Starting a Business in Thailand

How to set up a business in Thailand is a common question which many travelers ask especially those who have been enamored by the relaxed lifestyle they have experienced in Thailand. Many are keen to explore ways they could stay in this paradise for a longer period of time while taking advantage of the booming economy and making money.

Few Points to Consider

Thailand is ranked 21st out of 190 countries in the World Bank’s 2020 ease of doing business rankings. That is, it is among the top national economies to collaborate with. Every business in an alien country is different and demands a different approach. Few essential points that must be taken into consideration for doing business in Thailand to be successful. 

  • Working with a local partner Having an association with a local expert who has a thorough understanding of business implementation, is a valuable asset to help navigate the local bureaucracy. A scarce use of English is also another point why one needs to have a partner to mitigate language difficulties and solve critical business issues. 
  • Understanding the people Thailand has a different culture and it needs to be imbibed before doing business. So understanding local customs and etiquette will go a long way in building a successful local business while avoiding taboos. The secret of success in Thailand lies in building long-term and trustworthy relationships with customers/vendors and the support from a competent local adviser/partner.
  • Getting appraised  – Business in Thailand is much more introverted than their western counterparts. Many companies fail in their attempt to start a business in Thailand because of their lack of clear Thailand Market Entry plan and also local experience. Learning the tricks of the trade takes a longer time than imagined. Professional assistance from the Startup Specialists would surely be of help.

Most of the serious problems are not legal ones. They are usually the business associates in Thailand that you work with. Most Thai partners could be inexperienced, and not trustworthy who have less of prior research.  They join hands with a foreign partner merely to get in the shares and the profit even if they don’t have a business agenda.

Foreigners who have done their best in Thailand because they had true intentions, were determined, committed, and had a willingness to learn.

However, there are a lot of hurdles to set up a business in almost every foreign land and Thailand is no exception.

  • To start a business, one needs to navigate through four procedures (as already stated above). It takes on an average time period of 1 to 3 months to complete the whole process in Thailand if you have all the documents.
  • There are eight procedures to get the construction permit. It takes 157 days to complete the whole process on an average. This involves inspections, permits, and approval by the Metropolitan Department. Also, the approval of the building controller is required by the concerned authority.
  • Thailand is ranked 70th on the ease of getting credit list, according to the World Bank and International Finance Corporation.
  • Corporate income tax is flat 30 percent, and VAT takes the most time to complete. Thus taxing might be another issue.
  • Enforcing contracts can take up to 440 days can involve 36 procedures. While resolving insolvency can take up to 2.7 years.
  • Due to the high cultural society, Thailand has diversity. It might be difficult to understand every culture for a foreigner. This mix of cultures is complex to handle. Indirect and subtle communications are preferred in negotiations. This requires local Thai people much more than the foreign staff. Thus one needs to build a strong relationship with the Thais to help foreigners operate successfully. Most importantly, one needs to have a trustworthy and reliable Thai business partner.
  • Make sure that one have their target audience in mind before anyone start the business. Targeting only foreigners and leaving the large Thai base is usually not recommended. Similarly, one must have a huge base of funds and profit margin to strive in the Land of Smiles.
  • The Thai language is another barrier. Thus all the documents to be translated should be done by professionals you know.
  • Working hours are restricted to 8 hours a day or 48 hours a week. Thus overtime might cost you a little higher.

However, there is always a flip side of the coin. Doing business in any part of the world is not easy. Thailand attracts a great number of opportunities on the other hand.

Startup in Thailand recommends either one of the two options for setting up a business in Thailand. These are chosen by most clients because of their flexibility and it’s easy to start the business 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. Work Visa is an important prerequisite that you need to start your company in Thailand. As a foreigner, one is not even allowed to act as a volunteer at a business that was funded without a work permit

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

If an investor is setting up a large infrastructural project or a project related to technology, the best option is to apply for company registration through The Thailand Board of Investments and take advantage of additional incentives provided by them. 

Another option that an investor can explore for the registration of the company is to set up a Branch or Representative office in Thailand. Additionally, American companies or American individual business owners can take advantage of the US Treaty of Amity with Thailand and own 100% of the registered company.

