The Cabinet of Thailand has recently planned significant changes regarding immigration policy and rules on foreign land ownership.
The Cabinet plans to offer a 10-year visa to attract ‘wealthy foreigners’ to move to Thailand by approving a selection of economic and investment policies designed to attract high-potential foreigners to relocate to Thailand.
The first target is to draw more than one million expats to Thailand while targeting four particular groups:
1. ‘Wealthy’ global citizens with an income of at least $80,000 for the past two years and $1 million in assets. Another requirement is to invest at least 16 million baht in real estate or government bonds.
2. Digital nomads – or professionals working from Thailand – must earn $80,000 for the past two years or $40,000 a year, and either self-employed or employed by an overseas company with the ability to use Thailand as a working location. Another additional requirement is a master’s degree and work experience of at least five years.
3. ‘Wealthy’ retirees – this includes those aged 50 or over, who can invest at least $250,000 in property or government bonds and has a minimum pension fund of $40,000. In case that the retirees do not want to invest, a minimum pension fund of $80,000 per year is required.
4. Highly skilled workers from SET-listed corporations or businesses with over $50 million annual income. Furthermore, they must have earned at least $80,000 over the past two years or $40,000 per year. As with digital nomads, they are required to have a master’s degree and work experience of at least five years in targeted industries.
The next aim is to stimulate domestic spending by 800 billion baht and generate 270 billion baht in additional tax revenue.
The final goal is to boost the expertise of Thailand’s workforce by attracting foreign experts to move to Thailand to support the country’s economy.
Other additional measures being reviewed for approval include:
The Cabinet has apportioned the National Economic and Social Development Council (“NESDC”) to work with the Board of Investment Office, the Interior Ministry, the Labour Ministry, and the Royal Thai Police Office to review the final points before the new policies are formally announced.
The National Economic and Social Development Board (“NESDB”) anticipates that these measures will be rolled out over five years.
Other measures that aim to attract expats are being considered by the NESDB includes:
If you have any questions related to this topic, don’t hesitate to get in touch with us at [email protected]
How to Legally Acquire a House in Thailand as a Foreigner
Broadcasted on Friday, 22nd of October 2021, FRANK Legal & Tax expert real estate lawyers Mr. Fabian Doppler and Khun Mana Meerungruang were interviewed by Jett Gunther, a Youtuber who focuses on real estate and business matters in Thailand. The topic was “How to Legally Acquire a House in Thailand as a Foreigner”.
In the one-hour session, they explained in detail the legal structures available for foreign investors to acquire landed property in Thailand and other legal-specific issues under Thai laws relating to property.
Please see the complete interview here:
This article looks at the hotel license requirements and licenses available in Thailand under the Hotel Act B.E. 2547 and the application procedures.
Under the Hotel Act B.E. 2547 (“the Act”), “hotel” is defined as lodging premises established for commercial purposes to provide temporary accommodation to a traveler or any person for consideration. Hotels, guest houses, resorts, or hostels are types of hotel operation models, which require a hotel license to operate. However, if the building has less than four bedrooms and can occupy a maximum of 20 people, a hotel license is exempted.
Types of hotel license
According to the Ministerial Regulations on the Types and Guidelines on Hotel Business Operation B.E. 2551 (the “Regulation”), hotel licenses can be subdivided into four different types. The main differences are the facilities provided in the hotel and the application fee. However, it must be noted that the fee will be calculated upon applying to the local District Office will take into account the total area of the hotel when doing the fee calculation.
Hotel Type 1 shall contain only guest rooms;
Hotel Type 2 shall contain guest rooms, dining rooms or restaurants or kitchen;
Hotel Type 3 shall include guest rooms, dining rooms or restaurants or kitchen, and entertainment venue or conference venue; and
Hotel Type 4 shall include guest rooms, dining rooms or restaurants or kitchen, entertainment venue, and conference venue.
