Investment
Business contract
Joint Venture Agreement
1. The definition of a “Joint Venture” or a “Collaboration of Companies” (Consortium).
Conducting business in large-scale infrastructure projects requires significant investment, specialized expertise, and various technologies. An entrepreneur may need help to carry out such projects. Therefore, there’s a pressing need to collaborate and invest jointly with other entrepreneurs to ensure the successful execution of various initiatives. This collaboration between entrepreneurs may manifest as a “Joint Venture” or a “Consortium.”
A “Joint Venture” is an arrangement where individuals, companies, or partnerships involving at least two parties come together to undertake a specific business activity. They agree to share the profits or losses of the joint business according to the proportion of their investment.
The Revenue Code recognizes the business model of a “Joint Venture” for taxation purposes. It is stipulated in Section 39 that the term “Associated companies or juristic partnerships” refers to a company or juristic partnership established under Thai law or the law of another country and also defines Joint Ventures, including any formal business collaboration or profit-seeking activity between companies or between a company and a juristic partnership or between juristic partnerships or between a company and/or juristic partnership and an individual, a non-juristic body of persons, an ordinary partnership, or juristic persons.
The Revenue Code stipulates that a “Joint Venture” is taxed as a company or juristic partnership. However, it doesn’t provide a definitive meaning nor discuss the rights, duties, or involvement among the joint venture parties or with external individuals. Therefore, a joint venture is an uncertain business arrangement, depending on the agreement or contract among the involved parties or investors (Joint Venture Agreement). Additionally, the term doesn’t have a fixed legal definition and could refer to any lawful business collaboration and might be termed differently. The Revenue Code does not force that a joint venture be registered as a juristic person. Yet, if registered as such, it would have a separate legal status from its shareholders. As previously mentioned, even if it is not registered as a juristic entity, it will still be taxable under the Revenue Code.
Therefore, when the legal status and rights of the parties in a joint venture are not clearly defined by law, how are the parties bound to each other and to external individuals? This issue typically requires interpretation based on the contract or agreement between the joint venture parties and their representations to external parties. Even though, generally, joint venture parties do not act as agents for each other. However, if authority is explicitly or implicitly granted to act on behalf of another, or there’s a perceived representation as an agent, they may be liable to third parties as an agent. (Please consider Sections 820, 821, and 822 of the Civil and Commercial Code.) As for rights, assets, profits, and losses obtained jointly, the distribution among parties will depend on their agreement.
The term “Consortium” is not a term in law (a “commercial” as opposed to a legal term). Instead, it refers to a “collaboration or combination of companies,” often established to undertake large-scale projects from the government or private sectors, including major public utilities or large-scale infrastructure projects, such as roads, highways, bridges, railways, buildings, or consultancy tasks, where multiple specialists from various fields collaborate. Companies within such a consortium operate individually within the same project and don’t share profits or losses; each party is responsible for its obligations, there is no joint investment, and they don’t share liabilities for their work. Each party’s compensation is separated from the others.
2. Type of Joint Venture
2.1 Unincorporated Joint Venture: this type of Joint Venture is created by a Contractual Joint Venture as the major because it doesn’t register as a new company or juristic entity separate from individual investors.
2.2 Incorporated Joint Venture: this type of Joint Venture is created by registering to be a new company or juristic entity separate from a shareholder or individual investor, and it is also created to follow the aim of every investor prescribed in the long period, more than created to action in one project.
3. The purpose of Joint Venture and Consortium
3.1 For large-scale businesses or projects requiring substantial capital investment, individual entrepreneurs may need help to secure sufficient As a result, they need to collaborate and co-invest with other entrepreneurs. In cases where financing is sought from financial institutions, such joint investments also establish credibility or creditworthiness with the lending institution.
3.2 Expertise, technology, experience, past achievements, and business resources (licenses or certifications registered with government agencies). A project has to use a combination of various knowledge, technology, experience, past achievements, and different business resources. Individual entrepreneurs may lack expertise, technology, experience, past accomplishments, or specific business resources required for the task. Therefore, they need to collaborate and co-invest with other entrepreneurs with the knowledge, technology, experience, achievements, or business resources they are missing.
