COUNTRY

Thailand is a country located in the center of the Indochinese peninsula of Southeast Asia. Its official name is the “Kingdom of Thailand” and was formerly known as “Siam”.

Politically, Thailand is a constitutional monarchy with a democratically elected parliament. The prime minister is the head of government and leader of the majority political party. The king is the head of state exercising sovereign powers through the courts, cabinet, and the parliament as prescribed under the constitution.

Thailand faces the Andaman Sea and Myanmar to the west, Lao and Cambodia to the north and east, and Malaysia to the south. Bangkok is the largest metropolitan area, with a population of 9.27 million.

Thailand is one of the funding members of ASEAN, also member of WTO. Malaysia, Singapore, Vietnam, Cambodia, and Myanmar are all Thailand’s major exporting partners.

TAXATION

  • Headline tax rates: CIT 20%, PIT 0-35%, VAT 7%, WHT 15% (Interest, royalties) – 10% (Dividends)
  • Treaty Jurisdictions:

Major tax and non-tax incentives granted by the BOI include:

  • Exemption/reduction of import duties on machinery
  • Reduction of import duties for raw materials
  • 50% deduction of CIT
  • Permit to own land
  • No foreign currency control

BUSINESS

  • Suitable for: Manufacturing, Banking, Insurance, Trading Goods, Trading Financial, Property Ownership
  • Company Types: Limited companies, public limited companies, shareholding companies, general partnerships, limited partnerships, branches and sole proprietorships
  • Formation Cost: 300 – 700 USD$
  • Formation Time: 03 – 07 days
  • Maintenance cost: 1000 – 2000 USD$

INCORPORATION

There are clearly defined restrictions on foreigners who wish to establish a business in Thailand. The Foreign Business Act details out the industries in which foreign investors are prohibited to conduct business. Further, it specifies the industries in which foreign investors can establish business operations with special permission from the respective regulatory authority.

Partnership

Ordinary Partnership 

All partners are jointly and wholly liable for all obligations of the partnership. Ordinary Partnerships are twofold.

  • Non-registered Ordinary Partnership
  • Registered Partnership

Limited Partnership

Limited Partnerships are twofold.

  • One or more partners whose individual liability is limited to the amount of capital contributed to the Partnership
  • One or more partners are jointly and unlimitedly liable for all obligations of the Partnership

Features of Partnerships

1. Unregistered Ordinary Partnership

  • All partners are jointly liable for all obligations of the Partnership
  • Not registered with the Ministry of Commerce
  • Partnership pays taxes at the rates applicable to individuals
  • If the Partnership agreement does not specify the value attributable for services, the contribution is to be equal to the average shares from other partners who made contributions in the form of cash or property

2. Registered Ordinary Partnership

  • All partners are jointly liable for all obligations of the Partnership
  • Must be registered with the Registration Office at district level (based on the location of the Partnership) or at the Office of Business Registration Services, Ministry of Commerce (Bangkok)
  • A Partner’s liability for the Partnership’s obligations ceases two years after the Partner leaves the Partnership

3. Limited Partnership

  • One or more partners are jointly liable without any limitation for all the Partnership obligations
  • Obligations of one or more partners are limited to their contributions made to the Partnership
  • Must be registered with the Registration Office at district level (based on the location of the Partnership) or at the Office of Business Registration Services, Ministry of Commerce (Bangkok).
  • Partnership name should exclude names of Partners with limited liability
  • A limited partner can contribute cash &/or property
  • A limited partners cannot contribute only services
  • Can be managed only by partners with unlimited liability
  • A partner who engages in the management, becomes jointly liable, without any limitation on the Partnership’s obligations

Registration Procedure

Information required for a Partnership registration:

  • Name of Partnership
  • Objective of the Partnership
  • Location of the Head Office and/or Branches
  • Name, address, age, nationality and the occupation of the Partners
  • Name of Managing Partner (must be partner without limit)
  • Limitation of Managing Partners power
  • Partnership seal

Place of registration:

  • Head office is located in Bangkok – Central Business Registration Division, Department of Business Development or at any of the 7 Business Development Offices
  • Head office is located in other provinces – Provincial Business Development Office and can submit the request via www.dbd.go.th

Steps for registering a Partnership:

1. Reserve the Partnership name. Upon receiving approval for the name, request for the Partnership registration within 30 days.

