Setting up a company in Thailand

Can a foreigner setting up a company in Thailand ?

A foreigner can set up a business in Thailand. Thailand welcomes foreign investment and allows foreigners to establish their businesses there. The process involves registering the company with the Department of Business Development (DBD) and meeting the requirements for incorporation. Foreigners can choose from various business structures such as a registered partnership, limited partnership, limited company or representative/branch office. It’s important to note that certain industries may have specific requirements or restrictions on foreign ownership, so it’s advisable to consult legal experts or professional services to ensure compliance.

What are the regulations for a foreigner setting up a company in Thailand?

There are seven different points to consider:

• Foreign Business Act (FBA) :The Foreign Business Act regulates foreign investment in Thailand. It classifies business activities into three categories: prohibited activities requiring a license and activities exempted from the Act.

• Company Structures :Foreigners can set up various types of companies in Thailand, such as a Thai Limited Company, a Thai Public Limited Company or a branch of a foreign company.

• Thai Limited Company : The most common option for foreign investors is establishing a Thai Limited Company. Thai nationals must hold at least 51% of the company’s shares, while foreigners can hold 49%. However, certain industries may have specific ownership restrictions.

• Minimum capital requirements: Thai Limited Companies must have a minimum registered capital, but the amount varies depending on the business activity. In some cases, there are special minimum capital requirements for foreigners.

• Board of Directors: A Thai Limited Company must have at least one director who is a resident of Thailand. Foreigners can be appointed directors, but at least half of the directors must be Thai nationals.

• Licenses and permits: Certain government agencies may require additional licenses or permits depending on the nature of the business. Specific industries like banking, insurance or telecommunications may have stricter regulations and requirements.

• BOI Promotion : The Thailand Board of Investment (BOI) offers investment incentives and promotions for specific industries and activities. These incentives may include tax benefits, work permits and other privileges for qualifying companies.

It is important to note that these are general guidelines, and there may be specific conditions and restrictions depending on the type of business, industry, or investment promotion applied. I recommend you consult with legal professionals or relevant authorities, such as the Department of Business Development or the BOI, to obtain accurate and up-to-date information about your situation.

What laws apply for setting up a company in Thailand ? 

The laws that apply to foreigners setting up a company in Thailand include the following:

• Foreign Business Act (FBA) : The Foreign Business Act of Thailand regulates foreign investment and business activities in the country. It determines the types of business activities that are restricted, require a license, or are exempted from restrictions.

• Civil and Commercial Code : The Civil and Commercial Code governs general corporate matters and contractual relationships in Thailand. It provides regulations on company formation, management, shareholder rights, contracts, and other legal business aspects.

• Revenue Code : The Revenue Code contains provisions related to taxation in Thailand, including corporate income tax, value-added tax (VAT), and personal income tax. Foreign companies operating in Thailand are subject to taxation based on business activities.

• Labor Protection Act : The Labor Protection Act sets out regulations related to employment in Thailand. It covers minimum wages, working hours, employee benefits, termination procedures, and work conditions. Foreign companies must comply with Thai labor laws when hiring employees.
• Immigration Act : The Immigration Act governs matters related to entry, stay, and work permits for foreigners in Thailand. Foreign business owners and employees must comply with immigration regulations, including obtaining the appropriate visas and work permits.

• Specific Industry Laws : Certain industries in Thailand have specific laws and regulations governing their operations. For example, the Bank of Thailand regulates the banking and finance sector, while the National Broadcasting and Telecommunications Commission regulates the telecommunications sector. These specific laws apply in addition to the general rules mentioned above.

You must note that these fundamental laws apply to foreign businesses in Thailand, and there may be other laws and regulations specific to your industry or business activity. It is recommended to contact professional legal advice or consult with relevant government authorities to ensure compliance with all applicable laws and regulations.

How can a foreigner setting up a company in Thailand? 

As a foreigner, if you are interested about setting up a company, you need to consider these eight general steps:

Step 1: Choose the type of company structure: Foreigners can opt for various company structures, such as a limited company, representative office, branch office, or partnership.

Step 2: Obtain approval and register the company name: You need to verify the availability of your chosen company name and get it approved by the Department of Business Development (DBD).

