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Thailand’s BOI Incentives: Driving Business Competitiveness

Thailand’s Board of Investment (BOI) has introduced targeted incentives aimed at boosting the competitiveness of eligible businesses across various sectors in the local market. Here is a breakdown of the key programs and their benefits:

  • Upgrading Automotive Industry (BOI’s Notification No. 2/2566)

Existing BOI-promoted automotive projects can reapply for a 3-year corporate tax exemption if their previous benefits have expired. They must invest at least 1 million THB in automation and robotics manufacturers (excluding land and working capital). The new investment project must support the domestic industry by 30% of the total automation system and robotics value to qualify for a 3-year corporate income tax exemption.

  • Community and Social Development (BOI’s Notification No. 1/2567)

Active projects and new investment projects must have a minimum capital investment of 5 million THB (excluding land and working capital costs). Additionally, they must invest a minimum of 500,000 THB in supporting local organizations, such as social enterprises and unions, to qualify for a 3-year corporate income tax exemption.

  • Retention and Expansion Program (BOI’s Notification No. 2/2567)

Businesses with a long-standing presence of not less than 15 years and a significant investment history of not less than 10,000 million THB from at least 3 projects can get benefit from this program. Expansion projects with an investment value of at least 500 million THB (excluding land and working capital costs), will receive corporate income tax exemptions of 3 up to 13 years depending on the business’s category. The range of tax exemptions varies depending on the businesses categorized by the BOI office.

person in welding mask while welding a metal bar
  • Comprehensive Relocation Program  (BOI’s Notification No. 3/2567)

To encourage foreign investors in relocating integrated businesses, including manufacturing facilities, regional headquarters, and research and development centers, new investments that are eligible to receive BOI incentives of 3 up to 8 years of corporate income tax exemption under this promotion must submit manufacturing projects applications for investment promotion of the International Business Center (IBC) and an applicant must undertake the substantial functions of regional headquarters and/or R&D centers as indicated.

  • Economic Recovery  (BOI’s Notification No. 4/2567)

The activities categorized in group A such as businesses related to public utilities or the automotive industry are entitled to receive corporate income tax exemption not exceeding 8 years with the additional rights and benefits of 50% reduction from the standard corporate income tax rate applies to net profits derived from the investment for a duration of 5 years after the expiration of the corporate income tax exemption.  

Author: Panisa Suwanmatajarn, Managing Partner.

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BOI’s Vision: Thailand as a World-Class Events Hub and Electronics Powerhouse

Thailand Board of Investment (“BOI”) is committed to positioning Thailand as a hub for organizing events and electronics powerhouse under significant measures in place which are: 1) promoting investment in events such as music festivals, sports, and international festivals, and 2) promoting investment in Printed Circuit Board (“PCB”) businesses.

  1. Promoting investment in events such as music festivals, sports, and international festivals

To recover the country’s tourism and entertainment sectors from the COVID-19 crisis, BOI grants incentives to attract world-class events by offering benefits to organizers of large international concerts, sporting events, and festivals with investments or expenses not less than THB 100 million (approximately USD 2.8 million). These benefits include exemptions from import duties on equipment to be used in such an event and easing the process of obtaining a visa and work permit for the foreign staffs.

  • Promoting investment in businesses related to Printed Circuit Board (“PCB”) businesses

Thailand Board of Investment has endorsed incentives to boost foreign investment for three supply chain sectors related to PCB businesses as follows:

  • Businesses involved in supporting PCB production processes such as lamination, drilling, plating, and routing;
    • Key manufacturers for PCB production, including flexible CCL (FCCL), copper-clad laminate (CCL), and prepreg; and
    • Producers of essential materials and supplies for PCB manufacturing businesses such as dry film, transfer film, and backup boards.

These supply chain sectors for PCB businesses will be eligible for exemptions on import duties for raw materials and machinery used in product exportation. Additionally, they may qualify for corporate tax exemptions for up to 8 years, based significantly on the materials, technology, and investment scale.

