US-Thai Treaty of Amity

US-Thai Treaty of Amity

The US-Thai Treaty of Amity provides significant benefits for American citizens and companies looking to establish themselves in Thailand. This guide will cover the ins and outs of establishing a company under this treaty.

A company vested or certified as an Amity Treaty Company will be granted national treatment under Thai law. This allows them to bypass most restrictions imposed on foreign investment in Thailand.

Bilateral Trade and Investment Framework Agreement (TIFA)

The United States and Thailand have a Bilateral Trade and Investment Framework Agreement (TIFA). TIFAs establish broad goals for cooperation and provide a platform for negotiations on specific trade issues. TIFA Council meetings are held regularly at senior levels of government and address a wide range of issues, including market access, labor, environment, intellectual property, and capacity building.

An FTA would help boost US exports to Thailand, which currently face tariffs averaging 16 percent, as well as reduce non-tariff barriers that constrain American business. Both sides affirmed their commitment to high labor standards, effective intellectual property protections, and good regulatory practices. The United States also urged Thailand to accelerate the elimination of restrictive laws, such as those on the exploitation of natural resources. Companies that have been certified by the US Embassy can be exempt from over 50 categories of restrictions under the Foreign Business Act. This certification can take some time to obtain. Having the Certificate, however, can greatly expedite the registration process and minimize delays.

Trade and Investment Joint Council (TIJC)

Under the Treaty of Amity, companies that are majority-owned by American citizens (or are wholly owned by American nationals) can enjoy benefits in Thailand. These include national treatment (enabling the companies to engage in business on similar terms as Thai businesses), and exemption from restrictions on foreign ownership imposed by the Foreign Business Act of 1999.

To qualify as a Treaty of Amity company, a US registered corporation must have at least 50% American ownership. The number of authorized American directors must also be greater than the percentage of shares owned by non-American shareholders.

Although the investment climate has improved in recent years, there are still challenges. For example, gratuity payments to government officials remain common and may result in unfair competitive disadvantages for firms that refuse to make such payments. In addition, a WTO ruling has called into question Thailand’s ability to maintain its commitment under the Treaty of Amity to treat investments from all WTO member nations equally.

Foreign Investment Act (FIA)

Under the Treaty of Amity, companies that are majority-owned by American citizens and incorporated in the United States are granted national treatment, meaning they can engage in business on the same terms as Thai businesses. This also exempts them from restrictions imposed by the Foreign Business Act.

To be protected under the Treaty of Amity, companies must first submit documents to the Commercial Services Office (CSO) at the US Embassy in Bangkok. The CSO will then certify to the Department of Business Development that the company is an Amity Treaty company.

Investors who are interested in investing in the oil and gas sector or in other sectors that the Thai government has reserved for domestic investment should consider OPIC political risk insurance to protect their investments. OPIC can provide debt financing, loan guarantees, private equity capital, and technical assistance for investments in Thailand. In addition, it provides political risk insurance to investors against currency inconvertibility and expropriation.

Foreign Business Act (FBA)

If you want to take advantage of the provisions offered by the Treaty of Amity, your company must be incorporated in compliance with Thai law and certified by the US Embassy’s Commercial Services Office (CSO). In addition, all owners and directors must be American citizens.

The Foreign Business Act (FBA) restricts foreigners or foreign-owned companies from undertaking more than 50 categories of business activities in Thailand, unless they are exempted by a special law or a treaty to which Thailand is a party. Foreign-owned companies that wish to operate in businesses specified in Lists 2 or 3 of the FBA must have at least 50 percent ownership unless exempted by a special law.

The Overseas Private Investment Corporation (OPIC) can provide debt financing and political risk insurance for investments in Thailand. However, this process can be lengthy. It’s important to seek professional guidance to avoid pitfalls and ensure your business is protected. Alternatively, you may choose to seek BOI promotion, which can open your company to additional benefits and exemptions from FBA restrictions.

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