Industry and Legislative History

Thailand III Terms
New Procedures in 18th Round
Gas Supply Reform
Disputed Area

Legal Framework
Major Features of Mineral Legislation
Rights to Surface Land
Mining Rights

Special Rules for Offshore Mining
Other Required Approvals
Export-Import Policies
Alien Business Licence
Mining Council Membership
Administrative Efficiency
Security of Tenure
The Fiscal Regime


Industry and Legislative History

Prior to 1954 the right to explore for petroleum was reserved exclusively for government agencies, and exploration by the Defence Energy Department led to the discovery of the Fang Basin in Chiang Mai Province. Between 1954 and 1960 exploration permits were awarded to two private Thai companies but these companies were not successful.

In the early 1960s agreements were signed with Union Oil and Raphael Pumpelly for exploration in northeastern Thailand, under the general provisions of the mining law. In 1964 the offshore areas in the Gulf of Thailand attracted the attention of major international oil companies.

In 1967 the government introduced a concession system. This system was described in the government document titled Consideration Bases in Applying for Petroleum Exploration and/or Production. The Ministry of National Development invited applications for exploration under this system and the Council of Ministers subsequently granted the right to explore to six large oil companies. Agreements in an abbreviated form were signed with these companies in 1968, under which the Ministry of National Development agreed to issue concession agreements when a new petroleum law came into effect.

In 1971 Thailand promulgated the Petroleum Act (PA) and the Petroleum Income Tax Act (PITA). The PA established a concession system and nine ministerial regulations were issued in 1971 dealing with important subjects under the act. The PITA established an income tax system applicable only to concessionaires, with tax rates between 50% and 60%. A tax rate of 50% was prescribed by Royal Decree. Three additional ministerial regulations were issued in 1971 dealing with various tax matters under the PA.

The Petroleum Act (No 2) was enacted in 1973. It relaxed area limitations, restrictions on transfer of obligations, mandatory relinquishment requirements, and royalty rates for offshore blocks with water depths over 200 metres (ie, deep water blocks). The Petroleum Income Tax Act (No 2) was also promulgated in 1973. It provided for increased discounts on posted prices for petroleum extracted from deep water blocks.

In 1973 Union Oil Company made the first discovery of natural gas in the Erawan Field in the Gulf of Thailand. The company was concerned about the creditability of Thai taxes under US law, as the PITA prohibited the deduction of interest in the calculation of taxable income. After negotiations between the Thai government and the US Internal Revenue Service, the Petroleum Income Tax Act (No 3) was enacted in 1979. Its provisions apply only to Union Oil. Under this act interest is recognized as a deductible expense, provided the concessionaire has withheld tax at the rate of 50% on payments of interest income. Income tax rates for concessionaires falling within the act are fixed at 35% to 48% on profits (currently the rate is 35%), and 23.08% on dividends or other after-tax remittances. The effective rate is therefore about 50% (ie, 35% + 23.08%) - the same tax rate that is applicable to all other concessionaires.

In 1980 the government announced a one-year ban on the export of petroleum while it negotiated with concessionaires for the purchase of condensate. This ban was renewed each year until 1990. Since 1991, the ban has not been reinstated.

In 1981 Shell discovered crude oil onshore in the Sirikit Field in Kamphaeng Phet Province.

Oil prices rose dramatically in 1982 so the government prescribed new terms as 'conditions of bidding' for onshore blocks. Additional concessions were awarded, but following the drop in oil prices and the discovery of small, marginal fields the 1982 terms began to deter further onshore activity. As a result, in 1987 the government relaxed the 1982 terms and issued Ministerial Regulation No 13 dealing with commercial wells and production areas. Amendments to the PA and PITA were also promulgated in 1989.

The various changes that have been made to the PA and PITA have resulted in different sets of terms being applicable to concessions during three different periods. These include:

  • pre-1982 (Thailand I terms);

  • 1982 onshore (Thailand II terms); and

  • 1989 (Thailand III terms).

Concessionaires who had not yet started production by 1989 were allowed to opt for Thailand III terms.


The PA is administered by the Ministry of Industry through the Oil Fuels Division of the Department of Mineral Resources. However, an inter-ministerial Petroleum Committee makes most of the important decisions. (Section 16 of the PA lists the specific powers of this committee). Six sub-committees cover the following areas:

  • natural gas pricing;

  • concession applications;

  • use of natural gas;

  • legal matters;

  • issues under PA Sections 69 (immigration) and 70 (importation of exempt goods); and

  • petroleum legislation amendments.