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

Start-up Business

The process is faster as compared to other businesses.  Foreigners can invest in a  green startup project with angel funding or a startup with its own funds. Infrastructures for start-ups is available in easily in Thailand.  Furniture and office equipment can be easily bought. A lot of excellent designers can help you create an office of your choice or you can opt for a totally outsourced serviced business operations including serviced office space.

Read More: Outsource your business in Thailand and  Top 10 Business Opportunities in Thailand

Franchise

Franchise opportunities are ample. For instance, Subway, 7-11, Dunkin Donuts, etc  is all around in Bangkok. Many US franchises are much more popular in Bangkok than in the US itself. So taking up a franchise is one of the best ways to startup.

Read More: Top 10 Franchises that you would love to start in Thailand  

Buying

Buying is not always the best way to operate a business in a foreign land. It is costly. It requires a lot of paperwork and is time-consuming. However, it gives you a ready to go business. You just need to grow the business. On the other hand, there was a reason to sell the business by the seller which might not be in your favor. However, it is very important to opt for Legal Assistance in Thailand to do due diligence on the past records before investing.

Read More: What you should consider before doing business in SE Asia

Contact Startup in Thailand for a no-obligation discussion 

The laws in Thailand are pretty nationalistic. Thailand does not allow the buying and selling of economic areas and business categories for foreigners primarily under the Foreign Business Act (1999). Under this FBA act, foreigners are not allowed to engage in most business sections unless an external business operation work permit has been gained from the Director-General of the Department of Commercial Registration after gaining the approval of the Foreign Business Committee of Thailand. Distinct laws control and monitor foreign ownership of land as well as other such activities such as banking, insurance, finance, and shipping in Thailand. Thus a foreigner must comply with this act stated above in order to get a license to start a business in the Land of Smiles. Learn more about the Foreign Business Act.

A company needs to be owned by the majority of Thais in order to run, the maximum partnership being 49 percent by a foreigner. In some cases, 39 percent is an obligation. The Thai shareholders in a company partly or fully owned by the Thais, need to submit evidence of finance used to hold shares, including bank statements and other documents.

Exceptions to this clause are:

  • The ownership of an Alien Business License from the Ministry of Commerce, under the Board of Investment. Usually, very large capital or a very large number of Thais employed at the company, or technological transfer as in the field of energy fields are required to get this Foreign Business License.
  • American Treaty of Foreign Companies: Any foreigner who wants to set up a company in Thailand cannot own a company solely by himself; except for US citizens, under the treaty of Amity. This treaty was signed on May 29th, 1968. The history of this Treaty hail from the colonial times when Thailand was the only non-colony in the region and the US was an ally, and it further went on to Vietnam War years, when America was a major investor in Thailand.

However, an American Treaty Company is more complicated than a regular company. It costs double compared to any other Thai corporation, but the same scrutiny and governmental regulations as a Thai corporation. Contact us!

But why are US citizens treated specially?  Maybe major US Corporations were not too comfortable to share the control of their corporations with the Thais. For example, Coca-Cola or US car makers did not want any unwanted shareholders.

Talks have been held to abolish this Treaty since it expired in 2004 and revise the laws and regulations in regards to foreign businesses.  However, there has been much less progress than required.

However, control of a company is not necessarily lost by not having “majority ownership”. There are some measures where a foreigner can completely control the company. Let’s say that you own 39 percent whereas the Thais own 61 percent, you being the sole Managing Director who is the sole signatory authority. A Thai nominee under the FBA is a Thai person or Thai company registered as a shareholder in the company but who holds the shares on behalf of the foreigner. The actual owner of the shares is the foreigner, however, on paper, the Thai shareholder is registered as the owner.  In this case, you can set a scrum of shareholders at 65 percent. Thus even if you don’t attend, there is no scrum, so the bylaws cannot be changed nor can the Managing Director’s sole authority and powers be questioned.

The previous government wanted to amend this loophole in the Foreign Business Act.  Thus under the amendment, the company will need to get a Foreign License or would need to restructure and limit foreign control in the company. Under the new rule, under Section 36 and 37 of FBA, criminal investigation and evidence submitted to the court will find if Thai nominee shareholders are used.

