Key Changes

Por. 161/2566 represents a significant change in the TRD’s approach to collecting personal income tax on foreign-source income earned by Thai tax residents. Previously, Thai residents who spent 180 days or more in Thailand in any calendar year are subject to Thai personal income tax only if they bring foreign-sourced income into the country in the same year it was earned. If the foreign-source income is brought into Thailand in a subsequent year, it will not be subjected to Thai personal income tax.

However, with the implementation of Por. 161/2566, when a Thai tax resident repatriates offshore-sourced income into Thailand, that income will be subject to taxation in the year it is brought into Thailand, irrespective of the year in which it was initially earned.

Rationale and Objectives

The TRD emphasizes that these enhancements in tax collection procedures for ordinary individuals align with Thailand’s commitment to international agreements and forums. The overarching goal is to foster fairness in tax collection, particularly among individuals whose income streams originate from both domestic and foreign sources. Furthermore, these measures are anticipated to elevate the level of transparency in tax practices.

The TRD has also expressed its intention to engage in dialogues with stakeholders across various sectors to refine and implement these improved tax collection methods for individuals with foreign-source income.

Conclusion

One of the most significant implications of the new policy is that Thai tax residents will now be subject to Thai personal income tax on foreign-source income when it is repatriated into Thailand, regardless of the year in which it was initially earned. This represents a shift from the previous rule where only income brought into Thailand in the same year it was earned was subject to taxation. This means that Thai tax residents may see an increase in their tax liabilities on foreign income brought into Thailand in the future.

On a positive note, the TRD’s intention to engage in dialogues with stakeholders indicates a willingness to refine and implement these new tax collection methods. Thai tax residents, especially those with significant foreign income, should stay informed and participate in these discussions to ensure that their concerns are considered in the implementation process. Given the complexity of tax laws and regulations, Thai tax residents, particularly those with foreign income, should consider consulting with tax professionals to understand how the new policy affects their specific situations and to explore potential tax planning strategies.

For more information, please get in touch with our tax practice, or alternatively, please contact the authors.

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Tax Practice Group

Businesses often need proper tax planning and an efficient structure to sustain and enjoy long-term success. Our main goal is to provide a “one-stop service” where we can seamlessly connect with other practices to provide the most appropriate advice to our clients.

We have extensive experience in tax issues related to M&A, restructuring and wealth management especially when clients are faced with new business models, IPOs, as well as buying or selling assets to ensure tax mitigation and optimization. We conduct due diligence to determine whether or not tax planning is possible or required. This involves sharing information about specific tax privileges for which our clients may or may not know they are qualified.

Our clients extend to a wide spectrum of sectors: corporations, family businesses and high net worth individuals / ultra-high net worth individuals, who we believe require attentive services and a responsive team, a value we strive and for which we are known.

The post Thailand’s Tax Policy Shift: Change in Foreign Source Income Tax Treatment for Thai Tax Resident appeared first on Kudun.

Legal services for startups extend beyond mere formalities; they encompass protection and compliance that pave the way for sustainable growth. From intellectual property rights to regulatory adherence, the legal scaffolding established in the nascent stages of your enterprise can make or break its future. In this article, we underscore the indispensable role of legal support in a startup’s journey, navigating the labyrinth of legal challenges, and how to select the optimal legal ally for your venture.

Common Legal Challenges Faced by Startups

Navigating the labyrinth of legalities is a crucial aspect of running an indisputable business, especially in the startup world. Ensuring compliance for startups is more than just following rules; it’s about building a strong foundation that fosters growth and resilience. Startups commonly encounter a range of legal challenges that, if not addressed effectively, could potentially disrupt their growth trajectory and viability.

1. Intellectual Property Protection

Safeguarding intellectual property (IP) is crucial for startups. A legal service provider can help ensure your startup’s IP is secure. The case of Louis Vuitton Malletier vs. Haute Diggity Dog illustrates this need. Despite Louis Vuitton’s legal challenge over the alleged parodying of its product, the court ruled in Haute Diggity Dog’s favor. The actual cost of this legal setback for Louis Vuitton wasn’t made public, but the case highlights the potential risks and financial implications tied to IP issues. This reinforces the value of having sound legal advice in managing IP rights.

2. Employment Law

As startups grow, they often encounter employment law issues, such as employee contracts, benefits, and legal rights. Experienced legal services can assist in navigating these complexities.

3. Contract Drafting and Negotiation

Contracts form the backbone of many business relationships. Legal services can help draft, review, and negotiate contracts, ensuring your startup’s interests are protected. Legal insight helps in efficiently creating, managing, and enforcing contracts. Understanding the legal terms and requirements is essential to ensure that contracts with vendors, partners, and employees are clear, fair, and beneficial for your startup.

4. Regulatory Compliance

Startups must comply with various regulations, such as privacy laws and industry-specific rules. For instance, the Thailand Personal Data Protection Act (PDPA) B.E. 2562 (2019) emphasizes the importance of data protection, which has become paramount in the digital age. Non-compliance with such acts often results in fines or legal action, so engaging legal services is essential to maintain compliance. 

5. Fundraising and Financial Regulations

Raising capital is often essential for startup growth. Legal insight into the various laws and regulations surrounding fundraising can help you navigate this complex process more effectively and secure favorable terms. Legal services are also invaluable in fundraising rounds, providing advice on terms, equity dilution, and securities law.

6. Adapting to Legal Changes

Laws and regulations are continually evolving. Legal insight helps your startup adapt to these changes efficiently by staying abreast of new laws and understanding how they might impact your operations.

7. Risk Mitigation

By understanding the laws and regulations applicable to your startup, you can take steps to minimize legal risks. This includes compliance with labor laws, consumer protection laws, and industry-specific regulations.

These are paramount facets in a business that legal insight can streamline your startup’s seamless operations, ensuring a smooth journey.

How to Avoid Common Mistakes in Business Startups

In the entrepreneurial world, startups continually face challenges of survival. Among these challenges, legal mistakes often stand at the heart of many startup failures.

However, such mistakes can be avoided. Understanding what a legal services business does and budgeting for legal fees for startups can make a powerful advancement in the success of your venture. Legal services, which encompass a broad range of activities aimed at advising and representing clients in legal matters, play an essential role in guiding startups away from common pitfalls. These services are especially vital in preventing costly errors, such as neglecting to protect intellectual property, misclassifying employees, or failing to maintain regulatory compliance. Here’s how legal services can help:

• Intellectual Property Protection

Legal services can guide startups in establishing robust IP protection from the outset, mitigating the risk of costly disputes down the line.

• Employee Classification

Classifying employees erroneously as independent contractors can lead to legal complications. Legal services can advise on the correct classification and its implications for your business.

• Regulatory Compliance

Startups must comply with various regulations, such as privacy laws and industry-specific rules. Particularly for those considering foreign partnerships or investment, understanding and complying with the Foreign Business Act B.E. 2542 (1999) is paramount. This Act outlines the businesses and activities that foreigners can engage in while operating in Thailand. Non-compliance with this act can lead to significant legal repercussions, making it vital for startups to be well-versed in its stipulations. Engaging legal services familiar with the intricacies of this Act, as well as other relevant laws, can be invaluable in maintaining compliance and mitigating potential risks.

Factors to Consider When Selecting a Law Firm for Your Startup

Launching a new business venture is a challenging endeavor filled with many potential pitfalls. Startup legal solutions serve as a guiding light, illuminating the often-murky legal waters. As trusted advisors, they navigate the regulatory maze, protect your intellectual property, handle contract negotiations, and much more. They can help startups sidestep legal mistakes that could derail their success, ensuring they stay on a secure growth path.

1. Experience and Expertise

Choose a law firm with experience and expertise in startup law and your specific industry. Their understanding of unique startup challenges will be beneficial.

2. Cost and Fee Structure

Understanding a law firm’s cost and fee structure upfront can prevent surprises. Opt for a firm that offers transparent pricing and potentially startup-friendly payment options.

3. Availability and Responsiveness

Choose a law firm that is readily available and responsive. Fast-paced startups need legal partners who can keep up.

4. Cultural Fit

It’s essential to choose a law firm that fits your startup’s culture and values

5. Reputation and References

Look for a law firm with an indisputable reputation in the legal industry and positive references from previous clients. This step ensures that the firm can effectively handle your legal needs.

Contact Kudun & Partners today. Leverage our legal expertise to guard your business, streamline compliance, and unlock a world of possibilities for your startup’s growth. Let us empower you to focus on what you do best: planning, innovating, and growing your business. Your journey to startup success begins here.

About us

Startups Practice

Kudun and Partners, Kingsford Securities PCL and 2EXT have teamed up in a dynamic collaboration providing a one-stop service focal point for startups and investors to connect and help achieve their goals through coaching, mentoring, consulting, business matching and taking risk with them.

With our expertise in the financial, legal, and startup business, we aim to offer startups an accessible yet professional consultancy service, which will benefit startups and the growth of the startup ecosystem in Thailand.

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Digital Law in Thailand is revolutionizing the delivery of legal services. Incorporating cutting-edge AI and automation, the Thai legal sector is enhancing its efficiency, accuracy, and client services. The embrace of AI in Digital Law is setting the stage for a more agile, informed, and dynamic legal environment. As a result, law firms and legal professionals in Thailand are now in a position to handle complex legal issues with greater precision and in less time. This heralds a new era in the Thai legal sector, where technology and human expertise come together to navigate the intricate web of legalities in the digital age.

