Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

THAILAND

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 2004)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: May 4, 1990.
Exchange Arrangement
CurrencyThe currency of Thailand is the Thai baht.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe exchange rate of the baht is determined in the foreign exchange market. The bahtdollar reference exchange rate is announced daily, based on the average exchange rate of the previous day. The authorities intervene in the foreign exchange market as conditions require.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketFinancial institutions may engage in spot foreign exchange market transactions with nonresidents in local currency. Approval is required for nonresidents to sell foreign currencies for baht for same-day delivery (value same day) and for next-day delivery (value tomorrow). Forward transactions must be related to the underlying trade and financial transactions.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currencyBaht credit facilities provided by domestic financial institutions to nonresidents by any means must be used for domestic trade or investment activities. However, financial institutions may provide credit facilities for other purposes, up to a limit B 50 million an entity.
For capital transactions
Credit operationsYes.
Use of foreign exchange among residentsResidents are not allowed to use foreign exchange for domestic payments.
Payments arrangements
Regional arrangementsThailand is a member of the ASEAN.
Administration of controlThe Bank of Thailand (BOT) administers exchange controls on behalf of the MOF, but it delegates responsibility to authorized banks for approving most transactions. Import and export licenses are issued by the Ministry of Commerce (MOC).
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Banks and other financial institutions in Thailand have been instructed to freeze any movement of capital and assets of certain individuals, terrorists, and terrorist organizations, pursuant to UN Security Council resolutions.
In accordance with UN sanctionsYes.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeResidents may hold and domestically trade gold jewelry, gold coins, and unworked gold. Purchases or sales of gold on commodity futures exchanges are prohibited.
Controls on external tradeExporters and importers of gold ornaments exceeding the equivalent of $20,000 in value must complete foreign exchange transaction forms at customs when submitting import or export entry forms.
Controls on exports and imports of banknotes
On exports
Domestic currencyTravelers may take out domestic currency up to B 50,000; those traveling to Vietnam and the countries bordering Thailand are allowed to take out a maximum of B 500,000.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Approval requiredApproval is not required if funds originate from abroad and if, upon deposit, the depositors submit documents showing their obligation to pay in foreign currency to persons residing abroad and to authorized financial institutions within six months of the date of deposit; deposited amounts may not exceed the depositors’ obligations. The total outstanding balances in all accounts may not exceed the equivalent of $10 million for a juridical person and $500,000 for a natural person.
Held abroadYes.
Approval requiredApproval is required if deposits are made with funds of domestic origin.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyNo.
Nonresident Accounts
Foreign exchange accounts permittedNonresidents may maintain foreign currency accounts without limitations. The accounts must be credited with funds from abroad and balances may be freely withdrawn and transferred abroad.
Domestic currency accountsNonresidents must maintain baht accounts for settlement purposes only, while deposits held for other purposes must have a maturity of at least six months. The total daily outstanding amount for all such accounts may not exceed the equivalent of B 300 million without prior approval of the BOT. Any excess funds in these accounts at the end of the day must be surrendered to the BOT at a penalty rate.
Convertible into foreign currencyYes.
Approval requiredApproval is not required if funds originate from abroad or are withdrawn from foreign currency accounts, if they are transferred from other nonresidents’ baht accounts, or if baht proceeds are borrowed from authorized financial institutions.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresMost goods may be freely imported, but import licenses are required for certain goods.
Negative listImports of some goods are prohibited for security or social reasons.
Other nontariff measuresMilk product producers are required to purchase locally produced milk in some quantity when they import skim milk into Thailand.
Import taxes and/or tariffsAd valorem and/or specific duties are imposed on imports. In addition, special duties are levied on certain products. Tariff rates between zero and 5% apply to two-thirds of the tariff lines for goods imported from AFTA countries.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsExport proceeds of $20,000 or higher must be repatriated immediately after payment is received and within 120 days from the date of export.
