11 Oct ASEAN Today – Regional Legal and Business News – September 2019
ASEAN Today – Regional Legal and Business News for September 2019 including a clarification of the TM30 and TM28 reporting requirements, Pre Work Permit approval at the One Stop Service Center, and updates on Thailand’s new E-abritration system, new exemptions for service businesses under the Foreign Business Act, updated minimum capital requirements for licensed foreigners, and contract control for sales of used vehicles.Download PDF
ASEAN Economic Community News
Non-Tariff Measures Report
The Economic Research Institute for ASEAN and East Asia (ERIA) released a new report, Non-Tariff Measures in ASEAN – An Update, this month at the 51st ASEAN Economic Ministers Meeting. The report states that while tariffs have declined worldwide, the number of non-tariff measures (NTMs) keeps rising, especially in ASEAN. Over the last 3 years, NTMs in ASEAN have risen by 15%. The ASEAN Trade in Goods Agreement has explicitly stated obligations regarding NTMs for each member country, but overall, ASEAN Economic Community integration has focused on the removal of tariffs. Much of the NTM growth, in the context of tariff reduction, can be interpreted as protectionist policies for domestic producers and has the potential to raise trade costs and inhibit trade expansion. Technical barriers to trade are the most prevalent NTMs along with sanitary and phytosanitary measures (SPS) that target agricultural and food products. Thailand has the most NTMs in ASEAN, about 30% of the regional total, with Cambodia and Myanmar having the fewest. SPS measures are particularly popular in Thailand, Malaysia, Brunei Darussalam, and Myanmar. Hard measures on price and quantity restrictions, and export-related measures make up 40% of the NTMs in Cambodia, Laos, Myanmar, and Vietnam. In Cambodia, Laos, the Philippines, and Vietnam, 80% of imports, measured by number of products and import value, are regulated by NTMs. The report was produced by the ERIA in association with the United Nations Conference on Trade and Development (UNCTAD). Data was collected from the ten ASEAN member states and China, Japan, Korea, Australia, New Zealand, and India. A total of 28,947 measures were classified, 6,699 regulations were coded, and 11,347 product lines were covered.
Digital Services Tax
Over 50 countries around the world have instituted some form of Goods and Services Tax (GST) or value-added tax (VAT) on imported digital services. Singapore, Indonesia, and Malaysia are now following suit. Singapore will implement a 7% GST on digital services on January 1, 2020 which is expected to raise US$90 million in tax revenue. Malaysia will also begin to enforce a 6% tax on digital services on January 1, 2020. Earlier this year, Indonesia was supposed to implement a 10% VAT that targeted online marketplaces, but it was cancelled before implementation. Indonesia has since announced that it plans to draft new regulations to impose VAT on online products and services provided by offshore businesses.
Quick-response (QR) codes play an important role in payment acceptance in the world’s developing markets. Experts say that ASEAN must standardize QR codes for digital payments to help facilitate and simplify regional trade. A QR code must function the same in Bangkok as it does in Jakarta or Mumbai. For this to happen, however, there must be collaboration between the ASEAN Bankers Association, country regulators, the ASEAN Business Advisory Council, and the different Fintech country organizations.
Nuclear Energy Framework
ASEAN and the International Atomic Energy Agency (IAEA) signed the Practical Arrangements this month, a framework for cooperation in nuclear science and technology, applications, and nuclear safety, security and safeguards. The Practical Arrangements will serve as the overall framework for future collaboration between ASEAN and the IAEA, in particular, the promotion of peaceful uses of nuclear science and technology.
Intellectual Property Initiatives
The Intellectual Property Office of Singapore (IPOS) announced a series of initiatives to support ASEAN’s Industry 4.0 development. One such initiative, in conjunction with eight other ASEAN intellectual property (IP) offices, will expedite Industry 4.0 patent applications that prioritize key emerging technologies like fintech, cybersecurity, and robotics. The nine participating ASEAN IP offices have also agreed to broaden the scope of the ASEAN Patent Examination Cooperation (ASPEC) which will reduce costs and waiting time when obtaining a patent in an ASEAN member state. For the next 3 years, ASPEC will allow applicants to use their Patent Cooperation Treaty (PCT) reports from one ASEAN county to accelerate their patent applications in another ASEAN country.