Embracing AI & Automation: Key Steps for Thailand Law Firms and Legal Professionals

For Thai law firms and legal professionals, adapting to this changing environment is crucial. Key steps include:

• Investing in AI and automation technology

This involves allocating resources to acquire AI-powered tools and platforms that can streamline legal processes, enhance research, and improve client communication. It’s not just about having technology; it’s about having the right technology that aligns with the firm’s objectives and needs.

• Training and upskilling staff

As AI and automation become integral to legal practice, it’s essential for the workforce to understand and efficiently use these technologies. This involves continuous training programs and workshops to familiarize staff with the latest AI tools and techniques.

• Keeping abreast with regulatory changes

Digital Law is a rapidly evolving field. It’s important to stay updated on the latest legal regulations, including those governing AI, automation, and cybersecurity. This will ensure that the firm’s practices are compliant and are utilizing the technology within the legal framework.

• Formulating data-driven decision-making strategies

AI and automation provide valuable insights and data that can be used to make informed decisions. Law firms should incorporate data analytics into their decision-making processes, whether it’s for case assessment, resource allocation, or client acquisition strategies.

By following these steps, legal professionals in Thailand can position themselves at the forefront of the Digital Law revolution, combining technological innovation with legal expertise for an agile and robust legal practice.

Advantages of AI in Digital Law: Enhancing Efficiency and Accuracy

In an era where digital compliance and internet governance are becoming increasingly complex and critical, AI and automation technologies are playing an indispensable role in reshaping the legal sector by enhancing efficiency and accuracy. With the surge in digital contracts and the tightening grip of internet censorship, AI equips legal professionals with the tools necessary to navigate these intricate landscapes with ease.

• Reducing Administrative Burden with Workflow Automation in Legal Practices

Workflow automation is a boon for legal professionals burdened with administrative tasks. By automating processes such as document filing, scheduling, and billing, practitioners can allocate more resources to critical tasks like ensuring digital compliance and understanding internet governance.

• Speeding Up Document Analysis with AI in Legal Services

The efficiency of AI-powered tools in analyzing massive volumes of documents is unparalleled. Legal professionals can quickly sift through digital contracts and other documents, saving precious time and enabling a more thorough due diligence process.

• Leveraging AI for Comprehensive Legal Research

AI algorithms are game-changers for legal research. They can analyze vast legal databases to provide insights, identify patterns, and even predict case outcomes. This is particularly useful in understanding laws related to internet censorship and digital content.

• Streamlining Repetitive Tasks with AI Automation Process in Legal Workflows

Automation efficiently handles repetitive tasks such as data entry, allowing attorneys to focus on the complexities and nuances of cases, including those that involve intricate internet governance and digital compliance issues.

• Enhancing Client Support with AI Chatbots & Virtual Assistants in Legal Services

AI chatbots and virtual assistants revolutionize client support by providing instantaneous responses to common inquiries, scheduling appointments, and more. This allows law firms to better serve clients who require assistance in navigating digital contracts or understanding internet censorship regulations.

Understanding The Frameworks of Digital Landscape

In an era where digital technology is rapidly transforming various industries, it is imperative for businesses to be well-versed in the legal implications of operating in the digital sphere. To safeguard interests and ensure compliance, a deep understanding of the complex legal frameworks surrounding digital transactions and rights is essential. Below is an informative outline emphasizing the crucial aspects of digital law that businesses should be aware of:

1. Understanding Regulatory Compliance in Digital Payment Systems
This service ensures businesses are in line with local and international regulations governing payment systems, facilitating seamless transactions.

2. Legal Insights into Blockchain and Digital Business Operations
This service offers expert insights and advice on the legal aspects of blockchain technology and digital businesses, enabling clients to capitalize on these technologies while remaining legally compliant.

3. Guidance on the Procurement of Digital Systems
Attorneys provide advice on the procurement of digital systems, ensuring clients are well versed in the legal requirements and best practices.

4. Compliance with Laws Pertaining to Digital Assets and Payment Systems
This service helps clients meet the legal obligations tied to digital assets and electronic payment systems.

5. Navigating Legal Frameworks for Innovation in the FinTech Sector
This service aids clients in the FinTech sector to understand and navigate the complex legal frameworks, ensuring their innovative solutions comply with relevant laws and regulations.

6. Ensuring Data Privacy and Protection in the Digital World
A comprehensive range of services is offered, aimed at helping clients comprehend and fulfill their obligations under data protection laws.

7. Building a Robust Cybersecurity Framework
Assistance is provided to businesses in developing and implementing robust cybersecurity frameworks in compliance with legal standards to safeguard sensitive data and systems.

8. Understanding E-commerce Regulations for Domestic and Foreign Providers
This service offers expert advice on e-commerce regulations, guiding providers through the legal maze of online trading.

9. Ensuring Compliance of Secure E-payment and Online Payment Gateways
This service helps in ensuring that clients’ online payment systems are secure and comply with the relevant laws, protecting both businesses and their customers.

10. Legal Support for Broadcasting, Satellite, and Digital Agreements
Assistance is provided in drafting and negotiating agreements in broadcasting, satellite, and digital content distribution to protect client interests.

11. Legal Insights into Multi-party Platform Formation and Tokenized Assets
Clients are guided through the process of creating multi-party platforms, and advice is provided on the legal considerations of tokenized assets.

12. Effective Dispute Resolution in the Digital Space
Expertise in digital law is leveraged to effectively resolve disputes in the digital domain, including those related to intellectual property and contract disputes.

13. Strategic Tax Planning for Digital Businesses
Strategic tax planning services are offered for digital businesses to help them optimize tax liabilities while ensuring compliance with applicable tax laws.

Human-AI Collaboration in Legal Services: Harnessing the Best of Both Worlds

In the legal domain, the marriage of human expertise with AI isn’t just about efficiency – it’s about crafting a superior approach to legal problem-solving. As AI takes on an increasingly significant role in online dispute resolution, digital content regulation, and e-commerce regulations, it’s clear that integrating human ingenuity with AI’s analytical prowess is the pathway to the future. This collaboration paves the way for rapid, accurate, and inventive solutions, transforming the way legal services operate.

Here are some areas where human-AI collaboration is making a remarkable difference:

1. Online Dispute Resolution (ODR):

• • • Efficiency:
      AI accelerates the resolution process by automating case management and scheduling.

• • • Cost-effectiveness:
      By streamlining processes, AI reduces the costs associated with traditional litigation.

• • • Accessibility:
      Online platforms powered by AI make dispute resolution accessible to individuals who may not be able to attend physical court hearings.

2. Digital Content Regulation:

• • • Automated Monitoring:
      AI algorithms can automatically monitor and flag potentially illegal or infringing content.

• • • Global Compliance:
      AI can help ensure that digital content adheres to varying regulations across different jurisdictions.

• • • Protecting Intellectual Property:
      AI tools can identify and protect against the unauthorized use of copyrighted material.

3. E-commerce Regulations:

• • • Data Protection Compliance:
      AI systems can ensure that e-commerce platforms are compliant with data protection laws.

• • • Fraud Detection:
      Sophisticated AI algorithms can detect and prevent fraudulent transactions in real time.

• • • Customer Experience:
      AI enhances the shopping experience through personalized recommendations while ensuring compliance with consumer protection laws.

By integrating AI in these areas, legal professionals can focus on complex legal reasoning, negotiations, and strategy development, while AI handles data-intensive tasks. This Human-AI collaboration creates a powerful synergy that is redefining the legal industry.

Staying Ahead in the AI-driven Legal Environment

As AI and automation technologies continue to evolve, legal professionals must adapt to stay relevant. One area where AI proves to be particularly beneficial is in contracting. In the past, inefficient contracting has been a significant drain on firms’ resources and value. It is estimated that companies lose between 5% to 40% of value on a given contract due to inefficiencies. However, AI is changing the game by helping firms overcome many of the challenges associated with contracting. By embracing these technologies, upskilling, and forming strategic partnerships with innovators like Kudun and Partners, Thailand’s legal sector can ensure a bright, efficient, and technologically-advanced future.

In conclusion, the digital law revolution, with its heart in AI and automation, is here to stay. Kudun and Partners are leading the charge, ensuring that legal services in Thailand are not just keeping up but are on the cutting edge. Equip yourself with the best that AI has to offer, and take your legal practice to the next level, reducing contract inefficiencies and unlocking greater value for your clients.

Industries and Future Partners 

The legal landscape is shifting not only for legal professionals but for various industries and potential partners who are striving to thrive in an increasingly digitized world. As AI and automation technologies revolutionize legal services and business operations, Kudun & Partners stands at the forefront of this Digital Law evolution, offering cutting-edge solutions tailored for diverse sectors. Our expertise encompasses everything from securing compliance in digital transactions to leveraging AI for dynamic legal research and decision-making.

With Kudun & Partners, industries and future partners gain a strategic ally in navigating the intricate terrain of legal technology in Thailand. Through our expert guidance and tailored solutions, we empower you to efficiently address legal challenges while harnessing the potential of digital innovation.

