Business in Thailand
Thailand is indeed skyrocketing when it comes to the business industry. Thailand is renowned for its outstanding performance when it comes to the business sector. With the second largest economy in Southeast Asia after Indonesia, Thailand is conveniently located to be a hub for the ASEAN continent. Being known for its beautiful natural sceneries as well as a booming economy, Thailand is indeed a landing ground for foreign investors.
A regional leader in tourism, automotive, electronics, Thailand has shown a resilient economy despite going through tensed political situations in recent years. Long ranked as one of the fastest growing countries in Southeast Asia, Thailand has conquered its place as one of its top exporters. Now led by services and industry, Thailand is nonetheless also a regional hub for many industries and a leader in the production and export of several agricultural commodities and transformed products. Because of the massive foreign investments, especially from Japanese companies, Thailand has become a regional hub for the automotive industry. It is also a large production center for electric and electronic appliances and components, which are exported all over the world.
A leader in the production and export of several agriculture commodities, such as rice, rubber and fishery products, Thailand is primarily a service economy with a strong financial sector.
Thailand is a leader for tourism in Southeast Asia in terms of numbers of foreign tourists’ arrivals. With Bangkok, a global capital with rich heritage, world famous islands and beaches, jungles and wild nature and famous UNESCO world heritage sites, Thailand is a world-famous destination, long promoted as “Amazing Thailand”.
Table of Contents:1. Starting a Business in Thailand. 2. The Foreign Business Act of B.E. 2542 (1999) 3. List Annexed to Foreign Business Act. 4. Types of Legal Corporation in Thailand. 5. How can Siam Attorney help you with your Business in Thailand?
1. Starting a Business in Thailand.
Foreigners and the like who have fell in love with Thailand often ask the question: How to start a business in Thailand. It is a topic most often brought up by travelers who have become enamored with the lifestyle they’ve experienced in the Kingdom. It’s also the way they believe they can live in the country longer while making a comfortable living in Thailand. But they are not aware that foreigners who want to open a shop in Thailand is not allowed to fully own a company; except for US citizens under the US Treaty of Amity. And they wonder how much it cost to start up a business in Bangkok, Chiang Mai, Phuket, Pattaya or on any of the idyllic beaches along the country’s beautiful coastline.
There are also cultural differences and legal boundaries that have to be considered before planning to open a business in Thailand. Starting a business in Thailand is not as hard as you would think since Thailand is very receptive to foreign businesses.
Thailand has a lot of potential for a successful business if you:
- Have a strong idea and business plan
- Have ample supply of funds to start your business
- Willingness to understand Thai culture, mentality and be open minded with a huge dose of patience
If you’re a foreigner looking forward to start a business in Thailand please note that:
- You cannot own 100% of the company (not unless you are a US citizen, which will be subjected to the Treaty of Amity)
- You must have a Thai Partner which will hold 51% of the company, and you can own a maximum of 49% of the shares.
There are several types of corporations that you can set up. The type you choose should depend on how much you are investing or how well you know the people you are getting into business with. Remember, foreigners are not allowed to own 100% shares of any business in Thailand, unless you are a US citizen. The most popular way to start a business in Thailand is to register a business under a Thai person. However, the “Thai partner” by law must own 51% of the company which makes him or her the majority shareholder.
If you are going to register your business under a Thai partner, it has to be with someone you trust life and death with along with your hard-earned money. That said, the majority of successful small foreign owned businesses in Thailand have started out this way. It’s also by far the fastest way to set up shop and you may not even need to involve hiring a lawyer which cuts costs.
All you have to do to register a business under a Thai person is to have your Thai partner head over to the governmental agencies with basic information such as type of business. Then you will need proper paper-works of where you will be doing business so a contract with a landlord is required. Then your partner will need to deal with a governmental agency involved with taxes and acquire any necessary business licenses.
2. The Foreign Business Act of B.E. 2542 (1999).
The Foreign Business Act B.E. 2542 (1999) or also known as (“FBA”) was enacted to define, prohibit and control the business activities of foreigners in Thailand. The following are the important Sections of the Act. It also defines what the “foreigner” is in this context:
Section 4 “In this Act:
(1) Natural person not of Thai nationality.
(2) Juristic person not registered in Thailand.
(3) Juristic person registered in Thailand having the following characteristics:
Having half or more of the juristic person’s capital shares held by persons under (1) or (2) or a juristic person having the persons under (1) or (2) investing with a value of half or more of the total capital of the juristic parson.
Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager.
(4) Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2) or (3), or a juristic person having the persons under (1), (2) or (3) investing with the value of half or more of its total capital.”
The Foreign Business Act can prohibit and control the activities of foreigners. The activities are included in three lists of activities that are either completely prohibited or controlled, under the Section 5 of this Act it makes sure that the nation’s best priority is still the main priority.
Section 5 “In permitting the foreigners to operate the businesses under this Act, the advantages and disadvantages to the nation’s safety and security, economic and social development, public order or good moral, art, culture and tradition of the country, natural resource conservation, energy and environment, consumer protection, size of the enterprises, employment, technology transfer, and research and development shall be taken into account.”
Section 6 “The following foreigners shall be prohibited from operating any business in Thailand:
(1) Foreigners deported or pending deportation.
(2) Foreigners staying in Thailand without permission under the law governing immigrants or other laws.
Section 7 “The following foreigners may operate a business upon obtaining a License from the Director-General and may operate only certain businesses and in the locality announced with the approval of the Cabinet by the Minister in the Government Gazette. The Minister may prescribe any conditions deemed expedient in the notification.”
(1) Foreigners born in Thailand but not granted Thai nationality under the law governing nationality or other laws.
(2) A person who becomes a foreigner as a consequence of his nationality being revoked under the law governing nationality or other laws.
The application for a License, the issuance of the license and the period of permission shall be in accordance with the rules and procedures prescribed in the ministerial regulations.
In the case where the Director-General does not permit a foreigner under paragraph one to operate the business, the foreigner shall be entitled to lodge an appeal with the Minister and the provisions of paragraphs one and three of Section 20 shall be applicable mutatis mutandis.”
Section 8 “Subject to Section 6, Section7, Section 10 and Section 12
(1) Foreigners shall be prohibited from operating the business not permitted to them with special reasons as described in List One.
(2) Foreigners shall be prohibited from operating any business concerning national safety and security, business affecting art and culture, tradition and folk handicraft or the business affecting natural resources or environment as prescribed in List Two unless permitted by the Minister with the approval of the Cabinet.
(3) Foreigners shall be prohibited from operating the businesses prescribed in List Three in which Thai nationals are not ready to compete unless permitted by the Director-General with the approval of the Committee.”
Section 14 “The minimum capital used at the commencement of the business operation shall not be less than that prescribed by ministerial regulations and shall in no case be less than two million Baht.
In the case where the businesses in the preceding paragraph require the licenses under the Lists attached hereto, the minimum capital to be prescribed in the ministerial regulations for each of the businesses shall in no case be less than three million Baht.”
Minimum Capital for Foreign Business
At least Baht 3,000,000 for each of the businesses in the annexed schedules.
At least Baht 2,000,000 for each kind of business not in the annexed schedules.
3. List Annexed to Foreign Business Act.
The new Foreign Business act has classified the reserved businesses into 3 schedules (this means that these are the following nature of business restricted to foreigners in Thailand):
The businesses prohibited to the foreigners because of special reasons.
- Newspapers, radio and television broadcasting businesses.
- Rice farming, field crops farming, or orchard farming
- Animal farming
- Forestry and timber from natural forests
- Fishery, exclusively aquatic animals in Thai territorial waters and Thai specific economic zones.
- Thai herbs extraction.
- Trades and auctions in Thai antiques or objects of historical value to Thailand
- Manufacturing or casting of Buddha images and alms bowls
- Trade in land
The businesses related to the national safety or security or affecting culture, arts, traditional customs and folk handicraft or natural resources and environment.
Group 1: The businesses related to the national safety or security.
(1) Production, selling, repairing and maintenance of:
- Firearms, ammunition, gun powder and explosives.
- Accessories of firearms, ammunition and explosives.
- Armaments, ships, aircrafts or military vehicles.
- War equipment or components of war equipment of all kinds.
(2) Domestic land, waterway or air transportation, including domestic airline business
Group 2: The businesses affecting culture, arts, traditional customs and folk handicraft.
(1) Trading antiques or art objects being of Thai arts and handicraft.
(2) Production of woodcarvings
(3) Silkworm farming, Thai silk yarn production, Thai silk weaving or Thai silk pattern printing
(4) Production of Thai musical instruments
(5) Production of goldware, silverware, nielloware, bronzeware or lacquerware.
(6) Production of crockery of Thai arts and culture.
