WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH REGISTERING TRADEMARKS IN THAILAND?
As mentioned in the FAQ “What are the Benefits Associated with Registering Trademarks in Thailand?”, in order for a trademark owner to have the full protection of Thai law the mark must first be registered with the Department of Intellectual Property (DIP).
In order for a mark to be registerable under Thai law it must:
1. be distinctive
2. not be the same as or similar to a trademark already registered by another person and
3. not be otherwise prohibited by law.
Below is an explanation of some of the most common legal issues associated with registering marks in Thailand.
Distinctiveness
Determining whether a given mark is distinctive is a fairly subjective undertaking relying heavily on the discretion of the Registrar at the DIP. Thai trademark law does, however, provide guidance in this area.
A distinctive mark allows the consuming public to distinguish the goods and/or services with which the mark is used from other goods. Put simply, the mark helps the public to differentiate one particular product from other products.
The law, also, provides that marks possessing one or more of the following characteristics shall be deemed distinctive.
1. a combination of colors represented in a special manner, stylized letter(s), numeral(s) or invented word(s);
2. a word or words that has no direct reference to the character or quality of the goods and is not a geographical name designated by the Ministerial Notifications;
3. a personal name, a surname not being such according to its ordinary signification, a name of a juristic person or a tradename represented in a special manner;
4. the signature of the applicant for registration or some predecessor in his business or the signature of another person with his or her permission;
5. a representation of the applicant or of another person with his or her permission or of a dead person with the permission of his or her ascendants, descendants and spouse, if any;
6. an invented device.
Much of the above criteria is straight forward. Below are three of the most common issues which arise concerning whether a mark is distinctive.
1. Stylized Letter(s), and Invented Word(s)
The rule as stated in item 1 above is that in order for letters (which do not form a word) to be distinctive under this criteria they must be stylized.
2. No Direct Reference to the Character or Quality of the Goods
According to item 2 above, if a word or words in a mark have no direct reference to the character or quality of the goods, the mark will be distinctive. By implication then, marks containing words that do directly reference the character or quality of the goods would not be distinctive under this criteria.
This principle also applies to slogans.
3. Exception: Proof of Use
There is, an exception to the above rules concerning distinctiveness. A trademark that has been extensively used in Thailand prior to submitting the trademark application can be deemed distinctive even if it does not comply with the above listed rules.
The standard commonly used to evaluate use is that the use must be sufficient to cause customers to easily associate the mark with the goods or services of the applicant. Many times this standard is quite difficult to meet.
Evidence of use which may be considered by the DIP in these situations includes copies of advertisements containing the mark, sales receipts and other evidence of use. In order to qualify for this exception, the applicant must be able to demonstrate proof of use in Thailand. Proof of use in other countries will not be considered.
Not the Same or Similar to a Trademark Registered by Another Party
If a mark is the same or similar to a mark previously registered by another party it will not be registerable. In determining whether a given mark is the same or similar only marks previously registered in Thailand are relevant. Marks registered in other countries will not be considered unless the mark is considered a generally famous mark (see below section).
Prior to submitting the trademark application, the applicant should conduct a database search at the DIP to determine whether anyone has previously registered a same or similar mark in Thailand. If so, the applicant will know (before submitting the application) that the application may be rejected on this basis.
Not Prohibited by Law
The law specifically states that marks having the following characteristics are not registerable:
1. a mark, registered or not, which is identical with a well-known mark, as prescribed by the Ministerial Notifications, or so similar that the public might be confused as to the owner or origin of the goods;
2. state arms or crests, royal seals, official seals, Chakkri emblems, emblems and insignia of the royal orders and decorations, seals of office, and seals of ministries, bureaus, departments or provinces;
3. national flags of Thailand, royal standard flags or official flags;
4. royal names, royal monograms, or abbreviations of royal names or royal monograms;
5. representations of the King, Queen or Heir to the Throne;
6. names, words, terms or emblems signifying the King, Queen or Heir to the Throne or members of the royal family;
7. national emblems and flags of foreign states, emblems and flags of international organizations, emblems of heads of foreign states, official emblems, quality control symbols and certification symbols of foreign states or international organizations, and names and monograms of foreign states or international organizations, unless permission is given by the competent officer of the foreign state or international organization;
8. official emblems and emblems of the Red Cross or appellations “Red Cross” or “Geneva Cross”;
9. a mark identical with or similar to a medal, diploma or certificate or any other mark awarded at a trade exhibition or competition held by the Thai government or a Thai government agency for public enterprise or any other government organ of Thailand, foreign government or international organization, unless such medal, diploma, certificate or mark has been actually awarded to the applicant for goods and is used in combination with the trademark;
10. any mark which is contrary to public order, morality or public policy;
11. trademarks similar to those under 2, 3, 4, 6, 7 or 8;
12. geographical indications protected under the law on geographical indications;
13. other trademarks prescribed by the Ministerial Notifications.
1. Generally Famous Marks
As discussed in the previous section, in its determination of whether a given mark is the same or similar to another mark, the Registrar is generally just concerned with other marks registered in Thailand. Marks registered in other countries (but not in Thailand) are not taken into account. There is an exception to this rule, however, with regard to generally famous marks.
