Setting a Business in Thailand

Registering a company in Thailand is more complicated than in many other countries due to the restrictions on foreign ownership. There are ways to protect the foreign interest when setting up the company, and so you are best advised to consult with a law firm before set up to make sure you are proceeding in a way that gives you security, and provides the best structure going forward.

Key questions that can influence how you decide to setup your Thai company include the following:

  • What are the main business activities of the company?
  • Is there a foreign parent company with shareholding requirements?
  • Does the Thai company need to sponsor visas and work permits for foreign personnel?
  • Are there going to be Thai staff working full-time and registered with social security?
  • What premises does the company require?
  • What business licensing is required to cover the business objectives?

Why not take advantage of a FREE consultation regarding your company setup with ATA Services’ business consultants?

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In most cases, a straightforward limited company registration meets the business needs well, but there are other alternatives, including Representative Office, Branch Office, etc., which are listed below.

A limited company in Thailand is treated as a juristic person. As such, the shareholders are limited in their liability to the amount of capital put into the business, provided that the company is operating within the scope of its registered objectives, and the shareholders have not authorized unlawful activity.

To set up a company limited in Thailand, there are five critical considerations:

1- Shareholders

There must be a minimum of three promoters – these can be Thai or foreigner, in any mix, but must be natural persons. These promoters are often also the shareholders, but not necessarily so. While promoters must be natural persons, shareholders can be other companies, but there must also be a minimum of three. Generally 51% of the shares must be Thai owned, but there are exceptions (below). Even if 51% of the shares are Thai owned, ATA Services can structure the company for you so that the foreign 49% maintains complete control of the company, its dividends and share transfers. Ask us to explain how this is done.

2- Directors

The company must have at least 1 authorised director who will sign documents on behalf of the company. There can be more than one authorised director, and the signing conditions can require more than one signature ­– it is up to you. The authorised director(s) can be Thai or foreign, but some business licensing, for example Tourism Authority of Thailand (TAT), requires a Thai director. A foreign director signing on behalf of the company normally will require a work permit and visa.

3- Minimum capital

The company needs to register its capital when it is created, although this can be increased later for a small fee. You do not need to show the money as paid up at the time of company registration, but it will need to be included in your forst annual report. You should capitalise the company according to how much it will cost you to get the company cash positive. What this amount is depends on your business plan, However, the minimum capital in order to sponsor a work permit for a foreigner is 2m Baht per person, and this should be 100% paid up. If this is a hardship for your start up business in Thailand, talk to us about possible solutions.

4- Business objectives

You should advise your law firm of all your company objectives prior to registration. These objectives are in reality a statement of business activity, e.g. exporting of dried banana, and you should have a statement for each activity. Your law firm can then advise you accurately on any restrictions or licensing that may apply. ATA Services will give you this advice for free in an initial consultation.

5- Registered office

The company will need a commercial (not residential) address when registering. ATA Services provides virtual office solutions and flexible physical offices at our two Bangkok business centres if you need a starting point. Once the company employs Thai nationals (a requirement for sponsoring a work permit), a suitable physical office is required to register them for Social Security – the office will be inspected! Some business activities requiring licenses need the registered office to meet additional requirements. Whatever office you require, the land owner must be willing to provide signed copies of ownership documentation if your company needs to register for VAT with the Revenue Dept. As we own our business centres, ATA Services readily makes available the necessary documentation.

You are strongly advised to consult with a commercial law firm, who is experienced at setting up all kinds of business, prior to registering the company to explain your needs. While things can be ‘fixed later’, it is important that you have a full understanding of the issues, requirements, costs and options from the outset. Foreigners particularly need advice on the structuring of their company in order to protect their investments. Take advantage of our free consultation.

Company registration process

1- A short meeting –We would like to have a short meeting with the client to make sure all the variables have been explained and that there is a clear understanding on registration process, business objective, legal risk.

2- Name reservation – All companies will have Company Limited / Co., Ltd. added to the English name – this is mandatory. We do not know if the name will be accepted by the DBD until we submit the application – it is a manual decision by a DBD officer, and the an English name is sometimes rejected because of the way it appears in Thai transliteration. Thus, we ask for options in case the first choice is not available or rejected. The name can be given in English or Thai.

3- Get your company information – We provide you a questionnaire with explanations and a list of the documents you will need to provide us. Remember that in Thailand photographs of documents are never accepted – you must copy/scan on plain backgrounds at actual size. Also, signatures are required in ink (no scans of signatures), so that any shareholder outside of Thailand will need to courier/mail the documents back to us.

4- Submit the application – the submission and approval is completed in one full working day after receiving all the signed documents from the client. You can start your business using the company as soon as this registration is complete, provided you do not require specific licenses.

5- We prepare the bank document bundle for you to open a corporate bank account within Thailand. This is usually ready one working day after the company is registered. Note that if the director is a foreigner, some banks/branches require a work permit. We can suggest branches where this is not required.

Company setup options in Thailand

Partnership

is a very common juristic person, with a minimum of two persons. It can be registered with unlimited liability (ordinary partnership) or limited liability (limited partnership). This arrangement is not recommended to foreigners due to both the complexity and reluctance for officials to recognize it.

Branch Office

Unlike an RO, a registered branch office of a foreign company can invoice. However, as it is a foreign owned trading business it does require specific licensing and approval – a process that is lengthy and costly. As a branch office has no shareholders, the head office becomes liable for all activities of the Thailand branch office.