Group 3: The businesses affecting natural resources or environment.
(1) Production of sugar from sugarcane.
(2) Salt farming, including subsurface salt production.
(3) Rock salt mining.
(4) Mining, including rock blasting and quarrying.
(5) Wood processing for furniture and utensil production.
The businesses in which the Thai people are not yet ready to compete with foreigners.
- Rice milling and production of flour from rice and field crops.
- Fishery, exclusively aquatic animal cultivation
- Forestry from forestation.
- Production of plywood, veneer board, chip board or hard board
- Production of lime
- Accounting service
- Legal service
- Architectural service
- Engineering service
- Construction, except:
(a) Construction of things providing fundamental services to the general public in the field of public utilities or transport requiring special tools, machinery, technology or construction expertise, with a foreign minimum capital of Baht 500,000,000 or more.
(b) Other categories of construction prescribed in the Ministerial Regulations.
- Broker or agent business, except:
(a) Being broker or agent for underwriting securities or services related to future trading of agricultural commodities, financial instruments or securities.
(b) Being broker or agent for trading or procuring of goods or services necessary for production or rendering services amongst affiliated enterprises.
(c) Being broker or agent for trading, purchasing, or distributing or seeking both domestic and foreign markets for selling domestically manufactured or import goods in the manner of international business operation with a foreign minimum capital of Baht 100,000,000 or more.
(d) Being broker or agent of other kinds as prescribed in the Ministerial Regulations.
- Auction, except:
(a) Auction in the manner of international bidding not being the auction of antiques, historical artifacts or art objects which are Thai art works, handicrafts or antiques or of historical value to the country.
(b) Auction of other kinds as prescribed in the Ministerial Regulations.
- Internal trade connected with native products or produce not yet prohibited by law, except for agricultural futures trading at the Agricultural Futures Exchange of Thailand which has no delivery or receiving of agricultural commodities in Thailand.
- Retail of goods of all kinds having the total minimum capital less than Baht 100,000,000 or having the minimum capital of each shop less than Baht 20,000,000.
- Wholesale of goods of all kinds having the minimum capital of each shop less than Baht 100,000,000.
- Advertising business
- Hotel business except for hotel management service.
- Guided tour.
- Selling food or beverages.
- Plant cultivation and propagation business.
- Other service businesses except the ones prescribed in the Ministerial Regulations.
4. Types of Legal Corporations in Thailand.
Types of legal corporations you can set up are Limited Thai Partnerships and Established Thai Partnerships, which still require you to have Thai partners along with your name as company shareholders. However foreign partners cannot own the majority share. There are ways to circumnavigate the rules such creating “dummy” Thai partners.
Many foreign residents who do decide to open their own small business in Thailand choose the legal structure of a Private Limited Company. For this purpose, they have to fulfill the following requirements:
- The company needs at least three shareholders. They do not all have to be Thai citizens, though. However, more than 50% of the company shares need to be in Thai hands if you want to be exempt from the Foreign Business Act and its restrictions.
- Once you start employing staff, you need a capital of 2,000,000 THB for every foreign work permit you’d like to apply for. For every 1 million of initial capital, you pay a registration fee of 5,000 THB.
- You need to draw up articles of incorporation and articles of association in accordance with Thai business law. You must also hold an official inaugural meeting with all your shareholders.
- Moreover, you have to register for tax purposes within 30 days of founding the company and apply for a tax number.
- You have to do proper accounting according to Thai law (civil code, code of commerce, fiscal law, etc.) and withhold income tax from the employees’ salaries. Handing in an annual balance sheet at the Thai tax office is an absolute must as well.
5. How can Siam Attorney help you with your Business in Thailand?
Siam Attorney will give you professional and legal advice and we are dedicated in giving the best outcome for your future business here in Thailand. If you wish to invest and establish a company in Thailand it is best if you seek legal advice so that you will process and establish your business in a legal way and in a timely and relevant manner.
Here at Siam Attorney we value a strong teamwork and efficient working practices as well as uniform approach that enables us to provide the best possible options that fits our clients’ demands and preferences. We make sure that whatever your business ordeal is, may it be about the Board of Investment (BOI) Privilege, or about Setting Up a Company in Thailand, Representative Offices in Thailand, Shelf Companies in Thailand, Thailand Work Permit or even about the U.S. – Thai Treaty of Amity rest assure Siam Attorney is here to help. With our team of professional lawyers, we will make sure that all matters will be solved in a significant manner.