New interest rates under the Civil and Commercial Code

An Emergency Decree on the Amendment of the Civil and Commercial Code, which was published on the Royal Gazette and became effective on 11 April 2021, addressed the following key issues regarding interest rates:

Keywords: Mazars, Thailand, Legal, Civil and Commercial Code, Royal Gazette, Royal Decree, Ministry of Finance

12 May 2021

Key issue

Provisions

Notes

1. Reduction of the statutory rate

Section 7 – Whenever interest is to be paid, and the rate is not fixed by a legal act or by express provision of law, it shall be three per cent per annum.

The rate prescribed in paragraph one may be lowered or increased depending on the economic circumstances of the country by issuing a Royal Decree. The Ministry of Finance shall review such interest rate every three years to make it closed to that of the average rate between the rates of deposit interest and loan interest imposed by commercial banks.

In the past, the fixed rate of 7.5% per annum applied where an interest rate is not set out explicitly in Thai law or legal acts.

However, under the revised Section 7, this rate is lowered to the floating rate of 3% per annum, which can be adjusted from time to time through the issue of a Royal Decree. 

(*) The revised Section 7 applies to calculating interest on a debt which was due on or after the date on which this Emergency Decree became effective (11 April 2021), and shall not affect any calculation of interest made beforehand.

2. Reduction of the rate for defaults

Section 224 – A monetary debt which bears interest in the event of a default at the rate prescribed by Section 7 plus an add-on rate of 2% per annum. If the creditor can demand higher interest on any other legitimate grounds, this shall continue to be paid.

Interest in the event of default must not be paid upon interest on principal.

Proof of further damages is admissible.

In the past, the fixed rate of 7.5% per annum applied where a debtor defaulted on repayment of a loan.

However, under the revised Section 224, the rate for defaults on loan shall be set in line with the statutory rate under Section 7, plus an add-on rate of 2% per annum.

At present, the rate for defaults under this section is 5% per annum.

(*) The interest rate under Section 224 applies to calculating default interest on a debt which was due on or after this Emergency Decree became effective (11 April 2021), and does not affect any calculation of default interest made beforehand.

References:

http://www.ratchakitcha.soc.go.th/

https://jla.coj.go.th/

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