The Year to Come and Year in Review summarise a selection of major developments you should be aware of from 2021, and a selection of key developments expected in 2022.
Key updates to
15
pieces of legislation in 2022 and 2021
We anticipate significant law reforms and regulatory changes in 2022 as Thailand makes further amendments to its legal framework and implements policies and plans supporting various sectors.
Wanwisar Nakarat, Partner, Thailand
Tougher enforcement for online platform services: The role of online platform services has drastically increased in recent years, especially due to Covid-19. The Office of Trade Competition Commission (OTCC) has received many complaints of monopoly and unfair trade practices in relation to these platforms. The OTCC is now closely monitoring the following areas: online shopping platforms or e-commerce, online food delivery platforms and other delivery platforms. The OTCC is investigating the complaints received and will impose sanctions where necessary in accordance with the Trade Competition Act B.E. 2560 (2017). The OTCC is also reviewing activities on other types of e-platforms in order to prepare guidelines.
Cabinet resolution to incentivise foreign investment: On 14 September 2021, the Cabinet approved, in principle, economic stimulus and investment incentives to attract highly skilled and wealthy foreigners. These include a wide range of incentives relating to visas, employment, tax and real estate ownership which would require amendments to the current legal framework.
The National Economic and Social Development Council (NESDC) had been assigned to implement these measures in consultation with the relevant Ministries and the Royal Thai Police Office. According to the Cabinet’s resolution, there will be an evaluation every five years and the tax and foreign land ownership incentives will be valid for five years from the date on which the relevant measure became effective.
The proposed amendments which have attracted much attention relate to incentives for real estate ownership by foreigners. These include:
- increasing the quota for foreigners’ ownership of condominium units to 70-80% (currently capped at 49%);
- allowing foreigners to purchase single-family houses in household development projects if there is an investment of THB 10-15 million (currently the threshold is THB 40 million); and
- increasing the maximum lease term from 30 years (and renewable for 30 years or 50 years (in the case of leases for commercial or industrial purposes)). Under the draft amendments, the maximum lease term will be 50 years which may be extended for another 40 years (totalling 90 years).
We expect to see further amendments to the legal framework to implement the incentives approved by the Cabinet in 2022.
Reform of environmental law: In October 2021, the Ministry of Natural Resources and Environment (MNRE) approved a resolution to amend the Enhancement and Conservation of National Environmental Quality Act 1992. Draft amendments have been proposed which include simplifying the process of setting the emission and waste standards and increasing enforcement powers of the Pollution Control Department to increase efficiency and minimise potential delays. This is currently being considered by the Council of State. Although the proposed amendments are limited, this has sparked a push by academics and other stakeholders for further changes to the environmental legal framework in Thailand to bring it in line with international standards. It is to be seen whether the MNRE will take this into consideration and enact further changes in 2022, especially given the rising importance of ESG in Asia.
Long-Term Low Greenhouse Gas Emission Development Strategy: On 19 October 2021, the Cabinet approved Thailand’s Draft Long-Term Low Greenhouse Gas Emission Development Strategy which was submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in October 2021. This is one of Thailand’s contributions to keep the rise in the global average temperature below 1.5 - 2 °C as set out in the Paris Agreement. Notably, the draft strategy expresses Thailand's intention to achieve net-zero GHG emission as quickly as possible within the latter half of the century and be carbon neutral by 2065.
The Cabinet also acknowledged that Thailand needs to enhance its collaboration with other countries, provide financial and technical support and urgently improve its energy and transportation infrastructures. It also needs to encourage the private sector to transition towards technologies which reduce GHG emissions by 2050.
With COP26 having taken place, it remains to be seen if new legislation will be introduced to ensure that these milestones are reached.
