How to open a company in Thailand as a foreigner

Thailand has always been one of the most attractive places to do business in the Southeast Asian region. It is at the center of economic and business interactions among ASEAN member countries, with a wide range of customers and business opportunities.

Thailand's foreign policy is primarily focused on ensuring conditions conducive to stable economic development and maintaining the country's good reputation in the international arena. Despite slowly advancing market reforms, the country has demonstrated relatively high rates of economic growth and a rapidly improving business climate in the areas of contract enforcement, property registration and tax payment.

While Thailand actively seeks to attract foreign businesses, there are certain activities that are only intended for citizens of the country. The Foreign Business Act (FBA) was introduced as a way to regulate business activities involving foreign citizens and organizations.

The FBA restricts foreigners from conducting about 50 types of businesses. These businesses have been grouped into three lists.

List 1 includes newspaper business, livestock farming, land trading and other activities. Foreigners are prohibited from engaging in businesses on List 1 for "special reasons" and there is no permit that a foreigner or foreign organization can obtain.

List 2 contains three groups and includes businesses related to national security and domestic land, water or air transportation (including domestic aviation business). Foreigners or foreign organizations may engage in businesses related to the activities on List 2 if they obtain approval from the Minister of Commerce and the Cabinet. However, obtaining such approval is very difficult.

List 3. Foreigners and foreign organizations are prohibited from engaging in the activities on List 3 on the grounds that "Thai nationals are not prepared to compete" with foreigners. Foreigners and foreign organizations may obtain approval from the Director General of Commercial Registration of the Business Development Department (DBD) and the Foreign Business Committee for these activities. List 3 consists of “other categories of services other than those prescribed by ministerial regulations”.

Foreign Business Licenses

If a foreign entity wishes to engage in any of the activities listed in List 2 or List 3 of the Foreign Business Act in Thailand, it must obtain a Foreign Business License (FBL).

To apply for a Foreign Business License, an application must be submitted to the Department of Business Affairs and reviewed by the Cabinet or Foreign Business Affairs Committee. This license is usually valid for one year and must be renewed annually.

Various criteria will be taken into account when reviewing applications. Examples include:

• advantages and disadvantages for the country's security
• economic and social development
• size of the business
• local employment opportunities, etc.

You may also need an industry license to operate, depending on the type of business you run. For example:

• A license from the Health Promotion Department if you are opening a rehabilitation center or nursing home.
• A license from the Food and Drug Administration if you are handling food, alcohol, or medical products.
• An e-commerce license if you are selling online.
• A license from the Bank of Thailand if you are providing financial services.
• A license from the Tourism Authority of Thailand if you are operating as a travel agency.
• A license from the Ministry of Education if you are providing certain educational services.

Types of Companies

The BOI Guide to Starting a Business in Thailand lists the main legal business structures. These are:

Sole Proprietorship

A sole proprietorship is a legal structure that is only available to Thai citizens. It is the simplest form of business. However, in Thailand, it is illegal to operate as a sole proprietor in professions such as banking and finance. Only limited liability companies can engage in this type of activity.

The business does not exist as a separate legal entity, so the owner assumes sole responsibility for the administration of the business, debts, and tax payments.

Partnership

Partnerships in Thailand are different from sole proprietorships because they have at least two business owners, although there may be more. However, they are different from full company legal structures because there are no shares or shareholders in the company.

There are three different types of partnerships in Thailand:

• Unregistered Partnership: a basic unlimited partnership in which the business does not exist as a legal entity and the owners are solely liable to pay income tax on their share of the profits.
• Registered Partnership: where the business is registered as a separate legal entity that pays corporate tax and the owners are not personally liable for the business debts.
• Limited Partnership: a kind of hybrid model in which there is at least one partner who has the sole liability and responsibility for running the business and at least one partner with limited liability.

Foreign ownership cannot exceed 49% in these partnership models unless the company has a license from the BOI or the Department of Business Development (DBD).

Private Limited Liability Company

Private Limited Liability Companies (are a standard registered company model in which at least three owners or directors are legal officers of the company, which is a separate legal entity that pays corporate tax. Liability is limited, meaning that any debts are tied to the company and not the owners.

The company's capital is divided into shares, and the owners are the shareholders. The total number of foreign shareholders cannot exceed 49% unless the company has a BOI or DBD license. Private companies in Thailand often form a board of directors to simplify the management of the business.

Public Company

Public companies are similar to private companies, but they must have a minimum of 15 owners or shareholders. The company's shares can be sold to the general public, meaning the company is eligible to be listed on the Stock Exchange of Thailand.

As with other forms of business in Thailand, foreign ownership in public companies is limited to 49% for businesses without BOI or DBD approval.

Foreign companies looking to set up in Thailand can choose from the following types:

Subsidiary

Setting up a business as a separate legal entity in Thailand with the parent company as a shareholder. The processes and requirements are the same as setting up any other business.