The concept here is that there are some marks that are so widely known in the world that they should be afforded protection even if they have not been registered in Thailand.
The DIP keeps a list on file which it refers to when determining whether a given mark is generally famous.
Other Considerations
The following are other things to keep in mind when registering a mark in Thailand.
1. Class System
The DIP operates under the principle that a given mark may receive protection only with regard to the specific kinds of products and/or services that the applicant designates in the application.
Note that the specific item (s) for which protection is sought must fall under the headings presented.
2. Disclaimers
Many marks contain a combination of words, numbers, letters and/or symbols. As explained above, some of these words, numbers letters, and/or symbols will be registerable and some will not.
Normally, if an applicant applies to register a mark and a portion of the mark is not registerable the Registrar will withhold approval of the application unless the applicant disclaims the portion that is unregisterable.
By disclaiming, the applicant is requesting protection of the mark as a whole, but not for the portion which is not registerable.
3. Registration Procedure
All applications to register trademarks in Thailand must be submitted to the DIP.
The application process consists of a review of the application by the Registrar and publication of the mark in the Royal Thai Gazette, as well as other procedural steps.
Normally, if no challenges or other complications arise, the DIP registrar will grant registration of the mark within eight to ten months of the initial filing date of the application.
4. Official Fees
The official fees payable to the DIP upon filing the registration are calculated based upon the number of items that the applicant requests protection for. The official charge is 500 baht per item.
If the application is later approved, the applicant will be required to pay another official fee based upon the number of items stated in the application which were approved by the registrar. The rate is 300 baht per approved item.
5. Renewals
Every ten years each registered trademark must be renewed or it will lapse.
This documentation must be submitted to the DIP together with a government renewal fee of 1,000 baht for each item the applicant requests protection for.
As mentioned in the FAQ “What are the Benefits Associated with Registering Trademarks in Thailand?”, in order for a trademark owner to have the full protection of Thai law the mark must first be registered with the Department of Intellectual Property (DIP).
In order for a mark to be registerable under Thai law it must:
1. be distinctive
2. not be the same as or similar to a trademark already registered by another person and
3. not be otherwise prohibited by law.
Below is an explanation of some of the most common legal issues associated with registering marks in Thailand.
Distinctiveness
Determining whether a given mark is distinctive is a fairly subjective undertaking relying heavily on the discretion of the Registrar at the DIP. Thai trademark law does, however, provide guidance in this area.
A distinctive mark allows the consuming public to distinguish the goods and/or services with which the mark is used from other goods. Put simply, the mark helps the public to differentiate one particular product from other products.
The law, also, provides that marks possessing one or more of the following characteristics shall be deemed distinctive.
1. a combination of colors represented in a special manner, stylized letter(s), numeral(s) or invented word(s);
2. a word or words that has no direct reference to the character or quality of the goods and is not a geographical name designated by the Ministerial Notifications;
3. a personal name, a surname not being such according to its ordinary signification, a name of a juristic person or a tradename represented in a special manner;
4. the signature of the applicant for registration or some predecessor in his business or the signature of another person with his or her permission;
5. a representation of the applicant or of another person with his or her permission or of a dead person with the permission of his or her ascendants, descendants and spouse, if any;
6. an invented device.
Much of the above criteria is straight forward. Below are three of the most common issues which arise concerning whether a mark is distinctive.
1. Stylized Letter(s), and Invented Word(s)
The rule as stated in item 1 above is that in order for letters (which do not form a word) to be distinctive under this criteria they must be stylized.
2. No Direct Reference to the Character or Quality of the Goods
According to item 2 above, if a word or words in a mark have no direct reference to the character or quality of the goods, the mark will be distinctive. By implication then, marks containing words that do directly reference the character or quality of the goods would not be distinctive under this criteria.
This principle also applies to slogans.
3. Exception: Proof of Use
There is, an exception to the above rules concerning distinctiveness. A trademark that has been extensively used in Thailand prior to submitting the trademark application can be deemed distinctive even if it does not comply with the above listed rules.
The standard commonly used to evaluate use is that the use must be sufficient to cause customers to easily associate the mark with the goods or services of the applicant. Many times this standard is quite difficult to meet.
Evidence of use which may be considered by the DIP in these situations includes copies of advertisements containing the mark, sales receipts and other evidence of use. In order to qualify for this exception, the applicant must be able to demonstrate proof of use in Thailand. Proof of use in other countries will not be considered.
Not the Same or Similar to a Trademark Registered by Another Party
If a mark is the same or similar to a mark previously registered by another party it will not be registerable. In determining whether a given mark is the same or similar only marks previously registered in Thailand are relevant. Marks registered in other countries will not be considered unless the mark is considered a generally famous mark (see below section).
Prior to submitting the trademark application, the applicant should conduct a database search at the DIP to determine whether anyone has previously registered a same or similar mark in Thailand. If so, the applicant will know (before submitting the application) that the application may be rejected on this basis.