Don’t let the complexities of the digital legal realm hinder your progress. Opt for Kudun & Partners as your navigator and ally in this exciting voyage, and together, let’s unlock new horizons in Digital Law. Take the leap into the future – reach out to Kudun & Partners today and spearhead your endeavors with the utmost confidence and competence.

About us

Digital Law Practice Group

Our digital law practice consists of some of the most prolific digital law savvy lawyers in Thailand, offering a broad range of legal advisory services and quality solutions to both local and international clients across a broad scope of legal matters for a wide range of TMT industries. We understand the challenges and rewards of staying innovative and profitable amid fast-paced change in the information technology and communications industry.

We can assist in multi-party platform formation and tokenization of assets, advising clients on initial decentralization exchange offerings for multi-chain platforms, on digital asset exchange token listings and on the tokenization and fractionalization of real-estate and other real-world assets as well as conducting due diligence for digital exchange listings, drafting white/lite papers, SAFT, and other digital exchange and cryptocurrency-related agreements.

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The digital investment token is a fund-raising mechanism comparable to securities governed under regulatory framework of similar nature.  However, a distinction arises where the transfer of digital investment token is subject to a tax liability, distinguishing it from the transfer of securities.

Thus, in order to establish a synchronized tax liability for both digital investment token transfers and securities transfers, the Cabinet has issued the royal decree, issued under the Revenue Code governing the exemptions of tax and duties No. 779 B.E. 2566 (2023) (the “Royal Decree”) to waive the Corporate Income Tax (CIT) and Value Added Tax (VAT) on the transfer of digital investment token. The latest exemption of corporate income tax and VAT on the transfer of digital investment token aims to make fundraising with digital token more attractive and further boost the digital asset market in Thailand.

What is Digital Investment Token?

The “Digital Investment Token”, which is exempted from corporate income tax and VAT under the Royal Decree means an electronic data unit established on an electronic system or network, designed to determine the right of individuals to participate in investment activities in any projects or enterprises, in accordance with the Emergency Decree on Digital Asset Businesses B.E. 2561.

Corporate Income Tax and VAT Exemptions

Under the provisions of the Royal Decree, the exemptions from CIT and VAT for the transfer of digital investment tokens are outlined as follows:

a) Corporate Income Tax and VAT exemption

Companies or juristic partnerships are granted exemption from corporate income tax and VAT for the transfer of digital investment tokens issued to the public in accordance with digital asset laws in the primary market, starting from 14 May 2021. This exemption applies to the income or value of the tax base.

It is important to note that the VAT exemption applies to all types of transferors, including individual transferors, for the transfer of digital investment tokens in the secondary market.

However, if such digital token issued to the public in accordance with the digital asset contains both the characteristics of digital investment token and other types of token characteristics, the tax exemptions will solely apply to the digital investment token, which is distinctly differentiated from other digital assets, and such tax exemption will be exclusively applied to digital investment token only.

b) Eligibility of tax exemptions

Companies or juristic partnerships who wish to enjoy the tax exemptions must comply with the rules, procedures and conditions that are set to be issued by the Director-General of the Revenue Department. However, at the time of writing this article, the Revenue Department has not yet issued any rules, procedures or conditions.

Concluding Remarks

After a considerably long period of anticipation since the cabinet resolution on  March 17, 2023, the tax exemption policy designed to stimulate investments in projects and businesses in the country’s digital economy is finally in place. Nevertheless, it remains crucial to keep an eye on the development of enhancement in the digital economy of the new government and also keep track of the soon-to-be-issued notification from the Revenue Department outlining the procedure for companies and juristic partnerships in obtaining the right tax exemption. We will keep you informed on any subsequent updates.

For more information, please get in touch with our digital law practice, or alternatively, please contact the authors.

About us

Digital Law Practice Group

Our digital law practice consists of some of the most prolific digital law savvy lawyers in Thailand, offering a broad range of legal advisory services and quality solutions to both local and international clients across a broad scope of legal matters for a wide range of TMT industries. We understand the challenges and rewards of staying innovative and profitable amid fast-paced change in the information technology and communications industry.

We can assist in multi-party platform formation and tokenization of assets, advising clients on initial decentralization exchange offerings for multi-chain platforms, on digital asset exchange token listings and on the tokenization and fractionalization of real-estate and other real-world assets as well as conducting due diligence for digital exchange listings, drafting white/lite papers, SAFT, and other digital exchange and cryptocurrency-related agreements.

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This article discusses the obligations of employers in the private sector under the primary legal framework of Thai labor law – the Labor Protection Act B.E. 2541 (1998) (LPA). It highlights the fundamental roles that employers assume during times of crisis, while also examining recent regulations that deal with the growing trend of remote employment.

Fundamental Compliance with Thai Labor Law

Financial stability and individual well-being emerge as crucial aspects during times of crisis. The LPA establishes core compliance standards, imposing upon employers an unwavering legal duty to ensure prompt payment of wages and other compensations at least once a month, unless otherwise agreed upon for the benefit of employees[1], regardless of any business-related financial challenges. Furthermore, despite a decrease in the unemployment rate to pre-pandemic levels in Quarter 1 2023[2], certain industries, including e-commerce and technology, faced significant post-crisis declines and have been forced to carry out layoffs. In such cases, employers are required to follow provisions regarding employment termination as outlined in the LPA. This involves giving  notice of termination for a period of at least one wage payment interval[3] and providing severance pay to employees who have worked for a minimum of 120 days (except in cases of  extraordinary circumstances, such as termination due to dishonesty or refuse to follow employer’s lawful directives[4]). This legal mechanism has been designed with the ultimate goal of assisting employees in finding alternative job opportunities, while mitigating the potential adversities associated with job loss.

In addition, the LPA imposes the provision of paid leave as a fundamental right for employees in order to safeguard employees’ health and well-being while enhancing overall job satisfaction and fostering talent retention, especially amid the post-pandemic “quiet-quitting” culture. The LPA sets a baseline for paid time off, including sick leave of at least 30 days per year[5], annual leave of at least 6 days per year[6], and observance of at least 13 public holidays per year[7].

While the LPA outlines minimum requirements regarding employee benefits and welfare, employers have the discretion to provide additional considerations, such as health and medical insurance, and extended paid leaves.

Alternative Workforce Arrangement

As certain groups of the workforce have been seeking increased flexibility and control over their work schedules in the post- pandemic era, many employers have introduced alternative work arrangements, including remote work provisions and hybrid work cultures. To align with this recent shift in corporate norms, the Ministry of Labor has recently pushed forward the amendment to the LPA, effective as of April 18, 2023, aimed at addressing the rights and responsibilities of parties within employment contracts that encompass remote work conditions. This amendment grants remote-employees’ rights equivalent to those of on-site employees. Any remote employment agreements must comply with the following requirements:[8]

(i) The agreement must be documented in writing or electronic forms where the intended meaning is unalterable.

(ii) The agreement must encompass conditions such as;

• • • the designated remote work period.
    • working hours, workdays, break times, overtime policies, and entitlements to leaves.
    • the scope of employees’ responsibilities;
    • Employer controls and supervision;
    • responsibilities regarding the provision of tools, equipment, and arrangement of any necessary costs which may arise during the course of work.

This regulation not only addresses regulations regarding work-hours in remote work scenarios but also establishes legal rights for employees to decline any communications through any means with employers, supervisors, inspectors, or evaluators outside of working hours, unless the employee has previously agreed otherwise in writing.

Final Thoughts

The commitment of businesses to uphold legal obligations while adapting to evolving circumstances stands as a promising cornerstone of workforce resiliency, given their pivotal roles in cultivating an equitable work environment. This mutually beneficial relationship underscores the importance for employers to meet their legal obligations, not only to mitigate potential legal risks and damage to reputation but also to prioritize the well-being of their employees. When addressing the lasting impacts of the epidemic on employer-employee relationships, this approach provides a strategic path that contributes to a stronger workforce and the long-term sustainability of businesses in an ever changing professional landscape for years ahead.

[1] Section 70, LPA.

[2] Office of the National Economic and Social Development Council (NESDC). (n.d.). Thailand Social’s Outlook of Q1/2023. Retrieved August 4, 2023.

[3] Section 17, LPA.

[4] Section 119, LPA.

[5] Section 57, LPA.

[6] Section 30, LPA.

[7] Section 29, LPA.

[8] Section 23/1, LPA.

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In Thailand, Corporate M&A entails a multifaceted process that involves not only the consolidation of companies but also an in-depth financial analysis to evaluate the feasibility and potential returns of the merger or acquisition. Additionally, legal compliance is an indispensable aspect, as navigating the legal landscape is critical to ensuring the smooth execution and success of M&A deals. As the market dynamics continue to evolve, understanding the intricate interplay of financial analysis and legal compliance within Corporate M&A in Thailand is essential for both domestic and international investors.

The Growing Popularity of Corporate M&A in Thailand

In the context of Thailand, the country’s M&A landscape involves sophisticated deal structuring. For instance, an essential component often includes the share purchase agreement, which outlines the terms and conditions of the shares involved in the transaction. Additionally, competitive analysis is crucial for companies to assess the market and identify the strategic value of potential M&A deals. Such an analysis enables firms to make informed decisions and harness a competitive edge in the ever-evolving Thai market. With Thailand’s thriving economy and investor-friendly climate, corporate M&A is anticipated to maintain its upward trajectory, similar to the landmark deals seen globally.

