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Legal Assistance – Business in Thailand

Starting your business in an unknown territory, undoubtedly is a huge challenge and the foremost and mandatory thing is to get appraised of the local laws so that one does not get into problem later on.  For Starting up your business in thailand, you need to know the means of company registration, options available for registering a company, corporate laws, joint venture probabilities, licensing issues, tax implications, accounting procedures, staff obligations, Immigration processes, Work permit procedures etc. Often many business owners are mislead by wrong informations, so our intent is to provide you with the correct and expert guidance on these issues to justify your setup on a solid foundation. Understanding legal and operational procedures are of utmost importance in your business success in Thailand.

While having startup business ideas in Thailand, following few topics would be considered as the most sought after topics that any company would look for. It is important for anyone to do adequate research before setting up their operations in Thailand.

Once someone decides to setup a company in Thailand, there are actually two ways to approach it. In both cases, a company need to be registered but it could be either promoted by Board of Industry or it may registered in DBD, under Ministry of Commerce.

To establish a Thai Limited company one needs three promoters, one of these three must be Thai. A Thai Limited Company must have a Thai national holding 51% of the company in term of share holding, which means that foreigners can hold only 49%.

To register a Thai limited company one must have a physical address, be it as a virtual office, serviced office or a rental office. A PO Box is not acceptable, specially when the company has to register for VAT. VAT registration is surely required when the company start

To establish your Thai limited company the company address is not normally an issue, however, it will later become an issue when you are required to obtain a VAT certificate.

As a part of the process to obtain a VAT Certificate, the company is required to obtain the written permission of the owner of the premises where the company will be located.(if the company is not the owner of the premises). One must be careful of trying not to register any company in a condominium as most juristic offices condemns and prohibits condominium address as a commercial address.

Normally, most people would like to register a Thai company with a minimum capital investment of 2 million THB. This  is mandatory investment for any limited company, intending to have at least one foreigner working for them. For each foreigner working within the company one would require capitalization of 2 million THB.

Once the company is registered, then one needs to apply for the tax, VAT and also open a bank account. As a foreign Director, one would then be eligible for a working visa and a work permit.

Through our panel of lawyers, our team help our clients with the best possible options for a professional operation.

For a comprehensive information about how to do business in Thailand and what are the basic guidelines, please download the Business Guide

The Board of Investment (BOI) Thailand was set up to promote investment opportunities in thailand by providing privileges to local companies or foreign entities planning on incorporating under Thai law. They offer special incentive to companies falling under certain categories of business which enhances foreign investment and technical improvement of local manpower.

BOI Thailand Benefits:

  • Permission for foreign investors to own land
  • Permission to operate under 100% foreign ownership
  • Permission to bring in as many as foreign technicians and experts needed
  • Exemption of import duty on machinery
  • Corporate income tax exemption for up to 8 years
  • Deduction of Transportation, Electricity and Water Costs
  • Permission to remit foreign currency abroad
  • Deduction of Project’s Infrastructure Installation
  • Exemption of import duty on raw or essential materials used in the manufacturing of export products for 5 years

The following are some promoted activities which BOI Thailand offers as special privileges:

  • Agriculture & Agricultural Products
  • Projects with direct involvement in technological and human resource development
  • Industrial zones for environmental preservation, Waste water treatment
  • Mining, Ceramics & Basic Metals
  • Light Industry
  • Metal Products, Machinery & Transport Equipment
  • Electronics Industry & Electrical Appliances
  • Chemicals, Paper & Plastics
  • Software

For more informations about what are the latest privileges offered by BOI and how to get it, please download the BOI Guide Book.

The Revenue Code outlines regulations for the imposition of taxes on income, with income tax divided into three categories: Corporate income tax, value added taxes (or specific business taxes), and personal income tax.

Corporate Tax

All companies registered under Thai law are subject to taxation as stipulated in the Revenue Code and are subject to income tax on income earned from sources within and outside of Thailand. Foreign companies not registered or not residing in Thailand are subject to tax only on income derived from sources within Thailand.

Normal business expenses and depreciation allowances, at rates ranging from five to 100 percent, depending on the item, or at rates under any other acceptable depreciation method, are allowed as deductions from gross income. Inventory must be valued at cost or at market price, whichever is lower.

Net losses can be carried forward for up to five consecutive years. Interest payments on some foreign loans may be exempt from a firm’s income tax.

