A loan agreement for an amount exceeding 2,000 THB must be concluded in simple written form and signed by two witnesses.
The maximum interest rate under a loan agreement is 15 percent.
If interest is stipulated but the rate is not specified, a standard rate of 7.5 percent applies.
If no interest is stipulated at all, questions may arise from the tax authority. For example, if the parties to the agreement are legal entities, an interest-free loan may be treated as an attempt by the lender to avoid declaring income and reduce the tax base. The tax authority may conduct a market assessment and determine an applicable interest rate.
Real estate may be used as collateral to secure a loan agreement. In this case, the pledge must be registered with the Land Department, and a corresponding record is made in the title deed. It should be noted that if the borrower fails to fulfill the terms of the agreement, enforcement of the collateral is only possible through court proceedings.
A mandatory condition when entering into a loan agreement is the payment of stamp duty in the amount of 1 THB per every 2,000 THB of the loan amount, but not exceeding 10,000 THB. Failure to pay stamp duty may create obstacles in court if a dispute arises.
It is very important to protect your interests and consider all details when drafting a loan agreement, arranging collateral, and paying stamp duty.
For all questions regarding drafting or reviewing loan agreements, please contact +66 65 665 1970.
Author: Alexandra Agapitova.
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