With over 38 million workers, government support and the 2nd largest economy in ASEAN, Thailand remains an attractive destination for investors.
Promising economy: Thailand has demonstrated remarkable economic progress, at +21% in foreign direct investment (FDI), a huge success compared to global FDI at 0.7% over the same period and has shown strong economic resilience during the Covid-19 crisis.
Steady export growth: Thanks to the growth in exports and the thriving tourism industry (over 30 million tourists per year), Thailand has achieved a record current account surplus, equivalent to USD 48.2 billion in 2017 and this record is expected to be largely broken once the country reopens.
Lower cost, better quality of life: Thailand offers foreign investors many privileges, from 20% corporate income tax to quality office space at the best prices in the Asia-Pacific.
Thailand ranks 21st (out of 190 countries) according to the 2021 “Doing Business” business environment report listed by the World Bank.
Starting a business: Thailand has abolished the rule that requires the company to obtain a business stamp before it is established. Moreover, there will no longer be a need for the Department of Labor to validate the company’s internal regulations. All this makes it possible to establish a company in 4.5 days instead of 27.5 days.
Thailand’s Eastern Economic Corridor: EEC offers attractive business opportunities to foreign investors.
Now that you know why you should invest in the region, let find out how to register your company in Thailand in just a few steps. It is essential to follow these recommendations in order to avoid difficulties when registering your company or when expanding your business.
Before creating a company in Thailand, you must be sure that the business activity does not require specific authorization or licenses to have the right to operate in Thailand. Some activities are also prohibited to foreigners by the Thai law. It is therefore recommended to contact a legal expert before starting the Thailand company registration process.
The company name must be reserved with the Ministry of Commerce. Then, you need to confirm the reservation within 30 days with the name of the company director and his signature. Note that it is possible to extend this period.
In Thailand, it is mandatory to have an address to register a Thai company. Address information and a map must be added to the registration documents. Note that if you own or rent a condominium, it is not possible to use this address for company registration. However, we recommend that you use a virtual office address if you want to reduce the cost to start your business.
The MOA is an agreement made by the founders of the company that must be submitted to the Department of Business Development (DBD). It must includes the name of the company, the address of the registered office, the objectives of the company, the registered capital, the statement of liability of the shareholders, the information of the founders (at least three natural persons, no corporations).
The statutory meeting can be held once the MOA has been registered. The shareholders will meet to approve the expenses or remuneration of the promoters, the type of shares (ordinary or preference), the appointment of directors and auditor, and the fiscal year. Resolutions of the statutory meeting will be valid only if they are passed by a majority, including at least half of the total number of subscribers eligible to vote.
The application for Thailand company registration must be filed no later than three months after the date of the statutory meeting, or you will have to provide an explanation for the delay. The director of the company will also have to sign a declaration that each shareholder has paid the subscription for shares.
Once your company has been registered and within 60 days of incorporation, you will need to apply for a corporate tax ID card from the Revenue Department. A company that recruits one or more employees must register with the Social Security Office within 30 days of employing their first worker. Foreign nationals legally working in Thailand must also be registered with the Social Security Office and are eligible for the same advantages as Thai workers.
Apply for a non-immigrant business visa and Work Permit to work legally in Thailand. Your initial visa was for 90 days, but following your work permit application, it can be extended. To do so, you must provide your information and the company’s information, including VAT and Social Security Fund.
There are several business structures that foreign investors can opt for if they are interested in setting up a company in Thailand. Contact Themis Partner to assist you with the Thailand company registration process.
A Private Limited Company is established with the Department of Business Development (DBD), which is controlled by the Ministry of Commerce. The structure of a private LLC must include at least 3 shareholders who have limited liability equal to the value of their shares. Directors have no special liability for the company’s debts in the event of liquidation or bankruptcy, unless they are personally at fault, acting against the company’s objectives, or in violation of the law.
In order to incorporate a Public Limited Company, the investor must explain the objective of public offering of shares and the limit of shareholders’ liability in the articles of association. At least 15 shareholders are required to submit an application to establish a public limited company, and each shareholder must own at least 5% of the total shares. Moreover, at least 50% of the shareholders must be Thai residents.
The activity starts when the Thailand company registration procedures are completed, which is the same as the registration of a private limited company. In the next phase, the number of shareholders must be maintained at or above 15. If the LLC maintains its legal requirements, it will be allowed to be listed on the Thai Stock Exchange.
If a foreigner is a managing partner of a Limited Partnership, he/she can hold up to 49% of the shares and must obtain a valid non-immigrant business visa and work permit. However, a foreign business license is required if the foreign partner makes more than 49% of the investment. There are two types of partners:
➤ Partners who are jointly and severally liable for all obligations of the partnership. They can act as managing partners.
➤ Partners with limited liability whose contributions must be made in money or other material assets. The liability of each partner is limited to the amount contributed to the company.
A foreign company wishing to set up a company and have an economic activity in Thailand can consider the branch office to develop locally. The subsidiary has the same status and the same responsibilities as the foreign company which holds it. It is thus subjected to certain restriction as stipulated in the Foreign Enterprise Act (FEA). The branch office must also have at least one director running the operations in Thailand.
Foreign companies may choose not to register a branch. In this case, if the company activities fall within a category limited by the FEA, the company will have to apply for a foreign business license. It may also need to make specific registrations to comply with Thai laws and regulations, such as VAT registration, taxpayer identification card and business registration certificate requirement.
Before starting Thailand company registration process, a foreign company can explore the market in Thailand by establishing a limited presence in the country with a Representative Office. The purpose of an RO is limited to non-profit tasks. The activities of a RO cannot generate income, receive a purchase requisition, sign a sales and purchase contract or negotiate business contracts with anyone.
