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Thailand ‘Ignite Finance’ Draft Legislation: Paving the Way for Thailand’s Global Financial Hub

Thailand’s Ministry of Finance launched the Ignite Finance program (“Ignite Finance”) in 2024 as a cornerstone of the broader Ignite Thailand vision. This initiative aims to transform Thailand into a regional leader across eight critical industries by leveraging the country’s strengths in workforce, infrastructure, and technology. As part of the government’s strategy, Ignite Finance seeks to position Thailand as a leading financial center in the region, attracting global financial institutions and fostering economic growth.

Strategic Vision: Ignite Finance 

The strategic vision of Ignite Finance is encapsulated under the acronym “GLOBALIZATION,” which emphasizes the movement of four key elements: money, people, data/knowledge, and goods/services. The government aims to make Thailand a global financial sanctuary, or Thailand Financial Center (TFC), by focusing on three fundamental pillars:

  1. Future-Ready Regulation: The Ministry of Finance is drafting a new set of financial business laws (“Draft Legislation”) designed to be agile, transparent, and conducive to investment. These laws will establish a comprehensive regulatory framework for five key areas of the financial sector: banking, securities, derivatives, digital assets, and insurance. The goal is to streamline licensing, supervision, and strategic direction while ensuring coordination with relevant agencies to meet the needs of businesses and expand Thailand’s financial sector on the global stage.
  1. Next-Generation Incentives: Ignite Finance aims to make Thailand the top choice for global financial institutions by offering attractive incentives, including tax benefits comparable to other financial hubs, streamlined company registration for foreign entities, work visas for expatriates and their families, and additional grants. These incentives are designed to attract foreign financial institutions to establish operations in Thailand.
  1. Empowered Ecosystem: The program will develop a robust and transparent legal framework to support financial businesses, similar to Thailand’s Digital Asset Act. It will also focus on modern infrastructure to enhance business operations and the quality of life for professionals. Additionally, the Ministry of Finance, in collaboration with the Bank of Thailand, is introducing innovative financial policies, such as Virtual Banks (branchless banks that use alternative data for credit scoring) and the establishment of the National Credit Guarantee Agency (NaCGA) to promote fair competition and improve access to financial services for SMEs and individuals.
aerial photography of buildings

Key Principles of the Draft Legislation

  1. Business Categories under the Financial Hub: Businesses operating within the Financial Hub must provide services exclusively to non-resident clients and fall under one of the following categories: 
    • Commercial Banking   
    • Payment Services   
    • Securities and Investment
    • Derivatives
    • Digital Assets 
    • Insurance 
    • Reinsurance Brokerage 
    • Financial Services or Other Activities Supporting Financial Operations 

These businesses must be registered as limited companies or public limited companies in Thailand or as branches of foreign entities. They are also required to employ Thai nationals at a specified ratio.

  1. Incentives for Target Businesses: Businesses within the Financial Hub will be eligible for tax and non-tax incentives, including exemptions from foreign business operation laws, streamlined licensing under the Exchange Control Act, facilitated entry for foreign personnel, and ownership rights to condominium units for business and residential use.
  1. Supervision of Target Businesses: The Office of the Board of Investment and Promotion of Financial Centers (OSA Office) will provide end-to-end services, while the OSA Board will oversee policy formulation, promotion of target businesses, licensing, and supervision. Businesses must comply with international standards for Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT).
  1. Criminal Penalties and Administrative Fines: The Draft Legislation imposes criminal penalties for serious offenses, such as operating without a license, non-compliance with regulations affecting economic stability and operating outside the scope of the granted license. Administrative fines will be levied for less severe violations.

Economic and Social Impact:

The establishment of Thailand as a financial hub offers significant benefits for economic growth and development: 

  1. Attracting Foreign Investment: By attracting global financial institutions, Thailand will enhance its competitiveness, create new revenue streams, and stimulate economic growth. 
  1. Developing Skilled Labor: The Financial Hub will foster the development of a highly skilled Thai workforce in finance, technology, and financial support services, facilitating knowledge transfer and creating new job opportunities. 
  1. Promoting Economic Growth: The initiative will generate business opportunities for Thai enterprises, drive infrastructure development, and advance Thailand’s financial system, fostering innovation and sustained economic growth.
low angle photography of highrise buildings

Key Steps for the Draft Legislations to Become Law:

Following the Cabinet’s approval of the Draft Legislation in principle, the Council of State will conduct a legal review to ensure alignment with Thailand’s legal framework. The Draft Legislation will then be debated and approved by the House of Representatives and the Senate before being submitted to the King for royal assent. Once published in the Royal Gazette, the legislation will take effect 360 days later, allowing time for implementation preparations. Each step reinforces Thailand’s strategic goal of establishing a robust foundation to become a global financial hub.

