| BUSINESS REGULATIONS
Accounting and financial reporting requirements
Books of Accounts and statutory records
The Account Act of 2000authorizes the Director general of
the commercial Registration Department, Ministry of Commerce,
to issue regulations regarding the books of accounts and
supporting documents that must be maintained by business
enterprises. Further, Section 12 of the Accounts that should
be maintained as follows
- In keeping accounts, the person with duty to keep accounts
must hand over the documents required for making accounting
entries to the bookkeeper correctly and completely, in
order that the accounts so kept may show the results of
operations, financial position or changes of financial
position according to facts and accounting standards"
Accounting entries may be recorded in a foreign language,
but there should be an appended Thai translation. All
accounting entries should be written in ink, typewritten,
or printed.
Accounting period
A newly established company or partnership should close
its account within 12 months from the date of its registration.
Thereafter, the accounts should be closed very 12 months.
If a company wishes to change its accounting period, it
must obtain the written approval of the director-General
of the Revenue Department
Reporting requirements
In accordance with the Accounts Act of 2000, all juristic
companies, partnerships, branches of foreign companies,
and joint ventures are required to prepare the financial
statement for each accounting period. The financial statement
must be audited by and subjected to an opinion of , a certified
auditor, except the financial statement of a registered
partnership established under Thai law whose capital, assets
or income any one or all of them, are not more than that
prescribed in the Ministerial Regulations. Copies of the
audited financial statements must also accompany the income
tax return that must be filed with the Revenue Department
within 150 days from the closing date of each accounting
period.
Accounting principles
Generally, the basic accounting principles practiced in
the United States are recognized and accepted in Thailand.
In addition, accounting methods and conventions sanctioned
by law are considered as generally accepted accounting practices.
The Institute of Certified Accountants and Auditors of Thailand
is the authoritative group promoting the application of
generally accepted accounting principles.
Any accounting method adopted by a company must be used
consistently and may be changed only with approval of the
Revenue Department.
Certain accounting practices which may be of interest are
a s follows:
- Depreciation
The Revenue Code permits the use of varying depreciation
rates according to the nature of the classes of assets
which have the effect of depreciating the assets over
periods that may be shorter than their estimated useful
lives. These maximum depreciation rates are not mandatory:
a company may use lower rates that approximate the estimated
useful lives of the asset. But if lower rates are used
in the books of accounts, the same rates must be used
in the income tax return.
- Accounting for pension plans
Contributions to a pension or provident fund are not deductible
for tax purposes unless these are actually paid out to
the employees, or the fund is approved as a qualified
fund by the Revenue Department and is managed by a licensed
fund manager. In most cases, contributions to the pension
fund are not based on actuarial computation.
- Consolidation
Local companies with either foreign or local subsidiaries
are not required to consolidate their financial statements
for tax and other government reporting purposes, except
for listed companies which must submit consolidated financial
statements to the Securities Exchange of Thailand.
- Statutory reserve
A statutory reserve of at least five per cent of the annual
net profits arising from the business must be appropriated
by the company at each distribution of dividends until
the reserve reaches at least 10 per cent of the company's
authorized capital.
- Stock dividends
Stock dividends are taxable as ordinary dividends and
may be declared only if there I an approved increase of
authorized capital. The low requires the authorized capital
to be subscribed in full by the shareholders.
- Auditing requirements and standards
Audited financial statements of juristic entities (i.e.,
limited company; registered partnership; branch office,
representative office, or regional office of a foreign
corporation; and joint venture) must be certified by an
authorized auditor and submitted to the Revenue Department
and to the Commercial Registrar for each accounting year
(except for representative office and regional office).
Auditing standards conforming to international auditing
standards are, to a large extent, recognized and practiced
by authorized auditors in Thailand.
Foreign participation in business
Alien Business Law
On March 3, 2000, Alien Business Act 1999 became effective
replacing NEC Decree No. 281. Under this act, a foreign
investor and a majority foreign owned company registered
in Thailand are restrict to carry on certain types of business
activities unless prior approval is granted by the authority
for certain business.