Not Prohibited by Law
The law specifically states that marks having the following characteristics are not registerable:
1. a mark, registered or not, which is identical with a well-known mark, as prescribed by the Ministerial Notifications, or so similar that the public might be confused as to the owner or origin of the goods;
2. state arms or crests, royal seals, official seals, Chakkri emblems, emblems and insignia of the royal orders and decorations, seals of office, and seals of ministries, bureaus, departments or provinces;
3. national flags of Thailand, royal standard flags or official flags;
4. royal names, royal monograms, or abbreviations of royal names or royal monograms;
5. representations of the King, Queen or Heir to the Throne;
6. names, words, terms or emblems signifying the King, Queen or Heir to the Throne or members of the royal family;
7. national emblems and flags of foreign states, emblems and flags of international organizations, emblems of heads of foreign states, official emblems, quality control symbols and certification symbols of foreign states or international organizations, and names and monograms of foreign states or international organizations, unless permission is given by the competent officer of the foreign state or international organization;
8. official emblems and emblems of the Red Cross or appellations “Red Cross” or “Geneva Cross”;
9. a mark identical with or similar to a medal, diploma or certificate or any other mark awarded at a trade exhibition or competition held by the Thai government or a Thai government agency for public enterprise or any other government organ of Thailand, foreign government or international organization, unless such medal, diploma, certificate or mark has been actually awarded to the applicant for goods and is used in combination with the trademark;
10. any mark which is contrary to public order, morality or public policy;
11. trademarks similar to those under 2, 3, 4, 6, 7 or 8;
12. geographical indications protected under the law on geographical indications;
13. other trademarks prescribed by the Ministerial Notifications.
1. Generally Famous Marks
As discussed in the previous section, in its determination of whether a given mark is the same or similar to another mark, the Registrar is generally just concerned with other marks registered in Thailand. Marks registered in other countries (but not in Thailand) are not taken into account. There is an exception to this rule, however, with regard to generally famous marks.
The concept here is that there are some marks that are so widely known in the world that they should be afforded protection even if they have not been registered in Thailand.
The DIP keeps a list on file which it refers to when determining whether a given mark is generally famous.
Other Considerations
The following are other things to keep in mind when registering a mark in Thailand.
1. Class System
The DIP operates under the principle that a given mark may receive protection only with regard to the specific kinds of products and/or services that the applicant designates in the application.
Note that the specific item (s) for which protection is sought must fall under the headings presented.
2. Disclaimers
Many marks contain a combination of words, numbers, letters and/or symbols. As explained above, some of these words, numbers letters, and/or symbols will be registerable and some will not.
Normally, if an applicant applies to register a mark and a portion of the mark is not registerable the Registrar will withhold approval of the application unless the applicant disclaims the portion that is unregisterable.
By disclaiming, the applicant is requesting protection of the mark as a whole, but not for the portion which is not registerable.
3. Registration Procedure
All applications to register trademarks in Thailand must be submitted to the DIP.
The application process consists of a review of the application by the Registrar and publication of the mark in the Royal Thai Gazette, as well as other procedural steps.
Normally, if no challenges or other complications arise, the DIP registrar will grant registration of the mark within eight to ten months of the initial filing date of the application.
4. Official Fees
The official fees payable to the DIP upon filing the registration are calculated based upon the number of items that the applicant requests protection for. The official charge is 500 baht per item.
If the application is later approved, the applicant will be required to pay another official fee based upon the number of items stated in the application which were approved by the registrar. The rate is 300 baht per approved item.
5. Renewals
Every ten years each registered trademark must be renewed or it will lapse.
This documentation must be submitted to the DIP together with a government renewal fee of 1,000 baht for each item the applicant requests protection for.
Frequently Asked Questions (FAQs)
What follows is taken from chapter 6 of "Doyle's Practical Guide to Thailand Business Law". The book is currently on sale at Bookazine, Asia Books and Kinokuniya bookstores throughout Thailand.
What Incentives are Available to Investors from the Board of Investment and the Industrial Estate Authority of Thailand?
The first chapters discussed the generally applicable rules for foreign investors setting up business operations in Thailand. Different rules may apply, however, if the business activities qualify for Board of Investment (BOI) or the investors locate their factory in an industrial estate.
Board of Investment (BOI)
The Board of Investment (BOI) is the Thai government agency responsible for attracting investment to Thailand by offering a wide range of tax and non-tax incentives to investors to engage in specific kinds of projects.
The following are the most common incentives granted by BOI:
1. corporate income tax exemptions, reductions and special carry forward loss provisions;
2. custom duties reductions and exemptions for raw materials and machinery;
3. permission for foreigners to own land in order to carry out promoted projects or to establish offices or residences;
4. special rights with regard to the issuance of work permits and visas; and
5. special rights with regard to operating as a foreign--held company.
Generally, when BOI awards one or more of these incentives to a given project these awards supersede the legal rules which would normally apply. Once the award expires or has otherwise been utilized, the normal legal rules would apply to the project.
An exception to the above rule exists, however, for the incentives relating to the right of foreigners to own land and special rights concerning the issuance of work permits and visas for foreign employees. These incentives normally apply throughout the life of the project.
Also, note that the incentives awarded by BOI are applicable to the specific project promoted only and are not applicable to the business's other operations.