3.3 Diversifying risk in large businesses or projects requiring substantial investment poses a risk to a single investor. Even if that particular entrepreneur has no investment funding issues, they must co-invest with other entrepreneurs to spread the risk.
3.4 Reducing business competition through co-investment between entrepreneurs with similar or comparable competitive capabilities can decrease rivalry and enhance business opportunities. This allows each of these entrepreneurs to receive projects that follow their objectives.
3.5 For projects located abroad, the bidding or procurement terms for projects to be carried out internationally (Terms of Reference or TOR) often stipulate that bidding companies registered in Thailand must partner with foreign companies to execute the work in that particular country jointly.
Board of Investment (BOI)
The Board of Investment (BOI) or the Office of the Board of Investment promotes domestic and Thai overseas investments. Its duties aim to enhance the country’s competitiveness, helping Thailand overcome the “Middle Income Trap” and foster sustainable economic growth.
1. Benefits when receiving investment promotion from BOI:
1.1 Tax-related benefits:
1. Corporate income tax exception for up to 13 years (depending on the type of business and conditions).
2. 50% corporate income tax reduction for another 5 years (specific in investment promotion zones).
3. Exception from import duties on machinery.
4. Exception from import duties on raw materials imported for production for export.
5. Exception from import duties for items imported for research and development purposes.
1.2 Non-tax related benefits:
1. Permission for foreigners to hold 100% of shares (except for businesses listed in Annex One of the Foreign Business Act or as specified by other laws).
2. Permission to own land rights.
3. Permission for skilled workers/experts to work.
2. Types of businesses which investment promotion have 8 types as follows:
1. Agriculture and Agricultural Products: economic crops, organic and chemical fertilizers, and various agricultural.
2. Mines, Ceramics, and Basic Metals: Mining, metal extraction and production, glass and ceramics production.
3. Light Industries: textiles, production of bags or shoes, toy manufacturing.
4. Metal Products, Machinery, and Transport Equipment: The production of automotive parts and machinery.
5. Electronics and Electrical Device Industry: software business and electronic components production.
6. Chemicals, Plastics, and Paper: paper packaging, pharmaceuticals, polymer production.
7. Services and Public Utilities: Electric production or electricity and steam from waste or fuel from waste, industrial estate development, cloud services.
8. Technology and Innovation Development: Biotechnology, nanotechnology, and digital technology development.
3. The criteria for project approval by the Board of Investment (BOI) are as follows:
1. Abilities to develop the competitive of the agricultural, industrial, and service sectors:
– The project must have a value-added of at least 20% of its income, except for agricultural enterprises and agricultural products, electronics and parts, and metal-cutting businesses, with a no less than 10% value-added component.
– The production process must be modern and up-to-date.
– New machinery must be used. In cases where used machinery from abroad is utilized, specific criteria apply as follows;
1.1) Used machinery permitted for use in the project. It counted as capital investment for corporate income tax exemption but was not exempt from import duties. It must not be older than 5 years from the year of production to the year of importation. This machinery must have a certification from a reputable institution regarding its efficiency, environmental impact, energy usage, and an appropriate price evaluation.
1.2) Used machinery that is more than 5 years but not more than 10 years, from the year of production to the year of importation that is permitted for use in the project and is counted as capital investment for corporate income tax exemption but is not exempt from import duties applies only to pumps. This machinery must also have a certification from a reputable institution regarding its efficiency, environmental impact, energy usage, and an appropriate price evaluation.
1.3) For maritime transport businesses, air transport businesses, and printing presses, using machinery over 10 years in the project is permitted. This machinery will receive an exemption from import duties and is counted as capital investment for corporate income tax exemption.
2. Minimum investment and feasibility of the project.
2.1) Each project must have a minimum investment of at least 1 million baht (excluding land cost and working capital) unless specifically stipulated in the list of business types for investment promotion as per this announcement.
2.2) The minimum investment will be considered based on employees’ annual salaries for the business service group that uses knowledge as the primary factor in operations. This will be specifically defined in the list of business types eligible for investment promotion.
2.3) The debt-to-registered capital ratio must not exceed 3:1 for new projects. For expansion projects, the ratio will be considered on a case-by-case basis based on its appropriateness.
