Representative Office

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Multinational companies who want to extend their reach into Thailand without creating a separate legal entity. The have two options for entering the Thai market. They can form a branch office or a representative office. Both are governed by the Foreign Business Act but they serve two different functions.

The primary function of a representative office is to provide information and assistance to their foreign head offices. Representative offices in Thailand are not allowed to engage in profit seeking activities or act on behalf of third parties. They are not allowed to receive orders or to offer to negotiate a sale with any person or juristic person. Because of this fact, representative offices are exempt from Thai corporate income taxes or registering for the VAT.

The scope of their activities are limited to non-trading activities such as:

  1. Search and procuring information for the overseas headquarters
  2. Ensuing the quality and quantity of the product ordered by the headquarters
  3. Advise the head office on products offered by the head office to local distributors or consumers
  4. Disseminate news or updates regarding new products or services offered by the head office
  5. Reporting the economic or political situation in Thailand to the headquarters.

Representative offices are meant to only provide support to the head office and engage local customers. Exceeding the scope of activities can result in the income of the parent or affiliated companies being considered to be earned in Thailand and be subject to Thai taxation.

As a foreign business, a representative office will have to obtain a Foreign Business License. Representative Offices can also support a work permit for a foreign national.

Contact our office at info@virasin.com.

Due Diligence and Purchasing Property in Thailand

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The experience of the lessees who lose their homes and investment is an a fraudulent property provides clear examples of why due diligence is required when purchasing property. It is important for purchasers to be aware of the potential legal issues with their property purchases. For foreigners attempting to purchase or lease property or buildings in Thailand, it important to understand Thailand’s restrictions on foreign ownership of property.

Due Diligence goes beyond the terms of the contact. It is necessary to complete a title check, to physically inspect the property, review government permits, and review liens on the property. In addition, they need to complete a background check on the property developer and seller. The complex method of registering property creates situations where fraud can easily take place.

Title Search

A Title search is important prior to purchasing property or entering into a long-term lease. Condominium development projects may have to go heavily into debt to start development. It is necessary to ensure that the property does not have any liens or mortgages on the property. Liens or mortgages attached to a property may make the property unsellable.

Before placing a deposit on the property, buyers should search and review the legal documents pertaining to the property at the government land office. Each type of land title confers different property rights. There Tor Bor Tor Hok which was essentially squatter claims to a property to Chanote Title which is a true title deed that allows a property to be transferred or sold. There are many other types of property rights in between. In addition, there may be easements or appurtenances that confer rights to third parties over portions of the property.

 

Physical Inspection

An independent surveyor should inspect the property to see if the property is connected to a public road. The boundaries of the land should be clear and the title deed accurately reflects the actual boundaries. Access from public roads to the property will affect the property price. If there isn’t a direct access to a public road, the owner can legally force adjacent property owners to provide access but there will be legal costs and problems with neighbors.

In addition, there should be a review of the local zoning ordinances to see what will be built in nearby lands. A view of the beach or mountains might be blocked by a planned tall resort hotel, a large super mart, or a loud highway. The property value for property with an uninterrupted view of the ocean or the mountains may decline if the view is blocked.

 

Building Permits Review

It is important to ensure that the developer or seller has approved building permits and permission for development. Due diligence requires a review of the government filings to ensure that the type of development does not conflict with local restrictions in the area.

There have been recent news of condominium complexes and resorts being torn down because they encroach on national parks or government protected lands. An Environment Examination Report of the property can confirm that the property is being developed in accordance of environmental regulations.

Seller Background Review

The condominium project in Phuket is an example of the dangers of a developer who is not properly funded. There are also circumstances where people claim to own property which they do not actually own. In order to reduce the potential for fraud or abandoned projects, it is important to review the credentials of the seller or property developer.

The individual sellers and developers must be identified. If the developer or seller is a corporation, it is important to review the credentials of the primary shareholders of the company. The property developer and seller’s financial and criminal background should be checked. The property owners and developers names should be crossed checked with check names in court records for ongoing or past litigation. Litigation against the property developers and sellers is a sign of past or current problems.