Hotel Type 1 must not have more than 50 guest rooms with a total area of not less than 8 square meters per room, not including toilets and balconies. Hotel Type 2 must have a total area of not less than 8 square meters per room, not including toilets and balconies. Hotel Type 3 and 4 must have a total area of not less than 14 square meters per room, not including toilets and balconies. If there are less than 80 guest rooms, then entertainment venues are prohibited.
Legal obligations
Before submitting the hotel license application, the hotel building must comply with the Building Control Act B.E. 2522, and the building permit granted by the local District Office must indicate that the purpose of the building is for operating a hotel. Additionally, a building inspection license (usually issued after the completion of the building) must be granted before the hotel license can be applied.
Based on the Regulation, the following standard rules apply: 1) hotels may not be located near historical or religious sites as they may block the scenery or cause cultural disturbances to such sites, 2) entrance to the hotel must not cause traffic problems, 3) the location of the hotel must not be endangered to the health of hotel guests, and 4) the location of the hotel must not affect the business operation of nearby hotels. Other obligations indicated under the Regulation include a reception area, telephones for communication within and outside of the hotel, first aid kits, and 24 hours security service. Furthermore, room numbers must be clearly indicated on each guest room’s door.
After the hotel license has been granted, a hotel manager must be appointed and registered with the local District Office. After the hotel manager has been registered, the local District Office will provide a document to the hotel manager as a guideline for hotel operation. The document’s content depends on the type of hotel license granted and the size of the hotel; as a result, the document is issued on a case by case basis.
Application procedures
The procedures to apply for a hotel license can be summarized per the following:
1. Application of building permit at the local District Office.
2. Application of hotel license at the local Provincial Office.
3. Inspection of hotel building structures by related government agencies.
4. Issuance of hotel license by the local Provincial Office.
The process to obtain a hotel license may take approximately six months but may vary depending on the hotel’s location. The hotel license is valid for five years starting from the date of the issuance and may be renewed.
Feel free to contact us if you have any questions related to this matter at [email protected]
Under the Thai Foreign Business Act (“FBA”), A.D. 1999, foreigners who engage in certain business sectors, including any service business, require a Foreign Business License (“FBL”) to operate legally. However, under the new Ministerial Regulation of the Ministry of Commerce, a Regional Office is not considered a restricted business under the Foreign Business Act (FBA). Therefore, regional offices do not need to apply for a foreign business license to operate in Thailand.
Regional Offices are considered the same legal entities as their head offices and perform their businesses in Thailand on behalf of its head office abroad.
Permitted scope of activities
Similar to the Representative Office, Regional Offices are also restricted from earning income, purchasing, selling, and negotiating. Under the new Ministerial Regulation of the Ministry of Commerce, a Regional Office is not considered a restricted business under the Foreign Business Act (FBA). Therefore, regional offices do not need to apply for a foreign business license to operate in Thailand. However, a legal entity number is required from the Ministry of commerce.
Regional Offices also have to abide by Capitalization rules under the FBA. It must be at least 25 percent of the average estimated expenses for the first three years but not less than THB 3,000,000.
Conditions
In contrary to a company limited, Regional Offices must not:
– Derive any income from its activities. (Should the company make any profit, such profit must be allocated to the head office);
– Have the authority to accept a purchasing order or to make a sales offer;
– Negotiate / Enter into business arrangements with any natural or juristic person in Thailand.
Requirements
After successful registration, the Regional Office is subject conditions as follows:
– The total debt of the Regional Offices must not exceed seven times the amount of the capital owned by shareholders or the business owner.
– Funds used to finance the Regional Office must be remitted abroad. Over a five-year period after successful registration of the Representative Office, at least 5,000,000 THB must be invested into the Regional Office. 2,000,000 THB must be remitted in the first year, and 1,000,000 THB must be remitted in the first six months. After the first year, at least 1,000,000 THB must be transferred to the Regional Office each year until the full amount of 5,000,000 THB has been transferred.
– At least one person responsible for the operation and management of the Regional Office must reside in Thailand.