Companies promoted by the Board of Investment shall be permitted
to engage in certain business activities restricted under
the Alien Business Act. Moreover, US-owned enterprises may
claim exemption from the Alien Business Act under the provisions
of the Treaty of Amity and Economic Relations between Thailand
and the United States.
Types
of business restricted by the Alien Business Law
Alien Employment Act
The Alien Employment Act lists the occupations that may
be undertaken exclusively by Thai nationals and prescribes
procedures to regulate alien participation in others. The
substance of the law may be summarized as follows:
With a few exceptions, the law requires all non-Thai nationals
who work in Thailand to have work permits issued by the
Ministry of Labor
The use of these work permits is restricted to the particular
occupation, particular employer, and particular locality
for which they are applied; any change in these restrictions
will necessitate a new work permit.
Aliens working in companies promoted by the Board of Investment
or who are in Thailand under special laws (such as the Petroleum
Act of 1971) can be issued work permits which are valid
for the duration prescribed by such laws under which they
were allowed to enter Thailand. Likewise, foreigner assigned
to work in representative or regional offices may readily
obtain a work permit from the Commercial Registrar.
Aliens entering Thailand to work with promoted firms or
under special laws, as above, may commence work immediately,
but they should apply for a work permit within 30 day form
the date of entry into the Kingdom.
Within 15 days after the date of employment, transfer to
a new locality, or separation of an alien employee, the
employer is required to formally notify the pertinent government
entity that issued the original work permit.
Aliens working in Thailand under special conventions between
Thailand and other countries, including international organizations
such as the World Bank, are exempted from obtaining work
permits.
Occupations
and professions-Prohibited to aliens
Immigration requirements for foreigners
A foreigner may enter the country under the following categories
of visa:
Transit
Except for citizens of certain countries, a foreigner may
enter the country without a visa. He is normally granted
a 30 day stay. Extension of stay may be granted in certain
cases but would normally be limited to an additional 10
days.
Tourist
Foreigners who obtain a visa from a Royal Thai Embassy or
Consulate are initially granted a stay of 60 days. The Immigration
Department may grant an additional extension of 30 to 51
days.
Non-immigrant
A foreigner entering the country to work or fill an employment
post must obtain a non-immigrant visa from a Royal Thai
Embassy or Consulate. His spouse and dependents who accompany
him must likewise obtain the same type of visa. The visa
is normally granted for an initial stay of 90 days, but
it may be extended up to one year and is renew able each
year. This visa entitles the foreigner to apply for a work
permit. Holders of a transit or tourist visa cannot apply
for a work permit.
Immigran
A person wishing to immigrate to Thailand may apply for
a certificate for residence. How ever, the conditions for
qualifying as an immigrant are quite restrictive and covered
by annual immigration quotas and other conditions fixed
for each country by the Ministry of Interior.
Restrictions on an alien's right to own land
An alien may own land only with special permission from
the Minister of interior and only if, under a treaty between
his home country and Thailand, Thai nationals are extended
the reciprocal right to own land. In the case of a promoted
company, the company should obtain the approval of the Board
of Investment. If the BOI-promoted company ceases or transfers
its business, it has to sell such land within one year.
Once an alien has secured permission to acquire land, he
must use it for the purpose stated in his application. A
change in the use of the land can be made only with the
permission of the Ministry of interior. A sale or transfer
of land by an alien also requires approval by the ministry
of Interior.
A foreigner is permitted to acquire units in a high rise
condominium under certain conditions.
Labor regulations
The main basic Thai labor legislation consists of the Civil
and Commercial Code on contracts relating to the hire of
services (Book III, Title VI), the labor Protection Act
1998 promulgated with effect from August 19, 1998, the Labor
Relations Act 1975, the Act on Establishment of labor courts
and labor Court Procedures 1979, the social Security Act
1990 and the Compensation Act 1994. The Ministry of Labor
and Social Welfare is charged with implementing labor laws
and performing labor inspections throughout the country.