These measures cover a wide range of PCB-related businesses, including producers of PCB components and manufacturers of raw materials, and aim to enhance Thailand’s competitiveness in the electronics manufacturing sectors, the entertainment sectors, and the event industry sectors which in correspond with the Cabinet’s vision – Ignite Thailand – to elevate Thailand into a global hub for major events, aiming to attract the tourists from around the world. These incentives have been granted to those events and PCB related businesses by the BOI since 28 March 2024, enabling the BOI to promote the aforementioned businesses in Thailand.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand’s e-Workforce Ecosystem Platform: Empowering the Digital Workforce for Industry 4.0

Thailand’s e-Workforce Ecosystem Platform: Empowering the Digital Workforce for Industry 4.0

As Thailand embarks on its ambitious journey towards becoming an innovation-driven economy under the Thailand 4.0 policy, the development of a skilled digital workforce has emerged as a critical priority. To address this challenge, the Ministry of Digital Economy and Society (MDES) has spearheaded the establishment of the e-Workforce Ecosystem Platform (EWE Platform), a comprehensive initiative aimed at building and strengthening the country’s digital talent pool.

The EWE Platform serves as a central hub for skill development, job matching, upskilling, and reskilling programs, catering to the evolving needs of the digital age. Its primary objectives include equipping Thai workers with the necessary digital competencies, facilitating the efficient allocation of skilled talents, and fostering a collaborative ecosystem among various stakeholders.

At the core of the platform lies a robust training infrastructure that offers a wide range of online courses, workshops, and resources focused on high-demand digital skills. These include areas such as data analytics, cybersecurity, cloud computing, and programming, enabling workers to acquire the knowledge and expertise required to thrive in the Industry 4.0 era. Furthermore, the EWE Platform serves as a job-matching marketplace, connecting skilled workers with employers seeking digital talents. This function not only assists companies in fulfilling their talent requirements but also provides opportunities for skilled individuals to find suitable employment opportunities aligned with their expertise. Recognizing the rapidly changing job market landscape, the platform also offers upskilling and reskilling programs, empowering existing workers to adapt and acquire new skills in response to evolving industry demands. This proactive approach ensures that Thailand’s workforce remains agile and competitive in the face of technological disruptions.

Underpinning the EWE Platform is a collaborative ecosystem that brings together various stakeholders, including educational institutions, training providers, government agencies, and private companies. This synergistic approach fosters knowledge sharing, resource optimization, and the development of comprehensive talent development strategies. Moreover, the platform facilitates talent mobility, enabling skilled workers to move across different industries and regions within Thailand and ensuring efficient distribution and utilization of digital talents throughout the country.

To expand the EWE Platform’s reach and impact, The MDES has appointed the Thailand Professional Qualification Institute (TPQI) to oversee national reform activities affecting the country’s integrated workforce management system. The reform plan for culture, sports, labor, and human resource development suggests linking government agencies’ online and offline training curriculums and workforce information to the platform system, allowing officers from all agencies to register on the platform.

monochrome photo of triangle shape digital wallpaper

Target individuals, students, job seekers, freelancers, retired seniors, vulnerable citizens, employers, and government agencies can now benefit from the EWE Platform through the official website of TPQI, which connects workforce data from each agency into big data and creates six key features: a digital competency credit bank to gather knowledge and work experiences; career guidance and skill check to assess users’ skills; an e-coupon to support those in need of upskilling, reskilling, or creating new skills through digital wallet (Paotang); an e-portfolio to record experiences; job matching to connect employers and skilled workers; and labor market data for planning workforce policy for future national improvement.

As the driving force behind this ambitious initiative, the MDES has undertaken a multifaceted role, encompassing policy formulation, funding allocation, stakeholder collaboration, promotion, and performance monitoring. The ministry’s unwavering commitment to developing a future-ready workforce underscores the critical importance of human capital in realizing Thailand’s aspirations of becoming an innovation-driven economy.

The EWE Platform represents a significant step toward preparing Thailand’s workforce for the challenges and opportunities of the digital age. By fostering a skilled and adaptable digital talent pool, this initiative not only supports the adoption of Industry 4.0 technologies but also positions Thailand as a competitive player in the global digital economy.

Author: Panisa Suwanmatajarn, Managing Partner.

