How to Start a Business in Thailand: a step-by-step overview

Establishing a Company to start a business in Thailand 

Types of Business Entities 

In Thailand, as in any other country, there are different types of business entities available to entrepreneurs that they can use to setup their business, and every form has its advantages and requirements. The private limited company is the most popular business structure and can be formed by both Thai individuals and foreign investors. There is a minimum requirement of two shareholders in the private limited company structure and foreign ownership is limited to 49%,  subject to specific licenses or BOI approval. This is the structure of choice for the majority of investors, it offers simplicity and flexibility. There are alternative corporate structures organisations including the public company limited by shares, partnerships (general and limited), the representative office and the branch office, all tailored to certain operational and/or legislative requirements.

Obtaining a Foreign Business License to legally start a business in Thailand

If, however, foreign investors want to start a business in Thailand and to hold more than 49 percent of the shares or engage in activities in other areas of business restricted under the Foreign Business Act (FBA), they will be required to apply for a Foreign Business License (FBL). This license is a major condition which restricts the ability of foreign- controlled companies operating in retail, real estate, agriculture and only some services (sectors that are not open to foreign nationals in Thailand) to start a business in Thailand.

The FBL is issued by the Ministry of Commerce and is a very stringent application. Application processes require onerous business plans, ownership structures to be disclosed and that their businesses are in line with the nation’s economic interests. In some instances, exception is available: under the Board of Investments (BOI) approval, majority foreign equity ownership is permitted in certain industries on a targeted basis. However, the FBL still represents an important step for foreign investors who cannot take advantage of such exemptions and who will be active in relatively more regulated sectors.

Company formation process to start a business in Thailand

If you are looking to start a business in Thailand and to create a company, there is a process you will need to follow to ensure you are complying with the law. The first step consists of reserving a company name, and this is done with the Department of Business Development (DBD). When the name is agreed upon, other preparation steps involve writing of the Memorandum of Association (MOA) that contains details such as company name, address, objective, capital etc. along with shareholders information.

Upon the approval of the MOA, the company will be registered with the DBD, and a Certification of Incorporation will be granted. The registration generally takes few days, and the Company will be provided a Tax Identification Number (TIN) by the Revenue Department. After the registration, the company also needs to follow the social security regulations by registering the employees to the Social Security Office.

Corporation tax you need to pay when you start a business in Thailand

Corporate Income Tax (CIT) obligations when you start a business in Thailand 

When you start a business in Thailand, it is important to understand the corporate income tax (CIT) system applicable to locally registered entities. According to the Thai Revenue Code, any company registered in Thailand is subject to CIT on its net profit derived from business operations carried out within the country.

The standard corporate income tax rate is 20%. However, for entrepreneurs who start a business in Thailand under the SME category, the system offers competitive and progressive tax rates. Companies with registered capital not exceeding 5 million THB and annual revenue below 30 million THB benefit from the following structure:

• The first 300,000 THB in net profit is exempt from CIT (0%);
• Income between 300,001 and 3,000,000 THB is taxed at 15%;
• Any amount above 3,000,000 THB is taxed at the standard 20% rate.

This favourable regime is designed to encourage investors and small businesses to start a business in Thailand under manageable tax obligations, particularly in the early stages of operation.

Value Added Tax (VAT) compliance when you start a business in Thailand

When you start a business in Thailand, understanding VAT obligations is essential to remain compliant with Thai tax regulations. Under the Revenue Code, Value Added Tax (VAT) is imposed at a standard rate of 7% on the sale of goods and provision of services within the Kingdom, as well as on the importation of goods.

Businesses must register for VAT if their annual turnover exceeds 1.8 million THB. However, even before reaching this threshold, it may be strategically beneficial for certain companies to voluntarily register for Var, for instance, to claim input tax credits.

As part of the process to start a business in Thailand, VAT registration must be filed within 30 days from the date on which the business becomes liable, typically after surpassing the revenue threshold. Failure to comply can result in fines and penalties, making early planning crucial during the company setup phase.

Other Taxes

Besides corpora income tax and VAT, businesses in Thailand are liable for other taxes such as withholding tax on payment on dividend, interest and royalty payments. The rates of withholding tax differ according to the type of payment and the receiving party being Thai or foreign. In addition, companies that manufacture and sell certain goods are often monitored through excise taxes applied to goods such as alcohol, tobacco, and fuel.