Before you establish your business and register it in Thailand, you need to learn more about how this type of process works. Anybody who owns a foreign business in Thailand must comply with the Foreign Business Act, established in 1999. You need to make sure you comply and retain legal services. Otherwise, you could face some harsh penalties.
For example, non-compliance can result in spending three years in prison or paying a sizable fine. Also note, the Foreign Business Act stipulates that certain business activities cannot be performed by foreigners. Unless a foreign investor claims an exemption or applies for an associated license, he or she cannot form a Thai company.
While there is no general restriction on a foreigner who wishes to conduct business in Thailand, he or she cannot engage in the following activities or fields:
If you want to register your business in Thailand, you can do so if you have formed your company, as follows:
If you have an ordinary limited partnership, one of the partner’s liability is unlimited while the other partner’s liability is limited. This type of partnership is often registered in Thailand because of its easy formation and registration steps.
If you have 49% interest as a foreign investor and 51% of the company is owned and registered by Thai shareholders, you do not need to contribute as much capital upfront. This type of registered company is also easier to maintain. If you invest with Thai partners, they can buy land, if needed.
In fact, if you are a foreign investor, you may like this Thai-owned arrangement, as it is a fairly common business practice in Thailand. Thai law requires that you file balance sheets annually for this registered entity. You also must have a company address on file. You should be reasonably certain that the business can be profitable. Otherwise, it can become de-listed by Thai authorities.
If you invest in a limited company or partner with Thai majority shareholders, lawyers often assign the shares to the shareholders. Therefore, the shareholders do not have a direct interest in the company. Also, the income is normally disbursed through expenses, such as rent and salaries. In turn, shareholders usually do not have any equity to claim. This makes a Thai majority company quite attractive to a foreign investor.
Currently, the minimum capital needed for a Thai majority shareholder company stands at 2 million Baht. The set-up fee charged by the government is about 7,000 Baht. If you are married to a Thai woman or man and are a foreign owner, the required set-up fee is lowered to 1 million Baht.
If you need to acquire a Foreign Business license, your minimum capital requirement stands at THB 3 million for each of your business activities.
If you are a foreigner who wishes to do business in Thailand and register a company, you may want to form a partnership with a Thai-born citizen. When this method is used, the Thai entity hands over the total power of attorney to the foreign investor. This would make it possible for you to buy assets.
As an owner of a joint venture, you will need to submit a tax return and pay a yearly tax, plus administrative fees. However, you have to be careful in this respect. Using nominee shareholders or forming a joint venture for the main purpose of owning real estate can get you into big trouble legally.
Once you register your Thai-based business, you will need to pay taxes. A corporate income tax or CIT is levied on a partnership or juristic company that performs business in Thailand. It must also be paid on income that is derived in the country.
If you want to succeed in business as a foreigner in Thailand, you will find that it is not as simple as it sounds. You need legal help to realize good gains as well as the support of the Thai community. You can also own 100% of a Thai-based company. However, to start a business in Thailand as a foreigner, it is usually more practical to know Thai business people who can support and help you with your business goals.
Use your Thai business partner’s knowledge to help you learn more about Thai registration and to practice compliance. Doing so will upgrade your professional reputation and make it easier to follow the laws that have been established for foreign-based interests.
If you need legal advice or assistance from a qualified corporate lawyer, please contact us today.