2. Prepare the request for registration and submit to the Registrar (request form can be obtained from the Department of Business Development or any of the 7 Business Development Offices or the Provincial Business Development offices or can be downloaded via www.dbd.go.th)

3. Obtain the certificate of registered transactions (if required)

4. Receive the certificate of registration

Private Limited Company

Private Limited Companies in Thailand have the same basic characteristics as those in Western countries.  The most common form of establishing a corporate is to set up a Limited Liability Company.

Management

  • A Limited Liability Company will be managed by a Board of Directors.
  • The number of Directors is determined by the Shareholders’ meeting and there is no statutory minimum requirement.
  • Foreigners can be appointed as Directors
  • However, for companies which have received permission to conduct business under list 2 of the Foreign Business Act, at least two fifths of the Directors should be Thai nationals.
  • For a company established under the Thai-US Treaty majority of the Directors should be American or Thai nationals.

Investment capital requirements

There are no minimum or maximum share capital requirements

A minimum of three shareholders should be present at all times. Under certain circumstances a Private Limited Company may be fully owned by foreign nationals. However, for business activities restricted to Thai nationals under the Foreign Business Act, foreign participation is restricted to 49% of share capital. The 49% foreign ownership may exceed or maybe exempted if a Foreign Business License is granted. Minimum capital, transfer of technology and reporting requirements may vary based on the Foreign Business License.

Accounting/auditing requirements

  • Directors must arrange for an annual general meeting to obtain shareholder approval of the company’s audited financial statements within 4 months from the end of the fiscal year
  • Directors must file the audited financial statements, including the shareholder list to the Company Registrar within 1 month after holding the shareholders meeting.
  • Financial statements must be audited by and subject to the opinion of a certified auditor.

Steps that should be taken to register a Private Limited Company:

1. To establish a Private Limited Company there must be at least 3 promoters signing together in order to prepare and register the Memorandum of Association.

Initially a company name should be reserved. It takes up to 2-3 business days to reserve a company name. To reserve a company name, the company can either submit a signed Name Reservation form to the Department of Business Development of the Ministry of Commerce or fill in a Name Reservation form and submit it through the Department of Business Development’s website. Two alternative names should also be provided in case there is a conflict in the name selected by the company.

Upon receiving the shares, the director must register the company within 3 months from the date of the company’s first meeting.

Promoters should possess the following qualifications:

  • Be an ordinary person (should not be a juristic person)
  • Be at least 12 years of age
  • Must purchase at least 1 share

The following information is used to register the Memorandum of Association:

  • Company’s name (the name that was reserved)
  • Location of the head office (Province)
  • Objective of the company
  • Registered capital must be divided equally among all the shares (Share price per share must be at least 5 Baht)
  • Name, age, occupation, address and number of shares that the reserved
  • Name, age and address of two witnesses

2. Once the Memorandum is registered, the following actions must be taken.

  • Every promoter must purchase the reserved shares
  • Once all the shares are reserved, the promoters must hold a statutory meeting for all the subscribers.

3. Promoters shall handover the business to the Directors

4. Directors shall collect the share capital from the promoters and subscribers.

Such payment should be atleast 25% of the share capital.

5. Once the share capital collection is complete, the authorized Director must prepare the request for registration of company’s establishment and submit the form to the registrar. The request must be submitted to the registrar within 3 months from the date of the company’s statutory meeting.

If the following steps can be performed within the same day, then the promoter can prepare the Memorandum and the Director can register the Memorandum. Thus the company can be established on the same day.

  • All the shares that were reserved should be bought by the respective parties so that the company can be registered
  • Arrange a statutory meeting to establish the company according to the Civil and Commercial code
  • Personnel who set up the company shall assign all affairs to the Director
  • Director should request the personnel who reserve to buy shares and pay such funds according to the Civil and Commercial code 1110.

Registration

Registration is twofold.

  • Registering the Memorandum
  • Registering the establishment

 Registration procedure

 To register the establishment, the personnel who set up the company or the company’s director shall request to verify and reserve the company’s name. Upon reserving the name, a request for the registration of memorandum of association will be submitted within 30 days by reserving the name in person or via www.dbd.go.th

  • Prepare the request for registration and other attachments and submit to the Registrar
  • Pay the fee
  • Obtain the certificate of registered transactions
  • Receive the certificate of registration

Time restrictions for setting up a Limited Liability Company

  • Request for registering the company’s establishment-must be submitted within 3 months from the date of the company’s establishment
  • Request for registering new directors-must be submitted within 14 days from the appointment of the directors

Fees for registering a Limited Liability Company

  • Registering the Memorandum of Association 500 – 25,000 Baht
  • Register the establishment 5,000 – 250,000 Baht
  • Registering for tax documents: A tax ID card and a number must be obtained from the Revenue Department within 60 days from the date of incorporation. For foreign companies, a tax ID card and a number must be obtained from the date it initiates business activities in Thailand.
  • Registering for an employer account under the Social Security Act: An employer account must be established within 30 days from the start of employment. The registration process would normally take 1 day.

