:: Legal Issues for Foreign Investors  : 4. International Banking Facilities


A. Bangkok International Banking Facility
On September 16, 1992 the Ministry of Finance and the Bank of Thailand established rules and conditions for commercial banks to establish international banking facilities in Thailand. The annual fee for participants is 500,000 baht. 

A commercial bank that receives a license will be able to undertake international banking facilities (IBF) business for: 

Offshore Lending
Accepting deposits or borrowing from abroad in foreign currencies from foreign natural or juristic persons who have no establishment in or business with Thailand. An exception is made for receiving money from foreign banks that have a branch or representative office in Thailand, from foreign branches of Thai commercial banks, and from the Ministry of Finance, the Bank of Thailand, or the Exchange Equalization Funds. These foreign currencies may be lent abroad, to other IBF businesses, and to the Ministry of Finance, the Bank of Thailand and the Exchange Equalization Funds.    

Acceptance of deposits or borrowing of offshore baht funds from offshore banks, foreign branches of Thai commercial banks and other IBF. These funds may be lent to foreign banks, foreign branches of Thai commercial banks, or other IBF businesses. 
 
Local Lending
 - Acceptance of deposits, or borrowing from abroad in foreign currencies from foreign natural or juristic persons who have no establishment in or business with Thailand, foreign branches of Thai commercial banks, and other IBFs to lend foreign currencies in Thailand. However, each withdrawal and disbursement must be of an amount not less than US$2,000,000 except in one of the following two cases, where the minimum disbursement is US$500,000: 
    • An exporter who has income from export in excess of 50 percent of all income during the last accounting period 
    • An exporter who has goods and services that are sold to an exporter who meets the above-specified condition

Other Related Business  
Cross-currency transactions with overseas customers, other IBF businesses, the Bank of Thailand, the Ministry of Finance, the Foreign Equalisation Funds, banks licensed under the foreign exchange control laws, or local customers to whom such IBF businesses have lent foreign currencies 

  - Giving acceptance or guarantee against any debts in foreign currencies when either: 

 - The bank is licensed under the foreign exchange control laws; or 
 - The parties involved reside outside of Thailand.

                        - All matters dealing with letters of credit in cases where the buyer and the seller of goods involved with the letter of credit purchasing agreement both reside abroad and the goods involved in the agreement have not been either exported out of or imported into Thailand. 
 - Procuring, or managing the loan syndication procurement of, foreign currency loans from foreign sources to those requiring loans in foreign currencies. 

Other Unrelated Business
Commercial banks licensed to undertake IBF businesses may also: 
  • Provide news, financial and general economic information 
  • Prepare or analyze investment projects 
  • Advise in the purchase, merger or amalgamation of businesses 
  • Give financial advice; and 
  • Arrange or underwrite debt instruments issued for sale abroad. If the debt instruments are issued from Thailand, this must be undertaken in conjunction with the IBF business of a commercial bank registered in Thailand.

However, these activities must be separated from the accounts of the IBF business - as if the commercial bank were a separate juristic person.

B. Conditions for Participating in BIBF
The Bank of Thailand stipulates that the IBF must be separate from other banking business - as if it were a separate juristic person. In addition, the IBF business in offshore lending must be separate from the IBF business in local lending, and the IBF business in local lending cannot transfer or raise funds to the IBF for offshore accounts.

Customers of IBF are required to provide their actual names, addresses, and information for correspondence, and the names on the accounts must be the actual names of customers. 


Tax Privileges for participating in BIBF 

Corporate Tax 
(% of net income)

Business Tax 
(% of revenue)

Withholding 
Tax

Profit Remittance Tax

Stamp Duties 

BIBF 

 

 

 

 

 

Out-Out 
Out-In

10% 
10%

 

10%*

10%

No 
No

Other IBF

10%**

 

N/A 

10%

No

Others

30%

3.3% or 10% VAT

N/A 

10%

No

Commercial 
Banks 

30%

3.3% or 10% VAT

10% or 15%

10%

Yes

* Withholding tax paid on interest for O-I lent to State Enterprises is exempted 
** Tax on fee of O-O loan syndication exempted if:

    • At least three BIBF's participate in the same syndication
    • Most of the operations are carried out in Thailand  
    • If there is only one arranger, a BIBF is the arranger, or if there is more than one arranger, at least half the arrangers are BIBF's