New Mandatory Employee Leave Requirements

The major legislation governing labor law in Thailand is the Labor Protection Act (the “LPA”). The LPA prescribes labor protection standards applicable to both employers and employees working in Thailand. And it was amended on 4 April 2019 (the “Amendment”) and became effective 30 days after its publication. Among other things, the Amendment prescribes new requirements regarding employee leave. In the following we summarize the new mandatory employee leave requirements.

WEEKLY LEAVE

Unchanged remain the regulations governing leave that the employee is entitled to on a weekly basis. The employee must be given at least one day of leave per week. However, in the event that the business that the employee is working for is a hotel, the employer and the employee may agree that the employee may accumulate and postpone his weekly leave days within a period of four consecutive weeks to be taken at any time later.

ANNUAL LEAVE

An employee who has worked for an uninterrupted period of one year must be given at least six working days of personal annual leave per year thereafter. 

PUBLIC HOLIDAYS

In addition to such personal annual leave, an employee must be given leave on not be less than thirteen national holidays per year. However, in the event that the business that the employee is working for is a hotel, entertainment establishment, beverage shop, food shop, or similar, the employer and the employee may agree that the employee will take leave on an alternative day(s) to substitute for the official holiday(s) but the higher requisite “holiday wages” applicable on official holidays must be paid to the employee for his work on any such substitution work day(s). However, and in any event, an employer must obtain an employee’s consent for an employee to work overtime or to work on a holiday. An exception applies in the event that the employee is working for a hotel, entertainment venue food store, club, or other similar business, in which case an employer may require an employee to work on a holiday without the employee’s prior consent.

SICK LEAVE

An employee is entitled to a sick leave as long as he is actually ill. However, if an employee takes sick leave for three days or more, his employer may require the employee to present a certification of such illness from a licensed physician or an official medical establishment.

MATERNITY LEAVE

The regulations on maternity leave changed with the new Amendment. Previously, a pregnant employee is entitled to a maternity leave of up to ninety days for each pregnancy. Under the Amendment the entitlement for maternity leave has been extended to 98 days. It should be noted, however, that the employer is only required to pay the salary for up to 45 days during such maternity leave.

BUSINESS LEAVE

The employer is required to allow the employee to take up to three working days leave for “necessary business”. The employer is required to pay the employee’s salary during such business leave. 

OTHER LEAVE

Finally, the LPA also provides many other categories of leave for the employee: for example, sterilization; military training and service, and others.

Finally, although it is not directly related to an employee’s mandatory leave, both employees and employers should note that the Amendment makes clear that an employer is prohibited from discriminating on the basis of sex with regard to employee wages; work of the same nature, quality, and quantity, or the work is of equivalent value, must be remunerated at same rate regardless of whether the employee is male or female.

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 50 other countries. Visit them at: duensingkippen.com 

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Misunderstandings regarding the new foreign worker law

Last year we explained how Thailand’s Foreigners’ Working Management (No.2) (2018)(ED2), which came into force on 28 March 2018, has significantly liberalized restrictions on foreign workers, and which you can read hereand here. However, in recent months we have noted two different articles by legal commentators that have clearly misunderstood the extent to which ED2 has made the labor law environment in Thailand more foreign friendly. 

One of the articles proclaims the “good news” that directors of companies that are exempted under the Foreign Business Act (1999)(FBA) pursuant to the Treaty of Amity and Economic Relations between the United States and Thailand (1968)(Amity Treaty) no longer require a work permit. For reasons we explain below, this is not true.

The other article asserts that “in theory” directors of companies that are promoted under the Investment Promotion Act (1977)(IPA)and the Industrial Estate Authority Act (1979) (IEAA) are also not required to have work permits. For reasons explain below, this is also not true.

