When establishing a company in Thailand, there are 4 common forms. The characteristics of each form are summarized below.
1. Private Company
2. Limited Company
3. Public Company (including company with BOI)
4. Representative Office
Private Company
In Thailand, the establishment of foreign-owned Private Company is prohibited by the law; therefore the establishment of such company would have to be under trusted Thai partner.The employment of foreign citizen will not be permitted under the form of Private Company, and legal rights of all investment will go under Thai partner and hence, the risk is inevitably higher.
Limited Company
The merit of establishing Limited Company is its rather simple requirements with minimum of 3 founders/shareholders. However, in comparison to Public Company, individual shareholders will carry more direct responsibility of the business. Furthermore, as of July 2008, the deregulation of Thai law to change the required founder of Public Company from 7 to 3, has lessened the advantages of Limited Company format.
Public Company
Public Company formation can be done by gathering minimum of 3 founders (As of July 2008, the law has been deregulated, with number of minimum founders to be decreased from 7 to 3). The foreign-owned businesses in Thailand are often established in Public Company format.
Whilst establishing a Public Company, it is not required to prove the capital fund under Thai law. However, with law regarding to foreign intervention in Thailand, foreign business can only hold a share of up to 49%; therefore unless the case has been approved by Board of Investment (BOI), rest of 51% must be capitalised by Thai investor.
Representative Office
The Representative Office will be allowed minimum business transaction, mainly a work related to reporting back to the main head quarter in overseas.
The establishment of Representative Office, when compared to that of local establishment, require more cost and time, whilst strict limitations being applied.
For further question or assistance, please contact us.
In order to have Work Permit to be issued for the foreign business personnel, the minimum of 2 million THB is required as a capital fund of the company. The immigration, on the other hand, requires minimum of 1 million THB company value for the issuing and/or reissuing of Work Visa (B Visa).
Proof of Capital Fund for Establishment
Under Thai law, the establishment of the company can be achieved by proving 25% of the investing capital fund, however in order to obtain Work Permit, it is required to prove 100% of the capital fund.
The proof of foreign investment is not required whilst establishing a company in Thailand, with requirement of full investment proof from Thai investors. The capital fund will be checked for its origin, so it is important that the capital fund is saved under Thai investorโ€s account.
Capital Fund Proving Method
The document below must be presented during application:
Bank passbook with signed copy (must be signed by the account holder) of first and latest updated pages
A contract stating the investment agreement, with signatures from all investors and representatives
Corporate Tax
A company with less than 5 million THB capital fund will be applicable for small-midsized preferential taxation, where according to their income tax rate can be deducted.Corporate Tax Rate
In order to protect Thai culture and Thai traditional industry, Foreign Capital Restriction was set up in 1999. The law restricts the intervention of foreign venture in 3 fields listed below:
1. Absolute prohibition of foreign investor
2. Requirement of permission from Ministry of Commerce
3. Requirement of permission from Board of Investment (BOI)
This Foreign Capital Restriction is applicable for any company with over 50% of foreign investment, therefore a corporate with below 49% of foreign investment is not considered by this law.
Business restricted under Foreign Capital Restriction
Clause 1-Absolute prohibition of foreign investor
Manufacturing, sales and maintenance of arms, gunpowder, explosive, and ammunition
Dealings of art and craft goods of Thailand
Manufacturing of Thai silk
Manufacturing of Thai musical instruments, ceramic art goods, and earthenware
Manufacturing of money, silver, gold, bronze, and lacquered goods
Sugar refining from sugar millet
Rock salt mining and salt manufacturing
Mining including blast and macadam
Woodwork of furniture and fixtures
Clause 2 - Requirement of permission from Ministry of Commerce
Mass-media related
Crop farming, gardening related
Livestock farming and related
Forestry related
Fishery related in Thai water
Herbal processing and related
Sales of Thai antiques, historical object related
Production of Buddha and pottery
Land-related sales and purchase
Clause 3 - Requirement of permission from Board of Investment (BOI)
Rice and wheat mill
Fishery and forestry
Manufacturing of plywood, plywood board, and resin plywood
Limestone manufacturing
Accounting and legal affairs service
Architectural design service
Engineering
Construction industry below capital fund of 500 million THB
Forward business mediation of bond, finance, and farm products
Import sales and intermediary business below capital fund of 100 million THB
Auctioneering
Domestic dealings industry of farm products
Retailing business with capital fund of less than 20 million THB, or capital for each store below 100 million THB
Wholesale trade below capital of 100 million THB
Advertising service
Hotel business
Tourism business
Sales of food or beverage
Plantation related business
Service industry
For further assistance, please contact us.
