Treaty Of Amity Company

[maccat]

Hi All.

I have an American friend who is planning to take over a small guest house on Phuket.

In order to do this one of the things he having to do is create a new Thai Company.

However, yesterday someone told me about the "Treaty of Amity".

Does anyone have any experience of this. Is it easier, quicker, cheaper to set up than a Thai company.

Also is it suitable for a resort ownership.

I understand that only 3 shareholders are required and none need to be Thai, but that is about all i now.

Cheers for any feedback.

[Valjean]

It's the essentially same as setting up any Thai limited company except if you're American you can own 100% of the shares. You are correct there need to be 3 shareholders, but the 2 can just have a very small amount and an be 100% American. Very standard company structure, for Americans anyway. Once established to the best of my knowledge my company operates like any other Thai company - taxes, registration, work permits, etc. nothing special.

Google it and I'm sure you'll find plenty of info.

[ksamuiguy]

It's the essentially same as setting up any Thai limited company except if you're American you can own 100% of the shares. You are correct there need to be 3 shareholders, but the 2 can just have a very small amount and an be 100% American. Very standard company structure, for Americans anyway. Once established to the best of my knowledge my company operates like any other Thai company - taxes, registration, work permits, etc. nothing special.

Google it and I'm sure you'll find plenty of info.

A copy of the treaty is on line at the Thai Embassy website in Washington DC, both English and Thai.

If you call the U.S. Embassy American Services they will help you set it up.

[bbradsby]

I believe - but its been a while since I actually read the ToA - that the ToA Company can be one of various forms similar to in the US and not just a LLC/LLP. But, just go the US/BKK Embassy website. Its all there.

All the best,

[Sunbelt Asia]

Under the Amity treaty an American can own a bar, restaurant or guesthouse with no Thai partners required and once the certificate is granted they are entitled to the same rights as a Thai owned business. Sunbelt Asia has set up over a thousand Amity Treaty companies and has found that permission from the Board alone can take anywhere from 2 to 6 weeks. The Board that approves the applications only meets once a month, so timing would depend on how soon before they meet the application is submitted. However, from start to finish, it can take up to 3 months (including tax and VAT registration) as the necessary paperwork must also be submitted to the US Business Bureau before going to the Ministry of Commerce. Both Thai and US independent offices approve the application so it is a bilateral agreement that is still in force and there has been no insistence on the part of the Thai government to end the treaty.

The Amity Treaty and Economic Relations, was signed in Bangkok on May 29, 1966. The treaty allows American citizens and businesses incorporated in the U.S. to maintain a majority shareholding or to own a company in Thailand in its entirety, thereby engaging in business on the same basis as a Thai national. The Treaty permits American companies to maintain a majority shareholding or to wholly own its company, branch office or representative office located in Thailand. American companies receive national treatment, meaning U.S. firms may engage in business on the same basis as Thai companies, and are exempt from most of the restrictions on foreign investment imposed by the Alien Business Law of 1972. For American companies who wish to be covered by the Treaty of Amity, it is required to have at least 50% American directors and a minimum of 51% of the shares must be held by American citizens.

However, under the Treaty of Amity, Thailand restricts American investment in the following fields of business:

1. Communications

2. Transportation

3. Fiduciary functions

4. Banking involving depository functions

5. Exploitation of land and natural resources

6. Owning land; and

7. Domestic trade in agricultural products.

A limited company in Thailand formed under the Amity Treaty must have at least 3,000,000 baht of registered capital. It is recommended to pay up for 25% of the shares when setting up the company, to show that the business has working capital and has not been set up purely to provide a work permit. Providing you have four Thai employees and 3,000,000 baht of registered capital, you will be able to obtain one work permit through the company.

[sunbelt][/sunbelt]

[WarpSpeed]

A limited company in Thailand formed under the Amity Treaty must have at least 3,000,000 baht of registered capital. It is recommended to pay up for 25% of the shares when setting up the company, to show that the business has working capital and has not been set up purely to provide a work permit. Providing you have four Thai employees and 3,000,000 baht of registered capital, you will be able to obtain one work permit through the company.

Far be it for me to question our esteemed sponsors here but this is not how the official posting reads.. So has this been somehow ad lib misquoted after the fact or is there another official source other then the buyusa.gov website which reads as follows under legal requirements..

Additional Notes for Company Formation:

There are no limitations on registered share capital; in practice, a minimum of Bt3 million is advisable. If a company has an authorized and paid up capital of less than this amount, it could have difficulty in obtaining work permits for foreigners.

A representative or regional office structure may be beneficial for companies engaged in "non-trading" activities. Such companies may obtain expedited visas and work permits.

