Thailand represents a dynamic and promising economic environment for both local and international investors. Understanding the process will benefit entrepreneurs and corporations looking to establish a presence in Thailand.

Incorporation Option:

Investors in Thailand can choose from several types of business entities, including sole proprietorship, partnership, and limited company. Among these, the limited company stands out as the most popular form of incorporation due to its favorable features like limited liability to shareholders and flexibility in management and operations.

Registered Capital:

In terms of capital requirement, the law mandates for Thai companies a minimum registered capital based on the type of business and its specific operational needs.

Minimum Investment Capital:

The legally permissible minimum registered capital for a limited company incorporated under Thai law is 10 baht. However, in practice, no businesses opt for such a low capital amount as it does not reflect the true nature of business operations and may lead to business partners and clients perceiving the company as financially unstable.

However, foreign businesses in Thailand require a minimum registered capital of 2 million THB for non-restricted operations and 3 million THB for those under restriction by the Foreign Business Act. Thai-owned companies are not subject to these requirements.

Action Steps After Establishing a Limited Company:

To ensure your company operates businesses smoothly and in compliance with national law, there are several important steps to take once you have established a company. Those include:

• Open a corporate bank account: to manage financial activities effectively and maintain financial transparency
• Social security registration: to comply with legal requirements, manage employee contributions and claims
• Visa and work permit application for foreign employees: to enter Thailand to do business, a non-immigrant B visa and work permit are required

Shareholder:

Thai Majority-Owned Limited Company

In companies where Thai nationals hold more than 50% of the shares, the enterprise is classified as a Thai-majority-owned limited company. Generally, these companies face fewer operational restrictions in Thailand.

Foreign Majority-Owned Limited Company

A business is considered foreign-owned if at least 50% of its ownership is foreign-owned. Although foreign investors are generally allowed to fully own such companies, the Foreign Business Act specifies certain sectors, such as those involving natural resources or national security and some services, which are exclusively reserved for Thai nationals.

In these sectors, foreign investors are restricted to owning a maximum of less than 50% of the company’s shares. Exceptions to this restriction include situations where a Foreign Business License/Foreign Business Certificate is issued, or when the company receives a promotion from the BOI or benefits under international agreements like the Thai-U.S. Amity Treaty. These exceptions enable foreign investors to own a majority or even 100% of the company’s shares in otherwise restricted business sectors.

Business Types:

In Thailand, the business landscape offers distinct operational freedoms and restrictions for Thai nationals and foreign investors.

• Thai nationals – Thai nationals may face fewer restrictions on the types of business they can operate, however, certain businesses such as import-export or restaurant businesses still require specific licenses.
• Foreign investors – Foreign investors are free to establish and operate businesses in Thailand. Nevertheless, the Foreign Business Act categorizes businesses into 3 lists in which foreign operators must obtain a Foreign Business License or Certificate if one will engage in a business activity that falls under the scope of lists nos. 2 and 3 (e.g. restaurant, construction, hotel, services business, etc.). Business and technology transfer plans are required to be submitted when applying for a Foreign Business License. If foreign investors are promoted by the BOI or their nations are part of international agreements with Thailand, they become eligible to apply for Foreign Business Certificates.

This license/certificate permits them to engage in business activities that are otherwise highly restricted in Thailand, providing them with significantly more operational flexibility. Still, certain businesses require specific licenses.

Special Incentives:

The Board of Investment of Thailand (BOI) provides an attractive range of incentives, for entrepreneurs who engage in a particular business, designed to encourage foreign investment, especially in high-tech industries, research and development, and environmentally friendly projects. These compelling benefits include tax incentives (e.g. reduction or exemption of corporate income tax (up to 8 years) or import duty on machinery and raw materials), and non-tax incentives (e.g. expedited work permit and visa processes or land ownership rights).

Besides the BOI, the business operator or investor who engages in particular industries (e.g. advanced robotics, aviation, digital technology, etc.) and operates within the promotional economic zone within the Eastern Economic Corridor (EEC) area which all are situated in either Chachoengsao, Chonburi, or Rayong provinces, can apply for incentives; i.e. tax incentives and non-tax incentives, which include extended tax holidays, grants and subsidies for R&D, expedited work permit and visa processes, from the EEC.

It is essential to note that if you have already received incentives from the BOI, you can only apply for incentives that are not covered by the BOI Act from the EEC. However, if you have already received incentives from the EEC, it will be prohibited for you to apply for BOI incentives going forward.

Taxation:

In Thailand, there are key tax considerations for a limited company. Those include:

• Corporate Income Tax: It is calculated from net profit. The rate is currently fixed at 20%, however, if the business is an SME, it qualifies for a reduced tax rate. The business operators are required to submit corporate income tax semi-annually and annually.
• Value Added Tax (VAT): A limited company has the option to register for VAT, except for companies that meet specific criteria that are required for VAT without exception. By registering VAT, an additional 7% tax will be added to the price of goods and services. A company must file a detailed VAT return monthly, even if there are no transactions in that month. Failure to file shall result in penalties.
• Withholding Tax: the obligation to deduct a specific percentage of tax depends on what type of payment is being made and to whom. However, if a company receives incentives from the BOI, its tax obligations, among others, may be reduced or even exempted. Stakeholders must evaluate the criteria applicable to their company.

Land and Property:

Unlike Thai citizens or entities that are entitled to own land, foreigners are not eligible to do the same. However, there are practical solutions for foreign entities including:

• Long-term lease: Land can be leased for up to 30 years and it is also renewable.
• Condominium ownership: Foreigners can purchase and be the sole owner of condominium units. However, such condominiums cannot have more than 49% of their units owned by foreigners. In light of this, the government is in discussion to increase the maximum foreign condominium unit ownership from no more than 49% of all condominium units to no more than 75%.
• Business investment: Foreigners whose investment meets particular conditions and the minimum amount may own land for residential purposes. Also, foreign juristic persons promoted by the BOI can own land that shall be used in their promoted activities, such land can be used as their staff accommodation.
• Building ownership: Although foreigners are generally prohibited from owning land, they can own a building.

Stock Market Investments:

Foreigners are welcome to participate in the Stock Exchange of Thailand (SET), with opportunities to invest across a broad range of sectors. Key points to consider include:

• Foreign ownership limits on individual stocks vary by industry and company.
• Some brokers may require in-person account openings, but others are beginning to offer digital solutions to streamline this process.
• Access to emerging markets with potential, particularly in some industries like energy, technology, and consumer goods.

Overall, establishing a company requires navigating multiple steps, gathering the necessary documentation, and addressing complex details. Investors must ensure they comply with all requirements to prevent any potential issues. Thailand presents a compelling investment landscape for foreign investors. With its strategic location, dynamic economy, and supportive government policies, the country offers abundant opportunities for businesses to flourish. Foreign investors can successfully establish a presence in Thailand and tap into the nation’s economic growth potential.

Key takeaways:

• Incorporation options: Carefully consider the most suitable business entity based on the business goals.
• Foreign ownership restrictions: Be aware of limitations in certain sectors and explore options for obtaining necessary licenses or exemptions.
• Business incentives: Leverage the generous incentives provided by the BOI and the relevant sector to reduce costs and enhance profitability.
• Tax considerations: Understand the tax implications of operating a business in Thailand and seek professional advice to ensure compliance.
• Foreign land and property ownership: Foreigners can own land and property in Thailand under particular conditions.
• Legal and administrative requirements: Adhere to the necessary legal and administrative procedures to maintain a smooth and compliant operation