Legal Assistance – Business in Thailand

For a business owner, starting a new business in an unknown territory is undoubtedly a huge challenge. One of the most important aspect of starting a business is to get appraised of the local laws so that one does not get into a problem later on. They also need to be well versed with company registration processes, available options for registering a company, various corporate laws, joint venture possibilities, licensing issues, tax implications, accounting procedures, staff obligations, the immigration processes and work permit procedures, etc.

Many business owners looking to start a business in Thailand are often misled by unreliable information available online. Startup in Thailand’s intent is to provide their customers with reliable and expert guidance on all the legal and operational processes and procedures that a business needs to go through to establish a rock solid foundation in Thailand.

Startup in Thailand provides effective market entry advice for startup businesses, guiding them through the local intricacies which could otherwise be very time consuming and difficult to execute. Their intent is to provide their customers with reliable and expert guidance on setting up new business operations, exploring potential business acquisitions and joint ventures and understanding all the legal implications.

It is essential for a new business to conduct a thorough research of the local market and the various processes involved in it before they decide to start a new business in Thailand. Listed below are some of the important topics a company should be aware of before starting a business in Thailand.

Partnership:

Unregistered ordinary partnership, Registered ordinary partnership, and Limited Partnership. Read more

Thai Limited Companies:

  • Private Limited Companies are governed and maintained by the Civil and Commercial Code: Through a process which leads to the registration of a Memorandum of Association and Articles of Association, as its fundamental documents. A minimum of seven shareholders is required. It could be entirely owned by aliens but under those activities which are reserved for the Thais, a maximum of 49 percent of ownership is allowed to the foreigners. The registration fee is 5500 baht per million baht of capital.
  • Public Limited Companies are governed and maintained by the Public Company Act: Subject to adherence with approvals, bonds, debentures, offer shares, and warrants to the public and may apply to have their securities listed on the Stock Exchange of Thailand (SET). A minimum of 15 promoters are required and they must hold their shares for a minimum of 2 years before they can be transferred. The Board of Directors must have a minimum of five members, at least half of them to be Thai nationals. The registration fee is 2000 baht per million baht of capital. Read more about registering a Thai Limited Company
  • Joint Venture: It has not yet been recognized as a legal entity under the Civil and Commercial Code. However, its income is taxable under the Revenue Code, which makes it a single entity.
  • Representative Office: It is restricted to engaging in non-profit activities. At least one or more of the following purposes must be required for the establishment of an office. The business is to 1) Search for goods or services in Thailand for the headquarters overseas. 2) Check the quality and quantity of products ordered in the headquarters overseas. 3) Give advice to the headquarters about the goods to order. 4) Supply the information on the headquarters’ products to the customers in Thailand. 5)Report the economic movement in Thailand to the headquarters.Read more about Representative Office norms.

Startup in Thailand recommends the 2 best options for setting up the business in Thailand. These are chosen by most clients because of their flexible options and easy to start operations at the fastest possible time.

Thai Company Registration 

  •  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 terms of shareholding, which means that foreigners can hold only 49%. Most people prefer to register a Thai company with a minimum capital investment of THB 2 million. This is a mandatory investment for any limited company, intending to have at least one foreigner working for them on a work permit. To register a Thai limited company one must have a physical address, be it a virtual office, serviced office, or a rental office. PO Box is not acceptable, especially when the company has to register for VAT. VAT registration is mandatory when the company has started operations and income exceeds THB 1.8 million. To establish a Thai limited company the company address is normally not an issue, however, it may become an issue later when the business is 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 condemn and prohibit condominium addresses as a commercial address.

Thailand Representative 

  • It is meant for business owners who are not keen on investing much in Thailand but would like to take advantage of Thailand’s market opportunities. Startup in Thailand offers  Thailand Representation Service meant for companies or business owners who would like to avail of all the facilities of a fully functional branch office at a fraction of the cost. Operations can be started from day one with ready office and a team dedicated to full-fledged operations, all included under a highly customizable package. Learn more about Thailand Representation Service

Consult Startup in Thailand for professional legal assistance in determining the way forward and advise on doing business in Thailand the right way.

For additional information, please feel free to download a Business Guide that contains comprehensive information and guidance about how to do business in Thailand.

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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 incentives 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, Wastewater treatment
  • Mining, Ceramics & Basic Metals
  • Light Industry
  • Metal Products, Machinery & Transport Equipment
  • Electronics Industry & Electrical Appliances
  • Chemicals, Paper & Plastics
  • Software

Read a comprehensive article on the Board of Investments and contact the startup specialists who can consult and handhold you through the entire process.

For more information about the latest incentives offered by BOI and how to leverage it, please feel free to 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 information about Corporate Tax, consult the startup specialists or 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 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 tax credit, which must be paid in the following month.

For more information about Value Added Tax, consult the startup specialists or 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, like those working for the United Nations, officers, diplomats, and certain visiting experts, who come 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 information about Personal Income Tax, consult the startup specialists or 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 for 5 consecutive hours. The employer and the employee may arrange the daily rest period to be shorter than 1 hour 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 of 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 information about labour laws, contact the startup specialists or please download 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 they intend to work in 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. Check out a comprehensive article here about the Visa and Work Permits process in Thailand.