Due diligence requires a visit to the seller or property developers past projects or sales. The buyer should review the maintenance condition of the project and interview the current residences for any problems with the seller or ongoing issues with the property. The buyer should review the satisfaction level of the current owners. While not all projects are perfect, the investigation may reveal situations which can help the buyer bring up potential after sale concerns during the contract negotiation.

Thai Property Laws

Foreign ownership of property is complicated. The laws create hurdles for non-Thais to own property in Thailand. Under Thai law, foreign nationals are not allowed to outright own land in Thailand. The foreign national may lease the property but the lease cannot exceed thirty years. If the terms of the property contract says the lease is more than thirty years, the term will be reduced to thirty years. The lease can contain a renewal option for another thirty years but there may be problems with the renewal.

There may also be complications with family law and ownership of property in Thailand. When the foreign national is married to a Thai citizen, there may be some benefits during the marriage and problems if there are a divorce. The property can be purchased in the name of the Thai spouse but if there is a divorce, the foreign national may lose the property. There will also be issues with inheritance if the foreign national wants to transfer property such as a condominium to a non-Thai person.

Before embarking on the purchase of Thai property, it is in the buyer’s best interest to seek counsel of a disinterested English speaking Thai lawyer who can discuss Thai laws and regulations as it pertains to the buyer’s specific situation. In addition, a Thai attorney can review the contract terms and negotiate with the seller or property developer for changes to the purchase contract. A property contract is required to be in Thai. An English translation is allowed but the Thai version controls in court.

Purchasing property in Thailand is a complex process. If a foreign national wants to purchase property, the buyer should seek the assistance of a non-interested, knowledgeable, and experienced professional to navigate them through the process. Be careful of guidance by someone who has a personal interest in the sale of the property. They may not have your best interest in their mind.

Treaty of Amity

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The United States-Thailand Treaty of Amity allows the U.S. citizens and businesses the ability to establish a company or branch office in Thailand on the same basis as a Thai company. There are restrictions on certain types of business activities that U.S. and foreign citizens may not engage in. These types of business include owning land, communications, inland transportation, banking, agriculture, or the exploitation of land or other natural resources.

To receive protection under the Treaty of Amity, the U.S. citizen or the U.S. entity must register with the Department of Commercial Registration in the Ministry of Commerce as an American owned and controlled business. The shares of the entity must be 51% held by Americans and a minimum of 50% of the directors must be Americans.

The Treaty of Amity does not grant Americans unrestricted freedom to work in Thailand or to live in Thailand. Americans have to obtain entry visa and work permits just like other foreign nationals. In order to obtain work permit for the U.S. citizen or foreign nationals, the entity must be a partnership or a limited company. In addition, they are required to have a minimum capital requirement of 2 million THB if the business is not restricted by the Foreign Business Act and 3 million THB if the business is restricted.

A partnership, branch office, joint venture, or limited company are required to submit the following documents to the U.S. Commercial Services at the U.S. Embassy in Bangkok to be notarized. There may be additional documents required depending the specific type of entity.

  1. Articles of Incorporation
  2. Company Bylaws
  3. Affidavit of a Corporate Officer verifying the company information, shareholder nationality, and number of shares.

After the documents are certified by the U.S. Commercial Service, the documents are submitted with the registration form at the Department of Commercial Registration. Ownership can be transferred but the company will have to remain a U.S. majority shareholder and with a majority U.S. board of directors in order to qualify for the benefits under the Treaty of Amity.

Foreign Business License

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The Foreign Business Act of 1999 governs the ownership of Thai businesses by foreign nationals. Different rules apply to foreign owned businesses and Thai owned businesses. A foreign owned business is defined as a business with over 49% foreign ownership. Under Thai law, a foreign national can only be majority owner of business operation that is not prohibited by the Foreign Business Act, authorized by the Board of Investments, or allowed by bilateral treaty agreements.

