It doesn’t matter where you are in the world, the idea of starting a new business can be pretty scary.
Certainly starting a business in Thailand is no different, but if you do the right amount of research and go about things in the correct manner, it can prove to be both enjoyable and lucrative. There are lots of opportunities across a wide range of sectors so the chances are that you will be able to set something up for yourself.
Thailand’s economy is thriving and is the second largest in Southeast Asia, behind Indonesia according to the World Bank. Indeed, they even described Thailand as “one of the great development success stories”, a huge compliment and fair indication of how far the country has come in the last decade.
It is therefore no surprise that Thailand is an attractive business proposition, but that does that doesn’t mean that you should go striding in without conducting the necessary research. You need to familiarise yourself with the basics at least of Thai business law and regulations as well as carrying out the due diligence that you would always conduct before commencing a business in your home country.
We always advise people to take advice from professionals or individuals with a wealth of experience in actually running a business in Thailand rather someone you have just met in the local bar. Here is our 12 step guide to starting a business in Thailand:
What are the laws governing businesses in Thailand?
All foreign owned businesses are governed by the Foreign Business Act 1999 and it should be noted that the laws are strictly enforced. Failure to comply can result in fines of between THB100,000 and THB1 million with also the possibility of being imprisoned for up to three years – not something that should be taken lightly.
Some business activities are not permitted to be conducted by foreigners as they would provide too much competition for the local labour market. These activities are clearly outlined in Foreign Business Act. These activities include:
- Media – newspaper publishing, radio and TV broadcasting
- Farming – rice, arable and orchid as well as rearing livestock
- Anything connected to forestry
- Fishing in Thai waters or anything connected to the fishing industry
- Extraction of Thai medicinal herbs
- Trading of Thai antiques
- Manufacturer and casting of Buddha images
What types of business are available?
When you are considering starting a business in Thailand you will need to understand what options are available to you in the same way that you would if you were in your home country. These include:
- A Registered Ordinary or Limited Partnership
- Representative Office, Regional Office or Branch Office
- Limited Company
A Limited Partnership involving a foreigner is very different to that of a Thai Partnership. In this case one partner will have limited liability whilst the other, usually the foreigner, will have unlimited liability. Another difference is that Limited Partnerships MUST be registered, whereas this is not the case with a Thai Partnership.
Representative Office, Regional Office or Branch Office
Representative Offices, Regional Offices and Branch Offices are popular with larger, overseas companies who are looking to have a presence in Thailand although for many people that are not appropriate due to the restriction that are placed upon them. All three have slightly different structures but as a general rule of thumb are restricted from earning an income in Thailand.
As with pretty much every other country in the world, there are two forms of Limited Company. The first is a Private Limited Company and the second is a Public Limited Company. A Private Limited Company will have a limited number of shareholders who, in most cases at least, will know each other. The company will need a minimum of three “promoters” in order to be formed and they will need to complete a Memorandum of Association and Articles of Association.
A Public Limited Company will require a minimum of 15 promoters who must hold the shares for a minimum of 2 years. Once again the Articles of Association will need to be completed. A board of at least five directors will need to be formed and at least half of them should be Thai nationals. The cost of registering a Public Limited Company is THB2,000 per million baht of capital.
What are nominee shareholders and majority shareholders?
“Nominee Shareholder” is a term that is often used when companies are discussed in Thailand. In effect, they are a shareholder in name only have no financial interest in the business. They are often used so some foreigners can establish businesses without the need for ‘proper’ Thai partners. Under the Foreign Business Act 1999, nominee shareholders are illegal and the practice is punishable by imprisonment and/or fines.
Majority shareholders are those who own 51% or more of the shares. This is the general way in which foreigners become involved in businesses in Thailand. The foreign associate will own 49% of the shares whilst the other Thai nationals will own the 51%, split between them.
Isn’t having a smaller stake in MY company dangerous?
It is natural to be concerned about being the minority shareholder in your own business but so long as everything is correctly setup, you won’t face any problems (see #5). There are lots of advantages to having a Thai majority company as opposed to a registered foreign company such as greatly reduced paperwork and lower requirements in terms of capital. A Thai majority company can also purchase land if the necessity arises.