How did both of these legal commentators, law firms that specialize in labor law for foreigners in Thailand, get this so wrong? We believe it is because they did what is all too common and unfortunately the case—they asked and differed their legal opinions to “the official”: 

“we double checked with the Ministry of Labor in Bangkok and they agreed that American directors [of a Amity Treaty] company would not need a work permit”; 

“…authorized directors of companies [IEAA] and [IPA] companies . . . are no longer required to have work permits.  . . .  the Employment Office in Sriracha, Chonburi Province . . . is of the strong opinion that directors of [IEAA] and [IPA] companies are not eligible for a work permit according to the new [labor law]”;

rather than carefully reading and analyzing the relevant law themselves. So let’s do that.

First we need to understand that the FBA prohibits what it defines as any “foreigner” (both individuals and juristic entities) from doing most businesses in Thailand, without a licenseissued under the FBA. And the evident confusion in the articles mentioned above appears to stem from Section 4(2)(8) of the ED2, which states:

The following foreigners can now work in Thailand without a work permit: . . .  foreigners who are representatives of a company holding a foreign business licenseunder the foreign business law of Thailand.

Directors of a company are considered its representatives under Thai law and the current foreign business law of Thailand is of course the FBA. Section 8 of the FBA restricts “foreigners” from doing most businesses in Thailand without a foreign business “License” (as defined and detailed in Section 4 of the FBA). 

To obtain a License, Section 17 of the FBA provides that the applicant must apply for permissionby filing an application to the Cabinet of Ministers or the Director-General of the Department of Business Development. The Cabinet or the Director-General then will consider as to whether to give approval or grant permission within sixty days. In addition, Section 18 of the FBA provides that the Minister of Commerce may prescribe conditions to be observed by foreign business License holders such as: the ratio of the capital to loans for the operation of permitted businesses; the number of foreign directors who must have a domicile or residence in Thailand; or the amount of, and the period of time for maintaining, a designated minimum company capital in Thailand.

This is the primary purpose of the FBA, to define who “foreign” business operators are, require that they have a License to operate their business, detail how they can obtain a License and the penalties if they operate such foreign business without a License. 

However, there is one other exception to the prohibition against foreigners operating a business in Thailand under the FBA. Section 4 of the FBA defines a foreign business operating “Certificate”, which is nota License, but which nonetheless allows foreigners to operate a business in Thailand. To obtain the Certificate, subject to Section 11 of the FBA, the applicant need only notifythe Director-General of the applicant’s accurate eligibility and will readily obtain a Certificate within thirty days. 

Who is eligible for a Certificate? Section 10 of the FBA provides:

The provisions of section 5, section 8, section 15, section 17 and section 18 shall not apply to foreigners operating businesses specified in the Lists annexed hereto upon permission granted pro tempore by the Government of the Kingdom of Thailand.

Foreigners operating businesses specified in the Lists annexed hereto by virtue of a treaty to which Thailand becomes a party or by which Thailand is bound in consequence of obligations therefrom shall be exempt from the application of the provisions of the sections specified in paragraph one and shall be governed by the provisions of and conditions set forth in such treaty, which may, inter alia, confer upon Thai nationals or Thai enterprises the right to operate businesses in the countries of nationality of such foreigners as a matter of reciprocity.

And Section 11 says:

Foreigners under section 10 who intend to operate businesses specified in the Lists annexed hereto shall notify the DirectorGeneral in accordance with the rules and procedures prescribed in the Ministerial Regulation in order to obtain certificates, and the DirectorGeneral shall issue certificates to such foreigners without delay but no later than thirty days as from the date of receipt of their written notification, unless the DirectorGeneral considers that the notification is not in accordance with the rules and procedures prescribed in the Ministerial Regulation or that it is not in accordance with section 10, in which case the DirectorGeneral shall notify such foreigners thereof without delay but no later than thirty days as from the date of receipt of their written notification.

The certificates shall also indicate conditions prescribed by the Government or prescribed in the treaty.

And this (as we previously detailed)is precisely what a company that qualifies under the Amity Treaty is. Thus, an Amity Treaty Company does notoperate its business in Thailand by holding a License; rather it does so by holding a Certificate, a completely different category under the FBA and one that is not excepted under Section 4(2)(8) of ED2.

What about IPA and IEAA companies?

