CHAPTER
2
THE
UNITED STATES – THAILAND TREATY OF AMITY
Ownership of businesses by Thais and
Americans in each others’ countries is governed by a special treaty, the Treaty
of Amity and Economic Relations between the United States and Thailand
(1968). The Treaty is still in force today. It may be terminated by either
party upon one year's notice.
In 2003, the Thai Government
announced that the Treaty would be rescinded as part of the negotiations for a
bilateral trade treaty between the United States and Thailand. As at 1 October
2006, those negotiations are in progress and continuing.
Benefits of the Treaty Subject to seven exceptions, Americans are granted the same rights that
Thai nationals enjoy to own and operate businesses in Thailand. Likewise, Thai
nationals are granted reciprocal rights in the United States, but since the
United States generally does not restrict the right of foreigners to do
business there, Thai nationals rarely if ever have the opportunity to directly
claim benefits under the Treaty, although they do have the right to apply for
Treaty Trader and Treaty Investor visas under United States immigration law.
Proving entitlement In order to claim the benefits of the Treaty, the shareholders in a
Thai business entity that are American corporations, must present evidence of incorporation
in the United States, together with evidence that a majority of its
shareholders and directors are American. If there are numerous shareholders,
the company secretary may submit an affidavit describing the number of shares
owned by Americans. If the company's shares are publicly traded, the company
secretary may estimate the number of shares owned by Americans.
The company secretary must also
provide an affidavit, listing all the directors of the company and their
nationality. All evidence concerning American companies as shareholders as well
as other documents from abroad, including the affidavits, must be notarized or
certified to be true copies by a government official and then authenticated by
a Thai Embassy or Consulate. Evidence of American ownership must be proved down
to the ultimate level of ownership. Thus, if the shareholding company is a
subsidiary of another company, then there must be similar evidence provided
concerning the parent company's American status.
If an American company desires to do
business in Thailand through a branch office (see Chapter 4 Business Organizations),
it should apply for a Treaty Protection Letter and submit similar evidence
concerning its American ownership, as indicated above. All submissions to the
Ministry of Commerce must be accompanied by a letter from the Commercial
Attaché of the US Embassy in Bangkok, confirming that the persons and companies
involved are in fact American and entitled to protection under the Treaty.
Who may claim Treaty benefits The equal national treatment benefits under the Treaty may be claimed
by:
Treaty protection letter In order to do business as a Treaty protected business entity, it is
customary that the business applies for a Treaty protection letter from the
Ministry of Commerce. This is advisable, since without such a letter, other
Thai government offices will not recognize the entity's right to do business.
In order to obtain the Treaty
protection letter where the applicant is a natural person or an American owned
partnership or company constituted under the laws of Thailand, it is necessary
to present evidence that such natural person or a majority of the partners or
shareholders are American. For natural persons, this evidence usually consists
of a copy of the person’s passport.
Excluded business activities The categories of business excluded from protection under the Treaty
are:
2. transportation,
3. fiduciary functions
(in the Thai text of the treaty the term "fiduciary functions"
is translated as "looking after the property of others," and in
the opinion of the Thai authorities, businesses such as warehousing and
security services are included in this category, and are thus not entitled to Treaty
protection,
4. banking involving depository
functions (interpreted to include finance businesses),
5. the exploitation of land or
natural resources,
6. domestic trade in indigenous
agricultural products, and
7. the liberal professions (such as
law).
Although a particular business activity
may be excluded from the Treaty, it does not mean that Americans are prohibited
from engaging in such a business. For example, banking is excluded from the
Treaty, yet there are a number of American banks operating in Thailand.
Land ownership Foreigners may not generally own land in Thailand, with a limited
number of exceptions (see further Chapter 7 Land, buildings and
condominiums). The right to own land is not included in the Treaty. Thus Americans
are in the same position as others foreigners in relation to land ownership.
Work permits and visas Although Americans have the right to manage their businesses, the
Treaty does not grant Americans unrestricted freedom to work in Thailand, or the
absolute right to stay in Thailand if they own a business entitled to Treaty
protection. Americans are thus obligated to apply for work permits or visas, in
the same way as the nationals of any other country (see further, Chapter 19 Work
Permits and Chapter 20 Immigration).
Double taxation treaty The double taxation treaty between United States and Thailand is
entirely separate from the Treaty of Amity. It came into effect on January 1,
1998 (see further Chapter 16 Double Taxation Treaties).
Commentary As noted above, the Treaty is due to be rescinded as part of the
negotiations for a bilateral Free Trade Agreement between Thailand and the
United States. Two questions arise. After rescission, will American citizens
and companies be made subject to the Foreign Business Act (see Chapter 1 Foreign
Business Restrictions) in the same way as nationals and companies of all
other countries, or will different treatment be applied? Secondly, what will
happen with regard to existing companies that are registered under the
provisions of the Treaty?
These questions cannot be answered
at present. A tentative view is that Treaty companies will eventually be made
subject to the Foreign Business Act, and existing Treaty companies will be
allowed a grace period to comply with any foreign shareholding and other
limitations that arise under the Act. But it will be necessary to await
the outcome of the FTA negotiations.
Revised 1 December 2006