Improvements to introducing a new law through submission of a draft bill by eligible voters:
The Act on Submission a Petition for Introducing the Law B.E. 2556 (2013) was repealed and replaced by the Act on Submission a Petition for Introducing the Law B.E. 2564 (2021) (the Act). The Act came into effect on 27 May 2021 and aims to make it easier for eligible voters (of which 10,000 are required for introducing a new law and 50,000 for an amendment concerning the Constitution) to introduce a new law through submission of a draft bill to the Speaker of the House of Representatives. Less documentation is now required and certain parts of the process can be completed electronically. So far in 2021, a considerable number of draft bills on a wide range of areas have been proposed and are either under consideration (including amendments to the Constitution) or have not been accepted. It remains to be seen which of the draft bills will be accepted and, eventually, become law in 2022.
Draft bill approved to foster a “new space economy”:
Given the rise of businesses linked to space and related industries in Thailand, the Cabinet approved, in principle, the draft Space Affairs Bill on 13 July 2021 to address the legal restrictions on space affairs administration. The Bill includes the establishment of a national space policy committee and national space administration agency. It also introduces policies and plans for promoting and supporting state and public sector participation in space development. The Council of State is currently considering the draft bill. It is anticipated that this will benefit the country economically and socially as well as create a strong foundation for Thailand to be a key player in the rapidly growing space technology sector.
Amendment to the interest rate: The Emergency Decree amending the Thai Civil and Commercial Code B.E. 2564 (2021) (CCC) came into effect on 11 April 2021. The key amendments are:
Interest rate (section 7 of the CCC): in simple financing transactions where no interest rate is specified under the agreement or by law, the applicable interest rate has been reduced to 3% per annum (previously 7.5% per annum). This is unlikely to result in any major changes for general financing transactions which tend to specify the applicable interest rate.
- Default interest rate (section 224 of the CCC): in the event that the agreement does not specify the interest rate and default interest rate, the default interest rate will be the interest rate specified under Section 7 of the CCC plus 2% interest per annum, which is currently at 5% per annum (previously 7.5% per annum).
- Basis for calculation of default interest rate (new section 224/1 of the CCC): Where the debtor is obliged to repay the monetary debt in instalments, only the amount of a missed instalment will be used as the basis for calculating the default interest. Any agreement to the contrary will be void.
Based on the Office of the Court of Justice’s interpretation, it seems that section 224/1 of the CCC may not affect the right of a creditor, following the acceleration of the debt due to default on payment of one instalment, to charge the default interest on the accelerated amounts. It is noted that the amendments above apply to the interest and default interest rates due from the date on which the Emergency Decree became effective (i.e., 11 April 2021), regardless of when the relevant agreement was entered into.
Amendment to listing rules: The Stock Exchange of Thailand (SET) has amended the market capitalisation test under its listing rules, with effect from 19 May 2021. This should facilitate access to sources of funding in the capital markets for companies whose businesses are in the targeted industries according to the government policy under the national strategic plan. These include next-generation automotive, smart electronics, affluent medical and wellness tourism, robotics, aviation and logistics, biofuels and biochemicals and digital, as well as technology development and innovation industries. The latter include biotechnology, nanotechnology, digital technology or advance material technology development, which have been granted investment promotion from the Board of Investment of Thailand under the investment promotion law.
The amended listing rules allow qualified companies with the market capitalisation of THB 7,500m (minimum) and a three-year track record to list on the SET without considering the previous year EBIT or accumulated EBIT as required previously.
Update on required standards for electronic meeting and electronic voting system: Since the Emergency Decree regarding Electronic Meetings B.E. 2563 (2020) (Emergency Decree) came into force on 19 April 2020, the Ministry of Digital Economy and Society (MDES) has published subsequent notifications prescribing the standards, requirements and procedures with respect to electronic meetings and relevant electronic voting systems.
Under the Emergency Decree and the MDES’s notifications, companies that wish to hold an electronic meeting and/or use an electronic voting system must comply with the relevant criteria and ensure that the meeting/voting system used meets specified standards.
Further, to address the difficulties faced by companies in determining whether the electronic meeting system/application they wish to use meets the specified standards, the Electronic Transactions Development Agency (ETDA) has published lists of ETDA certified and self-assessment electronic meeting system service providers. A list of certified or self-assessment electronic voting system service providers is expected shortly.
