible to work in any industry not restricted by the Foreign Business Act with only a minimal capital requirement of THB 2 million for a single director.
The US-Thai Treaty of Amity provides a relative advantage to Americans who are either considering to establish a company or relocate to Thailand. In order to qualify for this benefit, American legal entities must have majority American shareholders (at least 50% of the Directors must be American citizens).
Companies registered under the Amity Treaty receive national company privileges in Thailand which are not available to foreign entities that are not incorporated under the US-Thai Treaty of Amity. However, the process of registering a company under Amity can be complicated and requires submission of certified documents from the US Commercial Services that confirm that the applying entity is an American owned and managed company.
In addition, registering under the Amity Treaty does not exempt companies from having to comply with all of the Foreign Business Act’s restrictions on foreign investment. This includes the requirement to inject or bring capital into Thailand in order to open a bank account and being subject to the Foreign Business Act’s limitations on domestic trade in indigenous agricultural products.