Step 3: Prepare the necessary documents: You’ll need to gather the required documents, including your passport, proposed office lease agreement, memorandum of association, and details of shareholders and directors.

Step 4: Deposit the initial capital: Depending on the type of company, you’ll need to deposit the minimum required capital.

Step 5: Register the company: Submit the necessary documents to the DBD and obtain your company registration certificate.

Step 6: Apply for a Tax ID: After company registration, you should apply for a tax identification number (TIN) with the Revenue Department.

Step 7: Obtain necessary licenses and permits: Some types of businesses may require particular licenses or permits, such as manufacturing, importing, or operating in regulated industries.

Step 8: Comply with employment regulations: If you plan to hire employees, you must abide by Thailand’s labor laws, including registering for social security and providing employee benefits.

It’s essential to note that the process and requirements may vary depending on the company structure and the specific industry you are operating. Seeking legal advice or professional services can provide expert guidance tailored to your needs.

Can Thai companies have more than one corporate purpose ?

Thai companies can have more than fifty objects. According to the Thai Civil and Commercial Code, a company’s objects may include any lawful activity or activities specified in its Memorandum of Association. Therefore, Thai companies can define and pursue multiple corporate purposes as long as they are lawful and stated in their Memorandum of Association.

How do you open a bank account for a company? 

To open a bank account for a company in Thailand, you will generally need to consider these six steps:

1.Choose a bank : Consider factors like the bank’s reputation, services offered, and requirements for opening a corporate bank account in Thailand.

2. Prepare required documents : Typically, the required documents may include the following:

• Certificate of company registration: This document verifies the company’s legal existence.
• Memorandum of association and association articles: These documents outline the company’s structure, activities, and rules.
• Identification documents: You will need to supply identification documents, including passports, for the authorized signatories and directors of the company.
• Work permits and visas (if applicable): Foreign directors may need to provide work permits and relevant visas.
• Board resolution: A board resolution authorizing the opening of the bank account is usually required

3. Complete the application form : Download it from the bank’s website and complete it with the necessary information.

4. Schedule a meeting : Contact your chosen bank and meet with a relationship manager at a local branch. During this meeting, you will submit the required documents, discuss your banking needs, and provide any additional information requested.

5. Bank evaluation and approval : The bank will review your application and documents to assess your company’s eligibility for a corporate bank account.

6. Maintain minimum balance and fulfill obligations : Once your bank account is opened, ensure that you maintain the minimum balance stipulated by the bank. Additionally, fulfill any obligations related to the account, such as reporting requirements or attendance at annual meetings.

It’s significant to note that specific requirements and procedures may depend on the bank and the type of company you have. Therefore, you should contact the bank of your choice directly for detailed information and guidance throughout the account-opening process.

How can you have a foreign currency account?

To open a foreign currency account in Thailand, you can follow these five steps:

1. Choose a bank : Select one that offers foreign currency account services to non-residents or foreigners living or working in Thailand.
2. Verify requirements and prepare documents: Verify the criteria to open a foreign currency account with your choice bank. Generally, you must provide proof of identity, address, and a minimum opening deposit in the specified currency.
3. Complete the application: Fill out the application form for opening a foreign currency account with your chosen bank.
4. Submit the application: Submit the finished application and the required documents to your bank.
5. Manage the account: Upon approval, deposit funds into the account to manage your foreign currency transactions.

Several central banks in Thailand offer foreign currency account services to non-residents. These include Bangkok Bank, Citibank Thailand, CIMB Thai Bank, and Kasikorn Bank. The specific terms and conditions for opening a foreign currency account may differ depending on the bank and account type.

Foreign currency deposit (FCD) accounts are a common type of foreign currency account in Thailand. These allow deposits and transactions in foreign currencies such as USD, EUR, JPY, AUD, GBP, and CHF. For example, Bangkok Bank offers FCD accounts to non-residents and foreigners, which allows you to hold foreign currencies without converting them to Thai Baht immediately. Similarly, Citibank Thailand offers foreign currency deposit services in multiple currencies with 24-hour digital access and global fund transfers.

What are the taxes for companies?