Amendment to the Bankruptcy Act 1940: On 10 August 2021, the Cabinet resolved to approve the draft Bankruptcy Act (No. …) B.E. … (Consideration Process relating to Debtors' Business Rehabilitation). Further, the Cabinet acknowledged that the country's bankruptcy and rehabilitation laws must be urgently reformed in order to facilitate the post Covid-19 economic recovery. The main objective of the new legislation is to ensure that SMEs have better access to a business rehabilitation process. This is to be achieved through several key changes to the existing Bankruptcy Act 1940, such as:
- the abolishment of the requirement on SME debtors to be registered with the Office of SMEs Promotion (OSMEP) or other government agencies to qualify as SMEs for the purpose of the Bankruptcy Act;
- SME debtors will have the option of filing petitions to enter into business rehabilitation without first having to prepare business rehabilitation plans; and
- the option of debtors filing petitions for the pre-packaged plan scheme (with evidence that the creditors have approved the rehabilitation plan) at the time the petition for the business rehabilitation is filed. Should the pre-packaged plan not satisfy the criteria, they are permitted to file the petition again without having to wait for six months. Alternatively, in the event that the pre-packaged plan is approved by the Bankruptcy Court, the court will issue the business rehabilitation order and the order approving the rehabilitation plan simultaneously – thus, expediting the process.
Despite this, we will still need to monitor for further developments as SMEs continue to be significantly impacted by the COVID-19 pandemic.
Postponement to the implementation of the Personal Data Protection Act 2019 (PDPA):
Provisions in relation to the establishment of the Office of the Personal Data Protection Committee became effective on 28 May 2019.
Other provisions of the Act governing the collection, use and disclosure of personal data and other rights and obligations were originally scheduled to be effective from 27 May 2020. However, due to Covid-19, on 5 May 2021 the Thai Cabinet postponed the application to 1 June 2022.
Transition to THOR gathers momentum: Since its first publication in April 2020, the Thai Overnight Repurchase Rate (THOR) continues to be adopted by players in the Thai financial market. In July 2021, the Bank of Thailand (BOT), the rate administrator, published an updated version of the User's Guide to the Thai Overnight Repurchase Rate to assist market participants in their transition towards THOR. In particular, the guide provides a detailed explanation on how THOR could be adopted as a reference rate in financial products, the interest calculation methodologies and the settlement-related market conventions for THOR-linked financial products. In order to expedite the adoption of THOR, the BOT also set milestones for financial institutions to transition away from the Thai Baht Interest Rate Fixing (THBFIX), a rate which has been under its administration for decades. The most notable milestone, nonetheless, is the discontinuation of the publication of THBFIX after 30 June 2023. Despite this, in recognition of the market participants’ need for a transition period, the BOT has also announced that it will continue to provide a fallback rate for THBFIX as a temporary stopgap for THBFIX legacy contracts.
In addition, pursuant to the BOT Letter No. FhorTorNgor(41) Vor 623/2564 published on 29 June 2021, the BOT encouraged financial institutions to, among other things, cease the offering of new loans and/or financial instruments referencing THBFIX which mature after 30 June 2023, from 1 July 2021. More importantly, the BOT clarified that the compounding of overnight rates is merely a calculation methodology of the backward-looking term rate in order to determine the interest rate for each interest period and therefore is not contrary to section 655 of the CCC which generally prohibits the imposition of interest on interest.
E-Service tax:
Since 1 September 2021, in line with the Organisation for Economic Co-operation and Development (OECD)’s recommendation to ensure fairer treatment of digital service providers, Thailand has imposed value-added tax of 7% on non-resident digital service providers (including foreign digital platforms) that earn more than THB 1.8m (the equivalent of approximately USD 54,000) per year.
Digital platform service providers: On 25 October 2021, the Cabinet approved a draft decree to regulate digital platform service providers such as online marketplaces, social commerce, food delivery, space sharing, ride/car sharing and online search engines. Prior to its operation, a provider of digital platform services to users in Thailand would be required to notify the Electronic Transactions Development Agency of their business and services. Providers are required to comply with the decree within 180 days from the date of announcement of the decree (with an additional 30 day period for digital service providers in operation prior to the issuance of the decree).
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