Amity Company

US persons (natural or juristic) can be majority shareholders in a Thai limited company. This requires additional procedures and documentation, slowing down the process, but licensing is granted provided the business is not restricted under foreign business law.

Representative Office

A foreign company can consider opening a representative office (RO). This can save costs and legal ownership complications, as a Thai partner is not required. An RO can sponsor work permits for up to two foreign staff. The head office needs to send funds to Thailand to cover the RO’s expenses, e.g. rent, salaries, etc. The downside to an RO is that it cannot invoice. It can support the business activities of head office, but the invoicing and payment must be handled by head office.

Foreign owned limited company

This is the same as a Thai limited company but with a majority of shares foreign owned. You can register this business, but you cannot trade until obtaining a Foreign Business License, which involves providing evidence that the company does not fall within the list of restricted activities and that it will provide benefit to Thai society and economy. The process can take 3-6 months, and the outcome is not guaranteed.

Board of Investment (BOI) promoted company

The BOI allows Thai limited companies to be foreign owned if the activities fall within the list of businesses it is willing to promote. BOI certification comes with a range of benefits in addition to foreign ownership, including tax relief and granting of multiple work permits and visas. The process is relatively complicated and involves one or more interviews with company directors. Contact us if you want to know whether your business falls within BOI promotion.

Thai Limited Company

As explained above, this is the most common business type in Thailand for locals and foreigners. This type of business structure is reliable, secured, and easy. The Thai Limited Company is very similar to other business structures in your home country with shareholders, directors, and other considerations… A Thai Limited Company may need licenses to work in certain sectors.

Other essential information before setting up a business

Value Added Tax registration – When you company has more than 1.8 million in revenue in one financial year, you are required to register with the Revenue Dept. for Value Added Tax (VAT), but you can also register immediately to have your company in the Revenue Department record, so that you can offset VAT paid against VAT charged. The VAT rate is 7% and monthly reports need to be submitted and paid. The monthly report is called a PP30, and it is one of the documents required to get your Visa and Work permit.

Corporate income tax – In Thailand companies can choose their financial year, so that if you register the company in the month of September, your financial year can be September 1st to August 31st. At the end of the financial year, a report must be prepared and submitted for tax payment. The corporate income tax is calculated thus:

Gross Profit (THB)Tax Rate
Not more than 300,000Exempt
More than 300,000 but not greater than 3,000,00015%
More than 3,000,00020%

For executives on high salaries, corporate income tax can be a lot lower than personal income tax, which, for example, can be as high as 35% on an income of THB 5m.

Withholding tax – Every payment the company makes requires that 3-5% withholding tax be deducted on transactions within Thailand. Foreign companies submitting invoices will also be deducted withholding tax, and this can be a much higher rate on service contracts. When you deduct you have to report and submit that money to the Revenue Department. Your Thai supplier can claim it at the end of the year, and foreign suppliers in countries with dual-taxation agreements can also offset against income tax.

Social Security Fund – When the company has an employee, the company and the employee must register in the social security system within 15 days after starting. Also, the company must report all the resignations and terminations of employees within 15 days from the end of contract. When you pay salaries to employees, you have to make deductions and report to Social Security Office (SSO) monthly. The company matches the employee contribution. ATA Services can help you with payroll services and do the reporting for you. Directors cannot register in the SSO system. Sponsoring a work permit and visa for a foreigner requires four Thai employees registered in the SSO per foreigner.

Accounting – A company must do accounting, even if trading is zero. At the very least and annual audit is required, which must be done by a registered Thai CPA. When your company is registered for VAT, has transactions of payments or has employees, the accounting need to be completed every month and a tax report submitted to the Revenue Department – without accounting you cannot calculate the tax. ATA Services offers full accounting services.

Intellectual Property (IP) – In Thailand there are three main types of IP protection, which are copyright, Patent, and Trademark. Only Patent and Trademark can be registered. Copyright cannot be registered, but you can notify the DIP. To register your trademark, the trademark needs to match the numerous conditions under Thai Trademark Law, and must not be similar to any previously registered. The process takes a least 3-6 months when no one objects, but if someone does object, the process can take more than a year because you have to fight to get the trademark. Note that tradenames cannot be registered in Thailand – this is something to consider when deciding your company name. If the name of the company contains your trade name, then you have protection from others using it in Thailand.

Legal protection and Compliance – In Thailand, there are more than 1000 statutes and thousands of regulations regulating a business. You will require a comercial lawyer who understands your business, can advise you and can represent you. Make an appointment today to get to know our lawyers at ATA Services.

Labour matters – Labour protection law in Thailand has peculiarities you may not be aware of. You should always consult with a lawyer on calculation of commission payments, overtime, severance pay and termination procedures. Let ATA Services help you draft your statutory work regulation documents and advise you on employee negotiations.

Dissolution of a company – The process of closing a company is long and complicated – you will certainly need to visit a lawyer and accountant. The lawyer will work on your documents and applications to dissolve your company. In the case that you never submitted the financial report, you need to pay the fine and submit all previous report sign by an auditor. Then, the accountant will make your balance sheet on your dissolution date, pay any debt to creditors, because all debt needs to be cleared, including debt owed to the Revenue Department and Social Security Office. You have to cancel your VAT registration, SSO registration and any licenses, and finally close the bank account. In the case that the company has money, payment will go to the shareholders according to the share structure.

Speak to our team!

ATA Services has the experience and expertise to set up any type of business in Thailand. Contact us for free advice on the best way to proceed.

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