When entering into a loan agreement, both the borrower and the lender need to understand their rights and obligations, as well as the possible consequences of violating applicable legislation.
In 2017, the Thai law “On the Prohibition of Charging Excessive Interest” came into force. This law establishes strict penalties for lenders who charge excessively high interest rates under loan agreements.
Loan agreements are governed by Chapter II, Book III of the Civil and Commercial Code of Thailand, titled “Loan for Use”.
The interest rate under such agreements must not exceed 15% per annum. If interest is предусмотрена but the rate is not specified, the standard rate of 7.5% per annum applies. If interest is not provided at all, this becomes a tax matter and will likely arise, especially if the parties to the agreement are companies. The tax authorities may conduct a market assessment of the agreement and determine an appropriate interest rate.
Loan Agreement Between Private Individuals. Form. Interest Rate.
Form of agreement. A simple written form is mandatory for loan amounts starting from 2,000 baht.
Maximum interest rate. 15% per annum.
If interest is предусмотрена but the rate is not specified. 7.5% per annum applies.
If interest is not provided or the rate is set below the market level. The tax authority or court may reassess the interest rate based on market conditions.
Liability of the lender for exceeding the maximum statutory rate. Imprisonment for up to two years and or a fine of up to 200,000 baht.
Author: Alexandra Agapitova.
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