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Opening a production company in Thailand.
The first important attraction of opening a production company in Thailand is the opportunity to use the developed infrastructure. The country has excellent technological equipment, developed transportation systems, including modern highways, railways, ports. This ensures the swift delivery of goods and services both within the country and to the neighboring territories. Furthermore, Thailand is characterized by a stable energy supply. Steady electricity and telecommunications network enable business owners to operate smoothly and avoid risks. The next powerful incentive for such decision making is the use of the skilled workforce by foreign investors.
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What are the BOI’s advantages for production companies ?
The Board of Investment of Thailand offers a wide range of advantages and incentives to encourage investment in the manufacturing sector. Some of the most critical benefits for factories include:
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Tax incentives : depending on the specific industry category and the factory’s location, BOI promotions may offer exemptions or reductions in corporate income tax for a certain number of years. It will reduce the tax burden for the businesses and, as a result, increase their profitability.
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Import duty exemptions : a factory that is granted a BOI promotion may be eligible for exemptions or reductions on import duties for machinery, raw materials, and other components necessary for manufacturing. It will reduce the cost associated with setting up and opening a new production company.
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Foreign ownership : for most incorporated businesses in Thailand, foreign ownership is limited to 49% of total shares of the company. However, thanks to BOI promotions, foreign ownership can be extended to 100%, giving the investors the ability to have complete control over their operations.
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Land ownership : the vast majority of foreigners are not allowed to buy land in Thailand, with a few exceptions. However, BOI promotions may grant special rights to foreign investors to acquire the land necessary to open a production company.
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Visa and work permit facilitation : a company promoted by BOI will receive special assistance in obtaining visas and work permit for foreign executives and skilled workers. It will be easier for the businesses to bring international talent to guide their operations.
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Non-tax incentives : BOI may also provide other non-tax incentives, such as the right to repatriate profits, the permission to export the product duty-free, and the simplification and acceleration of the procedures to obtain licenses and permits.
It is important to know that the benefits and conditions may vary depending on the industry and the type of BOI promotion. A company should carefully study the BOI’s guidelines and may consult with legal and business experts from our law firm Benoit&Partners to get a complete understanding of what incentives are available to the said type of business.
What are the requirements for foreign ownership in Thailand ?
Foreign Business Act and other related laws govern foreign ownership in Thailand. Here are some highlights regarding the same:
Foreign Business Act : Certain business activities cannot be done by a foreign-owned company under the Foreign Business Act. A business activity is classified as List 1, List 2, or List 3. If the major part of the business is owned by Thais, the activity is classified as List 1. An activity is classified as List 2 if it is entitled to foreign participation but the Thai government may impose conditions. If an activity is classified as List 3, it is entitled to foreign involvement with a specific mandate.
Limitation of Shares : Foreign investors are permitted to hold no more than 49% of company shares in Thailand. Thai nationals are required to hold no less than 51% of the total shares.
Investment Promotion by BOI : By grant of BOI promotion to your company, you may be entitled to certain privileges even if you fall under the principle restriction of the Foreign Business Act. You will be entitled to own business premises or land in the name of the company, and ownership of your company may be 100% foreign-held.
US-Thai Amity Treaty Rights : Under the US-Thai Amity Treaty, US citizens and US-owned companies in Thailand may be owned by Americans 100%, subject to certain limitations.
Land Ownership by Foreigners : With a few exceptions, foreigners are not entitled to land ownership. Foreigners may be granted leases or may own buildings and condominium units. There are also some exceptions, such as a company registered in Thailand being allowed to own land.
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What types of licenses and permits are required for opening a production company ?
It is vital to note that the types of licenses and permits required for opening a production company in Thailand will depend; the nature of the business, the industry, and the routine. Here is a list of some of the standard licenses and permits that may be required for the manufacturing or production business:
Factory License : a production company that involves manufacturing processes or industrial activities may require applying for a factory License from the Industrial Works Department or the provincial authority.
Import/Export Fallacies : when the production company imports the raw materials, components or machinery and exports the final goods, it may require an import license or export license from the Thailand Revenue Department
Environmental License : a production company which possibly affects the environment may require an environmental license or permit from the Natural Resources and Environmental Policy and Planning Office or the relevant provincial authority
Occupational Safety and Health Certificate : a production company that involves its tasks to put at risk the employee’s health and safety may require an occupational safety and health certificate. The certificate is applied in the Department of Labor Protection and Welfare or the relevant provincial authority
Land Use Permit : a production company with a specific type of land use such as industrial or commercial from a local municipality or the provincial authority
Building Construction Permit : a production company that builds or modify a building may require building or construction permits.
BOI Promotion : if the business license including BOI promotion , a company with a BOI promotion must apply the BOI incentives separately. This will have to apply to the BOI office and meeting their requirements of licensure.
It is evident that the requirements for licensing and permitting are location, size, and nature. It is highly recommendable to seek consultation from our law firm Benoit&Partners and more also the knowledgeable government authorities to be fully conversant with the requirements and license permit.