Starting a Business in Thailand

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Starting a Business in Thailand

While foreigners may create companies in Thailand, it is not a straightforward process and all company documents filed have to be in the Thai language. The help of a professional with experience in the field is highly recommended; there are restrictions on the type and activity of businesses that foreigners can be involved with under the Foreign Business Act and other legislation.

• Thailand Board of Investment (BOI)
  At: 555 Vibhavadi-Rangsit Rd, Chatuchak, Bangkok 10400
  Tel: 02 537 8111-8555
  Fax: 02 537 8177
  e-mail
  
• For comprehensive information from the BOI on establishing a company in Thailand: Click here

For a summary of the procedures and costs for setting up a business in Thailand: Click here

Types of Business

In Thailand there are three types of businesses:

1. Limited Companies (public and private)
2. Sole Proprietorships
3. Partnerships

The majority of foreign investors will form a private limited company.

Limited Companies

In Thailand two types of limited companies are acknowledged: public companies and private companies. Public companies are regulated by the Public Companies Act and certain other Acts, and private limited companies are regulated mainly by the Civil and Commercial Code.

Private limited companies

Generally, businesses in Thailand are set up through private companies. In this type of business there is no limit on capital investment. Foreigners may in general own 100% of the shares of a private company but there are certain types of business that foreigners cannot own on a majority basis, under the Foreign Business Act and other industry specific legislation. In some cases it may be possible to apply for a licence or permission for majority foreign ownership.

Private companies need to have at least three promoters to register the company and a minimum of three shareholders must be maintained at all times. In addition accounting, auditing and tax filing procedures described in the Civil and Commercial Code, the Revenue Code, and the Accounts Act, must always be complied with.

Note: On 1 July 2008 an amendment came into effect reducing the required number of shareholders from seven (as it had been previously) to three. Existing companies with seven shareholders may reduce their number of shareholders to three, but this will have tax and legal implications and professional advice should be taken.

Setting up a limited company

To set up a limited company in Thailand, the following should be done:

• Corporate name reservation: Some names are not allowed and others may be deemed to be too similar to existing names. There are reservation guidelines issued by the Commercial Registration Department at the Ministry of Commerce. Approval or disapproval of the proposed name can be obtained within 1-2 days. The validity of the approved corporate name reservation is limited to 30 days, but it can be reserved for an additional 30 days on expiration
• File a memorandum of association: A memorandum of association should be drafted and filed with the Commercial Registration Department of the Ministry of Commerce and must have the reserved name of the company, the company's office location, the company's business objectives, the amount of share capital and how it is divided up and show the names of the three promoters who sign the Memorandum. In general the amount of capital to be registered need only be sufficient for its business operations, but in certain cases a minimum amount of capital is required to be paid in, depending on the nature of the business, or whether the company employs foreigners. Government fees arise when the memorandum of association is registered: a fee of 0.05 percent of the registered capital, up to a maximum of THB 25,000
• Hold the statutory meeting of all shareholders: A meeting should be called after the share structure has been outlined. At least 25 percent equivalent to the value of each subscribed share must be paid up. In certain types of business, a specified minimum amount of capital must be fully paid, and a minimum of capital must be fully paid where the company is to employ foreigners.
• Registration: Application for the company's registration must be filed within 90 days of the meeting. When application is made to register the company, a government fee of 0.5 percent of the registered capital arises, up to a maximum fee of THB 250,000
• Corporate Income Tax registration: Within two months of the start of the company's operations, it must register for corporate income tax purposes, and obtain a tax ID card and number from the Department of Revenue. Generally speaking, corporate income tax is all the income of the company within that tax year, less allowable expenditure and depreciation. At present the general corporate tax rate is 30 percent of net income. Two corporate income tax returns must be filed each year, the first return is due two months after the end of the first six months of the company's tax year. One half of the estimated tax due for the whole year must be paid with this return. The final return must be filed within 150 days of the end of the company's tax year at which time the total tax remaining must be paid
• Value Added Tax registration A sole trader, partnership or company with gross income of either THB 300,000 in any single month or THB 1,800,000 or more per year, is liable to register for VAT if it supplies services, or sells goods liable to VAT, or imports goods. Certain services are zero rated and others are VAT exempt. Traders not required to register for VAT may register voluntarily if they wish. For example, this would be appropriate for exporting businesses which are zero rated to enable the trader to reclaim input VAT paid on materials or services purchase. VAT returns must be filed monthly. The VAT payable is generally speaking the VAT collected less the VAT paid to others. The current general VAT rate is 7 percent.

A company must also deduct monthly withholding income tax, social security contributions and workmen's compensation contributions from employees' wages.

Legal reporting requirements for private limited companies

Companies must observe accounting procedures and keep books as specified in the Civil and Commercial Code, the Revenue Code and the Accounts Act. Accounts must be maintained and returns filed in Thai, though it is permissible to prepare translations in other languages for the company's internal purposes.