Conclusion:

Thailand’s Ignite Finance program represents a strategic leap toward becoming a global financial hub. By offering a robust legal framework, attractive incentives, and a focus on innovation, Thailand is well-positioned to attract global financial institutions and drive economic growth. The next steps involve the review and approval of the draft legislation by the Council of State, Parliament, and the King, which will be critical to realizing Thailand’s vision of becoming a premier financial hub in the region.

Related Article: Thailand Unveils ‘Ignite Finance’ Initiative: A Strategic Move Towards Becoming a Global Financial Hub – The Legal Co., Ltd.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand Unveils ‘Ignite Finance’ Initiative: A Strategic Move Towards Becoming a Global Financial Hub

Earlier, the Ministry of Finance of Thailand announced the “Ignite Finance” initiative, a crucial component of Prime Minister Srettha Thavisin’s broader “Ignite Thailand” vision. This ambitious plan aims to transform Thailand into a regional leader across eight critical industries, with a particular focus on establishing the country as a prominent global financial hub.

The launch event, held at the Ministry of Finance, was attended by key figures including Prime Minister Srettha Thavisin, Deputy Prime Minister and Finance Minister Pichai Chunhavajira, along with other high-ranking government officials and leaders from domestic and international financial institutions.

The “Ignite Finance” initiative focuses on developing five key areas of the financial sector: banking, securities, derivatives, digital assets, and insurance. It also aims to improve financial access for underserved populations and small and medium-sized enterprises (SMEs), promoting inclusive economic growth.

The strategy is built upon three fundamental pillars:

  1. Future-Ready Regulation: The government plans to implement a streamlined regulatory framework that is agile, transparent, and conducive to investment. This includes establishing a one-stop regulatory mechanism for businesses operating within the Financial Hub.
  2. Next-Generation Incentives: To attract financial institutions and service providers, the initiative proposes progressive immigration policies, competitive tax regimes, and strategic incentive programs.
  3. Empowered Ecosystem: The plan emphasizes developing a cutting-edge legal framework and modern infrastructure to support businesses and enhance the quality of life for personnel.

As part of the initiative, the Ministry of Finance, in collaboration with the Bank of Thailand, will introduce virtual banks and establish the National Credit Guarantee Agency (NaCGA). These measures aim to address the financial needs of underserved populations and transform how SMEs access capital.

birds eye view of a city

The “Ignite Finance” program is expected to yield several significant benefits:

  1. Enhanced Financial Well-being: Beyond increasing investments in banks, securities, and virtual banks, the initiative aims to improve various professional service sectors related to finance. This comprehensive approach will help Thailand adopt cutting-edge innovations in financial business and establish a robust legal framework to address financial matters.
  2. Incentives for Foreign Financial Institutions: The new legal framework is designed to cover both domestic and international financial investments, making Thailand a more attractive and trustworthy location for foreign financial institutions to expand their operations.
  3. Knowledge Sharing: The program’s collaboration with foreign financial institutions will facilitate knowledge and experience exchange, accelerating the progress of Thailand’s financial sector.
  4. Improved Financial System Security: By adopting financial sector innovations and enhancing security measures, the program aims to strengthen the long-term reliability and stability of Thailand’s financial system.

Prime Minister Thavisin emphasized the initiative’s role in transitioning Thailand from a manufacturing-based economy to one driven by high-value services. By leveraging Thailand’s world-class infrastructure and new legal frameworks, the government aims to attract foreign capital and highly skilled professionals, positioning the country as a global financial epicenter.

The “Ignite Finance” initiative represents a significant step towards transforming Thailand into a leading financial hub. With the combined efforts of the government and financial leaders, this comprehensive strategy aims to create a dynamic ecosystem that fosters innovation and economic growth while maintaining the country’s financial stability.

As Thailand embarks on this transformative journey, the initiative is expected to ignite a future of prosperity, innovation, and leadership in the global financial landscape. The government estimates that a clearer legal framework will be developed by 2025, after which the draft will be presented to the parliament and cabinet for implementation.

Author: Panisa Suwanmatajarn, Managing Partner.

