Merchandise Trade

• Thailand has been a WTO member since January 1, 1995.
   
• Since 2015 many tariffs between member states of the ASEAN have been removed (other members are Brunei, Cambodia, Indonesia, Laos, Myanmar, the Philippines, Singapore, Malaysia and Vietnam) as ASEAN moves towards customs unification. The implementation of lower tariffs within the area has been beneficial, with regional trade booming in recent years, especially as Malaysia, Singapore, Vietnam, Cambodia and Myanmar are Thailand's major exporting partners.


• Although Thailand has abolished most tariffs, this mainly benefits regional (members of ASEAN) investors and a few other countries with which it has free trade agreements (FTAs). Consequently, high tariffs in many sectors and non-tariff barriers such as licensing requirements and excessively burdensome import requirements remain an impediment to market access. Price controls and excise taxes, often based on an exceedingly complex tax structure, also negatively impact trade in some sectors. Thailand is not a signatory to the WTO Government Procurement Agreement (GPA) although it has observer status in the GPA Committee.


• In May 2017, Thailand repealed the outdated Customs Act of 1926, and a new Customs Act BE 2560 (2017) came into force from November 13, 2017, that heralded a new era in customs and excise control in Thailand. The aim of the new act is to modernise Thailand's customs law, ease customs procedures significantly, introduce transparency and transform the Customs Department from effectively being a regulator into a facilitator of trade. Ambiguities in the present law were removed in order to bring the law closer to international best practices and more in line with Thailand's FTAs. Thailand has been a member of the World Customs Organization since February 4, 1972.


• Thailand has bilateral investment treaties (BITs) with Argentina, Bahrain, Bangladesh, the Belgium-Luxembourg Economic Union (BLEU), Bulgaria, Cambodia, Canada, Mainland China, Croatia, Czech Republic, Egypt, Finland, Germany, Hong Kong, Hungary, Indonesia, Israel, Jordan, North Korea, South Korea, Laos, Myanmar, the Netherlands, Peru, the Philippines, Poland, Romania, Slovenia, Sri Lanka, Sweden, Switzerland, Taiwan, Turkey, the United Arab Emirates, the United Kingdom and Vietnam. Three others are signed but not yet in force.


• Thailand has double taxation agreements with 61 countries.


• Thailand's improved position in the most recent IMD World Competitiveness Rankings was hailed by the Thailand Board of Investment as an endorsement of the government's Thailand 4.0 policy and the improvements made in the areas of training, technology and the regulatory framework. According to recently released figures, total foreign investments in approved projects had risen by 41% to THB74.9 billion from the same period in 2018.
• Negotiations for a EU-Thailand FTA were launched in March 2013 and put on hold in 2014. In October 2019, the EU announced that it intends to resume its FTA negotiations with Thailand.

Sources: WTO – Trade Policy Review, UNCTAD, Revenue Department of Thailand, ASEAN Briefing, Thailand Board of Investment, Fitch Solutions

Multinational Trade Agreements

Active

1. Thailand is a member of the ASEAN alongside Brunei Darussalam, Cambodia, Indonesia, Laos, Myanmar, the Philippines, Singapore, Malaysia and Vietnam. The ASEAN Free Trade Area was signed on January 28, 1992 and entered into force on January 1, 1993.
    
2. ASEAN-Mainland China FTA: The ASEAN-Mainland China FTA and the economic integration agreement (EIA) cover goods and services. The FTA for goods came into force on January 1, 2005, and the FTA for services came into force on July 1, 2007. The agreement aims to eliminate tariffs, encourage investment and address the barriers that impede the flow of goods and services. The ASEAN-Mainland China Free Trade Area was last updated in 2015.
    
3. ASEAN-India FTA: The ASEAN-India FTA and the EIA cover goods and services. The FTA came into force on January 1, 2010 for goods, and on July 1, 2015 for services, with the aim of minimising barriers and deepening the economic links between the parties. The agreement will lead to the progressive elimination of tariffs on all goods.
    
4. ASEAN-South Korea FTA (AKFTA): The AKFTA came into force in January 2010 and October 2010 for goods and services respectively. The ASEAN-South Korea Investment Agreement came into force on September 1, 2009. The agreements aim to create more liberal, facilitative market access and investment regimes between South Korea and ASEAN. A business council was set up in December 2014 to enhance economic cooperation between the parties and boost total trade to USD200 billion by 2020. Total trade between ASEAN and South Korea grew by 68% between 2007 and 2017.
    
5. ASEAN-Japan FTA: This FTA covers goods and came into force on December 1, 2008. Japan provides a huge market for a wide range of goods. This tariff-free trade benefits a number of important sectors, including manufacturing, agriculture, mining and chemical production.
    
6. ASEAN-Australia-New Zealand FTA: The ASEAN-Australia-New Zealand FTA and EIA cover goods and services. The agreement came into force on January 1, 2010.
7. ASEAN-Hong Kong FTA (AHKFTA): Hong Kong and ASEAN began negotiating an FTA and an investment agreement in July 2014. After 10 rounds of negotiations, Hong Kong and ASEAN announced the conclusion of the negotiations in September 2017 and forged the agreements on November 12, 2017. The agreements are comprehensive in scope, encompassing trade in goods, and services, investments, economic and technical cooperation, dispute-settlement mechanisms, and other related areas. The agreements will bring legal certainty, better market access and fair and equitable treatment in trade and investment, thus creating new business opportunities and further enhancing trade and investment flows between Hong Kong and ASEAN. The agreements will also extend Hong Kong's FTA and investment agreement network to cover all major economies in South East Asia. The agreement came into force on January 1, 2019, but it will take time for all members of ASEAN to comply because implementation is subject to completion of the necessary procedures. Hong Kong is a key export market and the reduction of tariffs will ease the trading process. Hong Kong's potential as a key export market increases the importance of AHKFTA.