Application process
A foreign company may apply for a permit to establish a Regional Office at the Department of Commercial Registration at the Ministry of Commerce – Alien Business Section. Such permit is valid for five years and subject to a registration fee of 5 THB for every 1,000 THB of registered capital (maximum of 5,000 THB).
The establishment of a Regional Office in Thailand usually takes about 2-4 weeks.
Visa and work permit requirements for employees
The Department of Commercial Registration will provide support to companies transferring their foreign staff to Regional Offices in Thailand and also helps with securing necessary visas and work permits. Regional offices must maintain a 1 to 1 ratio of Thai-to-foreign employees for all foreign staff (whether authorized persons or not) that require Non-Immigrant “B” visas.
Note: The regional office can only serve the main office’s branches and subsidiary companies; it cannot serve third-party clients.
Feel free to contact us if you have any questions related to this matter at [email protected]
The Thailand Elite Visa is a long-term Thai visa provided to Thailand Privilege Card members offering benefits and residency in Thailand for a set period of time, often with the option to renew the visa. The programme is managed by the Thailand Privilege Card Company Limited, under the Ministry of Tourism and Sport.
The Thailand Elite scheme aims to promote Thailand to foreign visitors; and attract high-end visitors, business people, and investors by offering long-term multiple entry visas and access to live in the Kingdom for up to 20 years. The membership programme provides benefits targeted for immigration, leisure, business, and health and wellness.
The various privileges include access to airport pick-up services, privilege passport lanes, airport lounges, visa assistance, golf club memberships, and discounts on a range of high-end services in Thailand. The Elite Ultimate Privilege membership level offers the most benefits among the various membership options; for more details about each membership level’s individual benefits and discounts, visit www.thailandelite.com
Below you can find some insights into the fees and length of each membership level, including the visas on offer:
1. Elite Ultimate Privilege membership
2. Elite Easy Access membership
3. Elite Superiority Extension membership
4. Elite Privilege Access membership
5. Elite Family Alternative membership
6. Elite Family Excursion membership
7. Elite Family Premium membership
8. Elite Maxima Health membership
The Elite Maxima Health privilege is the newest membership level and offers access to health advice from some of Thailand’s leading hospitals and healthcare professionals.
Please contact us about how to apply, more details on the various membership levels, and how to connect with an official representative of the Thailand Elite Visa programme at [email protected]
One of the most important areas of regulation in the acquisition of a company is the purchase price provisions. This is an extremely complex issue in which various aspects have to be considered. In addition, the opposing perspectives of buyer and seller have to be reconciled. In this respect, various basic models and approaches have become established in M&A practice. These vary in complexity so that correspondingly complex procedures should only be applied in larger transactions, while others are more suitable for medium-sized company sales. A distinction must be made between regulations that govern the determination of the purchase price and those that define the payment modalities.
In the following article, we give you an overview of the four most important purchase price clauses and purchase price adjustments in the acquisition of a company:
1. Fixed purchase price
The fixed purchase price is straightforward, at least in the first step. In this respect, an economic reference date in the past is defined, and the seller and buyer agree on a specific company value at this point in time. A fixed purchase price for the company is then determined based on this company’s value. In determining the enterprise value, the parties are usually guided by the last available annual financial statements.
The costs of preparing interim financial statements are often not economical in smaller transactions and should be avoided. It is clear that this approach, while simple, has certain limitations and risks. The economic cut-off date should not be too far in advance of the actual transfer of the business to the buyer. Otherwise, the value at the time of transfer may already have moved far away from the value determined at the economic reference date. Therefore, if the annual accounts are to be used as a basis, as is usually the case, the transaction should not be too far removed in time from the preparation of the same.
If a fixed price is used, the buyer must also prevent any outflows between the economic cut-off date and the company’s transfer that would reduce the value of the company. In this respect, the buyer is contractually bound by strict behavioural requirements for the period between the economic reference date and the transfer of the business. These are the so-called “representations” relating to the past and the so-called “covenants” relating to the future. These future-related requirements create a legal framework within which the seller may operate until the economic closing date and which is intended to prevent manipulation at the buyer’s expense until he can control the company himself. In US transaction practice, the term “locked box” is in place for this purpose.