The Ministry of Finance's Revenue Department administers the PITA. Section 7 of the Department's Investigation Division is responsible for concessionaires.


Although not expressly required by law, the Thai practice (until the 18th Round, discussed below) was to award concessions only after the publication of an international invitation (which usually provided at least 45 days' notice). The Petroleum Committee evaluated applications and forwarded its recommendations to the cabinet for approval.

Most concession terms and conditions are prescribed in the PA and its regulations. The first standard concession was set out in Regulation 4 in 1972 and included only 18 sections. In 1989 a new concession form was prescribed in Regulation 17. Concession applicants are rarely permitted to negotiate changes in the standard terms.

Thailand III Terms

The government reviewed its concession terms in 1986 due to (i) a fall in oil prices and (ii) the difficulty of some companies to obtain permission to produce marginal or isolated wells because they were unable to pass an economic test. For example, for crude oil, each well had to demonstrate a recovery of costs within 12 years. In July 1987 Ministerial Regulation No 13 was announced allowing wells in the same structure to be consolidated for purposes of applying the economic test. The definition of 'production area' was also broadened.

In 1989 the Petroleum Act (No 4) and the Petroleum Income Tax Act (No 4) were enacted making substantial changes to the previous law. These changes were reflected in the terms of the 13th bid round invitation for concession applications, issued in July 1990. These terms are set out in the following table.

Eligibility: Concessionaire must be a Thai limited company with registered capital of at least 100 million baht.
Area of blocks: Not exceeding 4,000 sq km, maximum five blocks or 20,000 sq km (except deep water blocks). Special concessions not exceeding 200 sq km, with relaxed royalty rates, may be issued for high-cost onshore fields.


Exploration period

Production period


Six years plus a three-year renewal.

20 years from end of the exploration period plus a 10-year renewal.

Commercial field test.

Production plans and reports and government approval of amendments to plans required.

Obligation to produce within four years, with possible deferrals of two years each.

Government sole risk option: exercisable after a 12-month negotiation period. If government does not proceed within two years, concessionaire may request return of the area. If government proceeds and realizes profits, concessionaire will be reimbursed its costs. Concessionaire may elect to co-venture with government for a period of three years.

Relinquishments: 50% after four years (35% in deep water block).
25% after six years (40% in deep water block).
Reserved exploration area: 12.5% of initial area, up to five years after end of exploration period.

Work and expenditure:


Special benefits

Special remuneration benefit (SRB)




















Income tax



Fixed for each of first three years, and later, for each of second three years. Excess may be carried forward. Modification possible with consent of the minister.

Government may require deposit of paid-up registered capital with commercial bank in Thailand.

As proposed in concession application (eg, bonuses, scholarships, grants to educational institutions or study tours).

SRB is a 'windfall profits' tax, payable only in the years a concessionaire has 'petroleum profit'. In calculating such profit (or loss), capital expenditure, operating costs and a special reduction (an expense 'uplift') for the year and petroleum loss carried forward indefinitely from prior years may be deducted. The 'special reduction' was specified as 0%. SRB is calculated by exploration block at the following rates, subject to a ceiling of 75% of petroleum profit:

Income per metre of well SRB
Up to 4,800 baht zero
4,800 to 14,400 baht 1% for each 240 baht increment
14,400 to 33,600 baht 1% for each 960 baht increment
Over 33,600 baht 1% for each 3,840 baht increment

To determine 'income per metre of well', first calculate annual petroleum profit and adjust for inflation and exchange rates; then calculate accumulated total metres of all wells drilled during concession period. Income per metre of well equals adjusted annual petroleum profit divided by total depth of all wells plus GSF (geological stability factor). GSF is fixed for each geological region and is at least 150,000 metres, higher in difficult drilling areas.

Imposed at progressive rates:

Up to 2,000 barrels per day - 5%
2,000 to 5,000 barrels per day - 6.25%
5,000 to 10,000 barrels per day - 10%
10,000 to 20,000 barrels per day - 12.5%
Over 20,000 barrels per day - 15%

In deep water blocks, royalty is 70% of the above rates. The government has authority to fix lower rates in special situations.

Royalty in cash is based on posted, realized or market price. Royalty in kind is volume equivalent in value to royalty paid in cash. Both are payable monthly. Royalty disputes must go to court, not international arbitration.

50% on profits (or 35% on profits plus 23.08% remittance tax, under royal decree). Payable semi-annually.

Revenues, deductions and taxes for all Thailand III blocks of the same concessionaire may be consolidated. Other blocks of the same concessionaire must be consolidated separately.