Waiting to be Signed

Regional Comprehensive Economic Partnership (RCEP): This is a regional economic agreement that involves the 10-member ASEAN bloc and their FTA partners: Australia, Mainland China, Japan, New Zealand and South Korea. As at February 7 2020, India is not party to the agreement. The RCEP is envisioned to be a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement that aims to advance economic cooperation, and broaden and deepen integration in the region. The RCEP will lower tariffs and other barriers to the trade of goods among the 15 countries that are in the agreement or have existing trade deals with ASEAN. The agreement was finalised in November 2019 and is expected to be signed in November 2020.

Under Negotiation

1. Negotiations for a EU-Thailand FTA started in March 2013. The negotiations aimed to conclude a comprehensive FTA in the short to medium term, and by November 2013 a partnership and cooperation agreement had been finalised, which provides a comprehensive framework for EU-Thailand relations and opportunities to develop cooperation. Further talks stalled because of the military takeover in Thailand in 2014. After Japan, the EU is Thailand's largest investor. Thailand and the EU resumed talks regarding the FTA in October 2019.


2. Negotiations for an EU-ASEAN region to region FTA were launched in 2007. Talks were paused in 2009 to allow for bilateral FTA negotiations as building blocks towards a region to region agreement. ASEAN as a whole represents the EU's third largest trading partner outside Europe.

Sources: WTO Regional Trade Agreements database, European Commission, ASEAN, UNCTAD, Fitch Solutions

Foreign Direct Investment

• Value Added Tax: 10%
• Corporate Income Tax: 20%

Source: Thailand Revenue Department

Important Updates to Taxation Information

• On March 14, 2018, Thailand's cabinet passed two provisional royal decrees aimed at regulating the cryptocurrency market. The finance ministry outlined new tax guidelines for the cryptocurrency market. According to Thai regulatory authorities, the measures taken are to protect traders from losing their money. VAT on cryptocurrency came in at 7% on all traders, while capital gains tax came in at 15%.
• In November 2018, Thailand introduced specific transfer pricing provisions into income tax law, applicable on or after January 1, 2019. Thailand has 61 double taxation agreements (DTAs). On June 4, 2019, the Revenue Department announced it had signed a memorandum of agreement with the Electronic Transactions Development Agency to help to develop reliable and secure standards for an e-Tax invoice and e-Receipt system as part of its plan to improve the efficiency of tax collection and to encourage domestic entrepreneurs by reducing costs and increasing convenience.

Business Taxes

Sources: Thailand Revenue Department, Fitch Solutions
Date last reviewed: May 1, 2020

Foreign Worker Permits

Prior to starting employment, all non-Thai nationals are required to obtain a work permit under the Working of Alien Act of 2008. Foreign nationals first need to secure an initial non-immigrant visa, which must be obtained before entering Thailand. The duration of the work permit is generally the same as the applicant's visa. Generally, work permits are issued for one year but are renewable. Foreign nationals are not allowed to perform work that is not permitted by their visa. To change occupations, they need to obtain authorisation from the Ministry of Labour.

Localisation Requirements

The Alien Employment Act (1978) prohibits foreign nationals from working in 39 occupations and professions (such as labourers, goldsmiths, farmers, accountants, auditors, engineers and architects).

According to the Employment and Job Seeker Protection Act (1985), companies need to have a certain minimum amount of fully paid up capital in order to qualify to employ specific numbers of foreign nationals in Thailand. Other conditions include having at least 50 local employees per expatriate. Businesses that are wholly foreign owned and incorporated in Thailand in terms of Thailand's Board of Investment are allowed to employ foreign nationals on a 4:1 ratio of locals to foreign nationals.

Visa/Travel Restrictions

In general, Thailand has an open visa policy. The country has bilateral agreements with a number of countries, that award preferential treatment to nationals of these countries in terms of the number of days granted to stay in Thailand visa free. These agreements give nationals from five countries visa-free access to Thailand for 90 days, six others (including Hong Kong and Macao) have access for 30 days, and one (Cambodia) for 15 days. A tourist visa exemption scheme grants nationals from 49 countries 30 days of visa-free access as well as being allowed to enter Thailand through a land border with a neighbouring country if required, rather than through the country's airports. Nationals from 19 countries, including Mainland China, can get a visa on arrival, entitling a stay of up to 15 days, whereas only a few needs to apply for a visa before departing for Thailand.

As part of a policy to attract talent and technology from abroad, Thailand launched the SMART Visa programme which has five types of visa according to the levels of talent, skills and entrepreneurial start-up investment. SMART visa holders will be granted a maximum four-year permission to stay, exemption from the normal work permit requirements, and entitlement to additional privileges. The government has identified a number of targeted industries, including next-generation automotive, biofuels and biochemicals, and agriculture and biotechnology. An overseas applicant can expect to hear within 60 days whether he or she has been successful. A one stop service centre will endorse or extend an applicant’s SMART Visa during their stay in Thailand.

Sources: Government websites, Ministry of Foreign Affairs of Thailand, Thailand Board of Investment, Ministry of Labour, Fitch Solutions

Sovereign Credit Ratings

Sources: Moody's, Standard & Poor's, Fitch Ratings

Competitiveness and Efficiency Indicators

Sources: World Bank, IMD, Transparency International, national sources

Fitch Solutions Risk Indices

Source: Fitch Solutions
Date last reviewed: May 1, 2020