Public Limited Company

Investment capital requirements

  • There is no minimum capital requirement. However, each share must have the same par value
  • The Promoters must subscribe to at least 5% of the total share capital and must maintain such shares for 2 years from the date of registration
  • The Securities and Exchange Commission (SEC), compliant with the SEC Act, is responsible for approving the offering of shares and supervision of the Stock Exchange of Thailand (SET)

Management

  • Must have at least 5 Directors and at least half of the Board of Directors must have a registered address in Thailand.
  • At least 50% of the Promoters must be residents of Thailand.
  • A Limited Liability Company will be managed by a Board of Directors.
  • Foreigners can be appointed as Directors
  • For companies which have received permission to conduct business under list 2 of the Foreign Business Act, at least two fifths of the Directors should be Thai nationals.
  • For a company established under the Thai-US Treaty, majority of the Directors should be American or Thai nationals.

Accounting/auditing requirements

  • Directors must arrange for an annual general meeting to obtain shareholder approval of the company’s audited financial statements within 4 months from the end of the fiscal year
  • Directors must file the audited financial statements, including the shareholder list to the Company Registrar within 1 month after holding the shareholders meeting.
  • Directors should publish the balance sheet in a newspaper (public media) for at least 1 day within 1 month from the date on which it was approved at the Shareholders’ meeting.
  • Financial statements must be audited by and subject to the opinion of a certified auditor.

Incorporation process

Corporate name reservation

To reserve a company name, the company can either submit a signed Name Reservation form to the Department of Business Development of the Ministry of Commerce or fill in a Name Reservation form and submit it through the Department of Business Development’s website. Two alternative names should also be provided in case there is a conflict in the name selected by the company.

It takes up to 2-3 business days to reserve a company name.

Once the selected company name is approved, the corporate name reservation will be valid for 30 days.

File a Memorandum of Association (MOA)

After the name reservation has been approved, the MOA must be submitted to the Department of Business Development of the Ministry of Commerce.

For a Public Limited Company the MOA must include at least the name of the company, purpose of the company, province in which the company will be located, registered capital, number of share, and the names, date of birth nationalities and addresses of the promoters and the number of shares each of the promoters has subscribed.

There must be at least 15 promoters to register the MOA and prepare the prospectus to buy all the shares specified by the MOA. Promoters should be at least 20 years of age. The promoters of Public Limited Company must be among the company’s initial shareholders.

Convene a statutory meeting

Once the shares subscribed reaches the number specified by the prospectus (not less than 50% specified by the Memorandum of Association) a statutory meeting should be convened. The following would be determined during the meeting.

  • Adoption of Articles of Association
  • Ratify any contracts entered into and expenses incurred by the promoters
  • Finalise the remuneration, if any, to be paid to the promoters
  • Finalise the number of shares, if any, to be issued
  • Finalise the number of ordinary or preference shares to be allotted as fully paid or partly paid up capital
  • Appointment of the initial directors and auditors

After the statutory meeting, the promoters should hand over all business matters to the directors of the company.

Registration

Within 3 months after holding the statutory meeting, the directors must register the company.

Time restrictions for setting up a Public Limited Liability Company

  • Submit the prospectus to the registrar within 15 days from the date the prospectus is submitted to the Securities and Exchange Commission.
  • Promoters should convene a statutory meeting when the number of subscribed share has reached the number specified in the prospectus (must not be less than 50% of the number of shares in the MOA) within 2 months from the date on which the subscribed number of shares  reach the specified number and no later than 6 months from the date on which the MOA is registered.
  • Board of Directors should request  for the company’s registration within 3 months from the date of establishing the company

Fees for registering a Public Limited Liability Company

  • Registering the Memorandum of Association 1,000 – 25,000 Baht
  • Register the establishment 1,000 – 250,000 Baht

However, if the company is specified as “foreign” under the Foreign Business Act, the following rules shall apply

  • Engages in business activities specified by the Foreign Business Act, the minimum registered business capital would be greater than 25% of the estimated average annual operating expenses, calculated over a 3 year period, and not less than 3 million Baht.
  • If the company does not engage in activities specified by the Foreign Business Act, minimum registered capital should be 2 million Baht.