For setting up an export-oriented company, the Board of Investment promotion programs can offer significant benefits. Please call BOI for eligibility criteria for promotion privileges.

For American companies, registration as a Treaty of Amity company may also be worthwhile (see FAQ 5 for more details). The Treaty filing is separate and in addition to the company formation/ registration process.

That is a substantial difference from saying they MUST have a minimum of Bt3 million capital.

Additionally is it required for a Thai company to have at least 4 Thai employees to set up a company?? This is also not specified anywhere I've seen after months of research as it is above and the requirements are supposed to be the same for Americans as for Thai's yes?

Source

[Indo-Siam]

I can confirm that it is completely routine to obtain Amity Treaty approval for a company established with 2,000,000 baht registered capitalization.

No Thai employees are required to establish a company - they are only required in order for the company to be eligible to sponsor a work permit. In most locations OUTSIDE of Bangkok, four Thai employees are required, per work permit. Within Bangkok, we routinely get work permits for new companies with just two Thai employees, initially.

In Bangkok, to sponsor a work permit, the company form Bor Or Jor 5 must show that 100% of registered capital has been paid up - as certified by a director's signature on the form. There is no requirement for a company to even a bank account opened, to apply for a work permit.

For the latest company for which we obtained Amity approval, key dates were:

Company incorporated 25 March

US Commercial Service endorsement obtained 31 March

Applied to Ministry of Commerce for Foreign Business Certificate 5 April

Received Foreign Business Certificate 20 April

Presumably, the MOC process was delayed somewhat by Songkran holiday.

Cheers!

Steve

Indo-Siam

[WarpSpeed]

I can confirm that it is completely routine to obtain Amity Treaty approval for a company established with 2,000,000 baht registered capitalization.

No Thai employees are required to establish a company - they are only required in order for the company to be eligible to sponsor a work permit. In most locations OUTSIDE of Bangkok, four Thai employees are required, per work permit. Within Bangkok, we routinely get work permits for new companies with just two Thai employees, initially.

In Bangkok, to sponsor a work permit, the company form Bor Or Jor 5 must show that 100% of registered capital has been paid up - as certified by a director's signature on the form. There is no requirement for a company to even a bank account opened, to apply for a work permit.

For the latest company for which we obtained Amity approval, key dates were:

Company incorporated 25 March

US Commercial Service endorsement obtained 31 March

Applied to Ministry of Commerce for Foreign Business Certificate 5 April

Received Foreign Business Certificate 20 April

Presumably, the MOC process was delayed somewhat by Songkran holiday.

Cheers!

Steve

Indo-Siam

Thank you for that comprehensive response and confirmation of suspicions, I'm disappointed that Sunbelt didn't respond but I'm pretty sure I know the reason ..

[chiangmaibruce]

Under the Amity treaty an American can own a bar, restaurant or guesthouse with no Thai partners required and once the certificate is granted they are entitled to the same rights as a Thai owned business.

Correct me if I'm wrong but this is not entirely accurate ... I understand that Amity companies can't buy land

[Sunbelt Asia]

Apologies for the delay in response but things have been quite busy post-Songkran.

Firstly, let me point out that what the guidelines are on a website and what is actually practiced are two different things and can vary, as all things do in Thailand.

Like the ocean tide changes so does the interpretation. Look at our post on this back on Feb 28th, 2007

We insisted it could only be 2 million for a work permit and the Labor Dept from Dec 2006 to Feb 2007, insisted it was 3 million and they wanted to see cash in the bank! We told them they were violating Thailand's Ministerial Regulation; Prescribing the Minimum Capital and Time Period (2004.) Even though Amity companies have preferential treatment compared to other nationalities,,they still would nevertheless need to satisfy the Minimum Capital 3 million baht requirement under the FBA but this Ministerial Regulation exempted it. However, after countless hours with our lawyers, the Labor Dept finally saw the light that this 2004 Ministerial Regulation was the guideline and it would end in Aug 2009. The Labor dept then gave a two year extension until they would then enforce it in Aug 2009. In Aug 2009, a new Ministerial Regulation 2009 gave a new 10 year extension till August 30th, 2019 where we have been told it will be 3 million Baht per business objective. We'll worry about that then in 2019 :-)

As of this time, however the Labor Dept in Bangkok wants to see only 2 million Baht for a work permit. The Ministry of Commerce however wants to see registered 3 million Baht for a Limited company if its a restricted business to foreigners, two million Baht if its not restricted, (but then why would you do Amity? ) however because of the Ministerial Regulation 2009 you do not have to bring the funds into Thailand till 2019. These funds are required to be shipped in 2019 to Thailand regardless of whether the Treaty Enterprise is a newly commencing business in Thailand or if it is an already-existing business. Now as I mention like the ocean tide changes so does the requirements. One day it might be any share capital and you may be approved ( still need 2 million for the wp)

Everyone has different experiences but given the large volume we do, this has been our experiences in the main.