Minimum wages
The minimum wages per day effective January 1, 2001, are
fixed at rates depending on the location of the work place
as follow:
165 bath for Bangkok, Nakorn Pathom, Nonthaburi, Pathum
Thani, Phuket, Samutprakarn and Samut Sakorn
143 bath for Chonburi, Chiang Mai, nakorn Ratchasima, Phang-nga
and Ranong
133 baht for all other areas
The above rates are subject to change from time to time.
Working hours and leave
maximum number of working hours of employees is fixed
at eight hours a day and 48 hours a week in total. In some
types of works, as stipulated by law, the employer and the
employee may agree to arrange the period of working hours
but the working hours in any case must not exceed 48 hours
a week. In establishments in which the work is deemed injurious
to health or personal safety, as stipulated by law, working
hours must not exceed seven hours a day and 42 hours a week
in total.
All employees are entitled to a daily rest period of at
least one hour after working for five consecutive hours.
The employer and the employee may arrange the daily rest
period to be shorter than one hour at each time but it must
not be less than on hour a day in total. A weekly holiday
of at least one day a week at intervals of a six day period
must be arranged for the employee.
For work performed in excess of the maximum number of working
hours fixed either by law or by specific agreement (if the
latter is lower), employees must be paid overtime compensation.
The rates of overtime vary and range from one-and-a-half
times to three times the normal average hourly wage rate
for the actual overtime worked. Certain employees engaged
in employment related work on behalf of the employer and
other types of work as prescribed by law are not entitled
to overtime compensation. The maximum number of overtime
working hours is limited to not more than 36 hours a week.
All employees are entitled to unlimited sick leave, but
the number of paid leave shall not exceed 30 regular workdays
a year. The employer may require an employee to produce
a certificate from a qualified doctor for a sick leave of
three days or more.
An employee who has worked consecutively for one year is
entitled to at least six working days of paid vacation every
year, in addition to the 13 holidays in a year traditionally
observed in Thailand. A female employee is entitled to maternity
leave for a period of 90 days including holidays, but the
number of days paid leave hall not exceed 45 days.
Employee record
An employee with 10 or more regular employees is required
to establish written rules and regulation in Thai language
governing work performance and to display these regulations
on the work pre3mises within 15 days from the date that
the number of employee reaches 10 employees or more. A copy
of these rules and regulation must be submitted to the Department
of labor Protection and Welfare within seven days from the
date that the employee announces or displays the working
regulations.
An employee with 10 or more regular employees is also required
to maintain an employee register in the Thai language together
with document s pertaining to the payment of wages, overtime,
holiday work and overtime on holidays. The employee register
must be maintained for at least two years after the date
of termination of employment of each employee together with
the supporting source documents.
Workmen's compensation
The compensation Act 1994 prescribes that the employer must
provide the necessary compensation benefits for employees
who suffer injury or illness or who die an a result or in
the performance of their work at the rates prescribed by
law. The compensation benefits can be grouped into four
categories: the compensation amount, the medical expenses,
the work rehabilitation expenses and the funeral expenses.
The payment of compensation benefits will be made in accordance
with the criteria and rates prescribed by law depending
on the seriousness of the case. In general, the compensation
amount must be paid monthly at the rates of 60 per cent
of the monthly wages of the employee but not lower than
2,000 bath and not exceeding 9,000 bath per month. The monthly
payment of the compensation amount will be paid over a specific
period of time and based upon the criteria prescribed by
law to the employee who is unable to work ccontinuously
for more than three days, has lost an organ, has become
disable or dies. Actual and necessary medical expenses must
be paid but not exceeding 35,000 bath for a normal case
and 50,000 bath for a serious injury. The work rehabilitation
expenses will be paid as necessary according to the criteria,
procedures and rates prescribed by law but not exceeding
20,000 bath. In case of death, the funeral expenses will
be paid at a maximum amount equal to 100 times of the minimum
daily wage rate prescribed by law.