Driving Forces behind the Boom in Corporate M&A in Thailand

In the realm of business expansion and corporate restructuring, mergers and acquisitions play a significant role. As companies continuously seek strategies to gain competitive advantages and optimize their operations, corporate mergers and acquisitions have become essential tools for achieving these objectives. Thailand, in particular, has been at the forefront of this trend, with several driving forces contributing to the surge in M&A activity.

From mid-2021 to mid-2022, Thailand witnessed almost a hundred M&A deals, resulting in a total deal value of over $10,682.9 million. This remarkable figure reflects the favorable conditions that have made Thailand a thriving hub for M&A activity. The factors propelling this surge include economic stability, making Thailand an attractive investment destination, government policies and incentives, regional integration and technological advancements that are significant drivers for the high volume and value of M&A deals, creating new opportunities for M&A in various sectors.

With the combined influence of these factors, the M&A landscape in Thailand is projected to continue its rising trend in the upcoming years, providing lucrative opportunities for businesses and investors alike.

Exploring the Benefits of Corporate M&A in Thailand

In Thailand’s booming economic landscape, corporate mergers and acquisitions present an array of benefits for companies, ranging from growth and innovation to diversification and risk management. Let’s delve into the array of advantages that corporate mergers and acquisitions offer in Thailand:

1. M&A facilitates growth by providing companies with resources and capabilities to scale their operations; therefore, the companies can access new geographies and customer segments, broadening their market presence.

2. M&A allows companies to achieve economies of scale, streamline operations, and enhance performance.

3. Companies can acquire innovative technologies and expertise, giving them a competitive edge in the market, including access to a larger talent pool, which is crucial for success in an evolving market.

4. M&A can create financial value through cost savings, revenue synergies, and increased market share.

5. M&A can help spread risks, gain stability in operations, and contribute to sustainable growth by enabling companies to adapt to market changes effectively.

Strategies in Corporate M&A Transactions in Thailand

In the dynamic landscape of corporate M&A in Thailand, identifying the implementing effective strategies are crucial for companies aiming to capitalize on M&A opportunities. The successful execution of M&A transactions necessitates well-thought-out strategies. Below, we explore the key strategies in corporate M&A transactions in Thailand:

• Proper Target Selection

Selecting the right target is one of the most critical elements of an M&A transaction. This involves analyzing potential targets’ financial performance, cultural fit, and strategic alignment with the acquiring company’s goals.

• Comprehensive Due Diligence

Due diligence is a rigorous process that involves thoroughly reviewing and analyzing all aspects of a potential M&A deal.

• Effective Negotiation

An M&A transaction involves complex negotiations over price, terms, and other key deal components. Effective negotiation skills are essential to ensuring that the deal is structured in a way that maximizes value and aligns with the strategic objectives of the acquiring company.

By acknowledging these trends and adopting the strategies outlined above, companies can navigate the M&A landscape in Thailand with informed decisions and strategic actions, positioning themselves for sustainable success.

Legal Complexities in Corporate M&A: The Importance of Expert Guidance

Corporate M&A are inherently accompanied by an array of legal complexities. From regulatory compliance to cross-border transactions, there are numerous aspects that require a vigilant eye and expertise. In this section, we delve into some of the legal challenges and the importance of having expert guidance to navigate the labyrinth of legal requirements in Corporate M&A.

• Navigating Regulatory Compliance: A Critical Step in M&A

Ensuring adherence to both local and international regulations is a pivotal aspect of any M&A transaction. Regulatory compliance spans across multiple domains including antitrust laws, securities, corporate governance, and more. Experts in legal services possess the knowledge and experience needed to guide businesses through these regulations efficiently.

• Understanding Legal Risks in Cross-Border Transactions

In the case of M&A that involves entities in different countries, the legal landscape becomes even more complex. Cross-border transactions entail understanding and complying with the legal systems of all countries involved. This includes tax laws, foreign investment regulations, and trade restrictions. Expert legal counsel can play a critical role in identifying potential risks and devising strategies to mitigate them.

• Intellectual Property Considerations in M&A Deals

Intellectual Property (IP) often forms a significant portion of a company’s value. During M&A, it is imperative to assess the IP assets which may include patents, trademarks, and copyrights.

• Structuring Agreements to Protect Interests

Drafting and structuring M&A agreements is a meticulous process. The agreement should be able to safeguard the interests of all parties involved. Legal professionals with expertise in M&A can help ensure that the agreements are comprehensive, clear, and enforceable.

• Addressing Employment and Labor Law Challenges

M&A transactions often entail organizational changes that might affect the workforce. Understanding and complying with labor laws is critical to preventing legal disputes with employees. Expert legal guidance can assist in planning and implementing changes in compliance with employment laws, while ensuring fair treatment of employees.

• Ensuring Data Privacy and Security Compliance

In an age where data is invaluable, ensuring the privacy and security of data during M&A is critical. This includes complying with data protection laws and managing the transfer of sensitive information. Expert legal advice can help in understanding the intricacies of data privacy laws and developing strategies for the secure handling of data.

The multifaceted legal challenges that accompany Corporate M&A necessitate the insights and experience of legal experts for seamless transaction. Engaging with legal professionals can not only help in efficiently navigating these challenges but also add value to the process through informed decision-making.

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Embrace the wave of opportunity in the thriving landscape of corporate mergers and acquisitions in Thailand. Amidst a booming economy and an increasingly connected market, now is the time to position your business for unparalleled growth and success through strategic M&A activities.

Entrust your M&A endeavors to Kudun & Partners, the seasoned legal connoisseurs who will be your guiding beacon in the vast sea of M&A possibilities. Our illustrious team of professionals boasts an unmatched prowess in the M&A domain, coupled with an astute understanding of the complexities of Thai business laws and regulations.

Kudun & Partners stand at the forefront of innovation and adaptability, ensuring your M&A strategy is not only compliant but also groundbreaking. Our bespoke solutions and razor-sharp insights will be the catalyst for your triumphant ascent in the ever-evolving Thai business ecosystem. Reach out to Kudun & Partners and embark on a transformative journey towards unmatched success and prosperity in the realm of Corporate Mergers and Acquisitions in Thailand. Your visionary voyage starts with us. Contact Kudun & Partners Today

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Corporate and M&A Practice Group

Kudun and Partners is at the forefront of this growth in Thai and regional activity. Our team of widely recognized lawyers has worked on many of the region’s largest deals, as well as providing crucial corporate advisory services. We distinguish ourselves by our responsive, client-focused approach and commercial acumen and are committed to developing a deep understanding of our client’s goals and objectives.

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Over the recent few decades, the trend of foreign direct investment in Thailand has seen a remarkable surge. The country successfully established itself as a welcoming haven for investors, characterized by its robust infrastructure, vast consumer market, and investment-friendly government policies. This article explores the terrain of foreign direct investment in Thailand, detailing the benefits, challenges, business structures, legal considerations, and more. By deepening our understanding of this dynamic market, we can better position ourselves to seize the opportunities it presents.

Overview of Foreign Direct Investment in Thailand

As we explore foreign direct investment in Thailand, understanding the dynamics of investment opportunities, laws, and policies is essential. This knowledge equips investors to make informed decisions and fully embrace the dynamism of Thailand’s economic landscape.

The World Investment Report 2022 presents a telling picture. Despite a slight dip from USD 289.39 billion in 2020 to USD 279.14 billion in 2021, the stock of FDI in Thailand remains significant. The major contributors, including Japan, Singapore, Hong Kong, the US, the Netherlands, China, and Mauritius, demonstrate the country’s wide appeal and solid position in the global economy. These figures highlight the promising prospects of foreign direct investment in Thailand, evidencing global trust in its economic potential.

What is Foreign Direct Investment (FDI)?

Foreign Direct Investment is a business investment made by a team or assembly in one country into a business entity in another country — in this case, Thailand. The foreign investor establishes a lasting interest and significant control over the business in the host country. By capitalizing on Thailand’s investment opportunities, investors not only contribute to the economic growth of Thailand but also have a chance to benefit from its thriving markets.

Benefits of Foreign Direct Investment in Thailand

FDIs have been a cornerstone of Thailand’s economic development, largely due to the country’s welcoming stance towards foreign investments. The Thailand FDI policy is notably investment-friendly, providing numerous benefits such as a strategic location at the heart of Asia, well-developed infrastructure, and a skilled workforce. These elements create an attractive investment climate where foreign investors can reap the advantages of expanding markets and robust economic growth.

Challenges and Risks of Foreign Direct Investment in Thailand

While the benefits are substantial, foreign investors also need to understand the challenges and risks associated with FDIs in Thailand. These can include regulatory complexity, occasional political instability, and bureaucracy. The foreign investment laws in Thailand can be intricate, and understanding these complexities is paramount for strategic planning and risk mitigation. By doing so, investors can effectively navigate the investment landscape and tap into the immense potential that Thailand offers.