Section 12 provides:

In the case where the business of the foreigner who is promoted under the law on investment promotion or granted written permission for the operation of the industry or the operation of trade for export under the law on the Industrial Estate of Thailand or under other laws is the business specified in List Two or List Three annexed hereto, such foreigner shall notify the DirectorGeneral in order to obtain a certificate. When the DirectorGeneral or the entrusted competent official has examined validity of the investment promotion certificate or written permit, the DirectorGeneral shall issue a certificate without delay but no later than thirty days as from the date of receipt of the notification of the acquisition of the investment promotion certificate or written permit, as the case may be. In this case, such foreigner shall be exempt from the application of this Act, with the exception of section 21, section 22, section 39, section 40 and section 42, throughout the period in which the business in question is under investment promotion or under permission for the operation of the industry or the operation of trade for export, as the case may be.

The issuance of the certificate under paragraph one shall be in accordance with the rules and procedures as prescribed by the DirectorGeneral.

And thus IPA and IEAA companies are exempted from the restrictions of the FBA by receiving a “Certificate”, nota License, as well. 

If the drafters of ED2 had wished to exempt the directors of Amity Treaty, IPA, and IEAA companies they could have either included companies holding foreign business certificatesunder Section 4(2)(8) or simply have made that Section applicable to any company that was exempted from the FBA restrictions. However, they did not do that. They specifically limited the exception to companies holding foreign business licensesunder the FBA. Thus, foreign directors of Amity Treaty, IEAA, and IPA companies holding foreign business certificatesare still required to have work permits. 

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com 

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Thailand’s New Work Permit Law (part 2): any work, anywhere, for anyone

In part one on our series on Thailand’s new foreign labor law we explained that the new law allows foreigners to work without a work permit in some limited but significant circumstances.

What most have failed to notice so far is that the new law is also very good news for foreigners who are still required to obtain a work permit.

Previously, foreigners who needed to obtain a work permit in order to work were prohibited from doing any work, for any employer, anywhere, and under any such conditions if such were not detailed and, therefore, permitted in the work permit itself.

That is no longer the case.

Until last year Thailand regulated foreign work permissions under the Alien Workers Act (2008) (the “Act”). In 2017 the Emergency Decree on Non-Thais’ Working Management Emergency Decree, (2017) (“Decree No. 1”) repealed the Alien Workers Act (2008). Decree No. 1, however, incorporated much of the repealed Act’s provisions and kept in force most of the regulations issued under it. Then, on 27 March 2018, the Emergency Decree on Non-Thais’ Working Management (No.2) (2018) (“Decree No. 2”) was issued. Decree No. 2 amended Decree No. 1.

Section 70 of Decree No. 1 (and the Act) provided that “person who is granted permission for working may not carry out the work of the type, with the employer, in a locality or on any working condition that is different from that specified in their work permit unless permission under section 71 is obtained.

Section 71 of Decree No. 1 (and the Act) provided that “a person who is granted permission for working, and who intends to change or add the following particulars, must obtain permission from the Registrar: (1) type of work (2) employer (3) location or (4) working conditions.

Section 72 of Decree No. 1 (and the Act) provided that “no person shall take into employment a foreigner who does not have a work permit with him (i.e. the employer).

And Section 73 of Decree No. 1 (and the Act) provided that “no person may allow a foreigner to work in a manner different from the requirements specified in the work permit.”

However, and very significantly, Section 37 of Decree No. 2 repealed Sections 70, 71, 72 and 73 of Decree No. 1. Furthermore, Section 28 of Decree No. 2 provides that a work permit holder may engage in any work that is not specifically prohibited to all foreigners on the “Official List” of work prohibited to foreigners. The Official List outlines, the limited number of activities for which a foreigner cannot obtain work permission for in any case. (The current Official List is the same as was last issued under the Act. However, the Official List is being revised and we detail such in part three of this series once the revision is complete.)

As a consequence, any foreigner who has a work permit in Thailand may now, work anywhere, for anyone, and do any type work, that is not excluded by the Official List.

