What is TAFTA Thailand and Australia Free Trade Agreement?

The TAFTA Thailand-Australia Free Trade Agreement, is one such free trade treaty. This agreement aims to boost trade between Thailand and Australia. Indeed, the TAFTA agreement has made it easier for many Australian companies to access the Thai market. It came into force on January 1, 2005 and is Thailand’s first comprehensive free trade agreement:

➤ Elimination of a majority of tariffs on imports from Australia
➤ Access to a preferential rate for certain products
➤ More open access for Australian companies to the Thai services market
➤ Possibility of majority ownership of Thai companies for Australian investors, applicable in certain sectors
➤ Simplification and harmonization of customs procedures
➤ Relaxation of a number of restrictive visa and work permit requirements
➤ Guarantee of non-discriminatory treatment and protection of Australian investments in Thailand

The agreement allows Australian companies to export more easily to Southeast Asia’s second largest economy and provides Australian investors with a range of benefits which will be discussed below.

Market Access: Regional Comprehensive Economic Partnership (RCEP)

TAFTA thailand economic partnership

The application of TAFTA in Thailand

TAFTA is a comprehensive agreement that applies to both Australian and Thai citizens and permanent residents as well as Australian and Thai natural and legal persons. In addition, the agreement covers all activities in all territories of Australia and Thailand.

The agreement itself includes 19 chapters and several annexes as well as circulars providing details on the implementation of the treaty. It aims to liberalize trade in goods and services and create favorable conditions for the stimulation of trade and investment flows between Thailand and Australia.


Benefits of TAFTA in Thailand

Upon entry into force of the treaty, Thailand has eliminated 2,934 tariffs, or about 53 percent of all products and 78 percent of Thailand’s current imports from Australia. The goal of the treaty is the final and comprehensive elimination of tariff restrictions. Therefore, customs duties should be permanently deleted between the two states.

First of all, Thailand has also authorized the holding of majority shares in Thai companies (60%) and up to a full ownership of the capital held by Australian investors for activities determined and specified by the treaty. As a reminder, Thai law does not allow foreigners to own more than 49% of the shares of a Thai company as specified by the Foreign Business Default Act and in the absence of specific authorization such as the BOI license.

Thus, Thailand allows Australian companies to hold a majority of the capital for the following activities:

➤ Mining activities
➤ Restaurant activity
➤ Hotel business
➤ Higher education specializing in science and technology (provided they are located outside Bangkok) and for companies providing certain sea freight services

Australian investment classified by sector (2016-2021)

TAFTA australian investment thailand

Secondly, Australian companies providing so-called “distribution” services can be 100% owned by Australian nationals without restriction and without having to apply for a specific license. This full ownership also applies to businesses providing certain construction and management consulting services through a regional operating office or associated company or branch.

Third, TAFTA also provides Australian investment protection guaranteeing a range of rights to Australian direct investment in Thailand, including the right to transfer funds out of Thailand without restriction or the right to impartial resolution of any investment dispute with the Thai government.

Fourthly, the said treaty allows Australian workers in Thailand to benefit from a longer visa and work permit of up to three years. In addition, Australians can also benefit from a visa waiver for business visits for up to 15 days and up to 90 days for APEC travel card holders. Finally, Thailand has reduced the number of documents required for Australians to apply for work permits and their renewals.

To all intents and purposes, this agreement is a demonstration of enhanced future engagement between the two countries at all levels. In addition, Thailand has specifically agreed to enhance its commitments in a number of areas of priority interest to Australia, including:

➤ Financial Services Negotiations
➤ Negotiations on telecommunications services
➤ Extension of the initial visa and work permit period for intra-company transferees to three years, with a total stay of up to 10 years
➤ Provision of offshore processing and granting of visas and work permits
➤ Granting automatic work rights for spouses of intra-company transferees
➤ Abolition of labor market tests

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How to obtain the TAFTA?

As stated previously, TAFTA is applicable to all Australian and Thai nationals whether they are a natural or legal person. However, for certain benefits of TAFTA, applications are to be made to the relevant authorities in each jurisdiction as with visa applications or applications for preferential rate conditions.

1. Obtain an AHECC

Australian Harmonised Export Commodity Classification code. The AHECC code is an eight-digit number used to classify goods for export. There are over 5,000 AHECC codes, so it is important to select the correct code when classifying your goods.

2. Determine the tariff schedule

Once you have the AHECC code, you should consult the Thai tariff schedule to see how the product will benefit from the TAFTA agreement. It is important to note that the tariff classifications are not harmonized, so it is up to you to determine which of these classifications applies to your products to identify the correct tariff rate.

3. Determine the rules of origin

A review of the rules of origin is required to provide the objective criteria for determining whether or not goods qualify for preferential rates. In effect, preferential rates are applicable to goods of Australian or Thai origin.

4. Register as an exporter

Once the determination of the preferential rate is made and you have established that your product meets the rules of origin, you must proceed to register as an exporter of that product under TAFTA. It is important to note that registration as an exporter must be done for each product. However, you will only need to register as an exporter once, unless there is a significant change in the nature of your goods after registration.

5. Obtain a TAFTA Certificate of Origin

TAFTA provides that goods can only be given tariff preference if they are accompanied by a certificate of origin that confirms that they meet the rules of origin. Also, please note that a separate and valid certificate of origin is required for each shipment of preferential goods. Thus, exporters must send a copy of each certificate to the Thai importer.

6. Visa and work permit procedure

Regarding the visa acceptance procedure, Thai authorities will consider visa and work permit applications submitted by an employer on behalf of an applicant.

In conclusion, TAFTA is designed to stimulate increased bilateral trade between Australia and Thailand. However, it is important to conduct a full analysis of the client’s business activity in order to verify its eligibility for some of the benefits offered by TAFTA as well as other investment regimes. If you are concerned by this agreement and you want to invest in Thailand. Contact our experts to know more and to know the solutions adapted to your profile.

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