• Imposition of taxes: Corporate income tax is generally set at 30 percent and is due twice a year, as described above. Companies must deduct monthly withholding income tax from employees' salaries and send it to the Revenue Department. At present, VAT is 7 percent and must be paid monthly by many companies, as described above. There are other business specific taxes for some companies engaged in certain businesses. Check with an accountant
• Annual accounts: Audited accounts must be prepared annually and approved by shareholders, and filed with the Commercial Registration Department, Ministry of Commerce, within five months of the end of the fiscal year, and with the Revenue Department, Ministry of Finance, within 150 days of the end of the fiscal year

Public Companies

These companies are liable to more onerous requirements regarding minimum capital, the number of shareholders, public offering of shares and other financial instruments, additional financial requirements, and a far greater degree of accountability to their shareholders. There are many legal requirements for a public company. For example half of the promoters must be resident in Thailand and there must be 15 promoters for the Memorandum of Association.

By passing a special resolution of the shareholders as specified by the Civil and Commercial Code, a private company may be transformed into a public limited company. However, a public company may not be converted back to a private company.

For more information on the formation of companies in Thailand contact the Department of Business Development.

• Department of Business Development
  At: 44/100 Nonthaburi 1 Rd. Bangkrasor, Muang Nonthaburi 11000
  Tel: 02 547 5050
  Fax: 02 547 4459
  Hotline: 1570
  e-mail
  

Sole Proprietorships

In a sole proprietorship one person is in charge of the business with unlimited liability. Legal action can be taken against the person's business and his assets. Other than those who are permitted under the United States-Thailand Treaty on Amity and Economic Co-operation, foreigners may not run sole proprietorships. A sole proprietor pays income tax at rate bands of 10 to 37 percent on the net profits, the same income tax rates that apply to individuals.

• The American Chamber of Commerce in Thailand
  At: 7th Floor, GPF Witthayu A, 93/1 Wireless Road, Lumpini, Pathumwan, Bangkok 10330
  Tel: 02 254 1041
  Fax: 02 251 1605
  e-mail
  

Partnerships

In Thailand, three types of partnerships are acknowledged. The tax treatment and degree of liability of the partners are the only differences between the partnerships. The Board of Investment generally does not encourage Partnerships, so it's unusual for foreign investors to form this type of company.

The three types of partnerships are:

• Unregistered partnerships: all the partners are fully liable for all responsibilities of the partnership. Personal tax arises on net profits at rates of 10-37 percent
• Registered partnerships: the partnership is a legal entity, and therefore, is separate and distinct from the partners. Tax is payable at the company rate of 30 percent
• Limited partnerships: the amount of capital determines the liability of the partners. This type of business must be registered. Tax is payable at the company rate of 30 percent
• For more information on the formation of partnerships in Thailand: Click here

Legal Restrictions in Thailand

The Foreign Employment Act and Restrictions on Foreign Employment

The Foreign Employment Act (2008) lists categories of work that foreigners are not allowed to carry out, and is relevant to company formation for foreigners in Thailand. Changes defining these categories are to be introduced.

• For a list of restricted jobs: Click here and scroll down to Page 13

The Foreign Business Act and Restrictions on Foreign Ownership of Businesses

The Foreign Business Act (FBA) is the main legislation that regulates ownership of businesses by foreigners. It regulates 43 specified categories of business activity grouped into three Schedules. The ownership restrictions are different and depend on the schedule in which the business is listed. Broadly speaking foreigners may have 100 percent ownership of most manufacturing businesses, but only 49 percent ownership of a services business unless permission for majority foreign ownership is obtained. There are also a number of other specific Acts and regulations that regulate foreign ownership in specific industries such as banking, shipping, insurance and telecommunications.

The Board of Investment has power to grant permission for majority foreign ownership of certain businesses that are restricted under Schedule 2 and 3 of the Foreign Business Act. The Treaty of Amity and Economic Relations (1968) grants certain preferential rights to American investors with regard to the ownership of businesses in Thailand.

Foreign investors should also be aware that ownership of land by foreigners is generally prohibited, subject to a number of specified exceptions.

Generally speaking, foreigners who work in Thailand must have a work permit issued to them allowing them to work in that position. A work permit may be applied for in any occupation, except for 39 prohibited occupations specified in a regulation issued under the Foreign Employment Act.

• To find out more about the Foreign Business Act: Click here

Further Information

• Department of Revenue
  At: 90 Soi Phaholyothin 7, Phaholyothin Road, 10400
  Tel: 02 272 8000
  
• Ministry of Commerce
  At: 44/100 Nonthaburi 1 Rd., Amphur Muang, Nonthaburi 1
  Tel: 02 507 8000
  Fax: 02 507 7717