Purchase price adjustment clauses – overview
The background to purchase price adjustment clauses is that the contracting parties do not have the data necessary for a concrete calculation at the time of negotiation of the purchase price. These often only result from a balance sheet that has yet to be drawn up. In transaction practice, the annual financial statements are preferably used to avoid the costs of preparing interim financial statements.
The parties then negotiate a purchase price formula and a provisional purchase price in the abstract, which is calculated or adjusted in concrete terms after the relevant balance sheet is available based on the balance sheet values contained therein. Which purchase price formula is to be used as a basis is a matter of negotiation, and in this respect, there is no generally applicable procedure; the various methods are presented below.
In practice, agreement on the purchase price mechanism should be reached as early as possible, i.e., already in the preparatory documentation of the basic economic agreement in the letter of intent (LoI) or term sheet. Otherwise, there is a risk that the company acquisition will fail at this fundamental point after considerable time and costs have already been invested in the sales process.
2. Equity guarantee
A method that dominated in Germany, at least in the past, is the adjustment of the purchase price based on equity. Here, a fixed purchase price is first set based on already available balance sheets. This is then adjusted later by how the equity capital determined in the final decisive balance sheet is higher or lower. The seller thus provides an “equity guarantee” on the fixed purchase price. This method is rarely used today, especially in transactions involving private equity investors.
3. Cash-free – Debt-free
A purchase price adjustment under the keyword “cash-free – debt-free” is usually only useful in larger corporate transactions, as it is typically costly and complex. The company is treated as if it had neither cash (“cash-free”) nor debt (“debt-free”). The company’s value is then regularly determined based on a so-called “discounted cash flow” or “DCF” method or based on an income capitalisation approach recognised by international accounting standards.
The assumptions “cash-free – debt-free” are intended to help neutralise the influence of the different characteristics of each company’s liquidity and financing situation. Any manipulation by the seller at the expense of the buyer is then regularly prevented by a contractually stipulated adjustment of the purchase price in relation to the change in net working capital (so-called “working capital adjustments”). Thus, the seller should not be able to “artificially” increase cash with an effect on the purchase price, such as delayed payments from suppliers or the sale of customer receivables by way of factoring. In this respect, many circumstances have to be considered during the purchase contract negotiations, and their treatment has to be stipulated contractually. The resulting complexity is regularly not justifiable for smaller to medium-sized company sales so that a purchase price adjustment on this basis is ruled out.
4. Earn-out – the variable purchase price
A variable purchase price adjustment using “earn-out” clauses can help to reconcile different price expectations of a seller and buyer in a company acquisition. The purchase price is then made up of a fixed and a variable part. However, the variable part must first be earned. Otherwise, it is cancelled without replacement. This is particularly applicable in situations where the selling entrepreneur remains connected to the company, such as managing director or consultant.
Example: The selling shareholder-manager is to remain in the company after the transfer of the shares and will continue to steer its fortunes. He will only receive part of the purchase price if he achieves the defined economic goals.
The reference framework for these economic goals can be, for example, turnover, gross profit, EBIT, EBITDA, or net profit, but also the number of newly acquired customers or production quantities. In practice, EBITDA is widely used. In any case, the mechanism should be well thought out and regulated in as much detail as possible to avoid disputes. If disagreements do arise, an accountant is usually called in as an arbitrator.
Earn-out clauses – good for the buyer
Earn-out clauses primarily serve the buyer because:
Earn-out clauses are particularly recommendable from the buyer’s point of view when acquiring companies where future performance is difficult to assess. This applies above all to start-ups but also to companies whose success is heavily dependent on individual persons.
