Thailand has long been a culturally rich country. Because of its tropical environment, which is good for many crops, food is readily available practically everywhere. As a result, the country’s distinct cuisine developed, and a plethora of gourmet businesses sprang up. A restaurant will very certainly be your one-way ticket to success if you’re thinking of a business setup in Thailand.
However, the possibilities do not end there. The Foreign Business Act of 1999 made it possible for offshore firms and newcomers to profit from Thailand’s rich history. This regulation, which was established by His Majesty King Bhumibol Adulyadej, specifies the types of business, commercial, and industrial activities that a foreign national may engage in within Thailand. Historically, the state has been more conservative in its policies, but that changed when this law was passed.
Of course, the statute will always have limitations. To begin with, not all foreigners are free to start doing business right away. For their operations, they must first get a necessary licence. Second, certain businesses are completely closed to non-Thai nationals. These are some of them:
- Newspaper publishing
- Radio or television broadcasting
- Rice farming, arable farming, or orchard farming
- Growing livestock
- Forestry and wood processing from forests
- Fishery businesses related to marine life in Thai waters and the state’s economic zone
- Extraction and manufacturing of Thailand’s medicinal herbs
- Trading and auctioning of antiques that are of historical value to Thailand or made by Thai nationals
- Manufacturing or moulding of Buddha images and alms bowls
- Trading in real property
Noncompliance with these policies may result in a penalty. You could face a three-year prison sentence and/or a fine ranging from 100,000 to 1,000,000 Baht.
Types of Business Setup in Thailand for Foreigners
It’s critical to understand the different types of corporations that can be formed before launching a business in Thailand. The following are the most typical business structures:
Regional Office
A Thai regional office can only execute the following operations, according to the Foreign Business Act of 1999:
- Collaborating, coordinating, and directing on behalf of the main office
- The operation of branches and associates in the region
- Offering consulting and management services
- Training and employee advancement
- Financial management
- Marketing, advertising, and sales promotion planning
- Product development
- Research and development services
A foreign corporation must also have at least one operating branch office or associate in Asia, according to the law.
Branch Office
Branch Offices, unlike Regional Offices, have smaller borders under Thai legislation. They are permitted to make money through non-trading activities. Any liability stemming from business operations in Thailand, on the other hand, will not be limited inside the country. Such responsibility extends even to the corporate headquarters in another country.
If one or more of the office’s activities are covered by the FBA Act, you’ll need a Foreign Business License (FBL) to carry them out in Thailand.
Private Limited Company
A Thai private limited business, like any other limited company, goes through an incorporation process. You must submit paperwork such as a Memorandum of Association and Articles of Association when creating a business in Thailand under this category.
Public Limited Company
A minimum of 15 shareholder members or promoters is required when founding a public company in Thailand. The names of these people will be written down in the memorandum of association. Furthermore, before selling their shares to a third party, these promoters must keep them for at least two years.
A public limited company’s Board of Directors must have at least five members. It should be noted that at least half of the board members must be Thai nationals. Such business setup in Thailand has a registration price of around 2,000 Baht every one million baht of capital.
Asset Acquisition
A foreign business owner can not really buy assets in Thailand before the FBA passed legislation in 1997. However, you can now buy specific properties in a variety of methods.
Many foreigners use the procedure of forming a majority limited company in Thailand. If you choose this method, there are a few things you must do. To begin, create an agreement declaring that your Thai partner will relinquish his or her power of attorney to you. This letter of authorisation is used to purchase assets. Following that, you and your Thai companion should file a tax return. As joint owners of the property, you must pay administrative fees and taxes each year.
It’s important to know that utilising nominee shareholders and structuring joint ventures only for the purpose of owning property is illegal. As a result, under Thai law, such an offence is criminal. To avoid this, you should see a lawyer for advice on how to navigate the technicalities.
Alternatively, obtaining a 30-year lease on a home is another option. Once you’ve obtained the lease, you can extend it for up to 60 years. You’ll need a Thai companion to assist you, just like in the first method. He might then be able to help you out as a lessor.
Full Ownership of a Business Setup in Thailand
It’s a load of foolishness to believe that foreigners can’t entirely own a Thai company. It may be against the law, but it is still doable. Although the procedures are akin to walking a tightrope, if you’re serious about opening a business in Thailand, you can get through them.
There are three approaches to achieve this goal:
Obtain a Foreign Business License
A foreign business licence functions similarly to a work permit for businesses. Technically, it allows foreign companies to engage in some activities that are prohibited by law. The Thai government will be able to control the entry of foreign enterprises into the country in this way. In essence, it safeguards Thai citizens and their interests.
Board of Investment Promotion
The Thailand Board of Investment (BOI) is a Thai government department. It supports the state’s economic perspective by encouraging company start-ups and initiatives on feasible regions.
US-Thai Amity Treaty Company
The Treaty of Amity and Economic Relations between Thailand and the United States is a unique agreement between the two countries. It allows American corporations or entrepreneurs to hold a majority of a company’s shares or full ownership in Thailand. Naturally, this strategy is only available to citizens and businesses in the United States.
Visa Requirements
A non-immigrant ‘B’ or business visa is required to start a business in Thailand. This document allows you to conduct business in Thailand, including the formation of a corporation.
This visa can be applied for at a Royal Thai Embassy or a consulate in your home country. A single entry costs 2,000 Baht and is valid for three months. If you plan on staying longer, you must pay 5,000 Baht for additional entries good for one year.
Opening a Bank Account
If your firm is too small, a Thai bank is unlikely to issue you a checking account. When you first start your corporate account, you’ll simply have a savings account to withdraw money from. You will not receive an ATM card with your company account right away.
You must go to the bank with a withdrawal slip to open an account. Your signature and corporate stamp must be included on this slip. You may send a proxy as long as he is allowed to represent you.
Individual bank checks will be written up by the bank upon request. Clients are usually paid in cash or funds are deposited into their bank accounts. Keep in mind that getting a loan from a local bank is difficult. Even though you’re transferring money to Thailand, getting a loan from your home country bank may be more feasible.
Corporate Income Tax
Thailand, like almost every other country, has its own corporate income tax. This sort of tax is defined by Thai law as a direct levy on a company or partnership conducting business in Thailand. Even if you’re not a full-fledged business, you’re still liable for taxes as long as you’re earning money.
When launching a business in Thailand, there are several more types of corporate income taxes to consider:
- The rate of taxation on interest paid to corporations is 10%.
- A 10% withholding tax applies on royalties to corporations.
- All sources of business income have a tax rate of 1% by government agencies.
The Bottomline
Thailand is traditionally a desirable location for establishing a business. It is due to its strategic location in Southeast Asia, as well as its role as a gateway to other places.
Most critically, Thailand’s startup and tech industries are thriving. Big organisations have had interests in startups for a few years with plans for business setup in Thailand. Due to this, there is development in accelerators to help enterprises grow in a variety of sectors. These sectors include e-commerce, medical technology, and financial technology. Thailand is attracting investors and entrepreneurs who want to take advantage of its strategic location in the area and ease of doing business.
Are you thinking to set up a business in Thailand? Mail us at [email protected] for more information and guidance in the process which is out of the scope of this article. Konrad Legal is one of the premium full-service law firms in Bangkok specializing in Business Setup in Thailand for foreigners.