Capital costs are generally amortized over five to 10 years (accelerated depreciation permitted).

Operating costs, royalties and SRB expensed.

Revenues on crude oil sales based on realized price or, for exports, on the higher of realized and 'tax reference' price, the latter being the posted price with a discount.

10-year loss carryforward. No loss carryback.


Crude oil

Natural gas

Export sales on free-on-board posted price fixed by concessionaire and agreed by government. Domestic sales, in absence of regular exports, on price not exceeding that of imported crude oil; otherwise, on average realized price of exports by all concessionaires.


Disposition of crude oil:

Local market supply



Government may require supply to local market at domestic sales prices. First priority must be given to government at a domestic oil refinery.

May be subject to ban or restriction under PA Section 61 (although are not at the moment).

Disposition of natural gas:

In practice, must be sold to PTT at negotiated price as it has a de facto monopoly on the internal transportation of natural gas.

Additional factors:

Office in Thailand.
Employment and training of Thai nationals.
Preference to local goods and services, including ships.
Approval of employment of foreign nationals.
Equipment becomes property of Thai government at end of production period.
Exemption from customs duty and VAT on imports required for petroleum operations.
No surface rentals, except for reserved exploration areas. No mandatory government participation.


To be settled in Bangkok, unless otherwise agreed. Rules of International Court of Justice of May 6 1946, as amended, apply. Royalty disputes to Thai court.


Qualifications of affiliated company transferees now to be scrutinized.
Confidentiality: Confidentiality period for reports submitted by concessionaire ends one year after date of receipt.
Application to prior concessions: Upon application and consent if concessionaire not yet in production.

New Procedures in 18th Round

On July 19 2000 the Department of Mineral Resources issued a letter enclosing an announcement of the Ministry of Industry dated July 11 2000, inviting applications for petroleum concessions. This is the 18th round of bidding since the enactment of the Petroleum Act. However, unlike all previous rounds, applications may be filed over a period of three years and will be considered monthly after the 15th day of each month. The last day for the first submission was August 15 2000 and six applications were filed. None have subsequently been filed. An application for a block subject to a previous application will not be accepted until consideration of the earlier application is completed.

The invitation prescribes the usual conditions applicable to recent rounds. Successful applicants must register a limited company under Thai law, which must have paid up capital of at least Baht 100 million.

Each application will be graded according to the following components: (i) petroleum exploration programme, and expenditure and work obligations, and (ii) special advantages (eg, scholarships, training or contributions to support petroleum development in Thailand).

Applications and supporting documents must be submitted to the Department of Mineral Resources. If an applicant does not have adequate equipment, personnel and financial resources to perform the exploration programme, a guarantee from an entity which does have those resources must also be submitted.

Applications may be filed for blocks located onshore, in the Gulf of Thailand and in the Andaman Sea. Onshore, there are 48 blocks in the northeast, five blocks in the north, 17 blocks in central Thailand and five blocks in the south. Offshore, there are eight blocks in the Gulf of Thailand and four blocks in the Andaman Sea. Detailed descriptions of the exploration blocks, the geological constant factors and special reductions of each block are contained within the announcement.

By allowing the filing of applications at monthly intervals, the new procedure avoids the long delays inherent in the classical system. It will place greater demands on the Department of Mineral Resources to promptly evaluate and award new concessions.

Gas Supply Industry Reform

The Petroleum Authority of Thailand (PTT) usually acts as the sole purchaser, transporter and distributor of natural gas in Thailand, through a 1,512 kilometre pipeline system.

The corporatization of the PTT scheduled for late 2000 has been postponed. Details of the proposed corporatization can be found in the report Privatization and Liberalization of the Energy Sector in Thailand, published by NEPO on March 29 1999.

The Department of Mineral Resources commissioned a study on third-party access, which is under review by the government.

Disputed Area

Since 1972 a significant area in the Gulf of Thailand has been off-limits to the petroleum exploration industry because of a dispute over maritime boundaries between Thailand and Cambodia. The area is believed to include commercial fields similar to the Thailand sector of the Gulf of Thailand. Unofficial talks to find a solution between the two governments continue.


The Thai petroleum concession provides a stable foundation for investment in the oil and gas industry, and downstream projects. There are no plans to change the legal regime.

There is a draft Energy Industry Bill pending consideration by the cabinet. This bill provides the legal framework for liberalization of the electricity and gas supply industries.


Legal Framework

The principal law governing exploration and mining in Thailand is the Minerals Act (1967), last amended in 1991 by Minerals Act No 4. This governs onshore and offshore exploration, mineral production, mineral trading, ore-dressing, transport, and export of minerals other than petroleum. The Mineral Royalty Rates Act (1966) prescribes the rates of royalties to be assessed for different kinds of minerals (see Annex II).