Vietnam is facing a potential energy crisis. A major shortfall of electricity generating capacity is expected and the government says that countrywide power shortages and blackouts could begin occurring as soon as 2021. Another serious issue for Vietnam is their continuing problem in developing their oil and gas reserves due to the situation in the South China Sea. Vietnam’s economy relies on energy-intensive manufacturing and interest in the country keeps growing due to the extended trade war. The government plans to complete a number of stalled power plants, fast track solar power projects, and is exploring the use of liquefied natural gas and importing power from neighboring countries.
The Indonesian government has reversed its decision to close Komodo Island next year. The government planned to close the island due to worries about tourism interfering with the life cycle of rare Komodo dragon population. The environment minister now says that the dragon population is stable and not under threat. However, Komodo Island will now become a special conservation tourism destination and the government plans to revamp tourism spots, improve the ranger training, and set up a research center for Komodo dragons.
Doing Business 2020
Myanmar has been listed as one of the top 20 most-improved countries in the World Bank’s ease of doing business index for 2020. Myanmar implemented five initiatives that enhanced its business environment. The initiatives include launching an online company registration platform to cut the need for official meetings and making property registration faster by streamlining deed registration and appraisal. Myanmar also strengthened construction quality control by imposing stricter qualification requirements for architects and engineers for investments in the country’s water and sanitation infrastructure.
Quality Inspections Abolished
Laos announced that it has abolished quality inspections for electronic and electrical appliances imported through the Lao-Thai Friendship Bridge I outside Vientiane. The requirement was initially implemented in 2017 and was supposed the help ensure the quality of the imports and protect local consumers. However, it quickly became a trade barrier as implementation increased the time-frame for the import of goods and increased service fees. Now, quality checks must still be done, but at the destination point without any addition fee collection.
New Minimum Wage
Cambodia’s government announced that it is raising the minimum wage for its garment industry. The minimum wage will be raised 4.4% to US$ 190 a month. Beyond being the country’s biggest export earner, garment workers are also a powerful political block and the current government is trying to curry favor with them. Traditionally, garment workers have supported the main opposition party and played a major role in both labor campaigns and political protests.
THAILAND LEGAL REVIEW
Section 37 Exemptions
Earlier this month, the Immigration Bureau clarified the reporting requirements for Section 37 of the Immigration Act of 1979. While Section 38 and its TM30 reporting are the responsibility of the property owner and landlord, Section 37 reporting is the sole responsibility of all foreigners in Thailand. Section 37, Subsection 3 states that a foreigner must register with the local police were they reside within 24 hours from time of arrival and must also register a change of residence within 24 hours. Subsection 4 states that if a foreigner travels outside of their registered home province for over 24 hours, they must register with the local police in that area within 48 hours from time of arrival. In theory, this meant that if a foreigner living in Bangkok went to Pattaya for the weekend and stayed at a hotel, there would be two reporting requirements. First, the hotel would need to file a TM 30 in order to be compliant with Section 38. Second, the foreigner would need to go to the local police station near where they were staying in Pattaya and file a TM28 and then when they returned to Bangkok, would need to file another TM28 with the local police. The Immigration Bureau released a statement in September 2019 detailing the exemptions to the reporting requirements. Now, if a foreigner falls under one of the 12 categories below, they are exempt from the reporting requirements for Section 37, subsections 3 & 4:
1. Diplomatic or consular missions
2. Performance of official duties
7. Promoted Investment
9. Crew of transport
10. Education and study
11. Scientific research
12. Skilled workers
However, there are no exemptions for missionaries or the holders of retirement visas, Thai spousal visas, or guardian visas. Journalists are not exempt either, but come under different rules. To be clear, a Thai spousal visa is not the same as a visa for the spouse and children of a work permit holder and Non-B visa. The spouse and family of a work permit holder with a non-B that receives a visa under the work permit are exempt from 3 & 4 of Article 37. A person married to a Thai national who has a spousal visa is not exempt.
