Thailand is a popular business destination due to its economic growth, valuable exports, and attractive culture. If your company is based in the United States and you are looking to expand into the Thai market, you could benefit from some distinct registration advantages offered through the U.S.-Thai Amity Treaty.
This article will walk you through the key components of this Amity treaty and in what ways it can offer unique benefits to U.S.-owned companies setting up in the Thai market. It will also explore some downsides to consider when determining how to register your business.
What is the Treaty of Amity between the United States and Thailand?
The Amity Treaty refers more specifically to the “Treaty of Amity and Economic Relations between the United States of America and the Kingdom of Thailand”. This agreement was signed in 1966 and aims to improve business and investment opportunities for U.S. companies that are seeking to expand activities in Thailand.
The Treaty primarily allows Americans to maintain majority shares in their Thai-located business. This is a distinct advantage in terms of retaining control when compared to Thai-majority companies, which limit foreign ownership to 49%. It also allows investors to bypass the restrictions imposed by the Foreign Business Act.
If you are looking to expand your business into Thailand, it is worth weighing the pros and cons of company registration under the U.S.-Thai Amity Treaty. You can also check out this guide on everything you need to know about BOI companies in Thailand, which is another potential option for your business registration needs.
Pros of company registration through the U.S.-Thai Amity Treaty
The U.S.-Thai Amity Treaty offers multiple benefits that can make this an appealing method of setting up business in Thailand for investors or companies based in the United States. Here are the main advantages to consider:
- Majority US Ownership: 100% ownership and control by US citizens or US-owned holding companies.
- Exemption from Foreign Business Act: No restrictions on specific business activities, land ownership (though limitations still apply), or minimum capital requirements.
- National Treatment: Equal rights and privileges to Thai-owned companies regarding business activities, investment opportunities, and resource access.
- Dispute Resolution: Access to international arbitration for resolving disputes with the Thai government.
- Protection from Expropriation: Safeguards investments from arbitrary expropriation by the Thai government.
- Simplified Registration Process: Quicker and easier than standard foreign business registration.
- Enhanced Brand Reputation: Demonstrates commitment to transparency and international standards.
Cons of company registration through the U.S.-Thai Amity Treaty
When determining a strategy for making your entry into the Thai market, it is important to weigh some of the downsides that come with company registration via the U.S.-Thai Amity Treaty, such as:
- Not applicable to all industries: Restrictions on foreign ownership still apply in sectors like agriculture and inland transportation.
- Land ownership limitations: Cannot directly own land in Thailand, requiring alternative solutions like leasehold arrangements or Thai subsidiaries.
- Eligibility requirements: Companies must meet specific ownership and incorporation criteria.
- Legal complexities: The registration process contains many legal nuances. U.S. documents must be notarized and nationality details of all Shareholders must be submitted. Incorporation documentation must be approved by authorities in each country.
- Cost considerations: Professional legal and accounting assistance might be necessary, adding to expenses.
Requirements for company registration
For a company to be eligible for registration under the U.S.-Thai Amity Treaty, it must adhere to a structure of majority U.S. ownership. At least 51% (up to 99%) of the shares in the company must be owned by US citizens or US companies owned by US nationals. This can be in the form of direct ownership by individuals or through US-owned holding companies.
The other structural requirement is that the company must be incorporated in either Thailand or the United States, as long as majority ownership is by U.S Shareholders. This means it must be legally registered as a separate entity in one of these countries. A separate entity refers to a company’s finances and activities remaining independent of the assets of shareholders.
While not directly mandated by the Treaty, it is important to note that Thailand generally requires a minimum registered capital of 3 million THB for foreign companies. Certain business activities within Thailand could also have restrictions on foreign ownership despite the Treaty. To simplify your registration process, consult with Emerhub’s team of Thai company registration experts.
Simplify the registration process under the U.S.-Thai Amity treaty with Emerhub
Once you have evaluated your business structure and determined that you wish to move forward with the registration of a company under the Amity Treaty, you can move forward with the three-step process:
- Prepare necessary documents like the Memorandum of Association and Articles of Association, along with evidence of US citizenship or company ownership for shareholders.
- Submit the completed application form and supporting documents to the Thai Ministry of Commerce.
- Once approved, the Ministry of Commerce will issue a Certificate of Operation confirming the company’s status under the Treaty.
Although there are only three steps in the process, there are many legal complexities involved in ensuring that you have the appropriate documentation and that it complies with the Amity Treaty. Emerhub’s advisors have a deep understanding of the registration process and can assist you every step of the way to ensure proper adherence to Amity treaty requirements.
Key considerations for company registration via the U.S.-Thai Amity Treaty
Do you still need a Thai shareholder or director?
A Thai shareholder or director is not a mandatory requirement for registering a company under the US-Thai Amity Treaty. The Treaty allows majority US ownership and control, meaning at least 51% of the shares and decision-making power within the company must be held by US citizens or US companies owned by US nationals.
There are, however, certain situations where you could benefit from having a Thai shareholder, which you should take into account when determining your company structure:
- Certain investment promotion programs offered by the Board of Investment (BOI) in Thailand might require some Thai ownership or participation in the company to qualify for incentives like tax breaks or land ownership rights.
- Having a Thai shareholder or director with knowledge of the local market and connections can facilitate smoother interactions with Thai authorities, partners, and customers.
- Some industries in Thailand, like land development or retail, might have specific limitations on foreign ownership even under the Treaty
Companies registered under the U.S.-Thai Amity treaty cannot directly buy land in Thailand. Despite the numerous advantages for US businesses offered by the treaty, this restriction can be a major drawback.
That being said, there are some alternative solutions to consider if land ownership is crucial to your business in Thailand and you still wish to register via the treaty:
- Leasehold arrangements: You can lease land from Thai landowners for a specified period with the possibility of renewal. This option provides long-term stability and use of the land, without granting full ownership rights.
- Land-owning Thai subsidiary: Establishing a Thai subsidiary owned by your Amity Treaty company allows you to purchase land through the subsidiary. This approach has legal and tax implications, so consultation with professionals is recommended.
- Joint ventures with Thai partners: Partnering with a Thai company that can own land on your behalf can bring local expertise and connections. It does however require careful consideration of ownership structures and profit-sharing agreements.
- BOI investment promotion programs: Some BOI programs allow exceptions to land ownership restrictions for foreign companies under specific conditions and investment levels. These should be explored on a project-to-project basis.
How to streamline the process
The U.S.-Thai Amity treaty can be an appealing option for U.S. foreign investors and companies seeking to operate in Thailand. Considering the many legal complexities involved in both countries, consider taking advantage of Emerhub’s expertise in the Thai market to streamline your entry.
Emerhub’s team of experts is well-versed in company registration policies and the involved legalities in Thailand. By partnering with us, you can rely on easy access to our top local advisors, as well as ongoing support throughout your registration process. This will ensure a smooth transition into the Thai business market and will avoid potential delays.
If you are interested in starting your entry into Thailand, then don’t hesitate to contact us via the form below!