The Department of Mineral Resources (DMR) is empowered to administer the Minerals Act and to issue ministerial regulations. The DMR also provides technical assistance in exploration, mining, mineral processing and metallurgical activities. It comes under the Ministry of Industry's (MOI) jurisdiction.

Major Features of Mineral Legislation

Ownership of minerals
Minerals belong to the state. No one can explore for minerals or undertake mining unless a prospecting licence or mining lease is first obtained. Since minerals are non-renewable natural resources, the country as a whole should benefit from their exploration. The government has a policy of promoting private-sector development of the mineral industry.

Exploration rights
Before prospecting can be undertaken, a prospecting licence must be obtained. There are three kinds of prospecting licences that mining investors may apply for:

  • the general prospecting licence;

  • the exclusive prospecting licence; and

  • the special prospecting licence.

The general prospecting licence is a non-exclusive, non-renewable licence that is issued for one year by the local mineral resources office (LMRO). The licence allows a mining company to explore a designated area. There are also other provisions that govern the possession of minerals. No licence holder may possess minerals of any type in excess of two kilograms without a licence from the DMR. Possession of a large quantity of minerals may be permitted for the purposes of analysis, but the quantity must not exceed the limit stated in the licence. Current practice is to allow 10 kilograms for each type of mineral.

The exclusive prospecting licence contains the same conditions as a general prospecting licence, but it includes an exclusive right to explore for any kind of mineral in the area that is covered by the licence. It is also non-transferable and is valid for a period of one year. It can be renewed for a second year. Holders of an exclusive prospecting licence must comply with the following:

  • exploration must begin within 60 days after the licence is issued;

  • an exploration report must be filed with the LMRO within 180 days after the licence is received; and

  • the final exploration report must be filed 30 days before the expiration date of the licence.

The maximum exploration area that may be granted to one person is 1,250 rai (ie, two grid blocks) per province. A work plan and a description of exploration methods must be submitted, both of which must be endorsed by a qualified geologist or mining engineer recognized by the DMR. The maximum area that may be granted for offshore exploration under the MOI's policy is 20,000 rai. For an area larger than 20,000 rai, it is possible to submit a special prospecting licence application, but the applicant must offer 'special benefits' to the government.

The special prospecting licence has a duration of three years and is renewable for two years. The exploration area granted under a special prospecting licence may not exceed 10,000 rai. An application for this kind of licence must include a work plan and an estimate of expenses for each year of the project, as well as an offer of special benefits to the government.

The prospector must commence exploration within 90 days of the issuance of the special prospecting licence. A progress report to the DMR must be submitted within 120 days of receiving a licence. The special prospecting licence is suitable for large projects involving high-value minerals or substantial investment capital, or when the applicant requires more time or a larger area for exploration. The prospector may relinquish areas he no longer wishes to prospect. Each applicant for the licence must propose special benefits to the Thai government in the application.

The DMR issued two internal regulations on application, renewal and transfer procedures for these kinds of licences. The regulations are treated as guidelines and mandates with which the applicants and DMR officials should comply.

Rights to Surface Land

Determining land open for exploration
Mineral rights under the Minerals Act do not include any rights to the surface land.

There are some categories of reserved areas that have been declared closed to exploration and mining activities by cabinet resolutions. These include wildlife reserve areas, national parks areas, forest areas (conservation forests and economic forests) and areas reserved for security purposes. The first three categories are administered by the Royal Forest Department, while the fourth comes under the control of the Ministry of Defence.

Development activities, including mining, are strictly prohibited in conservation forest areas and restrictions apply to mining activities in economic forest areas. Because the other areas in the country are classified as urban areas, water bodies and areas for settlement programmes, only small, site-specific areas are available for mining. The current programme to reclassify the country's forest areas will increase the total area of conservation forest and reduce the total area of economic forest.

A government resolution for watershed classification in May 1985 prescribed that without exception, all development activity would be prohibited in forest areas classified as Category 1A. Watershed Category 1B was subject to government approval on a case-by-case basis, while mining was allowed to operate in reserved forest Categories 2 to 5. It became more difficult to obtain permission to operate a mine in any category of reserved forest because of the revocation of forest concessions countrywide in January 1989. This resulted in a reclassification of the country's forests, which are now pending classification as national parks, wildlife reserves, economic forests and land reform zones.