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VAT collection on low-value imported goods

At the cabinet meeting on 2 April 2024, the Prime Minister directed the policy to the Ministry of Finance to urgently proceed with the measures regarding the Value-Added Tax (VAT) collection from the import of goods valued at less than Baht 1,500 per parcel to strengthen fairness for goods sold and/or produced by domestic Small and Medium-Sized Enterprises (SMEs) and also enhance and facilitate trade competition in the domestic market.

The government has its policy to reduce unfair trade between international and domestic enterprises. Currently, international enterprises are exempt from VAT for their imported goods to Thailand. This creates a huge differentiation between the price of goods imported from overseas and those produced locally in the market.  As a result, the Ministry of Finance has its plan to enact legislation requiring online platform traders in Thailand and overseas to register with the Revenue Department in order to collect VAT at the rate of 7% for the sales of imported low-value goods to the local market and also require them to submit its VAT submission form to the Revenue Department on a monthly basis, similar to those of local trade businesses.

The Deputy Minister of Finance stated that the Revenue Department will submit a draft legislation in May 2024 to the Cabinet for its consideration. In the meantime, the Ministry of Finance will implement measures to collect taxes on low-value goods through Thai Customs.

Author: Panisa Suwanmatajarn, Managing Partner.

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Personal Income Tax Exemption from the Income Derived from Digital Investment Token Dividends

The Royal Decree recently introduced by the Thai government marks a pivotal moment in the country’s economic landscape. Aimed at fostering growth in the digital asset industry, this Royal Decree grants personal income tax exemption to individuals deriving income from dividends earned through holding investment digital tokens. Let’s move into the details of this significant development.

Background and Rationale

Digital Tokens and Traditional Securities:

The emergence of digital tokens has blurred the lines between traditional securities and modern investment vehicles. By extending tax benefits to investment digital tokens, Thailand seeks to create a level playing field and encourage investor participation.

Tax Treatment of Traditional Securities:

Under existing Thai law, investors in traditional securities can exclude dividend income from their taxable income. A withholding tax rate of 10% already applies to these dividends. Investors may voluntarily include dividends in their taxable income for various financial planning reasons.

The Proposed Royal Decree:

The Royal Decree extends the same principle to investment digital tokens. However, the withholding tax rate for these tokens is set slightly higher at 15%.

This adjustment strikes a balance between incentivizing investment and maintaining tax revenue.

Key Provisions

Entity Covered and Conditions:

The Royal Decree applies to individuals who earn income from profits or other similar benefits as a result of holding or possessing investment digital tokens which withholding tax at the rate of 15% has already been deducted from such income. There is no need to include such income to calculate tax payment at the end of fiscal year. However, taxpayers must not request for a tax refund or credit, either in whole or in part.

Effective Date:

Income generated from 1 January 2024 will fall under the purview of this draft Royal Decree.

Implications and Conclusion

Harmonization of Tax Policies:

The Royal Decree bridges the gap between traditional securities and digital tokens. Clarity in taxation policies also fosters investor confidence.

Attractiveness as an Investment Destination:

By providing incentives and exemptions, Thailand aims to enhance its allure as a hub for digital asset investments.

In summary, the Royal Decree represents a significant stride towards a balanced taxation framework—supporting both investors and the digital asset ecosystem. As Thailand embraces the age of digital investment, this move underscores the nation’s commitment to innovation and economic growth.

Author: Panisa Suwanmatajarn, Managing Partner.

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Top-up Tax Bill: Implementing BEPS Pillar 2 in Thailand

The Organization for Economic Cooperation and Development/ the Group of Twenty (OECD/G20) has been leading a global effort to address tax avoidance by multinational entities (MNEs) through the Base Erosion and Profit Shifting (BEPS) project. This collaborative initiative involves over 140 member countries and aims to close the gaps in international tax regulations that allow MNEs to shift profits to low-tax jurisdictions, often referred to as tax havens. By exploiting loopholes and inconsistencies, these companies gain a competitive advantage over domestic entities while undermining the fairness and integrity of the tax system.

The BEPS project is divided into two main pillars:

Pillar 1: This pillar focuses on re-allocating profits and taxing rights on large MNE profits to ensure the impartiality of the tax system.

Pillar 2: This pillar introduces a global minimum tax rate of no less than 15% on MNE profits, preventing tax competition by requiring large MNEs to pay taxes at the Effective Tax Rate (ETR).