The Foreign Business Act restricts the activities which foreign owned business can conduct business. The FBA list three categories of controlled business activities. The first category are businesses which foreigners are barred from entering because of special reasons and they cannot get special permission from the government to enter into those businesses. These types of businesses are restricted only to Thai nationals. The businesses are as follows:

Prohibited Foreign-Owned Industries

  1. The Press, radio broadcasting station or radio and television station business
  2. Rice farming, plantation or crop growing
  3. Livestock farming
  4. Forestry and timber processing from a natural forest
  5. Fishery, only in respect of the catchment of aquatic animals in Thai waters and specific economic zones of Thailand
  6. Extraction of Thai medicinal herbs
  7. Trading and auction sale of antique objects of Thailand or objects of historical value of the country
  8. Making or casting Buddha Images and monk alms?bowls
  9. Land trading

The second category are industries which are vital national interests. They are generally related to national security, Thai arts, or national resources. Foreign owned businesses must get a license from the Minister of Commerce with approval from the Cabinet to operating in Thailand. The following businesses fall under the second category:

Businesses related to National Safety or Security

  1. Production, distribution and maintenance of:
    1. firearms, ammunition, gun powders and explosives;
    2. components of firearms, ammunition and explosives;
    3. armaments, ships, aircraft or vehicles for military use;
    4. equipment or components of all types of war materials
  2. Domestic transportation by land, water or air, including domestic aviation

Businesses Having Impacts on Arts, Culture, Traditions, Customs and Folklore Handicrafts

  1. Trading of antiques or artistic objects that are artistic works or handicrafts of Thailand
  2. Production of wood carvings
  3. Silkworm raising, production of Thai silk yarn, weaving of Thai silk or printing of Thai silk patterns
  4. Production of Thai musical instruments
  5. Production of gold ware, silver ware, niello ware, bronze ware or lacquer ware
  6. Production of crockery or porcelains representing Thai arts and culture

 

Businesses Having Impacts on Natural Resources or the Environment

  1. Production of sugar from sugar cane
  2. Salt farming, including non-sea salt farming
  3. Production of rock salt
  4. Mining, including rock blasting or rock crushing
  5. Timber processing for production of furniture and utensils

The third category of businesses have been designated as activities which Thai nationals are not ready to compete with foreigners. Foreign owned businesses can operate in these business categories with permission of the Ministry of Commerce and an application for a Foreign Business License. The following is a list of the businesses activities in category three with a catch-all in number 21 (Other service businesses):

Businesses Thai Nationals are Not Ready to Compete with Foreigners

  1. Rice milling and production of flour from rice and economic plants
  2. Fishery only in respect of the hatching and raising of aquatic animals
  3. Forestry from a grown forest
  4. Production of plywood, veneer wood, chipboards or hardboards
  5. Production of lime
  6. Provision of accounting services
  7. Provision of legal services
  8. Provision of architectural services
  9. Provision of engineering services
  10. Construction, with the exception of:
    1. Construction of structures for delivery of infrastructure public services in the sphere of public utilities or transportation requiring the use of special apparatuses, machines, technology or expertise, with the minimum capital of five hundred million Baht or upwards from foreigners;
    2. Construction of other types as prescribed in the Ministerial Regulation
  11. Brokerage or agency businesses, with the exception of:
    1. being a broker or an agent in the sale or purchase of securities or in services related to futures trading of agricultural commodities or financing instruments or securities;
    2. being a broker or an agent in the sale, purchase or procurement of goods or services necessary for the production or the provision of services amongst affiliated enterprises;
    3. being a broker or an agent in the sale or purchase, procurement, distribution or acquisition of domestic and foreign markets for the distribution of domestically manufactured or imported goods, which is in character the operation of international trade, with the minimum capital of one hundred million Baht or upwards from foreigners
    4. being a broker or an agent of other types as prescribed in the Ministerial Regulation
  12. Sale by auction, with the exception of:
    1. a sale by auction which, in character, involves international bidding of items other than antiques, objects of antiquity or artistic objects that are artistic works or handicrafts or objects of antiquity of Thailand or of historical value of the country;
    2. sales by auction of other types as prescribed in the Ministerial Regulation
  13. Internal trade related to traditional agricultural products or produce not yet prohibited by law
  14. Retail sale of goods of all types with the total minimum capital in the amount lower than one hundred million Baht or with the minimum capital of each store in the amount lower than twenty million Baht
  15. Wholesale of all types with the minimum capital of each store in the amount lower than one hundred million Baht
  16. Advertising business
  17. Hotel business, with the exception of the hotel management service
  18. Guided touring
  19. Sale of food and beverages
  20. Cultivation, propagation or development of plant varieties
  21. Other service businesses, with the exception of service businesses as prescribed in the Ministerial Regulation