Restrictions on foreign ownership
Ownership of land is governed by the Land Code (1954), the Civil and Commercial Codes, the Land Reform for Agriculture Act (1975) and regulations set forth by the Ministry of the Interior. Under Thai law, foreigners may own land only if a treaty has been entered into between Thailand and their country, or if permission is granted by the Ministry of the Interior. At present there are no such treaties between Thailand and any other country; the Treaty of Amity and Economic Relations between the United States and Thailand does not allow foreign ownership of land.

The Ministry of the Interior will generally give permission for foreigners to own land if they have met any of the following conditions:

  • they have received permission from the Board of Investment to own land and carry out promoted activities;

  • they have a factory within the approved government industrial estates;

  • they are in the petroleum business; or

  • they hold not more than 49% of the shares of a company that has a need to own land.

Acquiring surface rights
Before applying for a mining lease the applicant must acquire the right to use the surface land from the public or private owner, as the case may be. Negotiation with a private landowner is concluded by purchase or lease. A lease agreement may last for up to 30 years and must be registered with the Land Department.

When the government owns the land, a permit issued by the concerned government agency must be submitted along with the application for a mining lease before a lease is granted.

Mining Rights

Upon discovery of a commercial mineral deposit, a prospector must apply for a mining lease in order to mine. Although there is no guarantee of being granted a mining lease, prospectors holding exclusive prospecting licences or special prospecting licences have first priority. A mining lease may cover an area of not more than 300 rai onshore and 50,000 rai offshore. There is no limit on the number of mining leases for which one person may apply. A mining lease has duration of not more than 25 years and may not be transferred or subleased without the approval of the MOI. Pending the approval of the mining lease, a prospector may apply for a non-transferable temporary mining lease that is valid for one year.

An applicant for a mining lease must provide the following:

  • a map of the area to be mined;

  • evidence of financial capital;

  • a work plan;

  • evidence of the acquisition of surface land rights;

  • evidence of technological ability (eg, tools, equipment and machinery); and

  • an environmental impact assessment.

The DMR has published guidelines for determining the minimum amount of capital required. A letter of confirmation issued by a bank may be accepted as evidence of financial capital. An applicant who declares that he has his own machinery and equipment may produce evidence of ownership and value thereof for deduction from the amount of money for which evidence is required, as long as the deduction does not exceed 50% of the amount designated.

Special Rules for Offshore Mining

In August 1978 the cabinet passed two resolutions concerning offshore mining of minerals at depths not exceeding 200 feet. The resolutions can be summarized as follows.

Known deposits
After the expiration of the maximum mining lease period of 25 years, a foreign mining lease-holder may apply for a new mining lease to work an old deposit, provided that it realigns its equity interests so that Thai nationals hold at least 60% of the total equity interest in the venture.

Unknown deposits
A company with foreign shareholders may apply for a mining lease to exploit a new deposit offshore, provided that Thai nationals hold at least 51% of the equity interest initially, to be increased to 60% within two years.

These resolutions constitute administrative guidelines to be followed by the DMR in its consideration of whether or not to grant or renew an offshore mining lease.

Other Required Approvals

Purchase of minerals
Any person wishing to purchase minerals in the course of business must obtain a licence from the DMR. A purchasing licence is valid only until December 31 of the year the licence is issued. The holder of a purchasing licence may not purchase minerals at any place other than that specified in the purchasing licence. Purchasing minerals outside the specified place of purchase requires an external purchasing licence, which is valid for the same period as the purchasing licence. A holder of a purchasing licence must keep accounts of minerals bought and sold, and minerals still on hand.

Transportation and storage
The transportation of a mineral is possible only if the mineral royalty is paid. For most minerals, an ore transport licence must accompany the transporting vehicle to the destination stated in the licence. However, minerals such as fluorite, barite, gypsum, coal and gemstones require no ore transport licence after the royalty is paid. Any person who wishes to store minerals outside the mining area or outside the place of purchase must also obtain a storage licence. This licence is valid until December 31 of the year of issuance.

Ore dressing
No one can undertake ore dressing operations without a licence except for the holder of a mining lease or of a temporary mining licence.

Export-Import Policies

The import of mineral and metal of any kind (with the exception of tin) in excess of two kilograms does not come under the provisions of the Minerals Act, regardless of quantity. The Minerals Act, however, governs export of the following minerals:

  • tin ore in excess of 50 grams;

  • gold ore, in any amount;

  • copper ore, zinc ore and iron ore in excess of two kilograms each; and

  • minerals with columbium, tantalum and thorium, or other radioactive contents, in any amount.