For more informations about Corporate Tax, please refer to the Tax section by downloading the Business Guide 

Value Added Tax

The value added tax (VAT) system, which came into effect on 1 January 1992, largely replaced the old business tax system, which critics claimed caused inefficient redundancies and facilitated tax evasion.

Under the new tax regime, value added at every stage of the production process is subject to a seven percent tax rate. Those who are affected by this tax are: Producers, providers of services, wholesalers, retailers, exporters and importers. VAT must be paid on a monthly basis, calculated as:

Output tax – input tax = tax paid
where output tax is the VAT which the operator collects from the purchaser when a sale is made, and input tax is the VAT which an operator pays to the seller of a goods or service which is then used in the operator’s business.

If the result of this calculation is a positive figure, the operator must submit the remaining tax to the Revenue Department not later than 15 days after the end of each month. However, for a negative balance, the operator is entitled to a refund in the form of cash or a tax credit, which must be paid in the following month.

For more informations about Value Added Tax, please refer to the Tax section by downloading the Business Guide 

Personal Income Tax

Every person, resident or non-resident, who derives assessable income from employment or business in Thailand, or has assets located in Thailand, is subject to personal income tax, whether such income is paid in or outside of Thailand. Exemptions are granted to certain persons, including United Nations. officers, diplomats and certain visiting experts, under the terms of international and bilateral agreements.

Individuals residing for 180 days or more in Thailand for any calendar year are also subject to income tax on income from foreign sources if that income is brought into Thailand during the same taxable year that they are a resident.

A standard deduction of 40 percent, but not in excess of 60,000 baht, is permitted against income from employment or services rendered or income from copyrights.

For more informations about Personal Income Tax, please refer to the tax section by downloading this  Business Guide 

Employment legislation has a direct bearing on labor practices for each type of business. Business owners and Investors should seek appropriate advice from Startup Specialists to determine which legislation applies to their line of business and the best way to move forward.

Important protections contained in the law are:

Work Hours and Holidays: The maximum number of hours for non-hazardous work is 8 hours a day, but not exceeding 48 hours per week. Where the working hours of any day are less than 8 hours, the employer and employee may agree to make up the remaining working hours in other normal working days, but not exceed 9 hours per day and the total working hours per week shall not exceed 48 hours. In some types of work as stipulated by law, the employer and the employee may agree to arrange the period of working hours, but it still must not exceed 48 hours a week. Hazardous work may not exceed 7 hours a day, or 42 hours per week. The employees are entitled to no fewer than 13 national holidays per year, as well as a minimum of 6 days of annual vacation after working consecutively for 1 full year. The employees have the choice of whether they wish to work overtime or on holidays. A female employee is entitled to maternity leave for a period of 90 days including holidays, but paid leave shall not exceed 45 days.

All employees are entitled to a daily rest period of at least 1 hour after working 5 consecutive hours. The employer and the employee may arrange the daily rest period to be shorter than 1 hour at each time, but it must not be less than 1 hour a day in total. A weekly holiday of at least 1 day per week at intervals of a six-day period must be arranged by the employer.

For work performed in excess of the maximum number or working hours fixed either by law or by specific agreement (if the latter is lower), the employees must be paid overtime compensation. The rates for overtime vary and range from 1-1/2 times to 3 times the normal hourly wage rate for the actual overtime worked. The maximum number of overtime working hours is limited to not more than 36 hours a week.

The minimum age for employment is 15 years, and the workers below the age of 18 are banned from dangerous and hazardous jobs. They are also prohibited from working overtime, on holidays, or between the hours of 10 p.m. and 6 a.m. A pregnant employee is also prohibited from working overtime, on holidays, or between the hours of 10 p.m. and 6 a.m. However, if she works in an executive position, or performs academic, administrative, and/or work relating to finance or accounts, the employer may assign her to work overtime on a working day with her consent insofar as it does not affect the health of the pregnant employee.

For more informations about Labour laws, please refer by downloading the  Business Guide 

Like every other country, it is a pre-requisite for every foreign individual to hold a valid Visa and work permit if he is intending to work in the kingdom of Thailand. However, things are a little more difficult and more challenging in Thailand than elsewhere. Every individual should have a firm objective and precise planning while applying for Visa and Work Permit in Thailand. Read our comprehensive article about Visa and Work Permit here

Check out our industry domains section where you would find the different industries that offer vast business opportunities in Thailand.