Buying property in this manner is common practice although it should be noted that the company should not be setup purely for this purpose as this is illegal. Regardless of the purpose of the company a financial statement should be prepared, audited and submitted to the authorities on an annual basis. Failure to do so can lead to the company being delisted.
If I am the minority shareholder, could I be overruled in the running of MY business?
It is possible to use preferential voting rights and a ‘super majority of shares to votes’ in order to assume control of voting rights. This will ensure that you retain control of the business and cannot be overruled.
Another common feature is for lawyers to create companies whereby the “assigned” Thai majority shareholders have no active interested in the company, usually they will have signed away their voting right when the company was formed.
However, it should be noted that the income needs to be fairly distributed amongst shareholders although that is normally distributed through expenses such as salaries and rent – leaving nothing available should a coup be staged.
Do I actually ‘need’ all the physical capital to open the business in the first place?
The minimum amount of capital required for a Thai majority company is THB 1 million. Unless you are legally married in Thailand, the amount of capital will need to be double that amount if you require a work permit. Capital of THB2 million would entitle the business to have ONE work permit.
If your business is operating under a FBL the minimum requirement would be THB 3 million per work permit and for each business activity. 25% of this share capital in both cases must be “fully paid up”.
Can I own or buy assets through the business?
It is now possible to buy property and assets as part of your company thanks to the laws being relaxed back in 1997.
It should once again be noted that there are strict laws in place forbidding the company being setup with the sole purpose of purchasing land or property and once again potentially brings into play the fact that nominee shareholders are illegal. Obtaining a 30-year lease is the preferable way to obtain land or a property that isn’t in foreign ownership.
Can I own 100% of Thai Company?
It is a myth that foreigners can’t own 100% of a Thai Limited Company although it is quite rare and difficult.
Trying to achieve this can be time-consuming and in many cases the outcome is unknown at the start of the process. In reality, there are three ways in which a foreigner can take 100% ownership of a Thai company. These are:
By obtaining a FBL
In its crudest sense, a FBL is a work permit for a business. It is only permissible for certain professions, the same as the case with a work permit. This allows the Thai government to closely monitor who is doing business and also to ensure that the local labour market is not threatened.
Board of Investment (BOI) promotion
The BOI is a division of the Thai government that has been established to try and promote overseas investment in the country. Generally, the businesses that are set up are start-ups and they are usually businesses that are deemed to be of benefit to the Thai economy. Often the businesses are located in areas that are in need of a financial injection.
Via the Treaty of Amity (US Nationals only)
A special agreement is in place between the Thai and US governments that allows American companies or individuals to maintain a majority shareholding in a Thai company. This is great if you are a US national, but not so good if you are from elsewhere!
What visa do I require?
Anyone who has the intention of doing business in Thailand, in any form, will be required to have a Non-Immigrant B (business visa). It is recommended that you apply for these at the Thai embassy or consulate in your home country prior to travel. The visa fee is THB2000 for a single entry visa that last 3 months or THB5000 for a one-year multi-entry visa.
Is it possible to employ other foreigners in my business?
The simple answer to this is yes, but it is down to the amount of registered share capital that your business has as well as the number of Thai employees. It is also possible to obtain another work permit for every THB5 million paid in tax.
Can I open a Thai bank account?
You will need to open a Thai bank account for your business and if you are in possession of a work permit you can open one for yourself. The chances are you will only receive an ATM card as the bank will not grant you a cheque book. If is also possible to withdraw funds over the counter. It is highly unlikely that you will be able to obtain a loan as a foreigner.
What tax will I need to pay?
Corporate Income Tax
Corporate Income Tax (CIT) is a direct tax levied on a juristic company or partnership carrying on business in Thailand, or not carrying on business in Thailand but deriving certain types of income from Thailand.
- Tax will be withheld on interest paid to associations or foundations at the rate of 10%.
- Royalties paid to associations or foundations are subject to 10% withholding tax.
- Government agencies are required to withhold tax at the rate of 1% on all types of income paid to companies.