[sunbelt][/sunbelt]

[Sunbelt Asia]

Under the Amity treaty an American can own a bar, restaurant or guesthouse with no Thai partners required and once the certificate is granted they are entitled to the same rights as a Thai owned business.

Correct me if I'm wrong but this is not entirely accurate ... I understand that Amity companies can't buy land

Hi chiangmaibruce, apologies if there is some confusion here but we do not state you can own land. We state you can own a bar, restaurant or guesthouse with no Thai partners required. This is, of course, not the same thing as owning land as it is possible to own a business without owning the land but simply leasing.

[WarpSpeed]

Apologies for the delay in response but things have been quite busy post-Songkran.

Firstly, let me point out that what the guidelines are on a website and what is actually practiced are two different things and can vary, as all things do in Thailand.

Like the ocean tide changes so does the interpretation. Look at our post on this back on Feb 28th, 2007

We insisted it could only be 2 million for a work permit and the Labor Dept from Dec 2006 to Feb 2007, insisted it was 3 million and they wanted to see cash in the bank! We told them they were violating Thailand's Ministerial Regulation; Prescribing the Minimum Capital and Time Period (2004.) Even though Amity companies have preferential treatment compared to other nationalities,,they still would nevertheless need to satisfy the Minimum Capital 3 million baht requirement under the FBA but this Ministerial Regulation exempted it. However, after countless hours with our lawyers, the Labor Dept finally saw the light that this 2004 Ministerial Regulation was the guideline and it would end in Aug 2009. The Labor dept then gave a two year extension until they would then enforce it in Aug 2009. In Aug 2009, a new Ministerial Regulation 2009 gave a new 10 year extension till August 30th, 2019 where we have been told it will be 3 million Baht per business objective. We'll worry about that then in 2019 :-)

As of this time, however the Labor Dept in Bangkok wants to see only 2 million Baht for a work permit. The Ministry of Commerce however wants to see registered 3 million Baht for a Limited company if its a restricted business to foreigners, two million Baht if its not restricted, (but then why would you do Amity? ) however because of the Ministerial Regulation 2009 you do not have to bring the funds into Thailand till 2019. These funds are required to be shipped in 2019 to Thailand regardless of whether the Treaty Enterprise is a newly commencing business in Thailand or if it is an already-existing business. Now as I mention like the ocean tide changes so does the requirements. One day it might be any share capital and you may be approved ( still need 2 million for the wp)

Everyone has different experiences but given the large volume we do, this has been our experiences in the main.

[sunbelt][/sunbelt]

Yes, now where was that moon-walk icon ?

[Indo-Siam]

Here is the correct information:

If a company has majority foreign shareholders, the Labor Ministry will only allow it to sponsor a work permit if the requirements of the Foreign Business Act (FBA) are satisfied.

There are three possibilities:

1. The FBA does not restrict the declared business activity of the company. Example: Manufacturing

2. The Company has a Foreign Business License - in which case, under Section 14 of the FBA, the company must have registered capital of at least 3,000,000 baht.

3. The company has a Foreign Business Certificate - in which case, the 'default' criteria of Section 14 of the FBA applies - that being that the company must have registered capital of at least 2,000,000 baht.

The exact wording of Section 14 is:

"Section 14. The minimum capital used at the commencement of the business operation shall not be less than that prescribed by ministerial regulations and shall in no case be less than two million Baht.

In the case where the businesses in the preceding paragraph require the license under the Lists attached hereto, the minimum capital to be prescribed in the ministerial regulations for each of the businesses shall in no case be less than three million Baht."

The first sentence states the default condition. The second sentence states the condition if a Foreign Business License is required.

Amity Treaty companies fall under Section 10 of the FBA:

"The foreigners operating the business classified in the attached Lists under a treaty to which Thailand is a party or is obligated to abide "

and are therefore covered under Section 11 of the FBA:

"the foreigners qualified under Section 10 wishing to operate the business under the attached Lists shall notify the Director-General under the rules and procedures prescribed in the ministerial regulations in order to obtain a Certificate.

So - it is the fact that an Amity Treaty Company satisfies the FBA requirement with 2,000,000 baht - because it operates under a Foreign Business Certificate -- that allows the Amity Treaty company to sponsor a work permit with just 2,000,000 baht registered capital.

This is not a "new" rule - the current version of the FBA was published in 1999 (countersigned by Prime Minister Chuan Leekpai).

