1. Aircraft and Engine Purchase and Sale

1.1 Sales Agreements

1.1.1 Taxes/Duties Payable Upon Execution of the Sales Agreement

Apart from the general tax regime (which can include income tax, value-added tax (VAT), stamp duty and import duties), an aircraft or engine sales agreement is not subject to a specific tax or stamp duty.

1.1.2 Enforceability Against Domestic Parties

Under Thai law, there is no specific requirement that an aircraft or engine sales agreement be translated, certified, notarised or legalised to be enforceable against a domestic party. In the event of enforcement, however, certified Thai translations of the whole or any material part of the aircraft or engine sales agreement and any relevant agreements/documents may be required. If so, these must be attached to the originals when they are submitted as evidence to a Thai court.

1.2 Transfer of Ownership

1.2.1 Transferring Title

As Thai law does not specifically provide for the transfer of title to an aircraft, engine or other installed parts, including the APU, such transfer will be subject to general provisions of law regarding the transfer of ownership of movable property. Generally, unless agreed or specified otherwise by the parties, the ownership of the property is transferred to the buyer from the moment when the contract of sale is entered into.

Under Thai law, the sale of the ownership interest in the entity that owns an aircraft or engine would not effectively be recognised as a sale of such aircraft or engine itself.

1.2.2 Sales Governed by English or New York Law

Thai law recognises the contracting parties' right to specify a foreign law to govern the bill of sale, to the extent that such law is not contrary to the public order or good morals of Thailand. However, the party seeking to enforce foreign law must prove it to the satisfaction of the Thai court; otherwise, Thai law shall apply. In any event, such bill of sale and relevant agreements/documents, and the transfer of title, must be legal, valid, binding and enforceable under, and be in the forms prescribed by, English law or New York law (as the case may be) and/or Thai law if they are to be legally enforced in Thailand.

Although the sale of aircraft is not subject to specific formalities specified by Thai law, the contracting parties need, at a minimum, to ensure that the bill of sale is in writing and signed by the party liable, or that there is part performance or consideration given, and that it is not contrary to the public order or good morals of Thailand.

1.2.3 Enforceability Against Domestic Parties

Under Thai law, there is no specific requirement that a bill of sale be translated, certified, notarised or legalised to be enforceable against a domestic party. In the event of enforcement, however, certified Thai translations of the whole or any material part of the bill of sale and any relevant agreements/documents may be required to be submitted and attached to the originals thereof when they are submitted as evidence to a Thai court.

1.2.4 Registration, Filing and/or Consent From Government Entities

Under Thai law, a bill of sale is not required to be registered or filed with any government entity to become effective. 

There is no prerequisite to the execution and delivery of a bill of sale in relation to an aircraft in Thailand under Thai law.

1.2.5 Taxes/Duties Payable Upon Execution of a Bill of Sale

Apart from the general tax regime (which can include income tax, VAT, stamp duty and import duties), a bill of sale is not subject to a specific tax or stamp duty under Thai law.

2. Aircraft and Engine Leasing

2.1 Overview

2.1.1 Non-permissible Leases

Subject to compliance with applicable laws, operating, wet and finance leases will be recognised and permissible if and to the extent that they are not contrary to Thai law, or the public order or good morals of Thailand. However, for wet leases, the air operator is required to obtain permission from the Civil Aviation Authority of Thailand (CAAT), for which the air operator must submit an application in accordance with the Notification of CAAT regarding Criteria for the Use of Aircraft under the Wet Lease and Use of Aircraft under the Code Share Agreement by Air Operator. In granting permission, the CAAT will rely primarily on the criteria set out in the Notification.

2.1.2 Application of Foreign Laws

The parties may agree for a lease to be governed by a foreign law. However, according to Thailand's Act on Conflict of Laws BE 2481 (1938), the foreign law shall only be applied to the extent that such law is not contrary to the public order or good morals of Thailand. In addition, the party seeking to enforce the foreign law must prove to the satisfaction of the Thai court; otherwise, Thai law shall apply. In any event, the lease and relevant agreements/documents must be legal, valid, binding and enforceable under, and be in the forms prescribed by, such foreign law and/ or Thai law if they are to be legally enforced in Thailand. In relation to property or assets, please note Sections 9 and 16 of the Act on Conflict of Laws.

Section 9 states: "Unless otherwise provided by this Act or other laws of [Thailand], the formal validity of a juristic act shall be governed by the law of the country where the act is made. However, the law of the country where a property is situated governs the form required for the validity of a contract, document or other juristic act relating to immovable property."

Section 16 states: "Movable and immovable property is governed by the law of the place where the property is situated. However, in the case of exportation of movable property, the law of nationality of its owner shall govern from the time of exportation."

2.1.3 Restrictions Concerning Payments in US Dollars

There are no material restrictions imposed on domestic lessees for making rent payments to foreign lessors in US dollars. The domestic lessees must, however, comply with, inter alia, the Thai exchange control, tax and anti-money laundering laws/regulations, and must be able to provide documentary evidence for such transfer to the authorised juristic person or licensed financial institution.

2.1.4 Exchange Controls

Exchange controls in Thailand are governed primarily by the Exchange Control Act BE 2485 (1942), as amended, and Ministerial Regulation No 13. Outward remittances for rent payments under and according to a valid lease are permitted, provided that proper documentary evidence for such payment is submitted to the authorised juristic person or licensed financial institution.

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Originally published by Chambers and Partners

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.