Branch

Works similarly to a limited liability company, but does not have a separate legal entity from the parent company. It has no shareholders and is managed by a representative of the head office. A branch office must follow Thai business regulations and pay corporate tax on Thai income, but is ultimately accountable to its overseas base. The business must register with the DBD and obtain a foreign business license, but it can be 100% foreign owned.

Representative Office

The company establishes a presence in Thailand, but cannot trade or earn income. Its activities are limited to sourcing goods/services, manufacturing, providing advice and information, and reporting on business trends. Since the office does not make money from its base in Thailand, it does not pay business tax and is exempt from other government fees. It can hire foreign workers with work permits and is not subject to the 20% limit on foreign workers.

Branches and representative offices must provide capital of THB 2 million to set up in Thailand.

Business Visa

To work in Thailand as a foreign national or to invest here, you must apply for a business visa. Once you have received it, you can work in Thailand. Applications for a Thailand business visa can be submitted to the Royal Thai Embassy or Consulate in your country.

If you have a multiple-entry visa, you will need to report your status each time you leave or enter the country. If you enter on a single-entry Thai business visa, the visa will be cancelled once you leave the country. However, you can apply for an extension of your visa while you are in Thailand.

There are several categories of Thai business visas:

• Non-Immigrant Visa B (Business Visa): This is for foreign nationals who wish to do business in Thailand or who wish to apply for a work permit.
• Non-Immigrant Visa BA (Business Approved Visa): This is for those who wish to set up a business in Thailand and invest in a Thai business.
• Non-Immigrant Visa IB (Investment and Business Visa): This is for foreign nationals working on investment projects under the auspices of the Board of Investment of Thailand (BOI).
• Non-immigrant B visa (teacher visa): This is for foreign nationals who want to work in Thailand as a teacher.

Business Registration Process

If you choose a legal structure other than a sole proprietorship or unregistered partnership, registering your Thai business involves several steps. The process is as follows:

• Create an account with DBD and register your company name.
• Prepare your official business documents, such as the Articles of Association, list of shareholders, and Declaration of Business if you are a private or public limited company.
• Hold a shareholders’ meeting to formalize the company documents and deposit the initial capital into the company’s bank account (private and public limited companies only). Minimum capital requirements only apply to companies with foreign majority ownership approved by the BOI or DBD - the current requirement is THB 2 million.
• Register your business at your local DBD office or through the online portal.
• Register with the tax office and obtain a business tax identification number within 60 days of business registration. Businesses with an annual turnover of over THB 1.8 million will also be required to register for VAT.
• Once your business starts operating, you must pay taxes. According to the tax department, all companies must pay corporate income tax and file a tax return within 150 days from the closing date of their accounting period.
• If you are setting up a public company in Thailand, you may have to follow additional registration procedures depending on the nature of your business. You can check it in DBD.

Taxes

Thailand has a classical tax system and is implemented in accordance with the “Tax Act” (Revenue Code, 1995), which regulates 3 main categories of taxes: corporate income tax, value added tax (VAT) and personal income tax.

• Corporate Income Tax (CIT). Taxable income is the income of a legal entity engaged in business and registered in Thailand or another country (but receiving income from Thailand). The corporate income tax rate is from 15% to 20% depending on the size of the company and the amount of profit (small businesses with an income of up to US$5,000 per year are exempt from tax). The tax is calculated based on the annual income of the company and is paid once a year, respectively.
• Value Added Tax (VAT) is paid by both legal entities and individuals who are engaged in commercial activities and receive profit from the sale of products and services with added value. The VAT rate is 7%, including 6.3% - this is the standard rate and 0.7% - the municipal rate. Private entrepreneurs and small businesses with annual income of less than 1.8 million baht are exempt from paying VAT. Also, some goods and services are not subject to this tax: primary agricultural products, fertilizers, animal feed and pesticides, foreign printed products, health services, education and transport.
• Personal Income Tax (PIT). Personal income tax in Thailand is calculated on a progressive scale from 0% to 35%. At the same time, a distinction is made between residents (citizens of Thailand) and non-residents (those living in Thailand for less than 180 days a year). Residents pay the tax within 6 months after filing their income tax return. Non-residents also pay taxes every 6 months, but without declaring income in the territory of their residence, they actually pay taxes only on the amount they earned in Thailand.

According to the current scale, personal income is taxed at the following rates:

• up to 150,000 baht per year: 0%;
• 150,000-300,000 baht: 5%;
• 300,000-500,000 baht: 10%;
• 500,000-750,000 baht: 15%;
• 750,000-1,000,000 baht: 20%;
• 1,000,000-2,000,000 baht: 25%;
• 2,000,000-5,000,000 baht: 30%;
• more than 5,000,000 baht: 35%.

Property Tax

Thailand has 2 types of property taxes:

• building tax: ownership - 12.5%, rent - 7%;
• land tax: from 0.25% to 0.95%, depending on the size of the property.