In Thailand, companies are subject to various taxes. Here are some of the critical taxes that companies may need to consider:

• Corporate Income Tax : Companies are required to pay corporate income tax on their net profits at a standard rate of 20%. Certain companies, such as small and medium-sized enterprises (SMEs), may qualify for reduced rates.

• Value Added Tax (VAT): Companies engaged in the supply of goods or services in Thailand must register for VAT and charge 7% VAT on their sales. They can also claim input tax credits on their purchases.

• Withholding tax: Companies must withhold tax on certain payments such as interest, dividends, royalties and fees to non-resident individuals or companies. Withholding tax rates vary depending on the type of payment.

• Specific business tax: Certain types of businesses, such as pawnbrokers, financial institutions and professional service providers, may be subject to specific business tax at rates ranging from 0.01% to 3.00%.

• Property Tax: Companies owning real estate in Thailand are subject to an annual real estate tax at a progressive rate based on the property’s assessed value.

• Stamp Duty: Certain documents, such as contracts, loan agreements, and share transfer documents, may be subject to stamp duty at varying rates.

It’s important to note that this is not an exhaustive list, and there may be other taxes, exemptions, or incentives depending on the specific nature and location of the business. You should consult a local tax advisor or the Revenue Department of Thailand for further details and compliance requirements.

How do you obtain a Non-B immigrant visa?

To obtain a Non-B immigrant visa in Thailand, you typically need to consider these five steps:

• Step 1. Meeting the Qualifications : Non-B visas are issued to individuals employed or conducting business in Thailand. You must have an employment offer from a Thai company or be a business owner looking to invest in or manage a business in Thailand.

• Step 2. Gathering Required Documents : The documents required may vary based on the applicant’s circumstances and the Thai embassy or consulate. However, generally, you will need :
  • Passport with at least six months validity
  • Completed visa application form
  • Recent passport-size photo
  • Company registration documents or employment contract/offer letter
  • Bank statements showing sufficient funds
  • Criminal background check (may be required)

• Step 3. Applying for Non-B Visa : Once you have the necessary documents, you can use them at your country’s Royal Thai Embassy or Consulate. Check with the specific embassy/consulate for their application procedure, required fees, and processing time. Some consulates may require a personal interview.

• Step 4. Obtaining the Visa : After submitting your application, you must wait for the visa processing time specified by the Thai embassy or consulate. Once approved, the visa will be affixed to your passport.

• Step 5. Entering Thailand : With the Non-B visa, you can enter Thailand within the visa validity period, typically up to 90 days. Upon arrival, you must report to the local immigration office in your area within 7-15 days to obtain the applicable work permit.

It’s significant to note that the requirements and procedures may differ slightly based on your nationality and the consular office you are applying through. It’s always recommended to consult with the Royal Thai Embassy or Consulate in your country for the most accurate and up-to-date information.

What are preferential and ordinary articles of association?

To protect the foreign shareholder who owns 49% of the company in Thailand, it is possible to structure the articles of association to include provisions for preferential and ordinary voting rights that vary depending on the class of shares.

One way to achieve this is to create different class shares with different voting rights. For example, you can create “ordinary shares” with one vote per share and “preference shares” with multiple votes per share. The foreign shareholders can hold the majority of the ordinary shares, ensuring that they retain control over certain decisions, while the Thai shareholders can hold the preference shares.

It is essential to consult a corporate lawyer in Thailand who specializes in company law to properly structure these provisions within the regulations and requirements of the Department of Business Development. They can help draft the articles of association, ensure that they comply with Thai law and protect the interests of the foreign shareholders.

In addition, remember that there may be specific restrictions or limitations on foreign ownership in certain industries or businesses in Thailand. Research the applicable regulations to ensure compliance with foreign ownership restrictions.

Why is it necessary to draw up a shareholders’ agreement?

Drawing up a shareholders’ agreement in Thailand is essential for several reasons:

• Clarification of rights and obligations: A shareholders’ agreement helps to clearly define the rights, duties and responsibilities of the shareholders in the company. It can cover essential matters such as management, decision-making processes, distribution of profits, and dispute resolution mechanisms. This helps to avoid misunderstandings and conflicts between shareholders.

• Protect minority shareholders: A shareholders’ agreement can include provisions to protect the rights of minority shareholders, such as veto rights on certain decisions, pre-emption rights on share transfers or dispute resolution mechanisms. This will ensure that minority shareholders are not marginalized or disadvantaged.