1. BOI Benefits
The most common BOI investment incentives are discussed below. Note that which of these incentives (if any) would be awarded to a given project and the extent to which the incentives would be awarded depends upon many factors including the project's intended activities, location, and amount of investment as well as other factors.
a. Tax Incentives
The following are some of the normal tax rates applicable to businesses in Thailand.
Normal Rate BOI Rate
Corporate Income Tax 30% *
Tax on Dividends 10% *
BOI is authorized to grant qualifying projects tax reductions and exemptions from these rates during the period of promotion. Note that many times (but not always) BOI will limit the total corporate income exemption to an amount equal to the total capital investment in the project.
Note, however, that the above described limitation normally excludes the amount representing the investment in land and working capital in the project.
An applicant can often obtain exemption from both the above described limitations by submitting a "Supplementary Application for Promotion Privileges in Accordance with BOI's Investment Promotion Policy to Develop Skill, Technology and Innovation (STI) for Groups of Enterprises which Reinforce STI." The application must be submitted with the standard BOI application. The cap is exempted in cases where the applicant meets at least one of the following criteria:
1. Research and development expenses amount to at least 2% of annual sales not over 1,000 million baht, and 1% over 1,000 million baht, or
2. Not less than 1-5% of the total workforce, depending on the industry, have a bachelor's degree or higher in the field of science or any field related to research and development or design technology for the first three years of operation, or
3. The proportion of Thai employee training costs of the monthly payroll is not less than 1% during the first three years of operation, or
4. The average expenses for developing the capability of Thai subcontractors, or expenses for supporting related educational institutions is not less than 1% of annual sales for the first three years.
If a company incurs a loss in any year during the exemption period, it is allowed to carry forward the loss to deduct from its net profits (if any) within five years of the expiration of the exemption period.
b. Reduction or Exemption of Customs Duties
Normally, when raw materials or machinery are imported into Thailand a duty is levied by the Customs Department. This duty is calculated based upon the imported items' value together with the duty rate applicable to the item. BOI is authorized to award projects that qualify for reduction or exemption of this duty.
Note that raw materials and machinery that can be produced or assembled in Thailand which are of similar quality are normally excluded from this exemption. Additionally, used machinery and equipment considered obsolete (the standard threshold is ten years' prior use) are also normally excluded.
c. Foreign Ownership of Land
As discussed in Chapter 8, foreigners are normally prohibited from holding title to land in Thailand. However, BOI is authorized to grant qualifying projects the right to own land. This right may extend to not only factories, but for offices and residences purchased under the promoted company's name. d. Issuance of Work Permits and Visas
The normal rules and procedures associated with the issuance of work permits for foreign staff are discussed in Chapter 5. However, BOI is authorized to grant qualifying projects special rights concerning the issuance of work permits and visas for the foreign employees working on those projects.
These special rights are:
1. an increase in the number of work permits and visas that the company would normally qualify for as well as an increase in the normal duration of those work permits and visas and
2. access to BOI's One Stop Visa and Work Permit Service Center (which processes work permits and long-term visas in three hours or less), instead of using the normal procedure discussed in Chapter 5.
e. Operating as a Foreign Company
As stated in Chapter 3, companies legally classified as "foreign" that engage in List 3 activities (as stated in the Foreign Business Act) are required to obtain a Foreign Business License prior to commencing those activities.
The application process for this license normally takes a minimum of three months and many times the outcome of the application is less than certain. BOI is, however, authorized to grant qualifying projects an exemption from this requirement.
2. Promoted Activities
In order for a project to qualify to receive the above incentives it must fall into one or more of the activities promoted by BOI at the time. To see the current list of activities promoted by BOI go to www.boi.go.th. Note that different activities are entitled to receive varying levels of incentives.
BOI also has a list of priority activities which may qualify for maximum incentives. Appendix A contains the list of priority activities.
3. Promotion Zones
One of the ways BOI determines the level of incentives to be granted to a particular project is through the use of promotion zones. BOI divides Thailand's 76 provinces into three zones. Appendix B designates in which of the three zones each province is located.
Projects in Zone 1 (Bangkok and the five central provinces around Bangkok) and Zone 2 (the ten provinces that surround Zone 1 and the developed provinces of Phuket and Rayong) are eligible to receive reductions in import duties for machinery and exemptions from corporate income tax and import duties for raw materials of products for export.
Thailand's remaining 58 provinces fall into Zone 3 which is designated as an Investment Promotion Zone. Projects located there are eligible to receive more extensive incentives than those located in Zone 1 or 2. Note that those projects located in the provinces designated by BOI as the 22 least developed in Zone 3 are eligible to receive maximum incentives.
4. Application Process
BOI has a well-defined criteria governing the evaluation of projects and the awarding of incentives. Basically, BOI evaluates the application from the perspective of "how the project would benefit Thailand." The primary factors considered when determining whether to grant awards are (1) the economic contribution of the project to the country and (2) compliance of the project with the government's investment promotion policies and strategies. Other broad criteria include:
1. Project activity
2. The amount of project investment
3. Project location
4. Technology and knowledge transfer
5. Stature of the applicant internationally
6. Number of Thai employees
Although producing goods for export is not formally considered in investment promotion awards, a project's ability to generate foreign exchange for the country is also generally considered by BOI to be important.