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Project Nexus: Pioneering the Future of Cross-Border Instant Payments

In a groundbreaking initiative, the Bank of Thailand (BOT) has joined forces with the central banks of Malaysia, the Philippines, Singapore, and India, alongside the Bank for International Settlements (BIS), to develop Project Nexus. This innovative platform aims to revolutionize cross-border transactions by seamlessly connecting various countries’ instant payment systems (IPS), with the Bank of Indonesia participating as a special observer.

As of July 2024, the collaborative effort between regional central banks and the BIS has successfully culminated in the development of a multilateral international money transfer system, marking the completion of Project Nexus’s third phase.

Transformative Benefits

Project Nexus is set to significantly enhance cross-border transactions across multiple dimensions:

  1. Speed: The platform will facilitate near-instantaneous cross-border payments, operating on a 24/7/365 basis.
  2. Cost-Effectiveness: Aligned with G20 and UN Sustainable Development Goals, Nexus aims to keep transaction costs below 3% of the transfer value.
  3. Accessibility: Any bank or non-bank payment service provider (PSP) eligible to join their domestic IPS will have access to Nexus for cross-border transactions.
  4. Transparency: Senders will benefit from clear information regarding transaction costs and payment status.
people sitting on gang chairs

Functional Capabilities

Nexus is designed to support a wide range of account-to-account payments:

  • User Categories: The platform accommodates person-to-person (P2P), business-to-business (B2B), business-to-person, and person-to-business payments.
  • Payment Types: Currently, Nexus supports account-to-account push payments, with potential future expansions to include pull payments, point-of-sale merchant payments, and same-currency cross-border transfers.
  • Transaction Limits: While Nexus itself does not impose an overall cap, it respects limits set by domestic IPSs and PSPs, applying the lowest applicable cap automatically.

Implementation Strategy

The project’s success hinges on three key workstreams:

  1. Governance Framework: Establishing robust governance, scheme, and oversight structures to ensure safe and efficient operations.
  2. Sustainable Business Model: Developing an attractive business and revenue model to encourage participation from key industry players.
  3. Technological Infrastructure: Finalizing a state-of-the-art technology architecture and operational model to support secure and smooth transactions.

Looking Ahead

As Project Nexus enters its fourth phase, the Bank of International Settlements Innovation Hub (BISIH) Singapore Centre will spearhead efforts to establish a central organization. This body will drive the integration of member countries’ payment systems and facilitate the connection of their domestic IPS through Nexus, working towards live implementation.

The Nexus project exemplifies how innovation can dramatically improve the efficiency of international payments. Thailand’s involvement signifies a crucial step towards deeper regional cooperation, with ASEAN central banks united in their ambition to expand Nexus beyond Southeast Asia. This collaborative effort underscores a shared vision of extending this service globally, potentially reshaping the landscape of international financial transactions.

As Project Nexus continues to evolve, it stands as a testament to the power of international cooperation in addressing the challenges of cross-border payments in an increasingly interconnected global economy.

Key Takeaways

  1. Regional Collaboration: Project Nexus represents a significant collaborative effort among the central banks of Thailand, Malaysia, the Philippines, Singapore, India, and the BIS, with Indonesia as an observer.
  2. Instant Cross-Border Payments: The platform aims to enable cross-border transactions within seconds, operating 24/7/365.
  3. Cost Reduction: Nexus targets transaction costs below 3% of the payment value, aligning with G20 and UN SDG goals.
  4. Increased Accessibility: Both banks and non-bank PSPs can access cross-border payment capabilities through their domestic IPS.
  5. Flexible Participation Model: Financial institutions can participate as Payment Service Providers, FX Providers, or Settlement Access Providers.
  6. Sequential Processing: Nexus processes payments sequentially through the IPS in the sender’s and recipient’s countries, ensuring reliable transactions.
  7. Broad Use Cases: The platform supports various payment types including P2P, B2B, B2P, and P2B transactions.
  8. Scalable Architecture: While initially focused on account-to-account push payments, Nexus is designed to potentially incorporate additional features in the future.
  9. Regulatory Compliance: The project prioritizes the development of appropriate governance and oversight structures to ensure safe and efficient operations across different regulatory environments.
  10. Global Ambitions: While starting with ASEAN countries and India, Project Nexus aims for potential global expansion, signifying a major step towards more efficient international payment systems.

These key takeaways highlight the transformative potential of Project Nexus in reshaping cross-border payment systems, emphasizing its focus on speed, cost-efficiency, accessibility, and scalability in the evolving landscape of global finance.

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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