• Flexibility and adaptability : The articles of association provide a basic framework for the company’s governance, but a shareholders’ agreement allows for greater flexibility and customization. It can address specific issues that the articles may not cover, tailored to the particular needs and circumstances of the shareholders.

• Confidentiality: Unlike the articles of association, which are filed with the government and available to the public, a shareholders’ agreement is a private contract between the shareholders. This allows for including confidential or sensitive information not available to the public, such as intellectual property rights or business strategies.

• Dispute Resolution : A shareholders’ agreement can include mechanisms for resolving shareholder disputes, such as mediation, arbitration or other alternative dispute resolution methods. This helps to avoid costly and time-consuming litigation and promotes a smoother and more efficient resolution of conflicts.

It is advisable to consult a corporate lawyer in Thailand to draft a shareholders’ agreement that complies with Thai law and best protects the interests of all shareholders involved.

What are the corporate taxes for setting up a company in Thailand ? 

The corporate tax rates in Thailand are as follows :

• Corporate Income Tax : Thailand’s standard corporate income tax rate is 20% of net profits. However, there are different tax rates for certain types of companies and industries. Some specific rates include:
  • Small and Medium-Sized Enterprises (SMEs) with paid-up capital not exceeding 5 million baht and revenue not exceeding 30 million baht may be eligible for a reduced tax rate of 15% on net profits.
  • Regional Operating Headquarters (ROH) may be eligible for a 10% tax rate on net profits from qualifying activities.
  • Companies operating in specific industries, such as promoted activities under the Thailand Board of Investment (BOI) promotion, may be eligible for tax incentives and reduced tax rates.
• Value Added Tax (VAT): Value Added Tax applies to the sale of goods and services provision in Thailand. The standard VAT rate is 7% of the sales value. However, certain goods and services may be exempt from VAT or subject to a 0% rate.

• Specific Business Tax (SBT): Specific Business Tax applies to certain types of businesses, such as banking, finance, and insurance. The tax rate varies depending on the type of business and activity.

• Withholding Tax : Withholding tax applies to certain types of payments made by businesses to individuals or other businesses. The rates vary depending on the nature of the payment, such as dividends, interest, royalties, or payments for services.

It’s necessary to note that tax rates and regulations may have changed since my knowledge of the cutoff date. Therefore, it is advisable to consult with a tax professional or the Revenue Department of Thailand for the most up-to-date information and specific guidance related to your business and circumstances.

Are there any tax exemptions for SMEs ?

Thailand provides certain tax exemptions and incentives for Small and Medium Enterprises (SMEs) to encourage their growth and development. These exemptions and incentives aim to reduce the tax burden on SMEs and promote their competitiveness. There are four tax incentives for SMEs to consider in Thailand:

• Reduced corporate income tax rate: SMEs with paid-up capital not exceeding 5 million baht and turnover not exceeding 30 million baht are eligible for a reduced corporate income tax rate of 15% on net profits. This reduced rate provides a lower tax burden than the standard corporate income tax rate of 20%.

• Tax exemption for newly established SMEs: Newly established SMEs may qualify for an exemption from corporate income tax on net profits for up to 3 accounting periods. To qualify for this exemption, SMEs must meet specific criteria, such as being engaged in promoted activities and meeting registered capital and employment requirements.
• Investment promotion by the Board of Investment of Thailand: SMEs engaged in certain BOI-approved promoted activities are eligible for additional tax incentives and benefits. These incentives may include reduced corporate income tax rates, exemption from import duties on machinery, and other privileges depending on the specific investment promotion scheme.

• Research and Development Incentives : SMEs engaged in qualifying R&D activities may be eligible for additional tax deductions or exemptions for R&D expenses incurred. The aim is to encourage SMEs to invest in innovation and technology development.

It’s important to note that the eligibility criteria, requirements, and specific tax incentives for SMEs may vary depending on factors such as the industry, location of the investment, and the incentive scheme. It is advisable to consult a tax professional or the relevant authorities, such as the Revenue Department of Thailand or the BOI, for detailed information and guidance on the specific tax incentives available for SMEs in Thailand.