Pre Work Permit Approval at OSSC
Companies eligible to use the rapid process at the One Step Service Center (OSSC) can now file Pre Work Permit Approval (PWPA) applications at the OSSC. After filing the PWPA application, the OSSC will issue the PWPA letter within 1-2 working days. The regular process at the Employment Department takes 5-7 working days. After the applicant files the original passport and medical certificate at the OSSC, the work permit will be issued that day, instead of 4-5 working days at the Employment Department. However, after starting the final process for work permit issuance at the OSSC, the date for the collection of the work permit cannot be changed or postponed. The work permit must be collected on the date the passport and medical certificate are filed; otherwise, the PWPA will be revoked.
New E-Arbitration System
Earlier this year, an amendment to the Thai Arbitration Act (No.2) B.E. 2562 took effect and introduced provisions expanding the abilities of foreign arbitrators and representatives to act in Thai arbitral proceedings. As a result of the amendment, the Thai Arbitral Institute (TAI) launched an online electronic arbitration system with worldwide accessibility to help make arbitral proceedings in Thailand more convenient for all parties by allowing fast access to statements of claim and defense and related documents.
The E-arbitration system in Thailand is relatively new and not widely used because lawyers are accustomed with the standard arbitration process. The TAI is promoting the E-Arbitral system by introducing and demonstrating the e-arbitration system to leading law firms and international legal counsellors in Thailand to encourage the use of the system. The E-Arbitration system was not only established for convenience, but also help reduce costs due to travel expenses and time spent. The parties can submit documents through the E-Arbitration system online at any time or from anywhere in the world instead of appearing at the TAI. Furthermore, E-arbitration systems are well-known and being widely used in different countries. Now, the TAI can proceed in settling disputes using a fully integrated online system that conforms to international standards.
Corporate Law News
Service Businesses Exempted from Licensing Requirements under the Foreign Business Act
Ministerial Regulation No.4 prescribes new exempt service businesses that foreign investors can conduct without obtaining prior permission pursuant to the Foreign Business Act B.E. 2542, List 3 (21). The additional exempt service businesses include service businesses with domestic loan provisions, office space rental services with public utilities, and consulting services specifically in the areas of administrative management, marketing, human resources and information technology. The businesses must be made between related juristic persons having one of the following relationships:
(a) More than half of the number of shareholders or partners in one juristic person are also more than half of the shareholders or partners in the other juristic person;
(b) Shareholders or partners that hold shares or are partners valued from 25% of the capital in one juristic person also hold shares or are partners with such value in the other juristic person;
(c) One juristic person that holds shares or is a partner with the value from 25% of the capital in the other juristic person; or
(d) More than half of the authorized directors or managing partners in one juristic person are also authorized directors or managing partners in the other juristic person
Updated Minimum Capital Requirement for Licensed Foreigners
On August 28, 2019, the Ministerial Regulation regarding the minimum capital and period of time to bring or remit the minimum capital into Thailand came into effect for all foreigners conducting business in Thailand, pursuant to the Foreign Business Act B.E. 2542, Section 14. This updated Regulation results in the abolition of all antecedent Ministerial Regulations and harmonizes all previous regulations in relation to this matter into the new one. Most of general terms and conditions under new Regulation; however, remain unchanged compared to all previous regulations. The new Regulation also prescribes the new specific period of time for bringing in or remitting minimum capital into the Kingdom by foreigners who are bound by treaties, e.g., Thailand Treaty of Amity and Economic Relations.