Surrender requirementsForeign exchange proceeds must be surrendered to authorized financial institutions within seven days of receipt. Foreign exchange earners are allowed to deposit foreign exchange in their foreign currency accounts only if they have obligations to pay out such amounts to nonresidents abroad within six months of the deposit date.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesExports of rice, canned tuna, sugar, certain types of coal and charcoal, and textile products are subject to licensing and quantitative restrictions and, in a few cases, to prior approval, irrespective of destination. All other products may be exported freely.
Without quotasYes.
With quotasYes.
Export taxesExports of wood, wood articles, and hides are subject to ad valorem or specific duties.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersForeign exchange transaction forms must be completed for transactions valued at the equivalent of $20,000 or more.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirements
Surrender requirementsProceeds must be surrendered to authorized financial institutions or retained in foreign currency accounts with authorized financial institutions in Thailand within seven days of receipt. Travelers passing through Thailand, foreign embassies, and international organizations are exempt from this requirement.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsThe sale or issue of securities is under the jurisdiction of the Securities Exchange Commission (SEC). Under the securities law, rules and regulations differ according to types of securities and their maturity. Companies wishing to issue securities to the public need approval from the BOT and the SEC. Trading of securities in secondary markets requires registration with the Stock Exchange of Thailand.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsForeign equity participation is limited to 25% of the total amount of shares sold in locally incorporated banks, finance companies, credit finance companies, and asset management companies. The combined shareholdings of an individual and related family members may not exceed 5% of a bank’s total amount of shares sold and 10% of that of finance companies and credit foncier companies. Foreign equity participation is limited to 49% for other Thai corporations. Foreign investors are allowed to hold more than 49% of the total shares sold in local financial institutions for up to 10 years, after which the amount of shares will be grandfathered, and the nonresidents will not be allowed to purchase new shares until the percentage of shares held by them is brought down to 49%. Foreign investors are allowed to hold 100% for other Thai corporations with the approval of the BOT.
Sale or issue locally by nonresidentsThese transactions require the approval of the MOF, BOT, and SEC.
Purchase abroad by residentsPurchases of shares under employee stock option plans exceeding the equivalent of $100,000 a year are allowed without BOT approval.
Sale or issue abroad by residentsApproval is required under the regulations governing domestic issuance.
Bonds or other debt securities
Purchase locally by nonresidentsNo limitations apply except for investments of more than B 50 million a consolidated entity on short-term debt and related products (less than 3 months) issued by local financial institutions in the primary market without underlying transactions.
Sale or issue locally by nonresidentsThese transactions require the approval of the MOF, BOT, and SEC.
Purchase abroad by residentsPurchases require the approval of the BOT.
Sale or issue abroad by residentsThe potential issuer must submit an application for approval to the SEC, and permission will be granted if the issuer can prove that the security will be traded exclusively on primary or secondary markets abroad.
On money market instruments
Purchase locally by nonresidentsNo limitations apply except for investments of more than B 50 million a consolidated entity on short-term debt and related products (less than 3 months) issued by local financial institutions in the primary market without underlying transactions.
Sale or issue locally by nonresidentsThese transactions require the approval of the MOF, BOT, and SEC.
Purchase abroad by residentsThese transactions require the approval of the BOT.
Sale or issue abroad by residentsThese transactions are not allowed. However, finance companies are allowed to issue negotiable certificates of deposit and bills of exchange in foreign currency with more than a one-year maturity for sale to the public abroad or for sale to institutions that are authorized to deal in foreign exchange.
On collective investment securities
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsThese transactions require the approval of the BOT.
Sale or issue abroad by residentsThe offering of funds, both locally and abroad, requires approval from the SEC and only local fund management companies are granted permission. In addition, funds managed by local firms will be deemed to have Thai nationality regardless of the nationality of the majority of the unit holders.
Controls on derivatives and other instruments
Purchase locally by nonresidentsIn cases where there are no underlying trade and investment activities in Thailand, baht credit facilities, including swap and forward exchange contracts obtained by a nonresident from all domestic financial institutions combined, are subject to a maximum outstanding limit of B 50 million. The nonresident’s head office, branches, representative offices, and affiliated companies are counted as one entity.
