When considering whether to lend
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1. Is it necessary or advisable for any lender, arranger, facility agent or security agent to be licensed, qualified or otherwise entitled to carry on business in this jurisdiction: (a) by reason only of its execution, delivery or performance of the finance documents; or (b) to enable it to enforce its rights under the finance documents?

It is not necessary for any person or entity that acts as a lender to be licensed or qualified to carry on lending activities in Thailand because of the execution, delivery or performance of any finance documents to which it is a party or to enforce its rights under those finance documents.

If, however, that lender also carries out activities in Thailand that fall within the scope of commercial banking business activities under the Financial Institution Business Act B.E. 2551 (2008) (FIBA), as amended from time to time, then a commercial banking license would be required prior to the commencement of that activity in Thailand and for that lender to enforce its rights under the finance documents that fall within the scope of commercial banking business.

Under the FIBA, "commercial banking business" is defined as the business of:

  • accepting deposits of money from the public that are subject to withdrawal on demand or at certain periods
  • buying and selling negotiable instruments
  • buying and selling foreign currency

Please note that the following licenses are also required if any lender, arranger, facility agent or security agent is involved in the following activities in Thailand.

Foreign business license

If a foreign person or entity acts as an arranger, facility agent or security agent in Thailand, depending on the nature of that particular activity, it may be considered to be carrying on the business of providing services under the Foreign Business Act B.E. 2542 (1999), as amended (FBA). Under the FBA, foreigners are restricted from operating without a license those businesses that are only permitted to be carried on by Thai nationals (and these businesses include service businesses). Generally, an activity that involves the performance of any valuable action, deed or effort to satisfy a requirement or fulfill a demand or the sale of intangible products (e.g., time, energy and expertise) for the benefit of customers in exchange for valuable consideration is considered a service business.

Effective from 9 June 2017, the Ministry of Commerce has issued a ministerial regulation removing certain businesses from the category of restricted business activities, which included businesses governed by the laws on financial institutions including operating a commercial banking business, acting as a banking agent and acting as an agent in receiving payments (collecting agent) or accepting applications.

The operation of a service business in Thailand is a restricted activity under the FBA. A foreigner is not permitted to operate a service business without a license. Any foreign arranger, facility agent or security agent carrying on a service business (other than those that have been removed from the category of business activities) would be required to obtain a "foreign business license" prior to providing the relevant arranging and/or agency services in Thailand.

Personal loan business license

If a lender grants unsecured loans to individuals for nonspecific purposes, which is a regulated business activity under the Notification of the Ministry of Finance on Regulated Personal Loans ("Notification on Regulated Personal Loans"), a license must be obtained before the operation of the regulated personal loan business commences.

Retail loan business license

Granting loans (whether secured or unsecured) to individuals in the ordinary course of business is a regulated business activity for which a license must be obtained before the operation of the regulated retail loan business commences, pursuant to the Notification of the Ministry of Finance on Regulated Retail Loans for Business Purposes ("Notification on Regulated Retail Loans").

2. Will any lender, arranger, facility agent or security agent be deemed to be resident, domiciled, carrying on business or subject to tax by reason only of the execution, delivery, performance or enforcement of the finance documents?

An offshore entity is subject to tax if, by its execution, delivery, performance or enforcement of the finance documents, that offshore entity is considered to be conducting business in Thailand. The act of "conducting business in Thailand" is broadly defined under the Revenue Code as follows:

A juristic company or partnership incorporated under a foreign law that has an employee, a representative, or a broker in Thailand, for carrying on its business, and thereby derives income or gains in Thailand, such juristic company or partnership shall be deemed to be carrying on business in Thailand.

According to the interpretation of this definition by the Revenue Department, an employee, a representative or a broker does not need to be stationed permanently in Thailand to fall within the scope of this definition.

In principle, any activity undertaken by an offshore entity that involves having its employee, representative or broker carrying out the execution, delivery, performance or enforcement of any agreement that generates income for the offshore entity is likely to be subject to tax. However, it will depend on the facts of each case.

An offshore entity receiving certain types of income from Thailand must pay income tax at a fixed percentage of the gross income and the party in Thailand that pays the income is generally required to withhold the tax at the source of payment.

3. Are there any regulatory reporting requirements that lenders must observe in connection with those transactions?
There are some regulatory reporting requirements for a lender that is engaged in "commercial banking business," regulated personal loan business or regulated retail loan business in Thailand (see the answer to question 1 of this section). There are no other regulatory reporting requirements that a lender must observe in relation to those transactions.
4. Is it necessary to establish a place of business in your jurisdiction in order to enforce any provision of the finance documents?

No. 

5. Is a foreign bank/financial institution permitted to approach local entities for business?

Yes. The foreign bank/financial institution must obtain a license if the transactions intended to be executed between the foreign bank/financial institution and its local customer fall within the scope of the following prior to carrying on those regulated activities in Thailand:

  • "commercial banking business" under the FIBA
  • regulated personal loan business under the Notification on Regulated Personal Loans
  • regulated retail loan business under the Notification on Regulated Retail Loans