This is a very significant and welcome change to the Thai foreign labor law regime. It is obviously good news for work permit holders in Thailand. And Thailand will also benefit from having made its labor market more attractive to the best foreign labor talent it needs to compete for in the ever increase globalized economy.

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 50 other countries. Visit them at: duensingkippen.com

 

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Legally working WITHOUT a work permit?

The general rule is that someone who is not a Thai citizen must obtain a work permit if he or she wants to work in Thailand. Recently, however, Thailand has made a few significant exceptions to this general rule, as well as, some other notable changes to the foreign work permission regimen.

Until last year Thailand regulated foreign work permissions under the Alien Workers Act (2008) (the “Act”). In 2017 the Emergency Decree on Non-Thais’ Working Management Emergency Decree, (2017) (“Decree No. 1”) repealed the Alien Workers Act (2008). Decree No. 1, however, incorporated much of the repealed Alien Workers Act’s provisions and kept in force most of the regulations issued under it.

Normally, an Act, a law, can only be repealed in Thailand by another law passed by the legislature. However, Decree No. 1 was issued under Section 172 of Thailand’s Constitution, which provides for the King of Thailand to issue an emergency decree “for the purpose of maintaining national or public safety, national economic security, or averting public calamity.” And Section 172 also provides that such an emergency decree has the force of an Act or law as long as such decree is later approved by the legislature.

On 27 March 2018 the Emergency Decree on Non-Thais’ Working Management (No.2) (2018) (“Decree No. 2”) was issued. Decree No. 2 amended Decree No. 1.

Interestingly, the definition of “working” under the Decree No. 1 remained as broad as in the Act and was defined as “the use of physical strength or knowledge for engaging in an occupation or a job with or without an intention to obtain wages or any other benefit”. Decree No. 2 now redefines “work” as “an engagement of any profession, with or without employer, but excluding business operation of a licensee under the law governing foreigners’ business operation.”

Decree No. 1 prohibits people who are not Thai citizens from engaging in specific occupations. Permission to do such work will not be granted. Other occupations are open to non-Thais; however, the work performed by anyone who is not a Thai citizen is strictly limited to the activities and conditions to conduct such provided in the permission granted. However,Decree No. 2 now provides for exceptions to the mandatory work permit application requirement as well as other revisions of note. The most significant changes under the Decree No. 2 are as follows:

A. The following non-Thais can carry out certain activities in Thailand without a work permit:

(1) a non-Thai who comes to Thailand on a short-term periodic basis to: hold or to attend a meeting, lecture, seminar, training, exhibition of art or culture, or sports competition; provide an opinion; inspect work of others; or, any other activities, as prescribed by the Council of Ministers.

(2) a non-Thai who enters into Thailand to: operate a business; make an investment; or who has knowledge, ability, or skills that are considered beneficial to the development of the country;

(3) a non-Thai legal representative (e.g. director) of an alien juristic person that is licensed to operate business under the Foreign Business Act (1999);

B. It remains the case, as provided for under Decree No. 1 that a non-Thai who wishes to work in Thailand on an urgent and necessary basis for a period of up to 15 days is no longer required to receive formal approval of such from the Department of Employment and need only to notify the Department of such (Note: failure to do so is subject to a fine of up to Thai Baht 50,000). However, Decree No. 2 has amended this provision such that if the work cannot be completed within 15 days an application for an extension of up to an additional 15 days may be made;

C. An employer of a non-Thai employee must notify the Department of Employment of:

(1) the name, nationality and nature of work of a non-Thai employee within 15 days of employment; and

(2) the cessation of employment and the reason for such cessation of employment of a non-Thai employee within 15 days after the employment ends.