Sale or issue locally by nonresidentsThe issuance of warrants or equity-related instruments and bonds by nonresidents in the local market is subject to approval by the SEC. The approval criteria are based on the soundness of the underlying stock. There is no penalty for nonresidents for participating in the financial market.
Purchase abroad by residentsThe purchase of derivative instruments by residents and the transfer of funds require BOT approval.
Sale or issue abroad by residentsThe sale of derivative instruments by residents and the transfer of funds require BOT approval.
Controls on credit operationsIn cases where there are no underlying trade and investment activities in Thailand, baht credit facilities in the form of derivatives obtained by a nonresident from all domestic financial institutions combined are subject to a maximum outstanding limit of B 50 million. A limit of B 50 million applies on the amount that nonresidents may lend to domestic financial institutions. This limit applies to loans granted by nonresidents without underlying transactions with maturities of less than three months. The nonresident’s head office, branches, representative offices, and affiliated companies are counted as one entity. Financial institutions are allowed to extend direct loans in baht with collateral to nonresident natural persons permitted to work in Thailand for not less than one year. Financial institutions may issue letters of guarantee to nonresidents when there is a standby LC from a financial institution abroad. Direct loans in baht may be made to entities in neighboring countries (i.e., Cambodia, southern parts of China, the Lao People’s Democratic Republic, Myanmar, and Vietnam) under specified conditions and with prior BOT approval.
Financial credits
By residents to nonresidentsOnly authorized banks are allowed to grant financial credits, subject to the rule of net foreign exchange position. Without approval from the BOT, residents may grant loans of only up to $10 million (or the equivalent) a year to their affiliated companies, provided that they own at least 10% of total shares in the company.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsResident banks are allowed to guarantee transactions by nonresidents when undertaking bids or performance bonds to government agencies, state enterprises, or other legal persons in Thailand. However, resident banks must be provided with stand-by LCs from financial institutions abroad as collateral of nonresidents (back-to-back guarantee).
Controls on direct investment
Outward direct investmentInvestments exceeding $10 million (or the equivalent) a year require BOT approval.
Inward direct investmentForeign capital may be brought into the country without restriction, but proceeds must be surrendered to authorized financial institutions or deposited in foreign currency accounts with authorized financial institutions in Thailand within seven days of receipt.
Controls on liquidation of direct investmentAll proceeds may be repatriated without restriction upon submission of supporting evidence.
Controls on real estate transactions
Purchase abroad by residentsThai residents may purchase immovable assets for residential purposes up to the equivalent of $500,000 a person without approval of the BOT.
Purchase locally by nonresidentsThe purchase of property with funds that originate from abroad is allowed. Ownership of property by foreign entities with majority shares in Thai financial institutions is, at present, governed by the Commercial Banking Act and the Act on the Undertaking of Finance Business, Securities Business, and Credit Foncier Business. Regulations on foreign ownership for condominiums or properties are administered by the Land Department of the Ministry of Interior.
Sale locally by nonresidentsYes.
Controls on personal capital transactions
Loans
By residents to nonresidentsYes.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsThai residents are allowed, without approval from the BOT, to send up to the equivalent of $100,000 a year to relatives abroad who hold permanent resident permits.
Transfer of assets
Transfer abroad by emigrantsThai emigrants are allowed to transfer abroad up to the equivalent of $1 million a year without BOT approval.
Transfer of gambling and prize earningsGambling is illegal in Thailand.
Provisions specific to commercial banks and other credit institutionsIn cases in which there are no underlying trade and investment activities in Thailand, baht credit instruments in any form obtained by a nonresident from all domestic financial institutions combined are subject to a maximum outstanding limit of B 50 million. The nonresident’s head office, branches, representative offices, and affiliated companies are counted as one entity. Baht lending (direct loans) to nonresidents with or without underlying transactions or collateral is prohibited, except that lending to natural persons is allowed under specified conditions and lending to entities in neighboring countries requires BOT approval.