Alien Business Licence

The DMR has a policy of not granting mineral rights to foreigners (including companies in which ownership by foreigners exceeds 49%). However, it is possible that the DMR would grant mineral rights to a foreign company under a special agreement or a foreign company promoted by the Board of Investment. In such a case, a foreign company would require an alien business licence under Schedule 2(3)(4) of the new Alien Business Operation Act.

Mining Council Membership

The Mining Council was established by the Mining Council Act (1983). The council comprises members who are mining operators, including those involved in exploration and trading. Any person wishing to apply for mining rights is required to be a member of the Mining Council.

Administrative Efficiency

One characteristic of the Thai bureaucracy is the divided nature of Thai administration. Government agencies in Thailand are divided into ministries, departments and bureaus. Each is a separate juristic entity with independent contracting powers. Thus, the Ministry of Industry is a separate legal entity from the Department of Mineral Resources, which answers to it administratively. Even though the DMR is only one among many departments within the MOI, it can enter into contracts with a private party independent of the ministry. For example, the DMR can engage contractors to construct or repair buildings, purchase supplies and engage in consulting services. The director general, as the head of the department, is the signatory to contracts. The question of whether the department or the director general has the power to conclude contracts and the parameters within which this power can be exercised is governed by the law on public administration.

Each government agency is concerned only with administering its own law, even though that law may contradict other laws or may be inconsistent with national policy. This fact poses a major problem for the mineral industry in that the DMR is not the agency that has the final say on whether or not an exploration or mining venture can be conducted. The ultimate decision may rest with the Office of Environmental Protection (OEPP) or with the Forestry Department, if it happens to control the land on which the mining is to be conducted.

Foreign investors often believe that once having signed a contract with the DMR and having paid the bonus, they may then proceed with the exploration and development work. In reality, the contract is only a grant of mineral rights, subject to negotiation with the other agencies concerned, and there is no guarantee that investors will be given all necessary approvals in the end.

All acts of parliament have the same standing under the law. The Forestry Act, the Minerals Act and the Environmental Act are equal. Therefore, the DMR, the Forest Department and the OEPP are of equal legal status, in the sense that neither can tell the other what to do. There is no 'super-agency' to conciliate differences and impose its decision on conflicting agencies.

Policies issued by the heads of various ministries and departments are mandatory; the failure of government officers to comply with the policies may result in disciplinary action. These policies are internal directives and are not known to the public. As one looks through the various laws in Thailand, one finds many provisions giving wide discretionary powers to permanent officials responsible for administering the law.

Security of Tenure

One factor that is often cited as an impediment to the mining industry's development is the lack of 'security of tenure'. The existing legal system does not expressly guarantee that the holder of an exploration licence will be granted a mining lease if he makes a commercial discovery. The government bureaucracy and the limited scope of the mining laws are not the sole causes of the inability to assure a right to mine over prospected land. The conflicts and restrictions from other authorities as well as subsequent land-use conflicts complicate the issuing of rights.

The Fiscal Regime

The major taxes applicable to the mining business are company income tax, mineral royalties and value added tax.

Company income tax
A company that earns revenues from the mining business is liable to pay company income tax under the Revenue Code. The present rate is 30%. Dividend payments to overseas shareholders are generally subject to a withholding tax of 10%. Expenses incurred for the sole purpose of carrying on the business may be deducted.

Depreciation of assets may be deducted as a business expense but must be done on an annual basis. Official prescribed rates of depreciation are as follows:

  • 5% for permanent buildings;

  • 100% for temporary buildings;

  • 5% for depletable natural resources;

  • 10% for lease rights with no fixed termination date; and

  • 20% for other property.

Losses may be carried forward for five consecutive years.

Mineral royalties
Mining leaseholders must pay royalties to the government according to the Mineral Royalty Rates Act (1966).Royalties are paid based on the value of the minerals extracted, except in the case of gem mining, whereby the royalty is based on the size and the value of the land covered in the mining lease.

Value added tax
Effective from January 1 1992, the value added tax (VAT) replaced the existing business tax system. Mining companies are subject to VAT at the usual rate of 10% (reduced to 7% for two years from April 1 1999). However, a zero VAT rate applies to exports of minerals by mineral traders. The VAT payable is calculated from the difference between input tax (VAT paid by the mining trader to suppliers of goods or services) and output tax (VAT collected by the mining trader from persons who purchase goods or services).

Double tax treaties
Thailand has double tax treaties with 40 countries.

Board of Investment incentives
A mining project promoted by the Board of Investment under the Investment Promotion Act may be granted benefits including exemptions/reductions of customs duties on imported equipment, an income tax holiday of three to eight years, an exemption from withholding tax on dividends, and other incentives.