An employer with 10 or more regular employees is required
to contribute to the Compensation fund maintained by the
Office of Workmen's compensation Fund in the Social Security
Offices. The Compensation Fund has been established in order
to directly indemnify employees who suffer injury, illness
or death as a result or in the performance of their work.
The employer must pay contributions by January 31st of the
following year at the rates prescribed by the Ministry of
Labor and Social Welfare.
Social security
The Social Security Act 1990 and its amendment, the Social
Security Act (No. 2) 1994 require all employers with 10
or more employees to withhold social security contributions
from the monthly wages of each employee. The prescribed
rates applied to the monthly wages are:
From Jan. 1, 2000 - Dec. 31, 2000 Rate three per cent
From Jan 1, 2001 onwards Rate = 4.5 per cent
However, the maximum monthly wage base on which the above
rates are applied must not exceed 15,000 bath. The employer
is required to match the contribution from the employee.
The contributions of both the employer and employees must
be remitted to the Social Security Office within the 15th
day of the following month.
Employees with social security registration may file claims
for compensation in case of injury of illness, disability
or death which is not due to the performance of their work,
and for cases of child delivery, child welfare, old age
pension and unemployment. The social security contributions
are envisaged to rise as the benefits to be provided to
employees are increased.
Termination of employment
If an employment contract does not specify any duration,
either party can terminate the contract by giving notice
at or before any time of payment, to take effect in the
next pay period. An employee may be dismissed without due
notice and severance pay if the employee:
- Intentionally commits a crime or act of dishonesty
against the employer
- Intentionally or negligently causes the employer to
suffer damage
- Violates the employer's work rules, regulations or lawful
orders and a written warning has been given (except that
such warning is not required for serious offences)
- Has been absent for three consecutive working days without
a reasonable excuse
- Is adjudged to serve a prison sentence (except where
such sentence arose due to negligence or petty offence)
An employee terminated without a valid cause as stipulated
by law is entitled to receive the following severance pay:30
day's wages where the employment period is at least 120
days but is less than three years.
In the event that the employer relocates its place of business
that essentially affects the normal living of an employee
or his / her family, the employer must notify the employee
of the relocation at least 30 days in advance or pay an amount
in lieu of the advance notice equal to 30 days' wages. In
this connection. If the employee refuses to move and work
in the new location, the employee has the right to terminate
the employment contract and is entitled to receive a special
severance pay of not less than 50 per cent of the prescribed
rates of severance pay.
In the event that the employer terminates the employment of
an employee as a consequence of streamlining the work units,
production process and distribution service, due to the introduction
or change of machinery or technology which thereby results
in the reduction of the number of employees, the employer
must notify the Labor Inspector and the employee concerned
at least 60 days before the date of termination of the employment
or pay in lieu of the advance notice to the employee an amount
equal to 60 days' wages. The terminated employee will be entitled
to the prescribed severance pay. Moreover, if the terminated
employee, has worked consecutively for over six years, the
employee would be entitled to an additional special severance
pay at the rate of 15 days' wages per one full year of service,
calculating from the start of year seven onwards. However,
the total amount of this additional special severance pay
is limited to the equivalent of 360 days's wages.
Patents, trademarks, and copyrights
Patents
Although Thailand is not a member of the Paris Union or
signatory to any other international convention for reciprocal
protection of foreign patents, it has a number of bilateral
agreements entitling citizens of those countries to file
patent applications in Thailand and vice versa. Under the
patent Act (no.3) of 1999, patents for inventions have 20
years' validity, petty patents are valid for six years and
can be extended twice for two year period each and a product
design patent is valid for 10 years.
Certain inventions are not patentable in Thailand, including:
- Naturally existing microorganisms and their components,
animals, plants or animal or plants extracts,
- Scientific or mathematical principles and theories,
- computer programs,
- Diagnosis methods or treatments of human beings or animals,
- Inventions which are against public order, morality,
health or welfare.
