Liberalization of the Exchange Control Regime
In an active effort to promote private-sector investment in Thailand, the exchange control law and regulations have been amended by the Bank of Thailand (the BOT), and became effective from 5 June 2017 onwards.1
Below is a summary of the key changes.
I. Less supporting documents required for outward remittance
To reduce compliance costs borne by private-sector entities, the requirements for outward remittance have been eased, which include a reduced amount of required supporting documents.
The Foreign Exchange Transaction Form evidencing repatriation of loan proceeds or capital into Thailand is no longer required for outward remittance of money for loan repayment and interest payment to a foreign lender, or for return of capital to a foreign parent company or head office; instead a credit advice can be used.
Evidence of importation of goods into Thailand or any third country is no longer required for outward remittance of money for settlement of goods purchased.
A remitter can now also submit supporting documents for outward remittance of money to a commercial bank in Thailand through an electronic channel (e.g. email) as an alternative to submitting hard copies. For example, an electronic invoice can now be submitted via email as a supporting document to a commercial bank for outward remittance for purchasing goods.
II. Commercial banks can now grant THB loans to non-resident companies for investment in Thailand and neighbouring countries
Under the previous notification, commercial banks were not permitted to grant THB loans to a non-resident (NR), except for: (i) consumer loans to NR individuals; (ii) THB loans to NRs in neighbouring countries of Thailand;2 and (iii) credit cards for NRs.
However, under the new notification,3 commercial banks can now grant THB loans to NRs being companies for:
(i) investment in Thailand (subject to certain conditions – the NR must not be an offshore financial institution, and the investment must not include real estate, trading in securities or derivatives, or refinance); or
(ii) investment in infrastructure or project finance in neighbouring countries of Thailand.4
Loans can also be in various forms, such as term loan, letter of guarantee, letter of credit, trust receipt, or promissory note.
III. Easing of restrictions on daily balance limit in Non-resident Baht Accounts
Previously, the outstanding balance in all Non-resident Baht Accounts for general purposes (NRBA) could not exceed THB 300 million (per NR) at the end of any day, unless with approval from the BOT. The same restriction applies to the outstanding balance in all Non-resident Baht Accounts for Securities Purposes (NRBS).
Under the new regulation,5 the BOT now allows NR account owners to keep more than THB 300 million in NRBAs or NRBSs, provided that the NR can prove to the satisfaction of the commercial bank that the NR has an obligation to pay the excess THB on the next business day. This amendment takes into account the market practice when trade and investment are usually ongoing.
IV. Wider scope of purposes for depositing of money in an NRBA and NRBS
The new regulation6 provides wider scope of permissible deposit that NRs can make into NRBAs and NRBSs, e.g. THB received under THB interest rate or THB interest rate index linked financial derivatives transactions with an authorized financial institution in Thailand can now be deposited into an NRBA or NRBS. To deposit, the supporting documents evidencing the underlying derivatives transaction must also be submitted to the commercial bank. In addition, THB loan proceeds received from a commercial bank in Thailand can no longer be deposited into an NRBS.
V. Changes to the concept of special-purpose non-resident baht accounts opened with commercial banks
Given that NR corporate entities can now borrow THB from commercial banks in Thailand (as prescribed in item II) under the new regulation,7 commercial banks can now allow the opening of a Special-purpose Non-resident Baht Account (SNA)8 by an NR in order to facilitate: (i) investment in Thailand; or (ii) investment in infrastructure or project finance in neighbouring countries.9
VI. Continuance of development on the exchange control law and regulations
The BOT plans to continue developing the exchange control law and regulations throughout Q3 and Q4 of 2017 with the intention of creating a friendlier environment and stimulating the development of Thailand's financial market; including, among others:
- eliminate Foreign Exchange Transaction Form, which is normally required for foreign exchange transaction in an amount of USD 50,000 upwards;
- allow companies to hedge foreign exchange exposures for their affiliated companies, without prior approval required from the BOT;
- allow securities companies (in addition to commercial banks) to quote foreign currency to customers (both resident and NR) under the brokerage business; and
- allow retail investors having financial assets from THB 50 million to 100 million to directly invest in offshore securities (without being required to go through local intermediaries) up to USD 1 million per year.
As always, our team at Baker McKenzie will continue to provide updates as these further developments occur.
1 The Notification of the Exchange Control Officer re: Bases and Procedures Regarding Currency Exchange (No. 24), and the Notification of the Bank of Thailand No. 834/2560 re: Revision of Measures to Prevent Thai Baht Speculation.
2 Myanmar, Cambodia, Laos, Vietnam, and Yunnan province of China.
3 In the context of the Notification of the Bank of Thailand No. 834/2560 re: Revision of Measures to Prevent Thai Baht Speculation.
4 Myanmar, Cambodia, Laos, Vietnam, and Yunnan province of China.
5 The Notification of the Bank of Thailand No. 834/2560 re: Revision of Measures to Prevent Thai Baht Speculation.
6, 7 The Notification of the Exchange Control Officer re: Bases and Procedures Regarding Currency Exchange (No. 24).
8 Depositing and withdrawing of money from an SNA is subject to further conditions pursuant to clause 9 of the Notification of the Bank of Thailand No. 834/2560 re: Revision of Measures to Prevent Thai Baht Speculation.
9 Myanmar, Cambodia, Laos, Vietnam, and Yunnan province of China.