Below are the summarized merits and demerits of establishing a company in Thailand
Merits
The foreigner can lawfully acquire the working visa and the work permit, allowing long stay and work in Thailand.
The foreigner can legally own a business in Thailand, with lawful liability.
An effective receipt is issuable, hence has the rights to lawfully carry out the commercial transaction in Thailand.
The profit obtained in Thailand can be lawfully taken out to foreign countries within the range of the foreigner investment ratio.
The restoration of VAT from the expenditure can be received.
It is easy to clear the expenditure compared with owning a personal business.
Demerits
The obligation to submit monthly and annual financial report of the company.
The running cost occurs.
With Thai national shareholder having over half of the share, the company may have stronger influence from the local investor.
Because it is company based under Thai law, it may be disadvantageous for the foreigners.
For any assistance or further detail, please contact us.
Below is a rough-estimate of establishment and operation cost of the company in Thailand (with assumption that the office is in Bangkok with 1 Japanese staff, 1 secretary, 2 general workers and 1 chauffer). Please be reminded it is only an estimated figure.
Below is a step-by-step process on establishing a company in Thailand. Please be aware that required time and documents may differ accordingly.
Settling a Physical Address of the Company
Rent deposit and lease signing
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Selecting Thai Investors
Select investors with ability to prove the investing fund
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Registering a Company Name
Under the name of representative, apply for a company name. In event where same or similar names are already in use, the application may get rejected; therefore, prepare at least 3 possible names (if the name includes THAILAND, the only main name of the company will be assessed)
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Founder Application (Initial Company Application)
Application of founder’s name, signature, company names and logo
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Registration of Corporate Tax Number
Registration of taxation number (documents such as photo of the office, lease agreement, etc, is required)
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VAT (Value Added Tax) Number Registration
Documents such as photo of the office, lease agreement, etc is required
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Opening a Bank Account under Company’s Registered Name
Q. Is it possible to establish a company with less than 2 million THB as a capital fund?
A. In Thailand, the foreign investors do not necessary have to prepare the full capital fund. The detail will vary according to the format of the company, however with common limited company format; it is required to proof the fund but not in full amount.
Q. With Thai investor holding over 51% of the share, is there a risk of company being taken over?
A. Since the business in Thailand will be governed by the Thai law, it is very important to understand the law prior to establishment.
For foreign investors, the possibility of having company taken over occurs when the Thai investors organises a shareholder’s meeting, and overrule existing management. However, under the Thai law, it is possible to create a rule to forbid unfair shareholder’s meeting, so it is important to understand the risk, and make sure to avoid it.
Q. For foreign investors, is it possible to create a limited company and obtain a work permit and working visa?
A. Under the Thai law, it is not permitted for foreign investors to obtain a work permit or working visa with establishment of limited company. It is fair to say that the minimum requirement for the issuing of work permit and working visa is to establish a public company with capital fund of 2 million THB.
Q. Is it required to hire 4 local Thai staff per 1 foreign employee?
A. It is required to gather 3 investors for the establishment of the company; however it is not always necessary to employ 4 local Thai staff.
Q. Would there be any risk associated with using Thai business partner’s name?
A. According to Thai law, it is illegal to use or borrow third person’s name without the investment, and is liable for maximum of 1 million THB fine and life rejection from corporate registration in Thailand.
Q. Is it true that the establishment of corporate is rather difficult under revised Thai law?
A. As of January 2010, the investment fund must be available for minimum of 9 days. Therefore, it is incorrect to view that the establishment has been made more difficult.
For further question, please contact us at any time.
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