Note: an employer who fails to notify the Department of Employment of the above is subject to a fine of up to Thai Baht 20,000;

D. Work permit applications are now permitted to be filed electronically; and

E. Penalties under Decree No. 1 have been significantly reduced. For example:

(1) thepenalties for working without a work permit under Decree No.1 was an imprisonment for a term not exceeded 5 years or a fine ranging from Thai Baht 2,000 to Thai Baht 100,000, or both. But under Decree No. 2 that has been reduced to a fine ranging from THB 5,000 to THB 50,000 and the imprisonment penalty has been repealed; and

(2) the penalties for employing a non-Thai employee without a work permit under Decree No. 1 was a fine ranging from Thai Baht 400,000 to Thai Baht 800,000 for each employee so employed. Under Decree No. 2 this has been changed to a fine ranging from Thai Baht 10,000 to Thai Baht 100,000.

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 50 other countries. Visit them at: duensingkippen.com

 

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Opening a Representative Office in Thailand Just Got Easier

A Representative Office allows the foreign investor to evaluate potential market opportunities without the need to establish a subsidiary in Thailand. Thus, it provides an interesting “vehicle” for foreign investors who may be considering entering the Thai market.

Thailand has recently made the set-up process of such an office more investor friendly. Previously, prior to operating, the Representative Office was required to obtain a “Foreign Business License” because, under the Foreign Business Act (1999) (the “FBA”), its permitted activities were considered a“service” reserved to for Thais and prohibited to foreigners without such exemption.This requirement has been abolished. Under MinisterialRegulation No. 3 “Prescribing Service Businesses Which Do Not Require a Foreign Business License” (2017) of the FBA the operation of a Representative Office is no longer considered such a service.

Thus, aRepresentative Office is now permitted to provide its specified services without the need to apply for a Foreign Business License. This is good news for foreign investors who would like to open a Representative Office because the exclusion will now allow for an expedited and more efficient set-up procedure.

The purpose of a Representative Office is to provide services solely to its foreign head office, affiliates, or companies in the same group. The services it can provide are limited For example: a Representative Office is not allowed to accept purchase orders; make sales offers; or engage in business negotiations with any person. Andit is not allowed to generate any profit. The limited business activities the Representative Office is allowed to operate are as follows:

  1. Procurement of supply sources for goods and services in Thailand for the head office or affiliated company;
  2. Inspection and control of the quality and volume of goods by the head office or affiliated company or that was hired by the head office or affiliated company for production in Thailand;
  3. Consultation on various aspects pertaining to goods distributed by the head office or affiliated company to a distributing agent;
  4. Dissemination of information pertaining to new goods or services offered by the head office or affiliated company; and
  5. Reporting on business movements in Thailand to the head office or affiliated company.

Furthermore, a Representative Office cannot engage in the:

  1. Purchase goods on behalf of the head office or its affiliated company or any activity concerning such a purchase;
  2. Shipment of goods of the head office or its affiliated company that were purchased prior to the Representative Office beginning operations;
  3. Checking and control of the quality and quantity of goods for any company that is not the head office or its affiliate company;
  4. Giving of after sale service concerning the installation and maintenance of goods;
  5. Giving of advice concerning goods that are not produced or sold by the head office or its affiliated company;
  6. Receiving of any purchase order or service on behalf of the head office or its affiliated company;
  7. Coordination of any purchase or sale on behalf of the head office or its affiliated company;
  8. Propagation of information concerning goods or services that were sold in Thailand prior to the Representative Office beginning operations;
  9. Carrying out of activities as a “middleman” or “agent” between customers in Thailand and the head office or its affiliated company;
  10. Planning or coordination with any organization of business on behalf of the head office or its affiliated company;
  11. Acting on behalf of the head office or its affiliated company; or
  12. Reporting of information to any company that is not the head office or its affiliated company.

It should also be noted that since a Representative Office is not allowed to generate any income, the operation of the Representative office must be completely financed by the foreign head office. However, financing of the operation received by the head office is not considered to be taxable income. Nevertheless, a Representative Office is still required to apply for a tax ID and submit annul tax returns.

 

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 50 other countries. Visit them at: duensingkippen.com

 

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“Seasonal” Employment in Thailand?