Another questionable tactic is to hire a law firm which provides you stakeholders/promoters, who neither meets you nor they know you. But it might be illegal as well. Besides, if your company gets rich or acquires property and then you have an unfortunate accident, the Thais will get all the wealth and property. Thus it’s NOT a safe method to acquire full control over the company. You might want to know the stakeholders to run a safer business. It’s best to assign these shares to a diversity of Thais who you think you can trust.

Thirdly, most of the accounting firms and law offices in Samui, Pattaya, and Phuket set up a 100 percent Thai owned company that transfers the shares and company control to the foreigner after the formation and registration of the company. This prevents the investigation at the time of registration. But it doesn’t protect the Foreigner owning the company if a breach with the Foreign Business Act is found. It might lead to several penalties like prosecution and removal of the company from the Registrar of Companies. Read more about US Amity Treaty and registering a company under that.

The Board of Investments is a Government agency of Thailand. Its primary purpose is to offer information about various investment opportunities in Thailand. Foreign experts and skilled workers have to adhere to the Investment Promotion Act of 1977. Section 24 allows permission for non-native nationals to avail of investment opportunities in Thailand. They can reside in Thailand for a period of 4 to 8 months for as long as the companies they want to set up have yet to receive the Investment Promotion Certificate. Section 25 gives foreign nationals permission to stay in Thailand for a duration of 1 to 2 years if the companies have received the Investment Promotion certificate.

There are a lot of incentives offered by BOI. Some of them are listed below:

Tax incentives:

  • Exemption or lowering of import duties on raw machinery (Section 28/29)
  • lowering of import fees for raw or essential materials (Section 30)
  • Lowering of corporate income tax and juristic person income tax (Section 31/34)
  • 50% lowering of corporate income tax (Section 35(1))
  • Double lowering the costs of electricity, water supply and transportation (Section 35(2))
  • Additional 25 percent deduction of the cost of installation or construction of facilities ( Section 35(3))

Non-tax incentives:

  • Permit to own Land (Section 27)
  • Permit to take out or remit money abroad (Section 37)
  • Permit to enter the Kingdom for studying investment opportunities (Section 24)

Read more – The Thailand Board of Investments

Starting a business or setting up a business in Thailand is not that difficult as the country holds high respect for foreign businesses.

  • In comparison to other Asian economies like India, China, Vietnam, and Malaysia, it is easier to do business in Thailand in terms of duration and cost. Thailand ranks 21st out of 190 countries in the World Bank’s 2020 ease of doing business rankings.
  • Start-up barriers are also less and it gives ample opportunities to entrepreneurs.
  • A ratio of cost of living to the cost of operating business in Thailand excellent as compared to other Asian economies.
  • Low inflation, decreasing the budget deficit, lesser external vulnerabilities, and increasing national savings are parameters to attract foreign investors.
  • Growth prospects are also strong with a stable 1.8 percent GDP growth.
  • Bangkok being the central hub is cheaper in terms of land as compared to New Delhi, Shanghai, and Singapore.
  • Corporate income taxes are also low in Thailand. Besides, the Thailand Board of Investment offers incentives that might reduce tax liabilities.
  • Cross-border trade is very cheap. Although it might be time-consuming and bureaucratic.
  • Protecting its investors is another key point in Thailand’s business. It is used as a ‘test center’ for many products as well.
  • Getting electricity is a fairly straightforward task. It just requires permission from the Metropolitan Electricity Authority (MEA).
  • A skilled and cost-effective workforce is another cherry on the cake for doing business in Thailand.
  • Thailand has a diverse manufacturing sector with a large array of goods ranging from toys, rubber, and furniture to jewelry.

Thailand is a well-established market economy unlike many emerging economies in Asia.  It’s comparatively hard to start a business in Thailand for a foreigner. However, it attracts businesses since it is a good and flexible market to operate in. The legal part is fairly easy. What you need is the financial capital and the core business that you are setting up in a foreign land.

Thailand has a lot of potential for proving a great environment to set up a successful business provided there is:

  • A robust business idea and a feasible business plan
  • Ample supply of funds to start s business
  • Willingness to understand Thai culture, mentality and be open-minded a having a lot of patience

Read More: Why Thailand