Lending to nonresidents (financial or commercial credits)Government financial institutions, except the Export-Import Bank of Thailand, are not allowed to engage in foreign lending. Authorized banks in Thailand may lend to nonresidents in foreign currency without limitation.
Lending locally in foreign exchangeCommercial lending denominated in foreign currencies to particular industries may be partially (50%) included as foreign assets in order to recognize the potential risk that banks may not be fully repaid as exchange rate risk increases.
Purchase of locally issued securities denominated in foreign exchangeCommercial banks may purchase locally issued securities denominated in foreign exchange. Finance companies without foreign exchange licenses are required to obtain BOT permission for purchases of locally issued securities in foreign exchange.
Differential treatment of deposit accounts held by nonresidents
Interest rate controlsInterest may not be paid on nonresident accounts, except for fixed accounts with maturities of at least six months.
Investment regulations
Abroad by banksCommercial banks are allowed to buy or hold shares in a limited company (including public companies) in an amount not exceeding 10% of the total shares sold and 20% of their capital fund. Banks may seek approval to hold shares above the 10% limit in the following cases: (1) companies set up for supporting functions; (2) companies that operate as financial arms, such as leasing companies and factoring companies; (3) companies set up to manage foreclosed properties; and (4) companies set up to manage projects that are beneficial to the economy, especially infrastructure projects. Permission is generally granted to commercial banks to buy or hold shares exceeding the above investment limits, only if the excess portion is acquired through debt restructuring according to BOT guidelines
In banks by nonresidentsForeign investors may invest in Thai commercial banks up to 25% of the total amount of shares sold. Foreign investors may be allowed, on a case-by-case basis, to hold up to 100% of shares sold in commercial banks, finance companies, and credit foncier companies for a period of 10 years, which will be grandfathered. However, after the 10-year period, they will not be allowed to purchase additional shares unless their holding is less than 49% of the total amount of shares sold.
Open foreign exchange position limitsThe regulation on net foreign exchange exposure limits allows commercial banks to maintain a position for each currency relative to its capital fund not exceeding 15% or $5 million, whichever is greater, and to maintain an aggregate position relative to its capital fund not exceeding 20% or $10 million, whichever is greater.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadLife insurance companies, the government pension fund, the social security fund, mutual funds (excluding private funds), provident funds, and specialized financial institutions may submit applications to the BOT to invest in debt securities issued prior to January 1, 2003, by the Thai government and corporates, and in sovereign or quasi-sovereign debt securities issued by nonresidents ranked by international credit rating agencies as investment grade.
Limits (min.) on investment portfolio held locallyPortfolio investment of life- and nonlife insurance companies is governed by the acts and notifications of the MOC. The criteria are (1) total investment in equity and securities or debt instruments, stock of other life- and nonlife insurance companies, and unit trusts should not exceed 40% of total assets; (2) rediscount of state enterprise bonds guaranteed by the MOF is unlimited; and (3) investment in securities abroad requires approval from the appropriate authority, which is granted on a case-by-case basis. The criteria for investment of pension funds are (1) investment of at least 60% in government bonds, state enterprise bonds, deposits at commercial banks, and debt instruments issued by commercial banks; and (2) investment of not more than 40% in promissory notes of finance companies, stocks, and other debt instruments. In addition, the ceiling on investment in stocks is 25% of the portfolio, and that on any single stock is 5% of the portfolio.
Other controls imposed by securities lawsUnder the Securities Act, nonresidents may invest in Thai security companies, subject to the limitation that foreign investors may not exceed 50% of nonvoting depository receipts. Foreign security companies are permitted access to the Thai securities market in the form of representative offices whose role is limited to providing research material for their parent companies. In addition, they are allowed to enter into joint partnership with Thai security companies and to provide professional consultancy services.
Changes During 2004
No significant changes occurred in the exchange and trade system.

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