There are exemptions available for foreign businesses. The Board of Investments will allow certain business to engage in category 2 and category 3 activities if they have been designated promoted activities. Nationals of certain treaties such as the United States, Japan, Australia, and ASEAN may be accorded the same status as Thais in a certain number of listed business activities. The Thai government may also provide a temporary permit for a foreign owned companies to operate in a restricted business activity.

The process of forming a company in Thailand is complex with many restrictions. It is important that you contact a knowledgeable Thai corporate attorney to assist you with the process.

Company Registration in Thailand

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The formation of a Thai company can open avenues for a foreign nationals to purchase property, live, or work in Thailand. Thailand is considered the hub of ASEAN with the gradual removal of trade barriers in the region.

The process of forming a company involves the filing of multiple forms with multiple government agencies. A non-Thai who wants to form a Thai company should seek the assistance of an educated and experienced corporate attorney.

The majority of shares in a Thai company must be owned by a Thai citizen unless it is exempted by special legislation or government program. Foreigners can only own up to 49% of a Thai company. The 49% ownership limit of a Thai company can be exceeded or exempted if a Foreign Business License is granted. A Foreign Business License are granted to foreign owned businesses that are unique and do not compete with Thai businesses. Prohibited foreign owned business are listed in the Foreign Business Act

The owners of the new business has to select type of business organization. The most popular form of company is a private limited company. In a private limited company, shareholders have limited liability. However, the company directors may have unlimited liability. A minimum of three promoters are required for Private limited companies. The promoters can be any natural person, Thai or non-Thai that own shares in the company.

The process with the promoters reserving the name of the company with the Department of Business Development. The promoters must submit a minimum of three names which are not similar with existing reserve names and do not violate any current ministry regulations. The DBD will choose one name out of the three.

Next, a Memorandum of Association must be filed with the Commercial Registration Department. The Memorandum must contain the company name, the value of the shares, and the names of the promoters. Following the filing of the memorandum, a statutory meeting is called. This will establish the particulars of the shares, the directors, and remuneration to the promoters. If the company has foreign workers, there are minimum registered capital requirements and employment requirements for the company.

Within three months of the statutory meeting, the directors are required to submit an application for registration of the company. During the application process, the shareholders and promoters must submit payment for the shares in the new company then sign all of the registration documents. New companies who may be liable for income tax must obtain a tax ID from the Revenue Department within 60 days of incorporation or the start of business.

After registration, the company can begin the process of getting business licenses and start the operation of the business. The new company has to keep track and book income and expenses according to procedures specified in the Civil and Commercial Code, the Revenue Code, and the Accounts Act. There are periodical financial submission requirements for the company to maintain its legal status.

Board of Investments

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Thailand established the Board of Investments (BOI) to provide incentives to foreign and local businessmen to invest in targeted industries in Thailand. The product or enterprise must value added to the product must be 20% or more from the original materials. There are exceptions for the manufacturers of electronic products, agricultural products, or projects granted special approval by the BOI. The BOI applicant must use modern production processes and new machinery. In addition, there are financial sufficiency and environmental protection requirements that have to be met prior to consideration by the Board of Investments.

However, the investment promotions, incentives, and privileges are large. There are many incentives for companies that are granted to BOI companies.

