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Copyright SGA 2001

Trademark Act Amended

Thailand's Trademark Act was recently amended in order to comply with obligations that it has with certain international organizations pursuant to the World Trade Organization's Agreement on Rights of Intellectual Property and also to update its provisions in general.

The definition of trademark has been expanded to allow for 3-dimensional images and combinations of shapes and colors. The new Trademark Act also allows for greater freedom in registering names and text. Under the earlier Act, it was difficult to register the names of juristic persons, but the current Act allows for limited registration of juristic names.

Also, the Act specifies that if and when Thailand becomes a member if International Convention or Agreement concerning the protection of trademark, the application under the international convention or agreement shall be deemed to be an application under the Thailand law.

The new Act also allows for retroactive effect given to application files within the Kingdom that have been previously filed outside of the Kingdom if the application is within 6 months of the original filing outside of Thailand provided that other conditions are met.

Arbitration Services Removed from Prohibited Occupations for Foreigners

Pursuant to a recent Royal Decree, an exception has been carved out of the general prohibition of foreigners from engaging in legal services. Arbitration services, so long as they do not use Thai law or involve the enforcement of a judgment in Thai courts, are now services for which a foreigner may apply for a work permit.

Due to the change in the law, it is likely that more arbitration clauses in contracts will stipulate the application of law outside of Thailand.

SEC Rule Changes

Beginning from March 30, 2001, individual provident fund contributors will be allowed to select what kind of securities they want in their investment portfolios.

However, fund managers are required to the investment portfolios. Under the new Security Exchange Commission (SEC) rules, the SEC will draw up investment categories covering deposits, capital securities, debentures, convertibles and new financial products. Provident funds would be subject to the same investment limitations as mutual funds, with a listed company's total investments in securities not allowed to exceed 15 per cent of the net asset value.

Provident funds would also be subject to reporting requirements that they disclose the details of their funds, which would include the money contributed by employees and employers and funds benefits. The SEC has also made regulations concerning mutual funds more stringent by requiring commission approval for employees of mutual fund companies and distributors responsible for unit trust transactions. According to the regulations, every branch of a unit trust distributor must have at least one staff member approved by the commission.

BOT Institutes Policies to Forestall Further Baht Depreciation

In response to the drop in the value of the Thai currency last week, the Bank of Thailand (BOT) has instructed all commercial banks to require more documents from customers seeking to exchange baht for dollars. A BOT source stated that the move was made in order to assure that dollar baht exchanges were for bona fide payments of debts outside of the country.

The BOT measure requires all bank customers buying dollars for payment of either loans or interest on loans to show loan documents proving that the transfer of funds is legitimate.

SET Establishes New Units-Reorganization Plan

In a reorganization plan announced on January 9, 2001, the Stock Exchange of Thailand (SET), revealed plans to establish four core units in the following areas: (1) marketing and strategy development, (2) market operations, (3) regulations and risk management and (4) support. The objective of these changes is to assist the SET in preparing to compete with other international stock exchanges.

NPLs Seen as Declining

According to sources at the BOT, Thailand's loans are expected to decline. However, the anticipated decline will be due primarily to the write-off of bade debts. The BOT announced that non-performing loans ("NPLs") in November were 1.11 trillion compared to total loans from financial institution, which amounted to 4.9 trillion. Lending within Thailand has significantly dropped because of a decline in lending by domestic foreign banks. Because of the decline in new lending, the proportion of NPL's appears to be greater than it actually is. Actually, NPLs are declining each month, but in proportion to total lending the NPLs seem high.

Subject to a BOT regulation, at the end of each accounting period banks may write off bad debts following a full provision.

BAHTNET Developments

According to a BOT announcement on December 29, 20001, the BAHTNET system will be upgraded. The BAHT NET system was developed by the Bank of Thailand (BOT) as an online inter-financial electronic fund transfer. BAHTNET was first implemented on 24 May 1995. In every fund transfer through BAHTNET a debit is immediately recorded in the sending institution and credited in the receiving institution operating in real time. The fund transfer process through BAHTNET is irrevocable and is considered to be compliant with international standards.

In order to order to upgrade the BAHTNET system to a more international standard and in order to establish a base for future bond trading and money market objectives, an upgraded BAHTNET system called BAHTNET/2 has been established. The upgraded system adds government security trading capabilities through Delivery Services Payment (DVP) and provides host-to-host capabilities with member institutions employing the SWIFT system. The Bank of Thailand's investment in BAHTNET /2 is 500 million a baht and it is expected to be up and running by the end of 2001.

New US Immigration Law Affects Foreign Spouses and Children of US Citizens

On December 21, 2000, US President Clinton signed a sweeping legislative package entitled the Legal Immigration and Equity Act (LIFE). Under the new Act, a new temporary "K" visa will be available for spouses of US citizens (and their children) living abroad. The current "K visa is available only to fianc?es of US citizens who are coming to the United States to get married within 90 days of arrival.

Tax Law Updates
Clarification on exclusion from VAT base

Pursuant to the current structure of Value Added Tax (VAT) law in Thailand, a buyer purchasing imported goods from a seller in Thailand could get charged with double VAT; The first time would occur when the purchase is first made and the second time at the time of customs clearance.

To prevent the double VAT, the Revenue Department issued the Announcement of the Director General No. 80 dated 1 October 1998 setting out the guideline that the sale of the goods may be excluded from the tax base if the buyer pays VAT upon the import. However, to clarify the application of VAT in these situations, the Revenue Department issued Regulation No. Paw. 101/2000 dated 29 November 2000, which stated following guidelines:

1. The sale of the goods from a seller in Thailand to a buyer in Thailand may be excluded from VAT base only if the buyer pays VAT under its own name when importing such goods.

2. If the buyer is entitled to import tax privileges and no VAT is paid upon customs clearance, he will be subject to VAT upon the purchase of such goods. This principle is applied even if the buyer has an obligation to pay VAT when importing but he chooses to place a bank guarantee or collateral instead of cash payment.

3. If the buyer has made advance payment to the seller before he pays for VAT at the time of importation, said advance payment is subject to VAT. Subsequent payments incurred after the buyer has paid VAT upon importation can be excluded from the VAT base.

4. To claim the tax benefits, a copy of the receipt of VAT payment to the Customs Department in the name of the buyer must be kept with the seller.

These guidelines will be applied retroactively to the sales made before 1 October 1998.

BOT Notifies Banks to Write Off Bad Debts

The Bank of Thailand (BOT) has issued a notification requiring financial institutions write off doubtful debts, which appear to be, unrecoverable that have already made provisions of 100 percent from the accounts immediately.

Subsequently, if the financial institution is able to arrange a debt restructuring with the debtors, the accounting framework prescribes for the recognition of income once economic benefits are realized and measurement is possible. Therefore a financial institution shall recognize a loan loss which it might recover later as income only for those items which are likely recoverable and for which can be reliably measured The financial institution shall recognize loan loss which may later be recovered (through restructured payments) as income. Only the amount of payment actually received may be listed by the financial institutions as income.