Registering for tax documents

A tax ID card and a number must be obtained from the Revenue Department within 60 days from the date of incorporation. For foreign companies, a tax ID card and a number must be obtained from the date it initiates business activities in Thailand.

Registering for an employer account under the Social Security Act

An employer account must be established within 30 days from the start of employment. The registration process would normally take 1 day.

Branch

Foreign companies may carry out business operations in Thailand through a branch office. Such branch offices are subject to legal and tax regulations in Thailand. There is no special requirement for foreign companies to register their foreign branches in Thailand to carryout business operations. However, most business activities must adhere to the respective regulations (VAT registration, taxpayer identification card, Commercial Registration Certificate, Foreign Business License etc.)

Branches of Foreign Companies are considered as foreign entities and maybe required to apply for a Foreign Business License under the Foreign Business Act.

Investment capital requirements

Minimum investment capital must be greater than 25% of the estimated average annual operating expenses calculated over a 3 year period, but not less than 3 million Baht.

Once the Branch Office receives approval to commence business operations, the minimum capital must be remitted to Thailand for the commencement of business operations.

  • First 25% of minimum investment within first 3 months
  • Another 25% of minimum investment within first year
  • Another 25% of minimum investment within second year
  • Last 25% of minimum investment within third year

Management

At least one person responsible for operating business operations in Thailand must be domiciled in Thailand.

Accounting/auditing requirements

  • Branch office is required to maintain accounts only relating to the branch in Thailand.
  • Accounts and financial statements must be prepared to submit to the Department of Business Development for each accounting period.
  • The Manager must submit a copy of the financial statements to the Registrar no later than 150 days from the end of the fiscal year. Approval of the shareholders is not required.
  • Financial statements must be audited by and subject to the opinion of a certified auditor
  • Audited financial statements certified by an authorized auditor should be submitted to the Revenue Department and to the Commercial Registrar for each accounting period.

Auditing requirements specify that audited financial statements of juristic companies must be certified by an authorized auditor and be submitted to the Revenue Department and to the Commercial Registrar for each accounting year.

Tax regulations:

  • Branch is subject to Thai corporate tax of 20% on income derived from its business operations in Thailand
  • Must apply for a tax payer identification card and VAT certificate (if required)
  • Must file annual corporate income tax returns with the Revenue Department

Requirements to carry out reserved business activities:

  • Obtain a foreign business license
  • Adhere to minimum capital requirements, transfer of technology and reporting requirements attached to the Foreign Business License.

Fees for registering a Branch of a Foreign Company

  • Application fee 2,000 Baht
  • Government fee 20,000 – 250, 000 Baht

Representative Office

Must have the following 3 characteristics:

  • Established in accordance with the Foreign Law with an office in Thailand to operate the services to the head office or the affiliated company or the group of companies in foreign countries
  • Provides services to the head office, affiliated company or group of companies without receiving income for the services rendered. However, a Representative Office can receive funds to cover expenses.
  • Has no authority to receive purchase orders or to offer for sale or to negotiate business deals with any person or juristic person.

Scope of business activities should be limited to the following 5 categories.

  • Locating sources of goods and services in Thailand on behalf of the head office
  • Managing quantities of goods purchased in Thailand by the head office
  • Providing advice and assistance relevant to goods and services sold to agents or consumers in Thailand
  • Disseminating information on new goods and services to the head office
  • Reporting on Business developments in Thailand to the head office

Investment capital requirements

Minimum investment capital must not be less than 25% of the estimated average annual operating expenses calculated over 3 years, but not less than 3 million Baht.

Requirements to remit minimum capital are as follows.

  • First 25% of minimum investment within first 3 months
  • Another 25% of minimum investment within first year
  • Another 25% of minimum investment within second year
  • Last 25% of minimum investment within third year

Management

At least one person responsible for operating business operations in Thailand must be domiciled in Thailand.

Fees for registering a Representative Office of a Foreign Company

  • Application fee 2,000 Baht
  • Government fee 20,000 – 250, 000 Baht

Tax regulations        

  • Obtain a corporate tax identification number
  • Submit income tax returns to the Revenue Department and Department of Business Development
  • All individuals and local staff must obtain taxpayer cards

A representative office is not subject to Thai taxation since such representative office is understood to be receiving a subsidy from the head office to meet its expenses in Thailand and such gross receipts are not classified as revenue to be included in arriving at income tax payable by a juristic person.