Thailand’s tourism and hospitality industry is among the most important contributors to its economy. Anyone familiar with that industry knows that it’s dictated by high and low “seasons”. Business peaks during the winter holidays and dips during the spring and fall. Thus, if you are running a business in the Thai tourism or hospitality sector, you need more help during the peaks and less during the dips. As a result, we are often asked about “seasonal employees”. Are there any legal issues with hiring people for just the peak season and then letting them go if the following dip does not justify (from a business perspective) keeping them on? Are there any legal issues with, for example:

  1. hiring someone 1 November 2016 to 30 April 2016 and then letting them go; or, if business warrants
  2. hiring them again by entering under a new employment contract running from 1 May 2017 to 31 October 2017, and then letting them go; or
  3. hiring them a third time for the next high season from 1 November 2017 to 30 April 2018?

The short answer is: “yes, there are” and perhaps the most significant is severance pay liability.

Employment matters are generally governed by the Labour Protection Act (1998) (“LPA”). The LPA was largely enacted to protect employees on the assumption that employees are in the weaker of the two positions in their relationship with their employer and, therefore, in need of such protection. This also means that, in any dispute with an employer, Thai labour courts are supposed to interpret the LPA in the light most favourable to the employee.

One of the most significant rights that the LPA provides to employees is the severance pay that is due to the employee should he or she be terminated for any reason other than the rather limited “termination for cause” reasons defined by the LPA. The amount of severance that is payable to an employee terminated without such cause increases the longer the employee is employed.

The only way for a worker’s employment to come to an end without terminating them for cause and without paying severance is to hire that employee under a “fixed-term” contract. But Section 118 of the LPA significantly curtails who can qualify as a “fixed-term” employee as follows:

a.  employment in a specific project, which is not the normal business or trade of the employer  and requires a definite date to commence and end the work; or

b.  work which is occasional with a definite ending or completion; or

c.  work which is seasonal and the employment is made during the season.

AND whether it is under (a), (b) or (c) above, such work must be completed within a period not exceeding two years and the employer must make a written contract with the employee at the beginning of the employment.

Furthermore, although it is recommended, Thai employment contracts generally do not need to be written. However, in order to be qualified as a fixed-term employment exemptible from severance payment, the said contract must be a “written contract”.

So what about (c)? Are high and low tourism season employees, “seasonal” employees?

There is no definition of “seasonal employment” under the LPA. Thai courts’ interpretation of seasonal employment is still based on Thailand being an agriculture-based country. Therefore, as far as we are aware, the meaning of “seasonal employment” as interpreted by Thai courts has been limited to agricultural seasons, not high or low seasons in the sense of tourism, hotel, or any other businesses. Accordingly, Thai courts do not interpret tourism and hospitality “seasonal” employment contracts as “seasonal employment” under the LPA. Thus, such employees would be entitled to severance pay upon termination pursuant to the LPA.

What about at least limiting the amount of severance payable by entering successive employment contracts so that severance liability would only apply to the period covered by the most recent contract? The LPA does not allow for that either.

Section 20 of the LPA provides that if the employee has not worked continuously because the employer intended to deprive an employee of any right under the LPA, all such employment periods will be considered cumulative in determining what rights the employee is entitled to. Thus, when there are successive fixed-term employment contracts they are most likely to be interpreted under the LPA as the employer’s attempt to deprive the employee’s right to severance pay for the cumulative term of employment. In other words, our employee in our example above would have the rights of a standard 18-month employee (not a 6 month employee). Therefore, that employee would be entitled to severance pay equivalent of 3 months salary (rather than one month) if terminated “without cause” as defined by the LPA.

This is true even if the employment agreement provides for reducing or extending the duration of the employment, or details the “motive” for the employment as “due to seasonal business fluctuations”. The employer under Section 118 of the LPA and its “pro-employee” perspective would still owe severance payment for the cumulative employment period.

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 50 other countries. Visit them at: duensingkippen.com

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New annual statutory e-filing requirements for all Thai companies-FIRST DEADLINE is 30 SEPTEMBER 2015

Thailand’s Ministry of Commerce, by way of its Department of Business Development (DBD), recently issued an announcement regarding the submission of annual statutory audit financial statements by Thai limited companies. Starting in 2016, Thai companies will be required to file their 2015 reports electronically. This new system will replace the previous method of submitting documents by hardcopy.