For further information on this topic please contact Albert T Chandler at Chandler & Thong-ek by telephone (+662 266 6485) or by fax (+662 266 6483) or by e-mail ([email protected]).

Annex I: List of Petroleum Legislation

Petroleum Act

  • Petroleum Act, BE 2514 (1971), March 26 1971.

  • Petroleum Act (No 2), November 20, BE 2516 (1973) (regarding PA Sections 28, 33, 36, 50 and 84).

  • Petroleum Act (No 3), April 30, BE 2522 (1979) (regarding PA Sections 25, 26, 31, 32, 34 and 76).

  • Petroleum Act (No 4), August 4, BE 2532 (1989) (regarding PA Sections 4, 15, 16, 22, 25, 26, 28, 30, 36, 39, 40, 42 bis, 45, 48, 51, 52 bis, 59, 71, 76, 82, 84, 85, 87, 88, 89, 90, 94, 99 bis and ter, 100, 100 bis-octo, 104 bis, 109 bis and 110 and schedule of fees).

  • Petroleum Act (No 5), November 21, BE 2534 (1991) (regarding PA Section 70).

Related legislation and announcements

  • Announcement of the Office of the Prime Minister on Straight Baseline and Internal Waters of Thailand, June 11 1970.

  • NEC 331 on Benefits, Rights and Duties of Co-Investors with the Defence Energy Department, December 13 1972.
  • Proclamation on Demarcation of the Continental Shelf of Thailand in the Gulf of Thailand, May 18 1973.

  • Announcement of the Ministry of Industry on Concessions for Onshore Blocks, February 14 1979.

  • Announcement of the Prime Minister on the Exclusive Economic Zone of the Kingdom of Thailand, February 23 1981.

  • Announcement of the Office of the Prime Minister on the Appointment of Petroleum Committee, April 29 1999.

  • Act on Criminal Offences on Offshore Platforms, October 31 1987.

  • Announcement of the Ministry of Industry to Submit Applications for Concessions (13th bid round), July 27 1990.

  • Announcement of the Office of the Prime Minister on Straight Baselines and Internal Waters of Thailand, Area 4, August 17 1992.

  • Announcement of the Office of the Prime Minister (No 2) on Straight Baselines and Internal Waters of Thailand, February 2 1993.

  • Announcement of the Ministry of Industry to Submit Applications for Concessions (14th bid round), October 12 1995.

  • Announcement of the Ministry of Industry to Submit Applications for Concessions (15th bid round), February 23 1996.

  • Announcement of the Ministry of Industry to Submit Applications for Concessions (16th bid round), June 16 1997.

  • Announcement of the Ministry of Industry to Submit Applications for Concessions (17th bid round), March 27 1998.

  • Announcement of the Ministry of Industry to Submit Applications for Concessions (18th bid round), July 11 2000.

Ministerial regulations

  • Identification cards, September 13 1971 (repealed by No 14).

  • Concession applications, September 13 1971.

  • Form of concession and supplementary concession, September 13 1971 (annexed concession forms DMR/P2 and DMR/P3 have been replaced by those annexed to No 17).

  • Rules regarding operations, September 13 1971 (amended by No 12).

  • Safety areas, September 13 1971 (amended by No 11).

  • Safety measures, September 13 1971.

  • Reserved exploration areas, September 13 1971 (repealed by No 13).

  • Safety areas, April 17 1981.

  • Offshore production procedures and platforms, September 22 1981.

  • Commercial criteria and production areas, July 30 1987.

  • Application and surface reservation fees, December 8 1989.

  • Special allowances for SRB calculation, December 8 1989.

  • Expenditure and work obligations in concession applications, December 8 1989.

  • Amendment of forms DMR/P2 and DMR/P3 appended to Regulation No 4, December 8 1989.

  • Production plans and forecasts, December 6 1991.

  • Adjustment of petroleum income for SRB calculation, December 6 1991.

  • Calculation of petroleum income, capital expenses, regular expenses and those related to several blocks, April 21 1993.

DMR notifications and announcements

  • Rules and Procedures on Relinquishment of Offshore Exploration Block Areas Having a Water Depth not Exceeding 200 Metres, March 20 1975.

  • Exploration Areas in the Gulf of Thailand, December 15 1978.

  • Rules and Procedures on Relinquishment of Offshore Exploration Block Areas Having a Water Depth Exceeding 200 Metres, April 4 1979.