2.4) Projects with an investment (excluding land cost and working capital) of more than 750 million baht must submit a detailed feasibility study report determined by the committee.
Holding real estate of foreigners
Generally, foreigners cannot own real estate in Thailand. However, there are certain cases where the law allows foreigners to own land or condominiums in Thailand, subject to specific conditions as prescribed by the law, as follows:
1. In the case of foreigners who have obtained permission from the Minister of the Ministry of Interior to acquire land for residential purposes under the Land Code Act, Section 96 bis, in conjunction with the Ministerial Regulation specifying the principles, procedures, and conditions for foreigners to acquire land for residential purposes, B.E. 2545 (2002), there are conditions for the grant of permission that require an investment of no less than 40 million Baht in specified businesses or entrepreneurs and the investment must be maintained for a period of not less than five years. Additionally, the land to be acquired must be located within Bangkok, Pattaya, a municipal area, or within an area designated as a residential zone according to the urban planning law.
2. Foreign companies that have received investment promotion are allowed to hold land rights for business operations that have been promoted according to the criteria and conditions under the Promotion of Investment Act, B.E. 2520 (1977).
3. Foreign industrial operators are permitted to hold land rights within industrial estates for business operations as stipulated in the Industrial Estate Authority Act, B.E. 2522 (1979).
4. Business operators within the Special Economic Promotion Zone who are foreign legal entities and have received promotion are permitted to hold land rights within such promotion zone for conducting businesses authorized under the Eastern Special Development Zone Act, B.E. 2561 (2018) (EEC).
5. Foreign individuals or legal entities can hold the ownership rights of condominium units combined at a rate not exceeding 49% of the total floor area of all the condominium units in that particular building, as stipulated by the Condominium Act, B.E. 2522 (1979).
For the acquisition of real estate or land, one must follow the Land Code. Even if the person acquiring is not a foreigner, there are still considerations as follows:
1. A company with registered capital shares held by foreigners exceeding 49% of the total registered capital or where most shareholders are foreigners is considered a foreigner under the Land Code and, thus, is prohibited from owning land. Land officials will inspect whether a company intending to register land ownership exceeds this foreign ownership ratio. Furthermore, officials have the authority to investigate if there are suspicions that Thai shareholders in the company might be holding shares on behalf of foreigners. Notably, some companies have found ways to circumvent this law by issuing preferred shares, which grant more voting rights than common shares, to foreigners in a ratio not exceeding 49%. This ensures the company can avoid falling in the position of a foreigner by the Land Code, even if foreigners have more voting power than Thai shareholders holding a more significant proportion. On the other hand, some companies may allow Thai people to hold at least 51% of preferred shares, which possess certain rights over, but fewer voting rights than, common shares held by foreigners. This arrangement allows foreigners to have a greater voting power than Thai shareholders, with a more significant proportion. Such evasion of the law is possible due to Article 97 of the Land Code, which only considers the proportion of shares held by foreigners in a company.
2. A Thai individual is lawfully or unlawfully married to a foreigner, using marital assets or jointly earned money to purchase land; such land is considered marital property or together acquired assets under the law. This means the foreign spouse also owns the land, which the Land Code prohibits. Therefore, when registering the acquisition of such land, the Thai spouse must provide evidence that the funds used for the purchase are personal assets or personal funds. Furthermore, there should be no indication of an attempt to circumvent the Land Code to register the land purchase successfully.
3. Foreigners who belong to one of four high-potential groups:
1. Group of high wealth
2. Group of foreign retirees,
3. Group of foreigner who needs to be employed in Thailand, and
4. Group of specialized experts, along with their dependents (legally married spouses and children under the age of 20, limited to four persons),
These groups are allowed to reside and work in Thailand. They will be granted special permission to stay in Thailand under the Long-term Resident Visa (LTR Visa). This visa is valid for 10 years or grants residency rights for 10 years. The one-time fee for this visa is 50,000 Baht (previously 100,000 Baht). Moreover, they can apply for a work permit according to the law governing the employment management of foreigners.
Other Services
In addition to the investment above services, the company also offers services about investment for foreign individuals all of categories.