The representative office can only source local goods and services in Thailand, writing reports, and communicating with customers on behalf of the head office. Foreign investors must obtain a FBL Foreign Business License before establishing a representative office in Thailand.
If foreigners own 50% or more of the company’s shares, the company is considered foreign. A foreigner can also own 100% of the shares of a company in Thailand under certain conditions:
1. Purpose of manufacture: The purpose of the company is limited to the manufacture of products not prohibited by the Foreign Enterprise Act. Foreigners are allowed to own 100% of the shares. The company is then also allowed to distribute its products in the Thai market.
2. Import/Export business: Foreigners can also own up to 100% of the shares if the company is limited to importing/exporting goods.
3. Hotel Management: Foreigners can own 100% of the shares of a company whose sole business is hotel management.
4. Promotion of the Board of Investment: The Board of Investment (BOI) is a government agency that aims to promote valuable investments. The BOI grants tax and non-tax benefits to various projects considered beneficial to the development of the Kingdom of Thailand. If the BOI promotes the project, there is no limit to foreign business ownership. Foreigners can hold 100% of the shares when applying for Thailand company registration.
In addition, under certain conditions, several attractive incentives are available for BOI company, including:
|➤ Exemption from corporate income tax for up to 13 years.|
|➤ 50% reduction in corporate income tax.|
|➤ Exemption/reduction of import duties on machinery, and raw or essential materials raw or essential materials.|
|➤ Deduction of installation or construction costs of equipment.|
|➤ Land ownership rights for foreign investors.|
|➤ Facilitation of the arrival of foreign experts and technicians to work in the activities in the activities promoted by the investment|
|➤ Facilitation of the entry of foreign nationals in order to study Thailand investment opportunities.|
|➤ Providing SMART visa to highly qualified foreigners|
5. U.S. Treaty of Amity: U.S. citizens enjoy a privileged status by owning most of the shares of a Thai company and having the right to hold sole ownership of the Thai company.
6. Thailand-Australia Free Trade Agreement: Australian citizens also enjoy preferential treatment for certain businesses. In the case of the registration of partnerships and limited liability companies in which foreign partners or shareholders invest or hold shares equal to 40% or more of the registered capital (but less than 50%) or have a foreigner as an authorized director, all Thai partners or shareholders must submit documents indicating the source of funds for the investment or shareholding of each partner or shareholder.
A Royal decree dating from 1979 and still in force to this day, establishes a ban on the access of foreign workers to a list of 39 professions mainly from the handicraft and legal sectors. Here is the complete list of the professions forbidden to the foreign workers in Thailand:
|Manual work||Occupation in the field of agriculture, fishing and forestry|
|Trades in the field of construction||Wood carver|
|Vehicles driver||Street vendors|
|Trades in the field of auctioneering||Trades in the field of accounting|
|Working with precious and semi-precious stones||Hairdressing and aesthetics|
|Hand weaver||Working with straw, bamboo, rattan and reed|
|Rice paper maker||Lacquering|
|Thai musical instrument making||Goldsmith|
|All stone work||Thai doll making|
|Upholsterer and matelassier||Alms bowl making|
|Making silk products||Buddha making|
|Knife maker||Making umbrellas|
|Broker||civil engineering trades|
|Manufacture of clothing||Manufacture of ceramic pots|
|Cigarette maker||Tourist guide or tour operator|
|Peddling goods||Thai composition|
|Silk work||Secretary or clerical jobs|
|Legal professions and services|
The restrictions are based on the fact that Western culture is very different from Thai culture. Therefore, the government considers that handicrafts and manual occupations and those that must meet the standards of Thai customs, traditional skills and social practices are not suitable for foreigners.
In addition, this ban is also intended to preserve the order and organization of the country to work in Thailand. It is also to counteract the globalization which represents a real threat to the Asian culture.
The Private Limited Company is currently the most used Thailand legal structure by foreign investors because of its flexibility and regulation. Indeed, this company allows each shareholder to be protected concerning the invested amount, and the process of company registration for LLC is relatively fast and simple if a Bangkok lawyer guides you. This company allows foreigners to own up to 49% of the company in Thailand.
In Thailand, a limited liability company must pay taxes as follows:
1. Corporate income tax: This tax is at the rate of 20% of net income from or related to business activities in Thailand. Lower tax rates apply to small and medium enterprises (SMEs):
|0 - 300,000 THB||Exempted||300,000 THB - 3,000,000 THB||15%||3,000,000 THB and above||20%|
2. Value Added Tax (VAT): If the company’s annual income exceeds 1,800,000 Thai baht, it must register for the value added tax (VAT) system.
3. Withholding Tax: This tax applies to the transfer of profits outside and inside Thailand.
In general, the board of directors directs the rules of the corporation, which it elects by resolution of the meeting. The board of directors is also empowered by law and by the company’s articles of association. Foreigners can be directors as well as the managing director. The managing director is appointed to manage the day-to-day operations since the first day of the Thailand company registration or since the change of the company director. A plurality of members of the board of directors must elect a chairman for each meeting or for a fixed term. If the chairperson owns most or a significant number of shares, he or she is called the “president”. The chairperson has only one vote on the board of directors, like all other members. He may also have a casting vote if necessary. In addition, the bylaws may contain provisions regarding the signing authority of directors.
A shareholder of a company in Thailand can receive dividends, request an extraordinary meeting, control the company’s finances or get the right to sue for damages since the first day of the Thailand company registration or since the change of the company shareholder.
➤ Shareholders holding more than 75% of the voting rights have absolute control over all decisions to be made at the shareholders’ meetings.
➤ Shareholders holding less than 75%: need the agreement of the other shareholders to pass special resolutions.