To implement Pillar 2 of the BEPS project in Thailand, the Revenue Department has conducted a public hearing regarding the drafting of the Top-Up Tax Bill B.E. …. This bill aims to collect top-up tax in accordance with the Global Anti-Base Erosion Rules (GloBE) measure, allocate profits from such taxation to the National Competitiveness Enhancement for Targeted Industries Fund, and provide information on top-up taxpayers to the Thailand Board of Investment (BOI).

tax documents on the table

Understanding Top-Up Tax

Top-up tax is considered a type of assessment tax separate from income tax. It is collected by low-tax jurisdictions when a Multinational Entity (MNE) has a Net GloBE Income but an Effective Tax Rate lower than 15%. The Net GloBE Income and Effective Tax Rate are calculated according to the provisions of the bill.

Who is Subject to Top-Up Tax?

Constituent entities established in Thailand, which are members of an MNE Group with a collective turnover of the Ultimate Parent Entity (UPE) not less than the equivalent of €750 million in Thai currency, are subject to the top-up tax under the bill. However, certain types of entities may be exempted, including governmental entities, international organizations, non-profit organizations, pension funds, investment funds, real estate investment instruments, and others specified by the Royal Decree to be issued.

Collection of Top-Up Tax

Each constituent entity located in Thailand has the responsibility to submit the following documents to the Revenue Department within 15 months from the last date of the accounting period as imposed by each entity in which the top-up tax is considered.

  1. Notification reporting information of its MNE Group, information of the constituent entity, and the country where it is located;
  2. GloBE Information Return; and
  3. Top-up tax return and payment of the corresponding tax.

The bill empowers assessment officials to assess top-up tax within 10 years from the last date of submitting the GloBE Information Return.

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Penalties for Non-Compliance

Taxpayers who fail to pay the required top-up tax after submitting a GloBE Information Return and assessment by the Revenue Department will be subject to a one-time penalty equivalent to the amount of the top-up tax. Additionally, taxpayers who fail to submit a GloBE Information Return and pay the top-up tax will face a penalty equivalent to two times of the top-up tax amount. In addition to the penalties, the bill imposes criminal liability on taxpayers who fail to comply with its provisions and cause damages to the state’s financial stability, such as deliberately submitting false information or making false statements.

Disclosure of Top-Up Tax Information

Under the bill, the competent authority of Thailand, specifically the Director-General of the Revenue Department, is authorized to disclose top-up tax information. However, this disclosure is limited to cases where it serves the national economic and financial stability objectives or complies with international agreements regarding the exchange of information on taxation as per the GloBE measure.

Effective Date

The principle of the bill was published for a public hearing from March 1, 2024, to March 15, 2024. The next step in the process is for the Revenue Department to analyze the impact of the public hearing results and prepare the bill for the cabinet accordingly.

Author: Panisa Suwanmatajarn, Managing Partner.

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The Financial Revolution: Thailand Prepares for the First Virtual Bank

Thailand’s financial landscape is on the verge of a transformative revolution with the imminent introduction of virtual banks. The recent publication of the Notification of the Ministry of Finance on criteria, methods, and conditions for applying for licenses and issuing licenses to operate branchless commercial banking business (“Notification”) in the Government Gazette on 4 March 2024, marks a significant milestone in this journey. But what exactly are virtual banks, and why is Thailand embracing this new model?

Virtual banks, unlike their traditional counterparts with physical branches, operate exclusively online, providing a comprehensive range of financial services. The Notification defines a virtual bank as a Public Limited Company (“PLC”) licensed to conduct a commercial banking business through digital channels, excluding retail commercial banks and commercial banks that are subsidiaries of foreign commercial banks. The Bank of Thailand (“BOT”) proposes the virtual banking scheme to unlock opportunities for the financial sector to leverage technology and data in developing sustainable financial innovations and services that cater to users’ needs.

So, why are virtual banks a game-changer for Thailand? The country aspires to become the “Wall Street of ASEAN,” positioning itself as a regional financial hub. Virtual banks play a pivotal role in realizing this vision due to several reasons:

Financial Inclusion: Virtual banks have the potential to reach unserved and underserved populations in remote areas, promoting financial literacy and participation among these communities.

