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Challenges and benefits of launching a start-up in Thailand
For several years now, Thailand has been attracting many entrepreneurs looking to launch innovative projects in Southeast Asia. Thailand is now considered one of the most dynamic hubs for start-ups in Southeast Asia.
Launching a start-up in Thailand offers a range of strategic advantages supported by Thailand’s dynamic economy and the pro-innovation policies of the Board of Investment (BOI).
Thanks to the BOI’s promotion, start-ups active in the fields of technology, digital services, research, or innovation can access significant tax benefits—such as corporate tax exemption (for up to eight years), reduced import duties, the possibility of 100% foreign ownership, the recruitment of international experts, and a simplified visa and work permit system.
However, launching a start-up in Thailand is not just a matter of coming up with a business idea and putting together a team. In fact, launching a startup in Thailand requires an understanding of the local legal environment governing the creation of such companies, particularly for non-nationals.
The purpose of this article is to present the legal framework applicable to startups in Thailand so that investors have all the key information they need to set up their project.
Table of Contents
Why start a start-up in Thailand?
Thailand is currently attracting a growing number of start-ups due to a combination of economic, strategic, and legal factors that make it a prime location in Southeast Asia.
Located at the heart of ASEAN, Thailand offers direct access to a regional market of more than 650 million consumers, which is a considerable advantage for innovative companies wishing to expand internationally.
The local ecosystem benefits from numerous incubators, accelerators, and investors specializing in digital technology, as well as government support through the Thailand 4.0 policy and programs run by the National Innovation Agency.
Setup and operating costs in Thailand remain much lower than in other Asian countries, allowing entrepreneurs to invest more in innovation and growth.
In addition to these economic factors, there are incentives legally framed by the Investment Promotion Act and implemented by the Board of Investment (BOI), which offer tax exemptions, customs duty reductions, and greater flexibility in hiring qualified foreign personnel.
Finally, Thailand offers a young and skilled workforce, as well as a stable legal framework, which is particularly attractive to international investors who want to set up their start-ups in a dynamic and predictable environment.
The advantages of the BOI for start-ups in Thailand
The BOI (Board of Investment) promotion offers start-ups in Thailand tax benefits, customs exemptions, and more flexible conditions for hiring foreigners. However, it is only available to companies that meet certain well-defined criteria.
Project eligibility
The BOI encourages sectors considered strategic for the Thai economy. Eligible start-ups often fall into the following areas:
- Information technology and software
- E-commerce and digital platforms
- Research and development (R&D)
- Renewable energy and clean technology
- Biotechnology, healthcare, and medical devices
A start-up in Thailand wishing to benefit from BOI promotion must prove that its activity brings real added value, for example through innovation, technology transfer, or the development of local skills.
Application file
The start-up in Thailand must submit an official application to the BOI. The application must contain the following:
- A detailed business plan,
- A presentation of the technology or innovation,
- The planned investment budget,
- The implementation schedule,
- Job creation forecasts,
- The expected benefits for the Thai economy.
A BOI committee reviews the project based on economic and technical criteria.
Present the project to the BOI
In many cases, a hearing is organized. The founders must present their start-up, explain its benefits for Thailand, and answer questions from the reviewers. This step is essential to convince the administration of the project’s viability.
Receive approval and register
If the project is accepted, the start-up receives a letter of promotion. It must then register with the Department of Business Development (DBD) and comply with the conditions imposed, such as minimum capital, deadlines, and annual reporting to the BOI.
Maintain compliance
After obtaining certification, the start-up must regularly send progress reports and prove that it is fulfilling its commitments, such as investments, job creation, or R&D spending. Otherwise, the BOI may withdraw its benefits.
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BOI industries conducive to starting a business in Thailand
The BOI favors certain industries that fall into specific categories conducive to innovation in Thailand.
- Agriculture and agricultural products
The BOI supports modern agriculture, biotechnology, and food processing to enhance food security and exports. Innovative methods such as vertical farming and genetic engineering are particularly encouraged.
- Minerals, ceramics, and base metals
The BOI favors mining, metallurgy, and ceramics projects focused on innovation, energy efficiency, and sustainable waste management.
- Light industries
The textile, furniture, and consumer goods sectors receive support, particularly when they adopt environmentally friendly processes and recycled materials.
- Metallurgy, machinery, and transportation
The BOI encourages the manufacture of automotive, aerospace, and robotic parts, as well as industrial automation to strengthen regional competitiveness.
- Electronics and electrical appliances
Projects related to semiconductors, 5G technologies, IoT, and energy-efficient equipment are prioritized to support the digital economy.
- Chemicals, paper, and plastics
The BOI promotes sustainable materials, biodegradable plastics, and resource-efficient production processes.
- Technology and innovation
Investments in R&D, software, AI, machine learning, and blockchain are strongly supported to make Thailand a technology hub.
- Services and infrastructure
The logistics, healthcare, green energy, and education sectors are encouraged to improve infrastructure and quality of life.
- Special Economic Zones (SEZs)
Created to boost less developed regions, they offer additional incentives and simplified administrative procedures.
By grouping industries by sector, the BOI attracts investments aligned with national priorities and strengthens the country’s long-term competitiveness.
