A draft act to amend provisions of the Civil and Commercial Code (“the Draft”) was approved by the Cabinet on 9 March 2021 for further enactment. The key amendments concerning interest rates and the basis for calculating default interest on debts paid in instalments are as follows:
Keywords: Mazars, Thailand, Legal, Interest rate, Civil and Commercial Code
2 April 2021
1. The rate of statutory interest
At present, the rate of 7.5% per annum applies where an interest rate is not set out explicitly in Thai law or legal acts. However, the Draft proposes that this rate be lowered to 3% per annum and adjusted from time to time through the issue of a Royal Decree.
2. The rate of default interest
At present, the rate of 7.5% per annum applies where a debtor defaults on repayment. However, the Draft proposes that this rate be lowered to 3% per annum, plus an add-on rate of 2% per annum, to expedite the repayment of debtors.
3. New basis for calculating default interest on debts paid in instalments
At present, an instalment contract can include a clause that entitles a creditor to charge default interest on the balance of the principal, regardless of whether instalments are due. However, the Draft proposes that a creditor be able to charge default interest only on the principal component of the instalment due, and that any agreement contrary to this be void.
Reference: Cabinet meeting dated 9 March 2021