The minimum capital and period of time to bring in or remit the minimum capital into Thailand under the updated Regulation are as follows:
(a) Any foreigners who wish to render any non-restricted businesses in Thailand must have a minimum capital not less than 2 million Baht;
(b) Any foreigners who wish to render restricted businesses in Thailand must have a minimum capital not less than 25% of the average estimated expenditure per business per year for 3 years. However, this must not be less than 3 million baht;
(c) Any foreigner, whether an ordinary person or juristic person registered overseas, is required to bring in or fully remit the minimum capital into Thailand within 3 years from the date of commencement of the non-restricted / restricted businesses, as the case may be under the following conditions:
(i) At least 25% of the minimum capital must be brought or remitted within the first 3 months, and
(ii) A total 50% of the minimum capital must be brought or remitted within 1 year, and
(iii) The remaining minimum capital must be brought or remitted in each following year at the rate of 25%
In the case the business’s operation will be less than 3 years; the minimum capital amount shall be prorated on a yearly basis and according the desired operational period and must be brought or remitted within 6 months from the date of commencement of the non-restricted / restricted businesses, as the case may
(d) Any foreigners who render business in Thailand under treaties in which Thailand is involved in as an associate member or being bound by commitments granting exemptions to another associate member reciprocally, are required to bring or remit minimum capital into Thailand by August 29, 2029.
(e) Any foreigners being in the same situation as in (d) that start a business prior to this Regulation becoming effective are also required to bring or remit minimum capital into Thailand by August 29, 2029.
It is required to present evidence showing such bringing in or remitting of minimum capital into Thailand in any foreign currency together with the amount calculated into Thai Baht using the currency exchange rate as of the date of bringing in or remitting the minimum capital into Thailand. This shall be submitted to the Department of Business Development within 15 days from the date of bringing in or remitting minimum capital into Thailand.
Contract Control for Sale of Used Vehicles
Any contracts made in relation to the sale of used vehicles will start being controlled by the Notification of the Contract Committee from September 25, 2019 onward. The definition of used vehicles only covers passenger cars, vans, and pickup trucks for personal use that are registered under the laws concerning vehicles. Significant points under the Notification are as follows:
1. Any contract made between a business operator and a consumer shall be clearly made in Thai language with font sizes of not less than 2 millimeters and contain the following terms and conditions:
Details of vehicle which include brand, model, year, color, engine number, chassis number, engine power, car registration number and accessories attached to vehicle
(if any), vehicle-kilometers/miles, purchase price, earnest money, deposit, down payment, or other payment received from consumer (if any), as well as the date of acceptance of payment from consumer.
Date and place of delivery.
Detail of delivery of vehicle registration manual and other documents related to the registration as prescribed by the Department of Land Transport after execution of the contract.
Terms enabling the consumer to terminate a contract in the case any of the following actions of the business operator:
– Increase of vehicle price other than agreed upon
– Failure to deliver vehicle to consumer within the prescribed period of time
– Delivery of erroneous vehicle other than agreed upon
– Not able to register a change of name to be the consumer’s name
With reference to the termination as mentioned above, the business operator shall give a refund to the consumer within 15 days from the date of receipt of termination letter made to the business operator.
Any condition granting the business operator the rights to terminate a contract shall be made clearly visible
Upon non-performance by the consumer, the business operator may terminate the contract, provided that a written notice is submitted to the consumer in order for him/her to perform a contract in the period of not less than 15 days from the date of receipt of notification is made to the consumer, and such consumer fails to perform in accordance with such notification.
Details of vehicle accident (if any)
2. The following types of clauses cannot be part of the contract:
Exemption or limitation of liability occurred by the business operator
Grant the business operator the right to change the time of delivery as agreed or any conditions as prescribed in the contract resulting in more responsibilities for the consumer
Grant the business operator the right to terminate a contract without giving the consumer a written notice, or with no failure of performance or condition as part of the contract with the consumer
Grant the business operator the right to forfeit money, unless in case of default of contract by the consumer
3. The Contract shall be made in duplicate, each copy being equally authentic, and submitted to the consumer as soon as such contract is signed by the business operator.
The material contained herein is only provided for information purposes. No part thereof may be deemed to constitute legal advice or the opinions of this law firm or any of its attorneys. Whilst every effort has been made to verify the contents of the material contained herein, we do not represent, warrant, undertake, or guarantee that the information contained in this newsletter is correct, accurate, or complete. Legal advice must be sought before acting on any information contained herein.