In order to e-file all Thai companies are now required to obtain an official e-filing username and password from the DBD. Any Thai company that does not obtain their user name and password before 30 September 2015 will be required to file BOTH a hardcopy of their 2015 statutory audit by 31 May 2016 AND to file the same electronically no later 30 June 2016.

Thus, in order to comply with this new regimen most efficiently, all Thai limited companies should obtain their e-filing username and password by 30 September 2015. Such companies will then be allowed to e-file only their 2015 statutory audit by 31 May 2016.

 

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THE LICENSING FACILITATION ACT
 – A More Business Friendly Licensing Procedure in Thailand?

Historically, obtaining a desired business license, registration, or other requisite government permission has often been time consuming and incurred arguably unnecessary costs in Thailand. Such inefficiencies stem in large part from the broad discretion government offices are generally given to determine what an applicant must do or provide, to obtain a license, registration, or permission. What is required to obtain a given license at one office at one time may not be the same at another office or even the same office on a different day. Recently, however, the Thai government enacted a law that aims to significantly reduce, or even eliminate, such inconsistencies and resulting waste.

The Licensing Facilitation Act (2015) was formally published on 22 January 2015 and it will take effect on 21 July 2015. With a few notable exceptions, including court procedures, environmental regulation, and licensing related to strategic military operations, the Act applies to all licenses, registrations, and permissions that Thai law requires or allows individuals to obtain. It also applies to the government offices charged with issuing the same. The Act requires all other government offices to produce, and make available to the public, a Manual that details the procedure, timing, and specific requirements (including listing all necessary documents that must be provided) to obtain the licenses, registrations, and permissions that they administer.

Significantly, once a Manual is in place, Thai government offices covered by the Act will no longer have discretion to deviate from the requirements therein. If, but only if, an application does not meet the requirements in the Manual, an office may refuse an application. However, in such case that office must do so in writing to the applicant within the time required by the Manual. Any such written notice must also explain why the office is refusing the application and detail how the applicant should revise their application to make it acceptable. Thereafter the applicant may resubmit the application. If the office rejects it again, the office must provide reasons for the rejection again in writing. The applicant may then choose to either resubmit its application or file an appeal under the Administrative Procedures Act.

If an office is unable to make an initial determination on an application within the time required by the Manual, that office must provide reasons for the delay in writing to the applicant and send a copy of such to an administrative oversight committee. Such written notice must be repeated every seven days until the office provides its written decision on the application. In the event any such office fails to comply with this requirement “it shall be deemed that it commits or omits the commission of an act which causes damage to other persons; provided that such commission or omission was not caused by force majeure.”

The Act also favors business interests over regulatory formality. Under the Act if an application was submitted in accordance with the law, and any relevant regulation, and that law or regulation changes prior to approval of the application, the application remains valid and will be determined under the previous law and regulation. Renewing licenses may also become significantly more efficient. Operators of certain ongoing business activities may be eligible under the Act to renew their licenses by simply paying the renewal fee, without having to file a renewal application.

Finally, the Act requires all offices to establish “Service Link Centers” to accept applications, as well as, to provide information regarding what is required by law to apply for and receive any license, registration, and approval, which that office administers. The Act also provides for “One Stop Service Centers” to be established in each province in Thailand. Presently applications for and to renew a license, registration, or approval must be done at the specific government office that issues it. But once established, applicants will be able to accomplish all such applications and renewals at one location dedicated to this purpose. Furthermore, the Act provides for One Stop Service Centers to accept certain applications online.

This “mere administrative law” may not appear significant to some. And only time will tell how it will be implemented in practice. However, it is a welcome addition to Thailand’s legal landscape. We believe that, if properly implemented, the Act has the potential to greatly improve administrative efficiency and services, and therefore, make doing business in Thailand easier.