  1. BOI companies are exempted from corporate income tax for a maximum period of eight years.
  2. There is a 50% reduction of the normal corporate income tax rate for up to 5 years after the period of tax exemption.
  3. Double deductions from the cost of transportation, electricity, and water supply.
  4. Additional 25% deduction of the cost of installation or construction of facilities.
  5. Exemption of import duty on raw or essential materials for use in production for export.
  6. A BOI company can carry losses forward to the period of when they are required to pay taxes.
  7. Any dividends distributed during the income tax period are also exempt from income tax.
  8. There are tariff exemptions or reductions on the important of new machinery or raw materials.
  9. Work permits are provided for the foreign national owners and BIO companies may also bring skilled foreign workers and experts to work.
  10. BOI companies can own land for the purpose of their business operation.
  11. BOI companies can also take out or bring money into Thailand using a foreign currency.

There are additional protections provided by the Board of Investments to reduce the risks associated with investing in Thailand. There are also protections against government activities such as nationalization or price controls. To protect against private companies, the Board of Investments will limit the entry of a private company who attempts to compete with an approved BOI company that is involved in the same or similar activity. In addition, there are special BOI government agencies which help to fast track bureaucratic requirements for BOI companies.

The Board of Investment?s application procedure is very complex. For this important process, it is recommended a company interested in applying for a Board of Investment?s exemptions seek the assistance of an experience corporate attorney.

E-2 Investment Visa

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An E-2 Investment visa is available for foreign nationals who would like to invest and move their family to the United States. The visa is only available to nationals of countries with an investment treaty with the United States. The list of treaty countries can be located on the U.S. State Department website. Thailand is a country with an investment treaty with the United States.

For foreign nationals without a U.S. family sponsor or a U.S. employer sponsor, the E-2 Investment Visa is a straight forward way for them to temporarily live and work in the United States. The primary requirement is that the foreign national has money to invest and is capable of running the business operation. The United States welcomes foreign nationals who are willing to start a new business or invest in an existing one and create new jobs for U.S. residents.

The application process for an E-2 visa is complicated. Prior to beginning the processing, the applicant should consult an experienced professional. An error in the transfer of the funds, incorporation of the business, or the purchase of a business can result in the denial of the application. There are no minimum investment requirement but the closer the investment amount to $100,000 or more the greater the chance of approval.

The amount of investment is dependent on the type of business that is being started. For example, the amount required to start a new automobile company is higher than the amount to open a car repair shop.

The investment needs to be in a running business operation and not in speculative or passive investments. The investment cannot be the stock market or purchasing bonds. In addition, the amount needs to be substantial and sufficient to successfully run the business operation.

The amount invested must be in the control of the investor and the investor must bear the risk of business failure. The investor can use their personal assets to get a loan to fund the investment but they cannot use the business assets to secure the loan.

The business must be capable of generating significantly more income than just enough to provide the basic living expenses of the investor and his family. An investment in a single food cart would probably not qualify as an E-2 investment.

The additional benefits for E-2 visa holders is that the spouses of the primary E-2 visa holders can apply for employment authorization and can work without restrictive conditions in the United States. Children under 21 of E-2 status holders have similar educational benefits as U.S. residents. The children have the opportunity to enter public schools similar to U.S. resident unless restricted by state law or school requirements.

Once the investor enters the United States on an E-2 investment visa, the investor and their immediate family can remain in the United States for up to two years. The E-2 investment status can be extended in two year increments as long as the qualified investment enterprise is still in operation as outlined in the initial submission and the E-2 status holder has not violated the terms of the status. There are no limits in the number of extensions an E-2 status holder can file.

 

K-1 Fianc? Visa

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United States citizens can petition to bring their fianc? to the United States for the purpose of getting married. The U.S. government understands that the U.S. citizen and the fianc? might reside in different countries and want to avoid unnecessary travel or simply just want to get married in the United States. They created the K-1 visa to help the U.S. citizen and their fianc? to be together.