Legal structures for a start-up in Thailand
The creation and organization of companies are governed by the Civil and Commercial Code. The most suitable form for creating a start-up in Thailand seems to be the Private Limited Company (Co., Ltd.), as it allows for flexible management and limited liability to the capital contributed with a limited number of shareholders. By law, there must be at least three shareholders and foreign ownership may not exceed 49%. However, there are several ways to exceed this limit:
First, it is possible to apply for a Foreign Business License, granted by the Ministry of Commerce. However, this license is difficult to obtain and mainly concerns certain strategic sectors. It is also possible to register the company with the BOI, which in some cases allows 100% foreign ownership. Finally, a last resort is to use an alternative structure, such as a subsidiary of a foreign company or a joint venture with a local partner.
Each of these solutions has its own tax, legal, and practical implications. The choice depends mainly on the target sector and the level of control the investor wishes to exercise.
Taxation applicable to a start-up in Thailand
Taxation is a key issue when considering the creation and development of a start-up in Thailand. The standard corporate tax rate is 20%. However, for SMEs and small businesses, such as start-ups, the rate is reduced according to annual net profit.
Taxation is a key issue when considering setting up and developing a start-up in Thailand. The standard corporate tax rate is 20%. However, for SMEs and small businesses, such as start-ups, the rate is reduced according to annual net profit.
In addition to corporate tax, Thailand applies Value Added Tax (VAT) at a rate of 7%, which applies to most goods and services. All companies in Thailand with a turnover exceeding THB 1.8 million per year are required to register for VAT; this will be the case for a start-up in Thailand with a turnover exceeding this threshold.
There are specific tax advantages for companies registered with the BOI. For example, certain technology start-ups can obtain a tax exemption on profits for 5 to 8 years.
Finally, Thailand has signed numerous international tax treaties, notably with France, Germany, and the United States. These agreements avoid double taxation and facilitate the repatriation of dividends.
Intellectual property protection
It is strongly recommended that any start-up wishing to develop in Thailand protect its innovations with the Department of Intellectual Property (DIP), which is the competent authority for registering trademarks, patents, and copyrights.
The Patent Act B.E. 2522, amended in 1999, protects inventions for a period of 20 years. Trademarks, on the other hand, benefit from 10 years of renewable protection. Software is covered by copyright under the Copyright Act B.E. 2537 (1994).
A start-up wishing to develop in Thailand must secure its name, logo, and algorithms from the outset in order to avoid subsequent disputes and protect its value.
Visas and work permits for setting up a start-up in Thailand
To set up a start-up in Thailand, foreign investors must obtain an appropriate visa and work permit. The most common is the Non-Immigrant B visa, which allows them to work legally, provided that the company has a capital of at least THB 2 million and employs four Thai nationals per foreigner.
Depending on the investor’s profile, other options are available: the Smart Visa, intended for entrepreneurs and experts in the technology and innovation sectors, offers up to 4 years of residence without the need for a work permit; and the LTR (Long-Term Resident) visa, designed for investors wishing to settle permanently in Thailand, offers tax advantages and greater flexibility.
Start-ups benefiting from BOI promotion enjoy more flexible procedures, particularly for the recruitment of qualified foreigners without having to comply with the 4:1 ratio. Conversely, failure to comply with visa and work regulations may result in fines, a ban on working, and expulsion from the country.
Financing a start-up in Bangkok
Financing is a major challenge for any start-up, and each country has different regulations regarding sources of financing and their supervision. A start-up in Thailand can benefit from these various sources of financing:
- Capital contributions from the founders.
- Business angels.
- Local or regional venture capital funds.
- Public incentives via the BOI or the National Innovation Agency (NIA).
In Thailand, regulations on fundraising are strict. For example, the issuance of new shares must comply with the rules of the Civil and Commercial Code. In addition, Thai law does not yet allow completely open crowdfunding, although changes are underway.
Conclusion
In conclusion, Thailand offers a particularly attractive environment for innovation. Its geographical location, at the center of ASEAN, and its active policy of supporting technological development reinforce its appeal to foreign investors. The Thailand 4.0 program and the incentives offered by the Board of Investment (BOI) are proof of this. A start-up in Thailand that benefits from these measures can access major advantages: tax exemptions, customs facilities, and more flexible conditions for recruiting qualified foreign personnel.
However, creating a start-up in Thailand is a process that goes far beyond simple administrative formalities. It is a process that requires in-depth knowledge of local law, anticipation of tax constraints, and a coherent implementation strategy. The rules imposed by Thai law are sometimes complex, especially for non-nationals, and require rigorous planning to avoid any legal or tax obstacles that could hinder the project.
Thus, the success of a start-up in Thailand depends above all on meticulous preparation, scrupulous compliance with legal rules, and appropriate legal support.
Q&A
As a general rule, the FBA limits foreign ownership to 49%. However, 100% ownership is possible if the company obtains a BOI promotion or a Foreign Business License. These special schemes mainly concern technological, innovative, or strategic projects for the national economy.
The most common model is the Private Limited Company (Co., Ltd.). It requires a minimum of three shareholders and offers limited liability for contributions. For some more ambitious projects, a subsidiary of a foreign company or a joint venture with a local partner may be preferable.
The standard corporate tax rate is 20%. A start-up must also register for VAT if its annual turnover exceeds THB 1.8 million. Tax exemptions exist for companies promoted by the BOI, lasting up to eight years depending on the criteria.
It is essential to register your trademark, patents, and software with the Department of Intellectual Property (DIP). Patents are protected for 20 years, trademarks for 10 years (renewable), and software by copyright.
Foreign founders must generally obtain a Non-Immigrant B visa and a work permit. The company must have a minimum amount of capital and employ Thai nationals. It is also possible to apply for a Smart Visa or an LTR (Long-Term Resident Visa) depending on each investor’s situation. Companies promoted by the BOI benefit from more flexible rules.