Applications for BOI promotion can normally be completed within two to four months of submission of all required information from the company. Note that the application may be submitted before the company's final registration with the Ministry of Commerce (MOC).
The following is BOI's normal procedure for processing promotion applications:
1. A project officer is assigned by the BOI to each project;
2. The project officer evaluates the application, writes up recommendations for approval or rejection, and presents the project to an investment subcommittee for approval;
3. The evaluation is required to be completed in either sixty or ninety days depending on the circumstance.
It is not required, but is often a good idea for the applicant to meet with the director of the division handling the application and one or more senior BOI executives, to familiarize them with the benefits of the project to Thailand.
The application process normally involves a series of meetings between the applicant and BOI officials in order to discuss the details of the proposed project. The object of these meetings is to give the presiding BOI official a general understanding of the project's staffing requirements, logistic needs, production processes, etc.
Note that when explaining production procedures often it is useful if the applicant prepares a simple flow chart with pictures describing the individual steps.
The following BOI divisions process applications:
1. Incentive Management Division 1 or Agro-Industry Division
Tel: 0-2537-8097, 0-2537-8111 Ext. 1010-8
Fax: 0-2537-8160
2. Incentive Management Divisions 2 or Metals, Metal Products, Machinery and Transport Machinery Division
Tel: 0-2537-8164, 0-2537-8111 Ext. 1040-6, 2043-6
Fax: 0-2537-8103
3. Incentive Management Divisions 3 or Electronics and Electrical Industries Division
Tel: 0-2537-8165, 0-2537-8111 Ext. 1050-9, 5020-1, 4500, 4600, 1201, 5015
Fax: 0-2537-8104
4. Incentive Management Divisions 4 or Chemical, Paper, Plastic, and Light Industries Division
Tel: 0-2537-8166, 0-2537-8111 Ext. 1030-9, 2031, 2000-2
Fax: 0-2537-8102
5. Incentive Management Divisions 5 or Services and Public Utilities Division
Tel: 0-2537-8099, 0-2537-8111 Ext. 1070-7
Fax: 0-2537-8126
The BOI Promotion Application Form can be found on the BOI website.
Applicants may either submit the application at the appropriate division office (depending on the type activity) or submit it online.
5. Terms and Conditions
If the application is approved BOI will issue a list of terms and conditions. These are effectively the rules applicable to the project's promotion. The project's continued receipt of incentives will be contingent upon its ability to continue to comply with the terms and conditions during the promotion period.
Industrial Estate Authority of Thailand (IEAT)
Industrial estates are developed and managed by the Industrial Estate Authority of Thailand (IEAT), which is a state enterprise attached to the Ministry of Industry. Industrial estates are equipped to provide infrastructure necessary for industrial operations (for sample electricity, water supply, flood protection, waste treatment, solid waste disposal, etc.). Appendix C lists each of Thailand's thirty four industrial estates.
IEAT is authorized to grant non-tax incentives to investors who choose to locate their factories on an industrial estate. These incentives include:
1. permission for foreigners to own land in order to carry out promoted projects or to establish offices or residences (see Chapter 8);
2. special rights with regard to the issuance of work permits and visas; and
3. special rights with regard to operating as a foreign-held company (see previous section).
Just as with BOI incentives, when IEAT awards one or more of these incentives to a project the incentives supersede the normal legal rules which would apply.
Unlike most BOI incentives, however, the incentives granted by IEAT are normally applicable during the entire life of the project (as long as it remains on the industrial estate) instead of a specific period of time as with BOI.
For a description of the application process to obtain IEAT incentives see Chapter 8.
Export Processing Zone (EPZ's)
Seven of the total thirty four industrial estates in Thailand operate Export Processing Zones (EPZs). An EPZ is a special area within an industrial estate designed to allow goods to enter Thailand for processing. As long as the goods remain in the EPZ no Thailand customs duty or VAT is applicable.
Thailand Export Processing Zone Gate access
IEAT manages the EPZ, however, the Customs Department is in charge of the EPZ gate in order to monitor the goods entering and exiting the EPZ.
In this situation as long as the imported raw materials are shipped, processed and exported from the EPZ no Thailand VAT or customs duties would be applicable, just as if the raw materials had never entered Thailand.
Note, do not confuse EPZ's with Customs Free Zones, which offer similar benefits to investors, but are managed by the Customs Department rather than IEAT.
Appendix A: BOI Priority Activities
The following activities have been designated as priority activities.
1. Agriculture and agricultural products as specified in Section 1 of the Investment Promotion List. (Please visit http://www.boi.go.th/english/about/section1.pdf for more details.)