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com

 

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A Step Towards an End to Frustration and “Tea-Money” in Thailand?

Historically, obtaining a desired license, registration, or other requisite government permission has often been frustrating and costly in Thailand. Inefficiencies, and the all too common “tea money”/unofficial “fees” charged by government offices to perform their administrative duties, stem from the broad discretion government offices are generally given to determine what an applicant must do or provide, to obtain a license, registration, or permission. Recently, however, the Thai government enacted a law that may significantly reduce, or even eliminate, such waste and untoward practices.

The Licensing Facilitation Act (2015) was formally published on 22 January 2015 and it will take effect on 21 July 2015. With a few notable exceptions, including court procedures and licensing related to strategic military operations, the Act applies to all licenses, registrations, and permissions that Thai law requires or allows individuals to obtain. It also applies to the government offices charged with issuing the same. Furthermore, the Act requires all such government offices to produce, and make available to the public, a Manual that details the procedure, timing, and specific requirements (including listing all necessary documents that must be provided) to obtain the licenses, registrations, and permissions that they administer.

Significantly, once a Manual is in place, Thai government offices covered by the Act will no longer have discretion to deviate from the requirements therein. If, but only if, an application does not meet the requirements in the Manual, an office may refuse an application. However, in such case that office must do so in writing to the applicant within the time required by the Manual. Any such written notice must also explain why the office is refusing the application and detail how the applicant should revise their application to make it acceptable.

If an office is unable to make an initial determination on an application within the seven days of the time required by the Manual, that office must explain why in writing to the applicant and send a copy of such to an administrative oversight committee. Such written notice must be repeated every seven days until the office provides its written decision on the application. In the event any such office fails to comply with this requirements “it shall be deemed that it commits or omits the commission of an act which causes damage to other persons; provided that such commission or omission was not caused by force majeure.”

This “mere administrative law” may not appear significant to some. And only time will tell how it will be implemented in practice. However, it is a welcome addition to Thailand’s legal landscape. We believe that, if properly implemented, the Act has the potential to greatly improve administrative conduct and services in Thailand.

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com

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Labor Law in Thailand: PART 11 – The Skill Development Promotion Act

When an employer’s work force totals one hundred or more employees, the Skill Development Promotion Act (the “Act”) must be considered. The objectives of the Act are to promote and support occupational skill training and upgrade skill standards for employed labor in Thailand. The Act also estalished a Labor Skill Development Fund (the “Fund”) for use as a revolving fund for the promotion of skill development efforts.

Thus, the Act incentivizes private businesses and educational institutions to provide apprenticeships and occupational skill training. With regard to the the private sector, for example, any private business which provides occupational skill training to the labor force in general or to its own employees – utilizing training curricula or activities endorsed by the Act – will be eligible for certain privileges as stipulated the Act.

Any employer who has one hundred employees or more is required to arrange yearly labor skill training for at least 50% of its employees (it should be noted, however, that teachers do not count in this calculation for private school and college businesses). But, if such an employer does not provide such training, then that employer is required to make a contribution to the Fund before March of the following year, except for an employer:

1) who is a ministry, department, or government agency; or

2) who is a foundation or a charitable, or non-profit organization; or

3) whose activity is related to cultivation and planting, fishing, forest, animal husbandry, or salt farming; who does not employ an employee for a whole year; and who does not have any other business activities.

Currently, the requisite Fund contributiom is an amount equal to 1% of the current legal minimum wage per hours of the past calendar year ( currently Thai Baht 300/hour) x 30 x 12 months x the number of employees who have not been so trained.

If the employer fails to make such a contribution to the Fund in full as required by law, the employer is required to pay an additional payment in an amount equal to 1.5% of the outstanding contribution per month, until the contribution is made in full.

In the event that such an such employer – at any later time – has:

a) less than one hundred employees in every month of a calendar year; or

b) an average of less than one hundred employees per month in that calendar year,

then that employer must continue to report its number of employees but will not be required to make any Thai Baht payment to the Fund.

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DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com

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