Your Guide to Doing Business in
Doing business in Thailand has never been easier. According to the World Bank, Thailand is one of the great development success stories. Moreover, Thailand has moved up six places to 21st out of 190 countries in the World Bank’s ease of doing business rankings 2020. While economic growth is expected to slow down due to the impact of the COVID-19 outbreak, Thailand remains one of the most attractive markets to expand your business to.
Table of Content
Why is Thailand an attractive option for foreign direct investment?
- It is an access to Southeast Asia and Southwest Pacific, strategically located in the heart of the Mekong region with close proximity to China and India.
- Second largest economy in Southeast Asia with an open economy and participant in many bilateral FTAs in addition to the AFTA, allowing businesses to engage in virtually tariff-free or low-tariff trade.
- Government policy is favourable to free trade and investment in Thailand, with laws that protect the interest of minority investors and generous tax and non-tax incentives (BOI, EEC, IPA) offered.
- Ease of doing business in Thailand is well documented in the World Bank’s Doing Business 2020 ranking, due to the ease of company set up and clear legislation.
- Cost-effective, skilled, and diversified workforce.
How to incorporate a company in Thailand?
The most common type of a business entity for foreigners to incorporate is a Thai Limited Liability Company (LLC). The registration for this type of company is very straightforward.
The process of incorporating a company is as follows:
Submit 3 name Soptions for Department of Business Development (DBD), Ministry of Commerce. The name reservation is valid for 30 days upon approval.
Company must hold a statutory meeting once the company gets approval for the memorandum and the articles of association. The promoters shall hand over the business to the directors after the meeting. The directors shall thereupon ask the promoters and subscribers to pay in at least 25% of the registered capital.
Register the company, social security and workmen’s compensation fund and obtain TIN at the Partnership and Companies Registration Office, DED, Ministry of Commerce.
VAT registraion is mandatory for all companies when the threshold of THB 1.8 million. Application must be submitted to Bangkok Revenue Office.
Social Security Office
An employer and each employee must be registered as an insured peron with the Social Security Office (SSO). The employer shall collect the application form at the Social Security Office and submit the registration form at the Zone Office of Social Security.
What are the laws, rules, and regulations for doing business in Thailand?
After you have successfully incorporated a company, you will still have to deal with a few legal hurdles and ensure compliance with regulations. This includes:
1. Secretarial and Administrative Function
Every Thai company must employ a qualified corporate secretary who is experience and proficient in Thai corporate law.
2. Social Fund Registration
Social contributions on the employees’ salaries must be paid each month and the Annual Fund Contributions must be submitted at the end of each year.
3. 20% Corporate Income Tax
Withholding Tax: Ranging 0% to 10%
Value Added Tax: 7% or 0% or NA
4. Financial Compliance
Consolidation, accounting, and preparation of group financial statements in accordance with the Thai Financial Reporting Standards for Non-Publicity Accountable Entities (TFRS for NPAEs)
5. Minimum Registered Capital
Foreign majority owned companies are required to have at least=t THB 2 million registered capital depending on the type of business
6. Work Permit
A Thai company hiring a foreigner must have applied for Tax ID and VAT registration and have a minimum paid up capital of THB 2 million per foreign employee
7. Foreign Worker Quota
A Thai company must have a ratio of at least four Thais for every foreign worker (4:1)
8. Regulations & Licenses
Thai Law regulates the activities in which foreign mopanis may engage in while some activities are completely prohibited, some may be engaged in with prior government approval.
What are the advantages for businesses that are considering incorporating in both Thailand and Singapore?
- Skilled and cost-effective labor force in Thailand, especially in the manufacturing industry
- Taxes in Singapore are the lowest in ASEAN region, zero percent tax divide on capital gains.
- Thailand and Singapore are parties to an agreement that allows them to trade without incurring double taxations.
Are there any measures protecting minority investors doing business in Thailand?
Unless the business has received an exemption, such as a Foreign Business License, foreign ownership in Thai companies is limited to 49%. To measure investors’ rights and role in major corporate decisions, there are Civil and Commercial Code which governs private natural and juristic persons, and also Public Limited Companies Act:
Public Limited Companies Act:
- Every shareholder has the right to inspect minutes and records of company meetings and receive a copy of the company’s balance and financial statements.
- 25 shareholders representing 10% of the total number of shares sold can call for an extraordinary meeting (Section 100).
- Shareholders holding at least 5% of shares may bring an action against directors for breach of duty.
- Shareholders representing 5% of the total number of shares sold can inspect the transaction documents before filing suit (Section 128).
- At least 5 shareholders or shareholders holding at least 20% of shares may dispute a resolution of the shareholders passed in breach of the law or the articles of association of the company.
- Shareholders holding at least 10% of shares may petition to the court for a company to be dissolved.
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