2. Projects with direct involvement in technological and human resource development, specifically the following:
* 2.1. Research and development (Category 7.12)
* 2.2 Scientific laboratories (Category 7.13)
* 2.3 Calibration services (Category 7.14)
* 2.4 Human resource development (Category 7.15)
3. Infrastructure, public utilities and basic services, specifically the following:
* 3.1 Public utilities and basic services (Category 7.1)
* 3.2 Mass transit systems and transportation of bulk goods (Category 7.2)
4. Environmental protection and conservation, specifically the following:
* 4.1 Industrial zones for environmental preservation (Category 7.5.6)
* 4.2 Waste water treatment, disposal services for refuse, industrial waste or toxic chemicals (Category 7.16)
5. Targeted industries, specifically the following:
* 5.1 Manufacture of steel casting using induction furnace (Category 2.12)
* 5.2 Manufacture of forged steel parts (Category 2.13)
* 5.3 Manufacture of machinery and equipment (Category 4.2), specifically the following:
1. Manufacture of molds and dies and parts
2. Manufacture of jigs and fixtures
3. Manufacture of industrial machinery, specifically the following:
o Turning Machines
o Drilling Machines
o Milling Machines
o Grinding Machines
o Machine Centers
o Gear Cutting & Finish Machines
o Die Sinking EDMs
o Wire EDMs
o Laser Beam Machines
o Plasma Arc Cutting Machines
o Electron Beam Machines
o Broaching Machines
4. Manufacture of parts and equipment for high precision machine processes, namely, cutting, milling, turning, grooving, shaving, grinding, polishing and threading.
* 5.4 Manufacture of sintered products (Category 4.3)
* 5.5 Manufacture or repair of aircraft and aircraft parts (Category 4.7)
* 5.6 Manufacture of vehicle parts (Category 4.8), specifically the following: 1. Manufacture of ABS
2. Manufacture of substrate for catalytic converters
3. Manufacture of electronic fuel injection systems
* 5.7 Heat treatment (Category 4.12)
* 5.8 Manufacture of material for microelectronics (Category 5.6)
* 5.9 Electronic design (Category 5.7)
* 5.10 Software (Category 5.8)
* 5.11 Software parks (Category 7.5)
* 5.12 International distribution centers (Category 7.7)
Appendix B: BOI Promotion Zones
BOI divides Thailand's 76 provinces into three zones as follows:
Zone 1:
Includes Bangkok, Samut Prakan, Samut Sakhon, Nakhon Pathom, Nonhtaburi, and Pathum Thani (Bangkok and five provinces)
Zone 2:
Includes Ang Thong, Ayutthaya, Chachoengsao, Chon Buri, Kanchanaburi, Nakhon Nayok, Phuket, Ratchaburi, Rayong, Samut Songkhram, Saraburi, and Suphanburi (12 provinces)
Zone 3:
Encompasses the remaining 58 provinces
Appendix C: Industrial Estates in Thailand
At present The Industrial Estate Authority of Thailand (IEAT) has established 34 industrial estates located in 15 provinces nationwide:
Northern Region
LumPhun
Northern Region Industrial Estate EPZ*
Hariphunchai Industrial Estate
Phichit
Phichit Industrial Estate EPZ*
Northeastern Region
Khon Kean
Khon Kean Industrial Estate
Central Region
Ayutthaya
Ban-wa (Hi-Tech) Industrial Estate EPZ*
Bangpa-in Industrial Estate EPZ*
Saharattananakorn Industrial Estate
Bangkok
Bang Chan Industrial Estate
Lat Krabang Industrial Estate EPZ*
Gemopolis Industrial Estate
Pathumthani
Kraulok Industrial Estate
Saraburi
Kaengkhoi Industrial Estate
Nong Khae Industrial Estate
Samutprakarn
Bang Poo Industrial Estate EPZ*
Bang Plee Industrial Estate
Samut Sakhon
Samut Sakhon Industrial Estate
Sinsakhon Industrial Estate
Ratchaburi
Ratchaburi Industrial Estate
Eastern Region
Chachoengsao
Wellgrow Industrial Estate
Gateway City Industrial Estate EPZ*
Chonburi
Chonburi (Bo win) Industrial Estate EPZ*
Laem Chabang Industrial Estate EPZ*
Amata Nakorn Industrial Estate
Pin Thong Industrial Estate
Pin Thong Industrial Estate (Laem Chabang)
Rayong
Map Ta Phut Industrial Estate
Eastern Industrial Estate
Padaeng Industrial Estate
Eastern Seaboard Industrial Estate
Amata City Industrial Estate
Asia Industrial Estate
Hemaraj Eastern Seaboard
Southern Region
Song Khla
Southern Industrial Estate EPZ*
Pattani
Halal Industrial Estate
EPZ* = Export Processing Zone. There are ten EPZs.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH THE START-UP OF A COMPANY?
There are several legal and practical issues associated with the legal start-up of a private company limited ("company"). The start up process involves registration with the Ministry of Commerce (MOC), obtaining the company's Tax ID card, and VAT Certificate, if required (from the Revenue Department), as well as obtaining other government licenses and approvals that may be required for the business activities the company seeks to engage in. Note that shelf companies are not readily available in Thailand so this process must generally be followed each time a new company is formed.
1. Promoters
The parties responsible for registering the company with the MOC are referred to as the company’s promoters. The promoters must be individuals (not business entities), and they must be available to sign documentation, as required, during the registration process.
The promoters will be required to be among the company’s initial shareholders immediately after the company’s registration. Each promoters is required to hold a minimum of one share upon the company’s registration. However, they are generally free to transfer those shares to existing shareholders or third parties, thereafter, if they wish to do so. It is not required for the individuals serving as promoters to reside in Thailand.
