Some seventy businessmen attended by the recently held seminar for foreign investors organized by the four Nordic chambers of commerce, Thai-Swedish Chamber of Commerce, Thai-Norwegian Chamber of Commerce, Thai-Finnish Chamber of Commerce and Danish-Thai Chamber of Commerce.
The investment seminar focused mainly on the property sector, what regulations they should be concerned about as there have been several matters confusing foreign investors recently relating to Thai regulations, particularly the Foreign Business Act (FBA) and foreign-exchange control.
The FBA and legal requirements under the Land Code, taxes under the Revenue Code, foreign-exchange rules, property insurance and personal income-tax regulations are among the key things investors should know about before making any business decision. The FBA tends to be the biggest concern for investors, especially as the regulations are still in the process of amendment by the government.
The regulations were approved by the Cabinet on January 9, but the National Legislative Assembly (NLA) then suggested an adjustment on August 8. The draft law was sent to the NLA to make the changes and the assembly sent its version to the Commerce Ministry to consider whether to approve them.
The suggested changes include more intense regulation on stake-holding proportions, voting rights and management control. The amendments are not expected to be made within the term of the interim government. However investors should prepare themselves to adjust quickly once the law is enforced, the seminar was told.
First, they need to know whether their businesses are subject to the FBA. If they are, which annex covers their business? Businesses that are listed in Annex 1 are those that relate to national security. Annex 2 lists businesses related to Thai tradition and culture. Annex 3 lists businesses in which Thais are not strong enough to compete with international players.
Many have to set plans on how to restructure their companies to comply with the amended FBA in case it is enforced, which could be done by converting preference shares to ordinary shares. To do this, the companies might have to decrease their current registered capital to eliminate preference shares and increase registered capital again to increase ordinary shares, the seminar heard.
The next thing to know is the requirements under the Land Code. Basic details are the types of rights to own properties, which include land, condominiums and apartments, under freehold, leasehold and property rights other than ownership (habitation, superficies and usufruct) and how foreigners can obtain the rights.
Those who want freehold rights have to invest at least Bt40 million for five years in the stock market or government bonds or obtain a privilege from the Board of Investment or the Industrial Estate Authority of Thailand. Those who lease property for the long term can renew their first leasing contracts for a maximum period of 30 years twice. However, the rights of lessees under lease agreements will not be passed to their heirs by way of inheritance.
Taxes and the Revenue Code focus on taxes applicable to property developers, which consist of income tax (corporate income tax, personal income tax and withholding tax) and indirect tax (value-added tax, specific business tax and stamp duty).
The normal rate for corporate income tax is 30 per cent, but small and medium firms with paid-up capital not higher than Bt5 million have special progressive rates from 15 to 30 per cent. For withholding tax, all companies have to follow tax-payment regulations, but those from Scandinavian countries have to follow the double-taxation treaties signed with Thailand.
For indirect tax relating to VAT, all sales of goods and provision of services in Thailand excluding those subject to specific business tax, including services performed outside Thailand but which are made use of here, are subject to VAT. The rate is 7 per cent for normal transactions and zero for export transactions.
Firms carrying on some businesses in Thailand, including the sale of immovable property and lending money, pay specific business tax.
Then come the foreign-exchange rules and foreign investors should be concerned about laws and regulations relevant to the remittance of funds, reserve of funds, repatriation of funds, foreign exchange in business transactions and six measures for relaxation of foreign exchange. Some details, particularly refunds of reserved amounts, were adjusted early this year by the Bank of Thailand to control baht speculation.