Enhanced Competition: The increased competition brought by virtual banks can lead to improved interest rates, reduced fees, and the development of innovative financial products that benefit all customers.

Tech-Savvy Generation: With Thailand’s tech-savvy population growing rapidly, virtual banks cater to their preference for the convenience and efficiency of digital banking.

To ensure the smooth and secure operation of virtual banks, the BOT is meticulously crafting a regulatory framework. This framework highlights the qualifications and requirements for potential applicants. The BOT will be highly selective in awarding virtual bank licenses, considering the following key areas:

  • Financial Strength: Applicants must possess the financial resources necessary to establish and maintain a secure and reliable digital banking platform. The BOT evaluates applicants’ capital adequacy, track record of financial stability, and ability to attract further investments if needed.
  • Technological Expertise: Virtual banking heavily relies on robust and innovative technology. Applicants must demonstrate a proven track record in developing and managing secure digital services, including strong infrastructure and a business plan that encompasses cybersecurity, data management, and application development.
  • Business Model Sustainability: Applicants need to present a comprehensive plan outlining how they will generate revenue and effectively manage costs and capital for at least five years. This plan should prioritize financial inclusion and responsible lending practices, ensuring long-term profitability within the virtual banking framework.
  • Commitment to Innovation: The BOT seeks applicants who will drive innovation in the Thai financial sector by developing unique financial products and services tailored to the virtual banking environment.
  • Prioritizing Virtual Banking: Virtual banking should be the core business of the applicants, not just an add-on service.

The aforementioned requirements and qualifications, although not exhaustive, reflect the BOT’s rigorous standards for potential applicants. Obtaining a license will be a challenging process due to the complexity of the application and the strictness of the BOT’s requirements. Nevertheless, the BOT aims to ensure a secure, innovative, and inclusive virtual banking landscape in Thailand.

The timeframe to apply for a virtual banking license is as follows:

  • Application Period: Applications are open for a six-month window, starting from the date the Notification takes effect, which is from March 19 to September 19, 2024.
  • BOT Application Consideration: The BOT reviews applications for up to nine months, followed by the announcement of successful applicants.
  • License Approval and Launch: Once approved, applicants have one year to establish a PLC and apply for the virtual banking license, ultimately launching their virtual bank.

Thailand’s virtual banking landscape is expected to be a collaborative one, with established players joining forces to leverage their strengths. For instance, Gulf Energy Development, an energy conglomerate, will form a joint venture with telecom giant AIS, Krung Thai Bank, and PTT Oil and Retail. This strategic alliance exemplifies the potential benefits of collaboration. By combining Gulf’s technological expertise, AIS’s extensive user base, and Krung Thai Bank’s financial experience, this joint venture positions itself as a strong contender for a virtual banking license. It is likely that other collaborations will emerge during the application process, showcasing the dynamic and competitive nature of Thailand’s virtual banking race.

In conclusion, the arrival of virtual banks in Thailand promises to reshape the financial landscape of the country. By promoting financial inclusion, fostering competition, and catering to the preferences of the tech-savvy generation, virtual banks have the potential to propel Thailand towards its vision of becoming a regional financial powerhouse. The BOT’s cautious and meticulous approach to regulation ensures a secure and sustainable future for virtual banking in Thailand.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand – New Government with its Executive and Legislative Policies to Promote Foreign Direct Investment

The new government, which has taken office following a nine-year ruled by General Prayuth Chan-o-cha, signifies Thailand’s return to democracy after the 2014 military coup. Under the leadership of the Pheu Thai Party, led by Prime Ministerial candidate Srettha Thavisin, the government has set forth a visionary agenda, with a primary focus on promoting foreign direct investment to invigorate the country’s GDP.

To achieve this overarching objective, the government has implemented a multifaceted strategy that encompasses both executive and legislative policies. This strategy revolves around three core principles: reducing expenses, increasing income, and expanding opportunities, all designed to enhance Thailand’s overall business environment and attractiveness to foreign investors within the ASEAN region.