In order qualify for a K-1 visa, the U.S. citizen petitioner and the beneficiary must have personally met within the past two years, are both free to marry, and intend on getting married within 90 days of the beneficiary?s entrance into the United States.

The process begins with the U.S. citizen filing an I-129F petition in the United States with the United States Citizenship and Immigration Service (USCIS). The package must contain the required forms, passport photos, documentation of relationship, and personal sign statements of their intent to get married. ?After about three to five months, the USCIS will review the I-129F package.

If USCIS approves the I-129F, the application will be forwarded to the National Visa Center (NVC) for processing. After processing at the NVC for about a month, the package is forwarded to the local U.S. consulate that has jurisdiction to your fianc? residence. The U.S. Consulate will send the fianc? a list of required documents including birth certificates, police records, and evidence of the freedom to marry.

After the U.S. Consulate has reviewed the package, the consulate will schedule an interview with the fianc?. The fianc? will have to bring a seal envelope containing the medical exam and original official documents. The officer will review the documentation and interview your fianc? to ensure that the relationship is not fraudulent and to look for possible reasons why they would be inadmissible. If the fianc? has a child wants to bring their child to the United States also, the fianc? should submit the required documents for their child also.

The consular officer will inform the fianc? if the visa is approved after the interview. If the K-1 visa is approved, the officer will take the fianc??s passport to imprint the new visa. The passport will be mailed to the fianc? within 5 business days. The fianc??s child will receive a K-2 visa that will allow them to enter the United States.

The fianc? will receive a six month visa or a visa to the date the fianc??s passport expires. After the fianc? enters the United States, they must marry the petitioner within 90 days. The fianc? will then have to file for adjustment of status to obtain U.S. permanent resident status.

Immigrating Spouse of a United States Citizen

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A United States Citizen can petition for their immediate relative to come and live with them in the United States. There are no quotas for this type of petition and the spouse can come to live in the United States immediately after the application is approved. The question of who is considered a spouse is important. There are three main considerations of whether there is a marriage.

First, the marriage must have been?valid at the time it was performed. Each party of a marriage must have been free to marry at the time it was performed. The party must be single and all prior divorces must have been valid and recognized. The marriage ceremony must have been recognized as legal in the place where it was performed. With the exception of marriages between close family members or where one of the parties is considered too young, it does not have to be legal at the place of domicile. With the legalization of same-sex marriages in multiple states and countries, petitions by homosexual couples are accepted by U.S. immigration.

Second, the marriage must still be in existence at the time the immigration benefit is conferred or during the period that the principle foreign national is in the United States under a non-immigrant visa. The marriage does not have to be ?viable.? The couple can be separated or longer living in the same home but it must not have been legally terminated. In some states, a legal separation agreement would constitute the termination of the marriage. However, a marriage where the couple is not residing together may bring questions about the bona fides of the marriage.

Third, the marriage must not be a marriage of convenience or entered into for immigration purposes. The intention of the marriage should be based on good faith in accordance with the laws of the place where the marriage was performed. No fee or consideration should have been given to either party as a precursor to filing a petition for an immigration benefit. The level of scrutiny by U.S. immigration will depend on the length of marriage, the current living situation of the couple, the cultural background of the parties, and the development of their relationship prior to marriage.

The penalties for marriage fraud is severe. An immigrant found to have committed marriage fraud will be removed from the United States and essentially black listed from ever entering the United States again. The U.S. petitioner faces the possibility of imprisonment for up to five years and a $250,000 fine. The most severe penalties are for parties who have engaged in a criminal conspiracy to arrange fraudulent marriages.

For applicants who have been married to the petitioning United States Citizen for over two years, they will be entering under the IR-1 category which means that they will receive a 10 year permanent residency card upon entering the United States. If they have been married for less than 2 years, the applicant will receive the status of conditional permanent resident (CR-1). The applicant and the petitioner will have to provide evidence of their continued marriage prior to the second year of the applicant?s entry into the United States.