I think that the reason that there is a lot of confusion is that many/most people are not aware that there are two distinct categories of authorization to operate a "foreign business" - under a Foreign Business Certificate, or under a Foreign Business License.

There is another operational distinction between these two forms of authorization - that being in the government approval fees. The approval fee for a Foreign Business Certificate is a flat 20,000 baht. The approval fee for a Foreign Business License is based on which "list" of restricted activities the activity of an applying company appears, and on the registered capital of the company.

By the way, the other category of companies that operate under a Foreign Business Certificate is companies that are approved for BOI promotional benefits, and which have majority foreign share ownership.

An English version of the FBA is available at Foreign Business Act of 1999

The details of the differences in government approval fees are provided in Sections 2 and 3 at: Fee Schedule - FBA

Cheers!

Steve

Indo-Siam

[jimky]

A few questions if you guys don't mind.

Question #1

If understand it correct for a Thai company with less than 5 million baht capital the Corporate Income Tax is:

First Million Baht - 20%

Next 2 million Baht 25%

Everything Above 30%

Does the same apply to an Amity company, or is the rate now a flat 30%?

Question #2

I have a Thai wife and son, live in Thailand on a Non Immigrant "O" extensions already with my foreign income supporting the income requirements. For a Thai company I only need only two employees (for reasons I'm married and supporting a family here, and already have visa) to get a work permit.

With an Amity company would I still only need 2 employees? Or would I now need 4?

Question #3

Okay this one is slightly off topic.

Could this work long term?

The company is internet based and doesn't need much capital (200,000 baht is adequate).

Start the company with:

250,000 baht cash / 2,750,000 baht note (I owe the company this much) as my 3 million baht capital.

In addition to if this would work, what are the potential upsides and downsides to doing this way?

Thanks in advanced for any responses.

[Indo-Siam]

1. For company with registered capital of less than 5,000,000 baht, tax rate on the first 1,000,000 baht in annual profit is 15%, not 20%. Reference: Section 3 at Thai Corporate Income Tax

2. Amity Treaty status has no affect on work permit requirement, for you. So - just two Thai employees.

3. Nothing in "the system" currently prevents you from paying up company's registered capital in cash, then loaning some large portion of that cash back out to yourself - listing this "loan to related party" as an asset of the company. In the event your company becomes insolvent, and a creditor has claims against the company, it is (theoretically) possible for the creditor to petition via court action to collect the obligation due to that creditor DIRECTLY from the entity that owes the debt to the company.

You did not detail the nature of your business, but just for background knowledge, an internet-based business that is involved solely with export of Thai-sourced goods is not eligible to apply for Amity Treaty approval - because that particular activity may be routinely pursued by any company with majority foreign share ownership.

Good Luck!

Cheers!

Steve

Indo-Siam

[jimky]

Great thanks. I had read that 15% as well, but figured it was outdated after my quote from Sunbelt said:

Capitalization under 5 million:

20% Net profit not exceeding 1 million Baht

25% Net profit over 1 million Baht but not exceeding 3 million Baht

30% Net profit exceeding 3 million Baht

Question to clarify please

Is the tax rate for an Amity company under 5 million baht the same 15% on first 1,000,000, 25% on next 2,000,000? I had thought I read somewhere that foreign companies were always taxed at 30% and did not receive this small business tax break, but now can't seem to find that.

[Indo-Siam]

Actually the detailed correct answer is:

Thai Annual Corporate Income Tax for company will less than 5,000,000 baht registered capital:

First 150,000 baht in annual profit: 0%

150,000 to 1,000,000 baht in annual profit: 15%

1,000,001 to 3,000,000 baht in annual profit: 25%

Annual profit in excess of 3,000,000 baht: 30%

The 0% rate on the first 150,000 baht in annual profit, just like the 0% personal income tax rate on the first 150,000 baht in taxable income, are two initiatives put in place by the currently seated Thai government - but for which they never get any credit. These initiatives don't do much for wealthy people or companies - but they significantly help small businesses and modest earners.

Combine with the 99,000 baht in standard personal deductions and standard personal exemptions that apply to most wage-earners, it means that anyone who earns 20,750 baht or less per month pays ZERO personal income taxes in Thailand.

There is only one corporate tax rate of 20% that exist in Thailand - and that is for public companies that are listed in something called the Market for Alternate Investment (MAI). So - I suggest that you not use anyone who cites that rate to do your company bookeeping!

Cheers!

Steve

Indo-Siam

[jimky]

Steve, I very much appreciate your responses.

I want to make sure the answer is clear though:.

Yes or No? Does the same tax rate you mentioned in the above post also apply to American owned companies registered in Thailand under the Amity treaty?