Promoters’ potential legal liability is generally limited to the par value of the shares they will hold after registration is complete. The promoters are also responsible for paying the expenses associated with the company’s registration. After registration, the company may choose to reimburse the promoters for those expenses.
2. Timing
Registration of the company occurs at the MOC and can require between ten days and six weeks, depending upon a number of factors. These factors include the type of business activities the company is to pursue, the speed with which investors supply required information and documents, and the availability of parties who are required to sign various documents.
Note that if the company falls under the definition of “foreign” (as defined in the Foreign Business Act) it will normally be required to obtain Cabinet approval or a Foreign Business License prior to commencing operations.
Applying for and obtaining the company’s Tax ID Card and VAT Certificate (if required) takes place after registration with the MOC and normally requires seven to ten days after providing all required information and documents to the Revenue Department.
3. Filings
All documents associated with the company’s registration must be submitted to the registrar of the Department of Registration of the MOC. If the company’s office is to be located outside Bangkok, at the filing office of the province where the office will be.
All documents associated with the registration of the company’s Tax ID Card and VAT Certificate (if required) must be submitted to the Central Filing Office of the Revenue Department in Bangkok, or, if the company office is to be located outside Bangkok, to the Revenue Office of the province where the office will be.
4. Company Name
The first step of the company registration process is name reservation. In order to reserve the name, one of the promoters is required to submit a signed Name Reservation Form to the Department of Commercial Registration of the MOC.
The promoter is required to supply the requested company name together with two alternatives. The registrar will then examine the application to ensure that:
No similar company names have previously been reserved; and that
The names submitted do not violate any ministerial rules.
If the applicant’s intended name is in conflict with either of the above the name will be rejected, and the registrar will consider the alternative names submitted. This process can normally be completed within two to three days. If all three names submitted are rejected the applicant will be required to re-submit the form with three new names.
The registrar has considerable discretion with regard to his consideration of the company names submitted. Many times, the first name or even the first two names are rejected for violating one of the two rules stated above.
Therefore investors should not invest in marketing materials containing the company’s intended name until after the registrar’s approval of a company name. This sounds like common sense, but many people make this mistake.
5. Signatures
After the name is reserved, the company Memorandum of Association (MOA) must be submitted. Among other things the MOA must contain
1. The names and various personal information concerning the promoters (minimum seven individuals);
2. Amount of the company’s registered capital (see Section 7);
3. Address of the company (see Section 6); and
4. The company’s intended scope of business activities.
Each of the seven promoters is required to sign the MOA. This can cause logistical problems if the promoters are scattered in different countries because every promoters are required to sign the same physical document.
6. Address
As stated above, the MOA must contain the physical address of the company to be formed. A PO Box address will not be acceptable.
During the company registration process the sufficiency of the company's address is normally not an issue. The company’s address, can become an issue if the company is later required to obtain a VAT Certificate.
As a part of the process to obtain a VAT Certificate, the company is required to obtain the written permission of the owner of the premises where the company will be located (if the company is not the owner of the premises).
If the company address is a residential (not commercial) space, the building owner or landlord will often be reluctant to sign this permission. Common reason for such refusal is that the owner does not want the business traffic in the building that would be caused by allowing the company to be situated there.
Also, if the registered address is a condominium unit, be aware that some condominium buildings include a specific provision, in their standard condominium sales agreements or the condominium juristic office’s rules, prohibiting the condominium owner from using the condominium unit as a business address.
7. Registered Capital
Registered capital refers to the total financial responsibility of the company’s shareholders with respect to the company. Each individual shareholder may make this investment in the company by using either cash or non-cash assets. If non-cash assets are to be contributed, the shareholder(s) contributing such assets as capital should have the non-cash assets properly appraised during the company registration process. Each shareholder is required to pay into the company a minimum of 25% of their shares' par value.
Each shareholder should note that although he or she is generally required to pay in only 25% of his or her shares’ par value upon registration, that shareholder’s potential liability associated with the company’s activities is 100% of the shares’ par value.
Note that Thai law stipulates the company’s debt to equity ratio may not exceed seven to one, meaning that the company is not allowed to borrow more than seven times the amount of its equity.
8. Minimum Capital
The general rule is that there is no minimum registered capital requirement for a company limited. An exception to this rule applies, if the company falls under the definition of a foreign company, then the following rules apply:
If the foreign company engages in activities specified in the Foreign Business Act its minimum registered capital would be the greater of 25 percent of the company’s average per year expenses for its first three years of operation and 3 million baht (exceptions apply) fully (100%) paid up.
If the foreign company does not engage in specified activities its minimum registered capital would be 2 million baht fully (100%) paid up.
Also note, that if the company is to employ foreigners, other minimum registered capital requirements may also apply.
9. Articles of Association
Prior to final registration, the applicant will be required to submit the company’s Articles of Association (“Articles”) to the MOC. The Articles state basic rules the company is required to follow after incorporation is successfully completed.
These rules generally include the frequency of director and shareholders meetings, what constitutes a quorum at meetings, notice requirements for meetings, the numbers required to pass a resolution at the meeting, etc.