One of the government’s primary measures is an extensive economic stimulus program. This program aims to reduce the cost of living and production costs in the country. Key components include significant reductions in electricity prices, petrol prices, personal consumption loan interest rates, and suspension of debt payments for farmers. These measures are strategically designed to enhance the appeal of Thailand as a destination for foreign investment by improving the overall cost structure for businesses operating within its borders.

Furthermore, the government is focusing on boosting the Electric Vehicle (EV) industry as a driver of foreign investment. To achieve this, it plans to reduce tax exemptions for imported EV cars, incentivizing domestic EV manufacturing. By nurturing this emerging sector, Thailand seeks to enhance its industrial and technological capabilities, making it a compelling option for foreign investors looking to capitalize on the growing EV market.

The government has also implemented visa policies to promote foreign investment and tourism. Passport holders from China, Kazakhstan, Taiwan, and India already benefit from a free-visa policy, with plans to extend this privilege to other nationalities in the near future. Such policies foster an environment conducive to foreign business travel and investment in various sectors.

Furthermore, the government is taking steps to upgrade the country’s infrastructure. The proposed land bridge project, connecting the Andaman Sea to the Gulf of Thailand, will significantly enhance international trade routes, positioning Thailand as a pivotal transportation hub in the Indo-Pacific region. This infrastructure investment opens up opportunities for foreign investments in logistics and related industries.

Lastly, the government plans to introduce legislation to fund the 10,000 THB digital wallet project. This initiative will provide digital currency to adults with monthly incomes below 70,000 THB and savings below 500,000 THB. Any unused funds will be channeled into the National Competitiveness Enhancement for Targeted Industries Fund, further enhancing economic competitiveness and making Thailand an attractive destination for foreign investment.

In conclusion, the government’s comprehensive approach to economic development, with a focus on improving the business environment, supporting key industries such as EV manufacturing, and encouraging foreign investment, positions Thailand for substantial growth and prosperity. If effectively implemented, these policies have the potential to transform Thailand into a regional economic powerhouse.

Author: Panisa Suwanmatajarn, Managing Partner.

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Trade Competition Commission Draft Announcement on Suggested Price List

In 1999, Thailand enacted the Trade Competition Act B.E. 2542 (1999) (“Act”), establishing the Trade Competition Commission. The Thai Ministry of Commerce proudly introduced this Act with the aim of attracting Free Trade Agreements (FTAs) from countries around the world, thereby enhancing international trade and investments. In 2017, the Thai government proposed a new version of the Act to address new challenges that the previous version did not cover.

The Act is of paramount importance to Thailand for several reasons. Firstly, they promote healthy competition, encouraging businesses to become more efficient, offer lower prices, improve product quality, and foster innovation. This ultimately benefits consumers by providing them with more choices and better access to goods and services. Secondly, the Act protects consumers from anti-competitive practices that could result in higher prices, reduced product quality, or limited options. By preventing monopolistic behavior and collusion, these laws safeguard consumer interests. Additionally, they help attract foreign investment by demonstrating the fairness and transparency of Thailand’s business environment, which can lead to increased economic growth and align with international trade standards, further enhancing the country’s competitiveness in the global market.

white water boat

Furthermore, the Act ensures a level playing field for businesses of all sizes, supporting the growth of small and medium-sized enterprises (SMEs) while preventing market abuse by larger companies. They foster consumer trust in the marketplace, which can lead to increased spending and economic stability.

One key provision within the Act is Section 54, which prohibits business operators from colluding in various ways such as fixing purchasing or selling prices or any trading conditions that affect the price of goods or services, limiting the number of goods or services produced, purchased, sold, or provided by each business operator, as agreed, knowingly establishing an agreement or conditions for one side to win an auction or a bid for goods or services, or allocating areas in which each business operator will sell, or reducing the sale or purchase of goods or services.

In practice, many manufacturers or wholesalers provide suggested price lists. However, these suggestions, when followed by wholesalers and retailers, can result in monopolistic practices, reduced competition, or the elimination of competition in a given market.

low angle photography of glass buildings

To address this issue, the Trade Competition Commission has been granted authority under Section 17(3) of the Act. This authority enables the Trade Competition Commission to regulate business operations and issue Announcements to enforce free and fair competition. In response, the Trade Competition Commission has drafted an Announcement on Suggested Price List Guidelines (“Announcement”).