Types of Business Entities in Thailand

Before diving into the various business structures available for foreign investors in Thailand, it’s essential to grasp the wider context of what international direct investment entails. Foreign direct investment involves an investor establishing a long-term relationship with a business entity in another country. As an international investor, one can reap significant benefits in the form of economic expansion, access to new markets, and potentially higher returns on investment.

The landscape of foreign direct investment in Thailand is rich with opportunities, attracting top investors in Thailand from various sectors. One of the significant factors to consider when planning such investments is the range of business entities you can choose from. The Thailand investment procedures are quite thorough and require an understanding of these business entities, each with its unique structure and implications. Equally important is an appreciation of investment promotion in Thailand, as the Office of the Board of Investment offers incentives to attract foreign investors, setting the stage for lucrative investment scenarios.

Let’s delve into the details of these business entities and the procedures associated with them.

1. Sole Proprietorship
A sole proprietorship is the most prevalent business entity. It involves a single individual owning and running the business. However, this means the owner is also personally liable for all the business’s debts and liabilities.

2. Juristic Partnership / Limited Partnership
In a partnership type of business, there are two or more people who share ownership in the same juristic entity. Every partner contributes to all aspects of the business, including money, property, labor, or skills.

3. Limited Company
A limited company is a business entity that fuses the features of a corporation and a partnership. It allows limited liability protection to its shareholders, meaning their personal assets are generally not at risk in case of business debts or legal issues. This business structure provides flexibility in management and taxation while providing a level of personal asset protection.

4. Public Limited Company (PLC)
A PLC is a company that is authorized to offer its shares to the public. The shareholders’ obligation is limited to the amount unpaid on their shares, as same as the principle of the limited company.

5. Representative Office
A representative office acts as a liaison between its head office overseas and businesses in Thailand. It cannot generate income nor enter into business contracts.

Procedures for Foreign Investment

Navigating the terrain of foreign investment involves understanding the key procedures, regulations, and economic indicators of the host country. As to foreign direct investment in Thailand, staying abreast with the latest Thailand investment regulations, understanding Thai economic indicators, and being aware of foreign direct investment news in Thailand can equip an investor with valuable insights. It ensures that investors are well-informed and can make strategic decisions about their investment journey.

The procedures for foreign investment in Thailand are multifaceted and cover several aspects. From investment promotion to compliance with local laws, these procedures aim to create a favorable and secure investment environment. In the following segments, we will examine each of these areas more closely, providing you with a comprehensive discussion of what to expect when investing in Thailand.

1. Investment Promotion
Thailand’s Office of the Board of Investment (BOI) offers incentives for eligible investors, which can include exemption of corporate income tax, exemption of import duty for machinery and raw materials, and permission to own land and acquiring of work permit for foreign-skilled workers.

2. Company Registration
Registering a company in Thailand involves several steps, including reservation of a company name, filing of a Memorandum of Association, summoning statutory meeting, and registration of incorporation with the government entity.

3. Business Licenses and Permits
Depending on the business type, various licenses and permits may be required.

4. Taxation
Foreign businesses are subject to a range of taxes in Thailand, including corporate income tax, withholding tax, and value-added tax.

5. Compliance and Regulations
It is essential for foreign investors to comply with all relevant Thai laws and regulations, which cover areas like labor, environmental standards, and anti-corruption measures.

Key Legal Considerations for Foreign Investors

To comprehend the dynamics of FDI in Thailand, it is essential to grasp certain fundamental concepts. One such concept is understanding the meaning of “direct investment abroad.” In simple terms, it refers to domestic investors making business investments in enterprises located in other countries. Actually, in the fourth quarter of 2022, Thailand experienced a significant boost in FDI, amounting to an increase of THB 48,656.87 Million. This surge in FDI reflects the growing confidence of international investors in Thailand’s business environment and potential for returns.

Thailand’s investment incentives have played a major role in attracting foreign investors, but to fully reap these benefits, understanding the country’s legal landscape is paramount. Key legal considerations include everything from investment laws and regulations to labor laws and dispute resolution mechanisms. This section provides an overview of these important aspects, offering insight into how to navigate this terrain effectively and ensure your investment yields maximum returns.

• Investment Laws and Regulations

Thailand has specific laws and regulations that govern foreign investment, including the Foreign Business Act, the Investment Promotion Act, and others.

• Business Structures

Foreign investors should carefully choose the right business structure to ensure legal compliance and optimize their operations.

• Intellectual Property (IP)

Protecting intellectual property is crucial in Thailand, and the country’s IP laws provide protection for patents, trademarks, copyrights, and trade secrets.

• Labor Laws

Thai labor laws regulate working hours, wages, welfare, safety, and other employment conditions. Non-compliance with these laws can result in penalties, so it’s vital for businesses to understand and follow them.

• Dispute Resolution

Understanding Thailand’s legal system for dispute resolution, including negotiation, mediation, arbitration, and litigation, is crucial to navigating any potential business disputes.

Opportunities and Challenges for Foreign Investors

Delving into the realm of FDI, it is essential to comprehend its core. FDI means establishing a long-term relationship and controlling interest in a business in another country. As Thailand’s FDI statistics demonstrate, the country’s attractive incentives and strategic location make it a compelling choice for global investors. Coupled with the Thailand investment promotion privileges, this leads to a favorable environment for investment.

However, to seize these advantages, one needs to understand both the opportunities and challenges inherent in investing in Thailand. Here are some key points:

1. Robust Economy
Thailand’s economy is resilient and diversified, ranging from agriculture to manufacturing and services. It provides a stable base for profitable ventures.

2. Strategic Location
Thailand’s location in the heart of Asia makes it a logistics and trade hub, offering access to growing regional markets.

3. Business-Friendly Climate
The Thai government’s investment promotion privileges, including various tax incentives and support services, encourage foreign investment.

4. Potential Growth Industries
Certain sectors, such as technology, tourism, agriculture, and manufacturing, offer considerable growth potential and opportunities for investment.

Despite the many opportunities, investors must also consider potential challenges:

1. Regulatory Complexity
Navigating Thailand’s legal and regulatory framework can be challenging, particularly for foreign businesses unfamiliar with the local context.

2. Language Barriers
While English is widely used in business, there may still be language barriers in some areas.

3. Cultural Differences
Understanding local business etiquette and cultural nuances can be critical for business success.

To sum up, while Thailand offers a promising landscape for foreign direct investment, a deep understanding of the local business environment is crucial. Adequate preparation and strategic planning can pave the way for fruitful investment in the Land of Smiles.

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Foreign Investors, Business Sector

Navigating the complexities of foreign direct investment in Thailand calls for a trusted, knowledgeable partner. At Kudun & Partners, we offer expert guidance on all aspects of Thai business affairs. Our team is well-versed in securing business licenses, ensuring regulatory compliance, and delivering strategic insights tailored to your business needs.

By leveraging our deep understanding of Thailand’s vibrant business landscape, we empower foreign investors to unlock the vast potential of this flourishing economy. Choose Kudun & Partners as your reliable guide in seizing the abundant opportunities in Thailand.

Don’t miss the chance to accelerate your growth in one of Asia’s most dynamic markets. Contact us today to kickstart your successful journey into the Thai business realm.

About us

Foreign Direct Investment Practice Group

We are commercially-minded and solutions-oriented legal advisors whose every move is made with your objectives in mind. We act as trusted legal and business advisors to leading international private and public corporations, start-ups, private equity funds, and foreign individuals on all aspects of their foreign direct investment (FDI) transactions in Thailand.

Our team has extensive experience in providing legal services to international clients on every aspect of investing in or expanding their business in Thailand. We help foreign clients navigate Thailand’s foreign ownership laws to ensure that their businesses are structured and are carried on in compliance with legal requirements. We also regularly work with US clients on obtaining benefits under the Thai-US Treaty of Amity and Economic Relations.

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In an effort to streamline the overall process and enhance procedural efficiency of PP, the Office of the Securities and Exchange Commission of Thailand (“SEC”) has pushed forward the drafted bill – the Announcement of the Capital Market Supervisory Board No. TorJor. 28/2565 Re: Authorization of Listed Company to Offer Newly Issued Shares through Private Placement (“CMSB Announcement No. TorJor 28/2565”), which is set to become effective from 1 July 2023 onwards. The new regulations under the CMSB Announcement No. TorJor 28/2565 shall apply to all offerings of PP shares that obtain shareholders’ approval from July 1, 2023, onwards.[2]

This article aims to provide a summary of the previous issues related to the regulations governing the offering of PP shares by listed companies, SEC’s proposed amendment and the forthcoming changes for businesses.

Previous Regulations on Issuance and Offering of PP Shares

Under the current regulations in effect until July 1, 2023, SEC regulations pertaining to private placement shares can be categorized into two aspects – standard requirements and additional requirements.

As a standard requirement applicable to all types of PP shares offering, a listed company is required to (a) submit notice to summon shareholders’ meeting at least 14 days in advance; (b) obtain approval from at least three-fourths of shareholders; (c) submit corporate documents (including minutes of the board of directors and minutes of shareholders’ meeting) to the SEC; and (d) adhere to the relevant regulations, including information disclosure requirements on the Stock Exchange of Thailand (“SET”) and in the notice to summon shareholders’ meeting before raising funds through PP.