A company is normally completely free (within legal limits and as long as proper regulatory procedures are followed) to submit its own unique Articles. However, many new companies will initially elect to adopt standard Articles upon incorporation. Standard Articles represent very basic rules for the company’s operation that are in compliance with Thai law. Normally, if standard Articles are presented to the presiding MOC official they will be accepted without amendment.
Therefore, in order to avoid potential delays, many promoters choose to register standard Articles at the time of registration and then adopt the company’s own unique (non-standard Articles) at a later time.
10. Directors
After registration, the company’s Affidavit remains on file with the MOC and states the names of the company’s director(s) and their authority to sign on behalf of the company.
Directors are designated as authorized or unauthorized in the Affidavit. Authorized directors are allowed to sign on behalf of the company, unauthorized directors are not.
Many times, as a controlling mechanism, the company will designate that only a combination of two or more directors signing together are authorized to sign on behalf of the company. Also, many companies will designate that a director(s) may sign on behalf of the company only together with the company seal. This makes the physical presence of the company seal another kind of control mechanism.
The company is required to have a minimum of one director. Directors may be individuals only.
Unlike shareholders, directors (both authorized and unauthorized) incur legal obligations and substantial liability associated with the actions of the company. A person should carefully consider this before agreeing to serve as a company director.
11. Auditor Information
During the company registration process, the promoters will be required to supply the name, license number, and remuneration of the auditor the company is planning to engage.
12. Official Fees
The amount of official fees payable to the MOC is calculated based upon the amount of the company’s registered capital. There are two separate official fees payable at different stages of the incorporation process.
The first official fee is payable at the time of approval of the MOA. This fee is 50 baht for every 100,000 baht of the company’s intended registered capital. The maximum fee payable is capped at 25,000 baht.
The second official fee is payable upon the company’s final registration. This fee is 500 baht for every 100,000 baht of the company’s registered capital. The maximum fee payable is capped at 250,000 baht.
13. Bank Accounts
Immediately after registration is complete, most companies will want to open a corporate bank account. Requirements to open a corporate bank account vary from bank to bank, but generally, the company will be required to provide its Tax ID Card and VAT Certificate (if required) as well as other relevant documents.
Note that if any of the signatories for the bank account are foreigners, many banks will require that each of the foreign signatories submit a valid work permit prior to opening the account.
14. Public Access to Company Details
After the company is successfully registered, many details regarding the company’s structure are easily available to the public at the MOC. These details include the company’s list of shareholders and directors, registered capital, articles of incorporation, registered address, auditor’s report, and balance sheet for the preceding year, etc.
The above is an excerpt from Chapter 2 of “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.
WHAT ARE THE LEGAL ISSUES ASSOCIATED WITH FOREIGN OWNERSHIP OF LAND?
Contrary to popular belief, land ownership rules in Thailand as they apply to foreigners are pretty straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.
This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, the most common of which are discussed below.
1. Condominium Ownership
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.
a. Financing
The foreign individual or foreign company purchasing the condominium unit is generally required to bring into Thailand 100% of the amount of the purchase price from a source offshore. This rule is quite significant because it precludes the foreign purchaser from obtaining local financing in Thailand for the purchase. (Note that an exception exists with regard to foreigners holding a valid Permanent Residence Certificate).
In this situation the company would not technically fall under the definition of “foreign”; therefore, the restriction would not apply. In practice, however, it is not quite that simple. When a Thai party wishes to sell land, the parties must go to the Land Office of the district in which the land is located to transfer the title. At the Land Office, the presiding official will request the purchasing company’s list of shareholders. In practice, if the company’s foreign shareholders hold more than 39% of the shares of the purchasing company the official will not approve the transfer.
b. Ratio of Foreign Ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.
The general rule is that foreigners may own no more than 49% of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49% foreign ownership it would violate the above rule, and the official would reject the transfer.
There are exceptions to this rule for condominium buildings in Bangkok and Pattaya. Condominium buildings in those cities, if they satisfy certain requirements, are not subject to the 49% rule stated above.
2. Land Ownership by Foreign Companies
Foreign businesses classified as “foreign” according to the Foreign Business Act (see Chapter 3) are generally not allowed to own any interest in land. One of the ways in which a company may be classified as “foreign” is if non-Thai parties hold 50% or more of its shares. Ownership of land is included under the category of ‘Land Trading’ as specified in List 1 of the Foreign Business Act. This means foreign companies are completely prohibited from owning land unless the government grants a special exemption from this restriction.
If, on the other hand, Thai parties hold more than 50% of the company's shares and more than half of the company's shareholders are Thai nationals, the company technically should have the legal right to hold title to land. (Note that exceptions may be granted to those companies that are promoted by the Board of Investment or the Industrial Authority of Thailand).
3. Long Term Leases
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.
Foreigners are generally allowed to lease land (outside an industrial estate) for up to thirty years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.
If the foreign tenant wishes to divest his rights to the land he will be limited to assigning those rights to the land to a third party assignee (fi the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant's interest in the land is generally regarded as much less marketable than if he owned the land outright.
Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.
Registering the lease with the Land Department effectively places prospective third party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.
The above is an excerpt of Chapter 7 of the book “Doyle’s Practical Guide to Thailand Business Law”. The book is currently for sale at bookstores throughout Thailand.