Once enacted and enforced, this Announcement would prohibit business operators to conduct such as refusing to sell goods and services, reducing the sales of goods and services, or increasing the price of goods and services without reasonable grounds. This Announcement is intended to reinforce Section 54(1) of the Act, preventing monopolies, oligopolies, or any reduction in competition within relevant markets.

Author: Panisa Suwanmatajarn, Managing Partner.

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Proposed Rehabilitation Processes for Small and Medium Enterprises (SMEs)

In 2016, the regulation concerning small and medium enterprises (“SMEs”) was initially introduced to aid SME owners in managing their debts through rehabilitation processes that safeguard the interests of both debtors and creditors.

However, as of 2023, there are over 3 million SMEs in Thailand, playing a critical role in driving the country’s economy. Recognizing this, the Legal Execution Department has expressed a keen interest in ensuring the well-being of SMEs. To this end, they have conducted a public hearing on the draft amendment of the Bankruptcy Act B.E. 2483 (1940), specifically focusing on the business rehabilitation processes for SMEs. Consequently, active efforts are underway to formulate regulations.

In the past, debtors seeking to manage their debts through rehabilitation processes were required to adhere to the provisions outlined in the Bankruptcy Act B.E. 2483 (1940). These requirements included being insolvent and indebted to one or multiple creditors. However, the recent introduction of business rehabilitation proceedings for SMEs has brought about a new rule by eliminating the requirement of being an insolvent person. This means that anyone, regardless of their solvency status, can now initiate the rehabilitation processes.

The recent amendment to the Bankruptcy Act B.E. 2483 (1940) aims to simplify the business rehabilitation processes, making it more accessible for small debtors. This simplification is driven by the current economic and social conditions, and it offers several benefits for debtors. Notably, it introduces a new section that includes an accelerated business rehabilitation processes.

The key summary of the amendments is as follows:

  1. Broadening the definition of debtors in Section 90/91: Previously, the term “debtor” was limited to those specifically prescribed by the Office of SMEs Promotion (OSMEP). The amendment expands the definition to include any juristic person, regardless of the legal classification of SMEs. This change provides SMEs business owners with the opportunity to participate in business rehabilitation, enabling them to restructure their debts and maintain the continuity of their businesses.
  • Revision of the debt threshold in Section 90/92: When a debtor is unable to pay one or several creditors in aggregate, they may file a petition with the court for business reorganization. For individual debtors, the debt threshold has been lowered from 2 million baht to 1 million baht. For juristic persons, the threshold has been revised from not less than 3 million baht to not less than 2 million baht, with an upper limit of 50 million baht. These changes apply regardless of the debtor’s financial status or the number of creditors involved. However, both types of debtors must demonstrate a reasonable cause and prospects for the reorganization of their businesses.
  • Extension of the Business Reorganization Plan (“Plan“) period in Section 90/96(9): Recognizing that a 3-year plan may be insufficient, the amendment extends the Plan period from 3 years to 5 years. This extension aims to enhance efficiency and provide debtors with more opportunities to effectively proceed with their reorganization efforts while ensuring that creditors receive full payment of their debts.
  • Removal of certain rehabilitation processes in Section 90/95: Prior to the draft amendment, individuals seeking business reorganization has to wait for a court order granting absolute control over their property and approval of the Plan before filing a petition for reorganization. This process involved strict legal requirements, such as providing reasons for business reorganization, detailed asset information, and principles and methods, as per Section 90/96 of the Bankruptcy Act B.E. 2483 (1940). These requirements often proved time-consuming and costly. The draft amendment has eliminated some of these processes, allowing debtors or legally authorized individuals to initiate the plan. This change allows both debtors and one or several creditors of the debts arising from a business operation to take the necessary steps toward rehabilitation.
low angle photography of glass buildings

However, the recent amendment to the Bankruptcy Law B.E. 2483 (1940) is currently pending approval from the Council of Ministers. After this, the next stage will involve the draft amendment proceedings to the Members of the Parliament for consideration and approval before proceedings to the King’s endorsement and publish in the Royal Gazette.

Author: Panisa Suwanmatajarn, Managing Partner.

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