The SEC imposes additional requirements on the offering of PP shares, which is varied depending on the pricing of PP shares, which can be categorized into; (i) floating price, where the shareholders meeting resolve to assign the board of directors to indicate the offering price in accordance with the market price at the time of offer (Floating Price) /market price; and (ii) fixed price.

In the case of (i) offering PP shares at a fixed price, (ii) offering remaining shares from a right offering at a fixed price, and (iii) other PP allocation/price determining conditions that do not fall within the aforementioned SEC-prescribed scenarios, SEC approval is required. On the other hand, offering PP shares at Floating Price does not required SEC approval – listed companies shall be deemed to have obtained approval from SEC provided that they have complied with the standard requirements outlined above.

In order to obtain formal approval from the SEC, a listed company is required to submit relevant documents and information for the SEC’s review at least 30 days prior to the date of shareholders’ meeting (referred to as the ‘pre-process’). This regulation imposed by the SEC necessitates a minimum of two to three weeks to complete the PP certification process, thereby extending the funding timeline for businesses and contributing to inefficiency during urgent situations.

Regulatory Changes

The amendment outlined in CMSB Announcement No. TorJor 28/2565 entails several significant components, which we will discuss below, comparing them to the previous regulations stated in CMSB Announcement No. TorJor 72/2558.

Concluding Remarks

Following the implementation of CMSB Announcement No. TorJor 28/2565, we anticipate a more streamlined process for the issuance of PP shares in general cases. However, it is important to note that when issuing PP shares containing material substances, the SEC has replaced the approval process with the requirement of obtaining an IFA’s opinion, which may result in significantly higher costs for the listed company. While the elimination of the SEC’s approval process simplifies and increases the efficiency of the issuance of PP shares, it is debatable whether this regulatory simplification encourages business funding through PP from a commercial standpoint.

It is important to highlight that this change in PP regulation is relatively new and ongoing. We strongly advise companies to stay informed about any forthcoming changes in the SEC practice. The SEC retains the authority to disapprove, suspend, or terminate PP issuances that are deemed unfair to shareholders or lack sufficient information disclosure.

As your trusted partners, we are committed to keeping you informed about any additional action plan recommendations to navigate the evolving PP regulation and SEC practices in light of this recent development. For further information, please reach out to our Capital Markets Team or contact the authors directly.

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Praised by our clients for providing cutting-edge advice on complex securities and regulatory matters, our capital markets practice continues to represent many companies in their IPO transaction covering various sectors. We advise our clients on pre- and post-issue matters such as corporate restructurings, debt refinancing and liability management including a complete solution for evaluating capital market issues ensuring the correct set up for tax optimization through pre-IPO strategies.

[1] According to Clause 9 of the CMSB Announcement No. TorJor 28/2565, the issuance of new shares with the below conditions shall be considered as offering of PP shares;

(i) Issuance of new shares for offering to not exceeding 50 specific investors within a 12-month period;

(ii) Issuance of new shares with a value not exceeding THB 20 million within a 12-month period; or

(iii) Issuance of new shares for offering to institutional investors.

[2] Clause 23, CMSB Announcement No. TorJor 28/2565

[3] CMSB Announcement No. TorJor 28/2565

[4] Including connecting parties under Section 258, concert parties of the PP investor and connecting parties under Section 258 of the concert parties.

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When it comes to applying for a business license in Thailand, having a reliable legal service provider by your side can make all the difference. From streamlining the application process to ensuring your business complies with local regulations, working with experienced legal professionals will save you time, effort, and potential complications down the line. In the sections that follow, we’ll discuss the importance of business licenses in Thailand and how partnering with the right legal service provider can set your venture on the path to success.

The Importance of a Business License for Operating in Thailand’s Market

A business license does not only grant you legal permission to conduct your business activities, but it also demonstrates your commitment to complying with Thailand’s laws and regulations, including obtaining a foreign business license in Thailand if necessary. This commitment is especially crucial considering the significant presence of foreign investors in the Thai market. According to a report by The Nation Thailand, Japan remained the country’s highest foreign investor, accounting for 28.6 percent of the total investment, equivalent to 23.260 billion baht. The United States followed closely in second place, investing 5.948 billion baht, representing 15.4 percent of the total investment. Additionally, Singapore secured the third spot, with investments totaling 10.530 billion baht, making up 15.1 percent of the total in the recent year. These figures highlight the substantial inflow of foreign investment into Thailand and underline the importance of securing a business license to effectively tap into the market.

Here are some key reasons why securing a business license is crucial for your success in the Thai market:

1. Legal Compliance
Thailand has a set of regulations in place to ensure that businesses operate ethically and responsibly. By obtaining a business license, you show that your company abides by these laws, which helps build trust among your customers, partners, and local authorities.

 2. Business Reputation
A valid business license is a sign of credibility and professionalism. Acquiring a license illustrates that your company is serious about conducting business in Thailand and has taken the necessary steps to operate within the legal framework.

3. Tax benefit
In some cases, obtaining a business license may qualify your company for certain tax benefits or incentives. This could result in cost savings and a more favorable financial position for your business.

4. Peace of Mind
Knowing that your company is operating legally in Thailand gives you peace of mind, enabling you to focus on strengthening your business without worrying about potential legal issues or penalties.

Applying for a business license in Thailand is a crucial step for any entrepreneur looking to establish or expand their company within this vibrant market. By understanding the importance of a business license and complying with the country’s legal requirements, you’ll be wiser on your way to achieving success in the Land of Smiles.

Common Questions and Answers About Business Licenses in Thailand

According to Thailand’s 20 Year National Strategy, a comprehensive plan spanning 2018 to 2037, which outlines economic and social reforms in Thailand. This strategy is guided by the Sufficiency Economy Philosophy (SEP), emphasizing principles of moderation, reasonableness, and prudence, along with pillars of knowledge, ethics, and virtues. These frameworks create a favorable environment for businesses operating in the Thai market as the ASEAN’s second-largest economy.

Thailand, as the 8th largest economy in Asia, boasts a robust and diverse economic landscape. With a GDP of 16,316 trillion baht in 2018, the country’s free-market economy thrives on a strong domestic market. The private sector plays a pivotal role, with the industrial sector contributing 40% to the GDP and services, particularly tourism and financial services, accounting for 50%. While historically agrarian, the agricultural sector now represents approximately 9% of the country’s GDP.

In line with these factors, it is crucial to address common questions and concerns regarding business licenses in Thailand. Whether it involves navigating the complexities of the licensing process or understanding the specifics of securities associated with particular licenses, this information aims to provide comprehensive guidance. By exploring the answers, you can gain valuable insights into securing the appropriate license for your business in Thailand.

What Are the Different Types of Business Licenses in Thailand?

In Thailand, business licenses vary based on the nature of your business activities. Some common types of licenses include:

1. Factory License
Required for businesses specified under the list attached to The Ministerial Regulation Prescribing Categories, Types and Sizes of Factory, B.E. 2563 (2020)

2. FDA License
Necessary for businesses operating relating to food or drugs.

3. TISI License
Required for businesses relating to the controlled products under the Industrial Product Standards Act B.E. 2511.

4. Hotel License
Essential for businesses operating hotels or other accommodation services.

5. Import-Export License
Required for companies involved in importing or exporting goods.

6. Telecommunication License
Required for companies involved in the telecommunication business controlled by The National Broadcasting and Telecommunication Commission.

It is important to note that certain industries, such as banking, finance, or real estate, may require additional licenses or permits.

What Are the Eligibility Criteria for Obtaining a Business License in Thailand?

The eligibility criteria for obtaining a business license in Thailand depend on the type of license you’re seeking. In general, you must:

1. Register your business as a legal entity in Thailand, such as a limited company or a partnership.

2. Ensure that your business activities comply with Thailand’s foreign business laws, which may require obtaining a Foreign Business License (FBL) or forming a joint venture with a Thai partner.

3. Meet the specific requirements for the type of license you’re applying for, which could include minimum capital, qualifications, or experience.

How Long Does It Take to Obtain a Business License in Thailand?

The duration for obtaining a business license in Thailand, varies depending on the kind of license and the complexity of your business. In general, the process can take anywhere from a few weeks to several months. Some kinds of applying for a business license in Thailand may involve additional requirements or a lengthier review process. Working with a knowledgeable legal service provider can help expedite the process and ensure that your application is complete and accurate including the company can comply with all post compliance specified under Thai law.

What Documents Are Required for a Business License Application in Thailand?

The documents required for a business license application in Thailand may vary depending on the type of license. Some common documents include:

1. General corporate documents, such as the Memorandum of Association and Articles of Association.

2. A detailed business plan outlining your proposed activities, target market, and financial projections.

3. Proof of capital, such as a bank statement or a letter of credit.

4. Copies of the passports or identification cards of the company’s directors or shareholders.

5. Lease agreements, building plans, or other documentation related to your business premises.

What Are the Costs and Fees Associated with Obtaining a Business License in Thailand?

The costs and fees associated with obtaining a business license in Thailand, including a foreign business license, vary depending on factors such as the type of license, the size of your business, and the complexity of your application. When considering the foreign business license in Thailand costing and charges, keep in mind that you can generally expect to pay fees for:

1. Business registration and incorporation.
2. License application and processing.
3. Legal and consulting services.
4. Translation and certification of documents.