Earn-out clauses – not so good for the seller
One man’s joy is another man’s sorrow. For the seller, an earn-out entails numerous risks that are hardly or not controllable. The seller bears economic risk even though he is no longer a shareholder or only a minority shareholder. In addition, he is at the mercy of structural changes (such as a merger with another, loss-making company). When negotiating the purchase price, the seller must therefore pay particular attention to ensuring that, for example, he is granted far-reaching rights to information with which he can counter manipulation in the event of an emergency.
However, residual risks for the seller cannot be excluded entirely, even if detailed clauses are agreed upon. A seller should, therefore, always approach an earn-out clause with scepticism. Here it is worth negotiating with particular persistence.
On the other hand, it should be noted that the seller can raise additional purchase price potential vis-à-vis a sceptical buyer employing an earn-out clause, especially if he, as managing director, can continue to exert a decisive influence on the achievement of the objectives.
Final purchase price
As soon as the relevant closing date balance sheet is available, the variables specified in the agreed purchase price formula are applied, and the actual purchase price is agreed upon. This is neither fixed at the time of signing the contract nor at the time of closing. A refund of part of the purchase price or additional payment by the buyer occurs only afterward, depending on the adjustment necessary based on the purchase price determination.
If you have any questions, don’t hesitate to contact us at [email protected]
This article discusses the topic of e-signatures and electronic transactions in Thailand. For reasons which we will cover in this article, it is often best to seek legal advice before using e-signatures in the Kingdom.
Electronic signature has been recognized by law in Thailand since 2001, with the Electronic Transactions Act B.E 2544 (“Act”). Under Thai law, a written signature is not necessarily required for a valid contract; however, some requirements must be followed to comply with the Act. The Act states that contracts cannot be denied on the premise that they are concluded electronically. It is crucial to note that not all electronic signature applications or technology are allowed under the Act
A. Electronic Transactions Act B.E 2544 (2001)
According to the Electronic Transactions Act B.E 2544 (2001), “transaction” means any act related to civil and commercial activity. “Electronic transaction” means a transaction in which an electronic means is used in whole or in part.
According to Section 8 of the Act, in the case that the law requires the transaction to be made in writing if the transaction is generated in an electronic form without being altered, then it is deemed that such information is already made in writing. Furthermore, according to Section 9, an electronic signature shall be deemed complete if 1) it can identify the signatory and the signatory can verify that they are the signatory, and 2) the electronic signing is deemed appropriate and credible for the contracting parties.
Often, there is no clear practice of the authority to accept or consider the agreement signed electronically. However, in order to comply with Act, the following conditions must be met:
B. Timestamping
Electronic time stamp provides electronic documents with the reliable Timestamping Authority (TSA) and verifies the validity of reference times. It can be used with a digital signature to certify the existence of documents by having the TSA act as a witness or a trusted third party because they do not have any interest in such documents. It can also be used to verify that a time-stamped electronic document is valid.
C. Using electronic signature services
Electronic document signing services (such as DocuSign or Adobe Sign) can be applied based on the service’s specific features. However, we do not advise our clients to use e-signature because it may cause issues such as determining the signer’s intent or validating signatures. Furthermore, e-signature is still relatively new in Thailand, and not all government departments accept them. Moreover, we suggest that e-signature should be used in combination with e-timestamping to validate the document at all times.
Cases where it is not usually recommended to apply electronic signature:
Cases where an electronic signature may be permitted:
D. Company seal
According to our research, in cases where a company affidavit is required, even if the e-signature is valid, the corporate seal is still needed in the signing process. So, if a document or contract lacks the company seal, its legitimacy may be questioned in court.
E. Conclusion
It is important to recognize that not all applications, services, or technologies are accepted under the Electronic Transaction Act B.E 2544 (2001). The use of electronic document signing services should be subject to the definition of electronic transaction and effective under the law. Therefore, a proof of agreement made and signed through the signing service should be provided.
It should be noted that many government officials still require hard copies; often, they do not accept documentation related to electronic transactions. Furthermore, we do not recommend e-signatures for high-value transactions.
If you have any question regarding the e-signatures, Please contact [email protected] or +66 02 117 9131 or 2