  • Demarcation of Exploration Blocks in the Gulf of Thailand and Andaman Sea, May 16 1980.

  • Rules and Procedures for the Submission of Statements of Expenditures in Conducting Operations, April 30 1982. (repealed by notification of April 30 1992).

  • Place, Form and Supporting Documents for Payment of Royalty, May 4 1983.

  • Exploration Blocks in Andaman Sea, June 2 1983.

  • Rules and Procedures for the Relinquishment of Onshore Exploration Block Areas, March 1 1984.

  • Rules and Procedures for the Submission of Statements of Expenditures in Conducting Operations, April 30 1992.

  • Forms and Filing Periods for Calculating SRB, March 19 1993.

  • Rules, Procedures and Duration for Submission of Reports on Petroleum Operations, January 4 1999.

  • Onshore and Offshore Petroleum Exploration Exploration Blocks in the Gulf of Thailand and the Andaman Sea, June 29 2000.

Other material

  • DMR brochure "Petroleum Exploration Opportunities in Thailand", which includes an SRB calculation, 1990.

Petroleum Income Tax Act

  • Petroleum Income Tax Act, BE 2514 (1971), March 26 1971.

  • Petroleum Income Tax Act (No 2) on tax reference prices for deep water exploration blocks, November 20 1973.

  • Petroleum Income Tax Act (No 3) on alternative provisions to qualify for US foreign tax credit, December 30 1979.

  • Petroleum Income Tax Act (No 4) on income tax and tax returns, August 4 1989.

  • Petroleum Income Tax Act (No 5) on specific provisions governing joint development zone, September 17 1998.

Related legislation

  • Revenue Code Amendment Act (No 29) BE 2534 on provisions to qualify for US foreign tax credit, November 6 1991.

  • NEC Announcement No 95 on amortization of capital expenses, February 29 1972 (amended by royal decrees of November 28 1973 and April 22 1979).

Royal decrees

  • Prescribing 50% petroleum income tax rate, September 3 1971.

  • Prescribing the categories, rates and conditions for deduction of capital allowances, November 28 1973.

  • Prescribing the categories, rates and conditions for deduction of capital allowances (No 2), April 22 1979.

  • Prescribing 35% petroleum income tax rate for certain concessionaires (No 2), December 30 1979.

  • Prescribing companies subject to Chapter 7 bis of the Petroleum Income Tax Act, July 13 1991.

Ministerial regulations

  • Entertainment expenses, December 27 1971.
  • Assessments and fines, December 27 1971.
  • Price discounts for deep water blocks, March 5 1974.
  • Transfers of petroleum business, March 14 1984.
  • Allocation of income and expenses among blocks, October 25 1993.

Ministerial notifications

  • Public charities, clinics and educational institutions, September 8 1971.
  • Appointment of officers and place for filing income tax returns, October 8 1981 (no English translation).
  • Amendment of notification dated October 8 1981, August 5 1992 (no English translation).

Note: This list does not include all legislation applicable to concessionaires and petroleum service companies. See, for example, the Alien Business Law, Civil Aviation Act, Construction Professions Act, Customs Act, Explosives Act, Forestry Legislation, Immigration Act, and Working of Aliens Law.

Annex II: List of Mineral Legislation

Mineral Act

  • Mineral Act, BE 2510 (amended up to Minerals Act (No 4) BE 2534 and Royal Proclamation (No 2) BE 2528).

  • Ministerial regulations (latest issued in June 1996, No 78).

  • Notifications, various (latest issued in July 1999).

  • Internal DMR regulation regarding procedures for ML application, renewal and transfer and regulation regarding procedures for application for a prospecting licence, dated July 19 1988 and their amendments.

Mineral Royalty Rates Act

  • Mineral Royalty Rates Act, BE 2509 (amended up to Mineral Royalty Rates Act (No 3) BE 2522).

  • Ministerial regulations (latest issued in July 1997, No 54).

Tin Control Act

  • Tin Control Act, BE 2514.

  • Royal decrees (amended up to November 1986).

  • Ministerial regulations (latest issued in June 1985, No 10).

  • Notifications, various (latest issued in August 1987).

Mining Council Act

  • Mining Council Act, BE 2526.

  • Ministerial regulations, various.

Revenue Code

Royal decrees

  • No 161 (November 8 1985) regarding exemption of stamp duty to an engaged person for exploration of minerals under a contract with government agency.

Ministerial regulations

  • No 171 (September 19 1986) regarding exemption of income tax to the revenue from the sale of tin as from January 1 1988 and the dividends or shares of profit computed from the revenue received from the sale of tin.

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