Trademarks
Trademarks are provided protection under the Trademarks
Act of 2000 and other ministerial regulations. Registration
of a trademark may be accomplished by the trademark proprietor
himself or through an agent. Application for registration
must be made on official forms duly signed either by the
proprietor or the agent. If an application is approved,
the registration will be published in the Trademark journal.
Once published and not opposed. The proprietor has the exclusive
right to use the registered mark for all the products of
the classes in which registration has been granted. Registration
remains effective for 10 years from the date of the registered
trademark must be made within 90 days before the date of
expiration.
The Trademark Act allows the protection of Service Marks,
Service Names, Collective Marks, Certification marks, and
Trade Names.
Copyright
The Copyright Act 1978 was repealed and replaced by
the Copyright Act 1994. The types of creative work qualified
for protection under this Act are literary work, dramatic
work, artistic work, musical work, audiovisual material,
motion picture, sound recording, sound and picture broadcast,
or any other works in the field of literature, science,
or arts. A copy right is under protection for the period
of the life of the creator plus 50 years from the date of
creation, or 25 years where the copyright is of applied
art.
Thailand is a member of the Berne convention for the Protection
of Literary and Artistic works. This allows certain copyrights
registered in other Berne Convention countries to be enforced
in Thailand.
Foreign exchange regulations
From April 1, 1991, Thailand has substantially relaxed its
control of foreign exchange transactions. The relaxation
of controls effectively allows authorized banks to conduct
majority of foreign exchange transactions without government
control.
Thai residents must exchange foreign currency or place these
on deposit in a foreign currency or place these on deposit
in a foreign currency account with an authorized bank within
seven days of receipt. The daily balance of a Thai resident's
foreign currency account must not exceed US$ 5 million for
juristic persons and US$ 500,000 for an individual.
There is no restriction on the amount of investment funds
or foreign loan funds that may be remitted into Thailand.
Records of inward remittance should be maintained to expedite
subsequent outward remittance. Foreign exchange capital
investments and loans must be converted into Bath or deposited
in a foreign exchange account within seven days of receipt
by a Thai resident,.
Repatriation of capital in vestments, loan funds, profits,
interest, and dividends out of Thailand is not restricted,
although tax is generally withheld on remittances of profits,
interest, and dividends. The amount of Thai currency that
a traveler may take out of Thailand is limited to 50,000
bath.
Thai residents can repatriate funds offshore for international
capital investments and loans up to US$ 5 million per year
but approval of the Bank of Thailand must be obtained as
a matter of formality.
Proceeds of exports from Thailand in excess of Bath 500,000
must be collected within 120 days and converted into Thai
currency or deposited in a foreign currency account within
seven days of receipt.
Export and import regulations
Although Thailand's exports and imports generally proceed
with a minimum of regulation, certain items are subject
to restrictions in the form of outright prohibition, imposition
of duties, or licensing of dealers. Thus, export of unmilled
rice and rice bran is expressly prohibited. Other goods.
However, such as rubber, timber, rice hides and skins, silk
yarn, and iron scrap may be readily sold to foreign buyers,
but duties must be paid on them. To export certain items
such as gold, cattle or sugar, one must secure a license
from the pertinent government authorities
With the exception of some specified items considered to
be in direct competition with domestic products, goods may
be freely imported into Thailand. A license to import any
of the specified items must be secured from the Ministry
of Commerce. Application for the license must be accompanied;
by a supplier's order, confirmation, invoice, and other
pertinent documents. One must secure additional special
permits from government authorities other than the Ministry
of Commerce to import certain articles subject to controls
under other laws and regulations.
Source: American Chamber of Commerce in Thailand
and Thailand Opportunities Magazine, Jul-Aug 2002
Related Documents
Labor
Costs Regulations
Related Links
Ministry of Labour and
Social Welfare
Department of Intellectual
Property
Immigration
Office, Police Department Department of Consular Affairs
Ministry of Foreign Affairs
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