Remember that it is essential to work with a reputable legal service provider to ensure that you have the full understanding of all the costs involved and budget accordingly for a smooth business license application process.

Factors That May Affect the Timeline for Obtaining a Business License in Thailand

Obtaining a business license can be a complex process, and the timeline may vary due to numerous factors, including external factors and others like the business license cost in Thailand. To help you better understand what may affect the duration of your application process, we’ve compiled a list of aspects that could potentially impact the timeline for securing a business license in this dynamic country.

• Completeness and Accuracy of Application Submission

Incomplete or inaccurate applications can lead to delays in processing times. Ensuring that you submit a comprehensive and error-free application will help expedite the process.

• Availability of Supporting Documents and Information

Having all necessary supporting documents and information readily available can significantly shorten the processing time for your business license application.

• Current Workload and Processing Times of Relevant Government Agencies

The timeline may be affected by the current workload and processing times of the government agencies responsible for issuing the license.

• Additional Requirements or Requests from Government Authorities

Occasionally, government authorities may request additional information or documentation, which could extend the timeline for obtaining your business license.

• Language Barrier or Misunderstandings in Communication

Miscommunications due to language barriers can lead to delays or errors in the application process. It’s crucial to work with a reliable legal service provider to help bridge any language gaps.

• Changes in Business Regulations or Policies

The timeline for obtaining a business license may be affected by changes in regulations or policies, which may require additional steps or adjustments to your application.

• Legal or Administrative Issues with Previous or Current Business Operations

Issues with previous or current business operations, such as non-compliance or pending litigation, can affect the result of applying for some kind of business license.

• Delays or Disruptions due to External Factors, such as Pandemics or Political Instability

External factors, like pandemics or political instability, can lead to disruptions or delays in the processing of your business license application.

Being aware of these factors and working closely with a skilled legal service provider can help you navigate the complexities of the business license application process, ultimately enabling you to obtain your license more efficiently and start your business operations in Thailand sooner.

Renewing or Updating Your Business License in Thailand: What You Need to Know

Once you have successfully obtained a business license in Thailand, it’s crucial to stay informed about the process of renewing or updating your license. Keeping your business license current and accurate is essential for maintaining compliance with Thai regulations and ensuring the continued success of your business. In this section, we’ll provide you with vital information on renewing or updating your business license in Thailand.

When Should You Renew Your Business License in Thailand?

The renewal period for business licenses in Thailand varies depending on the kind of license you hold. Some licenses may require annual renewal, while others may have longer validity periods. It is imperative to check the expiration date of your business license and begin the renewal process well in advance to mitigate any potential disruption to your business operations.

What Are the Requirements for Renewing a Business License in Thailand?

The requirements for renewing a business license in Thailand typically include the following:

1. Submitting a renewal application form along with the required supporting documents.

2. Paying the renewal fees, which may vary depending on the type of license.

3. Providing evidence of compliance with Thai regulations and any license-specific conditions.

Get in touch and consult with a legal service provider to ensure that you meet all the renewal requirements for your specific business license.

How to Update Your Business License Information in Thailand?

In case of any changes to your business operations or contact information, it’s crucial to update your business license accordingly. To update your business license information in Thailand, you will generally need to:

1. Submit an application form for updating your business license information.

2. Provide supporting documents that substantiate the changes, such as updated lease agreements, or company registration documents.

3. Pay any applicable fees associated with updating your business license information.

Penalties for Failing to Renew Your Business License in Thailand

Neglecting to renew your business license in Thailand can lead to penalties, including fines, suspension or revocation of your license, or even legal action. The severity of the penalties and fines depends on the type of license and the extent of non-compliance. Furthermore, not renewing your license may also incur additional Thailand business license fees when you attempt to rectify the situation, making it even more crucial to stay on top of the renewal process.

How to Avoid Common Mistakes When Renewing or Updating Your Business License in Thailand

To avoid common mistakes when renewing or updating your business license in Thailand, consider the following tips:

1. Start the renewal process early to ensure you have ample time to gather the required documents and address any potential issues.

2. Regularly review and update your contact information to ensure you receive timely notifications regarding license renewal or other compliance matters.

3. Consult with a legal service provider to ensure you meet all renewal requirements and avoid costly mistakes or oversights.

4. Stay informed about changes in Thai regulations that may affect your business license and operations.

Simply sticking with these guidelines and working closely with a legal service provider ensures the seamless renewal or updating of your business license in Thailand while fully safeguarding the ongoing success of your venture.

Don’t miss out on the potential Thailand holds for your business. Contact us today and let Kudun & Partners guide you towards the path of prosperity and success in the dynamic Thai market.

About us

Foreign Direct Investment Practice Group

We are commercially-minded and solutions-oriented legal advisors whose every move is made with your objectives in mind.  We act as trusted legal and business advisors to leading international private and public corporations, start-ups, private equity funds, and foreign individuals on all aspects of their foreign direct investment (FDI) transactions in Thailand.

Our team has extensive experience in providing legal services to international clients on every aspect of investing in or expanding their business in Thailand. We help foreign clients navigate Thailand’s foreign ownership laws to ensure that their businesses are structured and are carried on in compliance with legal requirements. We also regularly work with US clients on obtaining benefits under the Thai-US Treaty of Amity and Economic Relations.

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In this post-Covid era, Foreign Direct Investment (FDI) into Thailand has been on the rise, with FDI inflows and applications for investment promotions increasing 36% from the previous year (approximately 13 billion USD).[1] Accordingly, Thailand’s gross domestic product (GDP) is expected to increase from 2.6% in 2022, to a projected high of 3.7% in 2023.[2]

According to the Thai Government, the top sources of foreign investment into Thailand last year were from Japan, Singapore, US, Taiwan, HK and China.[3] The Board of Investment recorded that the electronics, EV and automobile, and digital sectors had the highest growth rates in 2022.

There are many factors that make Thailand an attractive place for foreign investment, including its geographical location in South East Asia, a skilled labour force, Board of Investment incentives, and the introduction of Long-term Resident visas for foreigners. In November 2022, the BOI introduced more incentives to promote investments, such as tax exemptions, new industry categories and special investment zones.[4]

Based on such positive financial trends and government encouragement, things are looking upwards for foreign investors and investments into Thailand. However, where there is further investment, there is further risk and potential for problems and disputes. This article provides an overview of the top legal and practical problems frequently encountered by foreign investors in Thailand, and how to minimise or avoid such risks.

Legal Problem 1: Licensing, Corporate Structure, and Contractual Issues

Under Thai law, foreign businesses wishing to invest in Thailand must comply with the Foreign Business Act B.E. 2542 (1999) (FBA) which identifies three categories of businesses that are restricted for foreign investors. The following table provides a brief explanation of the three categories and examples of businesses from each category:

Therefore, in order to conduct business in Thailand, foreign investors must obtain one of the following:

• • • a foreign business license (FBL); or
    • a foreign business certificate (FBC) for promoted activities from the Office of the Board of Investment (BOI); or
    • an FBC for approved business from the Industrial Estate Authority of Thailand (IEAT); or
    • an FBC under an international treaty such as the US-Thailand Treaty of Amity and Economic Relations (1996).

In addition to the aforementioned restrictions, foreigners are prohibited from land ownership in Thailand[6], unless they fall within certain exceptions (such as having obtained an investment promotion through the BOI).[7]

In light of these restrictions, it is common for foreign investors wishing to do business in Thailand to establish a joint venture (JV), typically in the form of a Thai private limited company, with a Thai company or Thai nationals.

When entering into a JV with a Thai company, foreign investors must consider various factors to avoid potential future problems:

• • Contracts
    • • As foreign investors are typically the minority shareholder of a JV contract, they should ensure that there are contractual provisions in place to protect their rights. For example, provisions relating to decision-making (such as the quorum needed for the shareholders’ or board meetings, number of board seats, and veto rights) and company operations, should be carefully drafted to ensure that foreign investors can maintain a role in the management and operation of the JV company.
      • Additionally, it is important to exercise foresight in anticipating future dispute resolution scenarios, with particular attention given to deadlock, termination, and dispute resolution clauses.

• • Governing law and dispute resolution clauses
    • • Drafting such clauses requires careful attention. The governing law specified in the contract will determine the legal framework that applies to the contract, encompassing the parties’ rights and obligations. For example, provisions regarding share transfer restrictions or shareholders’ and directors’ meetings will be governed by the governing law. Additionally, the foreign investor should carefully assess whether the chosen governing law adequately safeguards the interests of minority shareholders.
      • On the other hand, the dispute resolution clause determines the mechanism for resolving any potential disputes. It is crucial for foreign investors to carefully evaluate which dispute resolution mechanism (such as Court litigation or international arbitration) will effectively serve their interests in the event of a dispute.
      • Consistency between the governing law clause and dispute resolution clause should be considered to avoid lengthy and costly legal proceedings. Poorly drafted clauses in these areas can inadvertently lead to expensive and time-consuming disputes.

• • Articles of Association (AoA)
    • • In accordance with the Thai Civil and Commercial Code, a company’s operations must comply with the provisions outlined in its AoA.[8] Therefore, it is essential to carefully review and align any clauses in the JV Contract with the AoA to prevent future discrepancies and complications.

