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Treaty of Amity Info

Posted by sideshowBOB | Blog, Newbies, Reader Submissions | Posted on May 24th, 2007

Disclosure: This is all based on some of our direct experience, speaking with a local company who asissts individuals in company setup and some information online. If anyone has anything newer, is currently going through Amity setup or knows something we don’t – please just comment.

Much appreciated!

When it comes to setting up a company in Thailand, Americans are afforded a special way to form a Thai company. These companies are called Treat of Amity companies and are a huge benefit for Americans. The Treaty was suppose to expire in February 2006 but did not. Further to that the Free Trade Agreement between US and Thailand was suppose to be signed sometime in 2006 thus effectively ending the Treaty but the FTA has not been signed so the Treaty still lives. Under the FTA laws enforced by the WTO – no one country is to have specific benefits over and above any other country. So the Treaty should die but given the lack of a solid government in either the US or Thailand – the loophole lives on. Also keep in mind that if the Treaty were to stop, it should not have an affect on already approved or established Treaty companies. It also appears that Treaty companies are immune, for the moment, to the current changes in the Foreign Business Act that is currently shaking up Thailand.

There is another theory as to why the Treaty will continue and why Treaty companies tend to be immune from the changes in the FBA that I will espouse here – like it or not. The US military presence in Thailand is the largest of any foreign country and the US funds training exercises like Cobra Gold along with selling military equipment to the Thai military. Bottom line is there is too much at stake diplomatically for Thailand to eradicate the Treaty and if they did my guess is they would not mess with already established Treaty companies. So my take is get one while u can.

Below is some basic overview information about Treaty of Amity companies and how they get created. I will try to get some cost estimates soon for creating an Treaty of Amity company.

Basic Facts regarding the Treaty of Amity:

- Signed at Bangkok on May 29, 1966 by His Excellency Thanat Khoman, Thai Minister of Foreign Affairs, and The Honorable Graham Martin, United States Ambassador. – Provides equality of benefits to both sides.

- Grants Thai firms the right to operate in the United States under the same conditions as U.S. domestic firms (‒national treatment”). Grants U.S. firms reciprocal rights in Thailand.

- Provides international law protection (and recourse to the International Court of Justice) for Thai firms in the United States. Under the treaty the U.S. Congress may not on act discriminatory laws against Thai firms. Their assets may not be expropriated. Their profits may be freely remitted to Thailand. Grants U.S. firms reciprocal rights in Thailand.

- Provides for special ‒treaty trader” and ‒treaty investor” visas for Thai businessmen working in the United States. Such visas are available with minimum application formalities. The number of Thai applicants for such visas has grown each year with increasing Thai participation in the U.S. economy -an increasing Thai participation in the U.S. economy – an estimated 230 Thai businessmen will receive them this year.

- Creates a hospitable climate for investment in the two countries. As a result, U.S. firms have been major traders and investors in Thailand for over thirty years. In recent years, with growing Thai economic success, more Thai companies are trading and investing in the United States. They are enjoying the treaty’s benefits. Abrogation of the treaty would end these benefits, and could raise obstacles to increased flows of U.S. investment to Thailand.

How to Register for Treaty of Amity Benefits for American Companies:

The Treaty of Amity and Economic Relations between the United States of America and the Kingdom of Thailand – commonly known as the Treaty of Amity – was signed on May 29, 1966. There are two major benefits of the treaty:

- The Treaty allows American companies to maintain a majority shareholding or to wholly own its company, branch office or representative office located in Thailand,

- American companies receive national treatment. That is, they may engage in business on the same basis as Thai companies, and are exempt from most of the restrictions on foreign investment imposed by the Alien Business Law of 1972.

Some restrictions on American investment still exist. They include:

1. Owning land;
2. Engaging in the business of inland communication;
3. Engaging in inland transportation and communication industries;
4. Engaging in fiduciary functions;
5. Engaging in banking involving depository functions;
6. Engaging in domestic trade in indigenous agricultural products;
7. Exploiting land or other natural resources

Some US businesses still choose to form joint ventures with Thai partners and allow them to hold the majority stake because of their familiarity with the Thai economy and local regulations.

Application for certification of a Treaty company is generally done in conjunction with or after establishment of a company. Completion of the entire Treaty certification process typically takes about five weeks. It normally takes less than one week for certification from the U.S. Commercial Service office. It may be advisable to consult with a Thai legal or tax expert to be assured of successful registration.