• • Use of nominees
    • • Thai law strictly prohibits the utilisation of Thai nominee shareholders to hold interests on behalf of foreign investors.[9]

• • Tax considerations
    • • Establishing a JV in Thailand entails addressing various tax considerations, including VAT registration, withholding tax, specific business tax, and corporate income tax.[10] Additionally, it is crucial to take into account any tax incentives provided by the BOI.

Legal Problem 2: Employment issues

Thailand is generally known for its pro-employee stance. There are often disputes that arise between employees and employers concerning termination (unfair dismissal), forced resignations, and reduction of salaries.  When a foreign investor establishes a JV with a Thai company/individual, the investor should be aware of the following Thai labour laws to avoid future problems with employees:

• • Termination
    • • Under Thai labour law, employers have the authority to terminate employees with or without cause,[11] although it is challenging in practice to terminate employees with cause unless there is substantial evidence and valid grounds. The law specifies that employers can terminate the employment agreement without compensation if the employee “willfully disobeys” or “habitually neglect” their duties, or is found to be “guilty of gross misconduct” that justifies termination with cause.[12] Even when there are valid grounds for termination, the law requires that the employer clearly state the grounds relied upon in the termination letter and cannot change or add grounds at a later stage.
      • There is a significant practical distinction between “with cause” and “without cause” terminations, as the amount owed to the employee upon termination differs. In the case of termination without cause, the employer is required to pay any unpaid wages, payment in lieu of advanced notice, severance pay, unused annual leave, and any other entitled payments under the employment.[13] If the termination is “with cause”, in theory, the employer is not obligated to pay money in lieu of notice or severance pay. However, employers must exercise caution when terminating an employee with cause to avoid the possibility of an “unfair dismissal” claim.

• • In practice, it is not uncommon for terminated employees in Thailand to file claims for “unfair dismissal,” even in cases where the termination is without cause, particularly if statutory payments have not been fully made. To avoid prolonged litigation in the Thai Labour Courts, depending on the circumstances, employers should seek legal advice early on and consider the possibility of a mediation or reaching a settlement with the employee.

• • Changes in contract terms
    • • Under Thai Labour law, employers are prohibited from making changes to employment terms that are less favourable to employees without their consent.[14] This includes provisions related to work hours, wages, welfare, annual leave, working conditions, and work location.

• • Language of the contract
    • • While Thai labour law does not require a written employment contract (for open-ended employment contracts) or mandate the use of the Thai language for the contract, it is advisable in practice to have a written agreement. If the employee is Thai and does not fully understand English, it is prudent to have the agreement in Thai (or in a dual-language format, English and Thai). This helps minimise the risk of misunderstanding the terms of the employment agreement and potential disputes in the future.

• • Remote working
    • • Thailand has recently introduced the “Work from Home Bill,” amending its labour laws to establish a framework for remote working arrangements for employers and employees. Employers and employees can now agree in writing for employees to work outside the office using information technology, and remote employees are to be treated equally to those working “in-person.” [15]

In addition, employers must arrange visas and work permits for any foreign employees. To be eligible to apply for work permits for foreign employees, the company must meet the following requirements:

(1) have a registered capital of at least 2 million Baht per work permit;

(2) maintain a ratio of 4 Thai employees to 1 foreign employee; and

(3) demonstrate an investment capital of at least 3 million Baht for the company (if the company is not registered in Thailand).[16]

There are exemptions for foreign companies with the requisite BOI permit or foreign employees falling within specific exemptions, such as diplomats, individuals engaged in temporary business activities in Thailand, or those who hold a Smart Visa.

Legal Problem 3: Compliance Issues

According to a survey conducted by PricewaterhouseCoopers (PwC), approximately one in four Thai companies experienced fraud, corruption and other economic/financial crimes in 2022.[17] Alarmingly, the survey also revealed that only 37% of Thai companies have established risk management and compliance functions to address fraud risks, which falls below global standards. The prevalent types of fraud encountered by Thai companies include cybercrime, procurement fraud, and asset misappropriation.

Foreign companies who enter into JVs with Thai counterparts face similar challenges. Foreign investors often encounter issues such as the disclosure of confidential information or trade secrets to competitors, misappropriation of petty cash and embezzlement of company funds by employees, and bribery of public officials.

These problems typically come to light through complaint procedures, document reviews, internal reporting, or whistleblowing hotlines. However, the lack of adequate risk management and compliance functions in many Thai companies implies that the actual occurrences of fraud may be even higher than reported. For foreign investors, particularly large multi-national corporations, these issues within the Thai JV company can have severe business and reputational consequences.

To mitigate the risk of fraud, it is highly advisable for foreign investors to ensure that the Thai JV company establishes robust reporting and compliance procedures and guidelines. These measures will enable the prevention and swift resolution of any issues that may arise. It is essential to clearly communicate these procedures to managers and employees, providing regular training sessions in the Thai language. Additionally, the company should implement accessible reporting channels and whistleblowing hotlines for employees.

Furthermore, the National Anti-Corruption Commission of Thailand (NACC) has issued guidelines for companies to implement proper internal control measures to prevent bribery by the company and its staff.[18] While having a comprehensive compliance program does not absolve liability in the event of a bribe, it can be considered as a mitigating factor by the Courts if an individual associated with the company is involved in bribery.[19]

Once a report is made through the company’s established procedures, it is crucial for the company to promptly and transparently address the concern. To ensure an efficient and effective process, it is advisable for the company to have a well-defined internal investigation plan in place. This plan should encompass both minor and major incidents of fraud or non-compliance, outlining the assigned investigators, investigation scope, procedural steps, estimated timeline, and circumstances necessitating the engagement of external legal counsel.

In the event that a bribe is discovered as a result of the investigation, the consequences for the company will vary depending on the recipient of the bribe. Thai law[20]defines bribery as an offence involving the act of giving, or promising to give, property or any benefit to an public official to induce such person to wrongfully perform, or not perform, or delay the performance of, their duty. In 2015, the Anti-Corruption Act was amended to include foreign public officials and officials of public international organisations. The penalties for bribery in Thailand are contingent upon the nature of the bribe and the specific laws governing the relevant authority involved in the bribery incident.

Foreign investors should also bear in mind that certain acts such as bid collusion for the purposes of submitting proposals to state agencies are criminal offences in Thailand.[21]

Conclusion

Thailand presents numerous promising opportunities for investment and the future is looking bright for Thailand. However, it is essential for foreign investors to be mindful of common challenges when conducting business in Thailand, particularly when investing through a Thai JV as outlined above. Thoroughly assessing and proactively addressing these issues in advance will contribute to the successful realisation of investment goals in Thailand.

For more information, please get in touch with our foreign direct investment practice, our dispute resolution, litigation and arbitration practice, our employment and benefits practice or alternatively, please contact the authors.

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[1] Thailand Board of Investment (https://www.boi.go.th/upload/ejournal/2023/Vol33/Jan/index.html#p=1)

[2] Thailand Board of Investment (https://www.boi.go.th/index.php?page=macroeconomics)

[3] Thailand Board of Investment (https://www.boi.go.th/upload/ejournal/2023/Vol33/Jan/index.html#p=1)

[4] Thailand BOI Announces New Incentives for Investor Retention, Relocation, Hydrogen Vehicles (https://www.boi.go.th/upload/content/PR106_2565.pdf)

[5] Defined as a natural person who is not of Thai nationality, a legal entity not registered in Thailand, and a legal entity of which at least 50% of the total issued shares are held by foreigners (Section 4 of the FBA).

[6] Referencing the typical practice of the Land Department, a company is deemed to be foreign if 49% of its registered capital is held by foreign entities, or the number of its foreign shareholders is more than half the total number of shareholders (https://www.thaigov.go.th/news/contents/details/62246).

[7] Section 27 of the Investment Promotion Act B.E. 2520 (1977)

[8] Section 69 of the Civil and Commercial Code

[9] Section 36 of the Foreign Business Act B.E. 2542 (1999)

[10] Chapters 3, 4 and 5 of the Revenue Code

[11] Section 582 of the Civil and Commercial Code and Section 17 of the Labour Protection Act B.E. 2541 (1998) (LPA)

[12] Section 583 of the Civil and Commercial Code, and Section 119 of the LPA

[13] Section 17, 17/1, 67 and 118 of the LPA. Careful consideration should be given to the scope of “salary” as defined in the LPA.

[14] Section 20 of the Labour Relations Act, B.E. 2518 (1975)

[15] Section 23/1 LPA

[16] Regulation of the Department of Employment on the Criteria for Consideration of Alien Work Permission B.E. 2552

[17] PwC’s Thailand Economic Crime and Fraud Survey 2022 (https://www.pwc.com/th/en/consulting/forensic/assets/economic-crime-and-fraud-survey-2022.pdf)

[19] Amendment No. 3 (B.E. 2558) to the Act Supplementing the Constitution relating to the Prevention and Suppression of Corruption B.E. 2542 (1999)

[20] Section 143 and Section 144 of Thai Penal Code and Organic Act on Anti-Corruption B.E. 2561 (2018)

[21] Section 5 of Act on Submission of Bids B.E. 2542 (1999)

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