Setting Up a Business in Thailand

Business activities can be operated under various forms, such as sole proprietorships, limited partnerships, limited companies, etc. or joint investment with other persons. In deciding under which form the business should be operated, one must consider various essential elements such as nature of the trade, capital investment, knowledge and ability to operate the business, etc.

The following is an overview of establishing a business in Thailand.

Types of Business Organizations

Thailand, like many other countries, recognizes three types of business organization:
  1. Sole proprietorship
    This is a firm, owned by a single individual, that is not incorporated.
  2. Partnership
    Thai and Western concepts of partnership are broadly similar. Thailand provides for three general types of partnerships as follows:
    1. Unregistered ordinary partnerships, in which all partners are jointly and wholly liable for all obligations of the partnership.
    2. Registered ordinary partnerships. If registered, the partnership becomes a legal entity, separate and distinct from the individual partners.
    3. Limited partnerships. Individual partner liability is restricted to the amount of capital contributed to the partnership. Limited partnerships must be registered.
  3. Limited Companies
    There are three kinds of limited companies, as follows:
    1. Private Limited Company
      The most popular form of business organization among foreign investors is the private limited company. Private limited companies require a minimum of seven promoters and must file a memorandum of association, convene a statutory meeting, register the company, and obtain a company income tax identity card. They must also follow accounting procedures specified in the Civil and Commercial code, the Revenue Code and the Accounts Act. A balance sheet must be prepared once a year and filed with the Department of Revenue and Commercial Registration. In addition, companies are required to withhold income tax from the salary of all regular employees. A representative office may also be established to engage in limited "non-trading" activities, such as storing goods or services in Thailand for its head office or inspecting and controlling the quality and quantity of goods which its head office purchases in Thailand. A regional office of a multinational corporation may be established to coordinate and direct the operation of branches operating in the region on behalf of its head office, and must not receive income or have the authority to negotiate business with persons or legal entities in Thailand. Application for establishment of a representative office or a regional office must be submitted to the Department of Commercial Registration.
    2. Limited Partnership
      An entity with two categories of partners, i.e.
      1. partner(s) with limited liability, being one or more partners who liability is (are) limited to only the amount he (they) agree(s) to invest in the partnership;
      2. partner(s) with unlimited liability, being one or more partners who shall be liable for all the obligations of the partnership without limitation.
      When two persons or more agree to jointly invest in the operation of activity under any type of juristic partnership as above mentioned, the managing partner (in case of a limited partnership, the managing partner must be the partner with unlimited liability) appointed by every partner has the duty to apply for the registration for the establishment of such partnership with the competent authorities at the Commercial Registration Office in whose area the head office of the partnership is located. He must proceed in accordance with the method and procedures prescribed by the law and the official regulations. Afterward, if such juristic partnership agrees to make any change to the registered particulars, application to register such change must be made at the same Commercial Registration Office.
    3. Public Limited Companies
      Public Limited Companies must have a minimum of 15 promoters. Permission for inviting the public to subscribe for shares must be applied for as prescribed by the Securities Exchange Act B.E. 2535.

Forming a Company

To set up a limited company in Thailand, follow the procedures below:
  1. File a Memorandum of Association
    A memorandum should be prepared and submitted to the Company Registrar in the Ministry of Commerce. The memorandum should include the name and address of the company, its business objectives, and total capitalization. Capitalization information should include the number of shares outstanding and the value per share. In addition, provide personal details of the promoters (minimum of seven), along with the number of shares each holds. There are no minimum capital requirements, although capital value should reflect the nature of the business. The Memorandum registration fee is 50 baht per 100,000 baht of registered capital. The minimum fee is 500 baht; the maximum is 25,000 baht.
  2. Convene a Statutory Meeting
    Once the share structure has been defined, a statutory meeting is called. A minimum of 25 percent of the par value of each subscribed share must be paid.
  3. Registration
    Within three (3) months of the date of the Statutory Meeting, the directors must submit applications to establish the company. Company registration fees are 500 baht per 100,000 baht of registered capital. The minimum fee is 5,000 baht; the maximum is 250,000 baht.
  4. Tax Registration
    Businesses liable for income tax must obtain a company income tax identity card and number from the Revenue Department within 60 days of incorporation or the start of operations. Business operators earning more than 600,000 baht per annum must register for VAT within 30 days of the date they reach 600,000 baht in sales.

Reporting Requirements

Firms must keep books and follow accounting procedures specified by the Civil and Commercial Code, the Revenue Code and the Accounts Act. Documents may be prepared in any language, provided that a Thai translation is attached.
  1. Imposition of Taxes
    Companies are required to withhold income tax from the salary of all its regular employees. A value added tax of 7% is levied on the value added at each stage of the production process, and is applicable to most firms. The VAT must be paid on a monthly basis.

    A specific business tax is levied on firms engaged in several categories of businesses not subject to VAT, based on gross receipts at a variable rate ranging from 0.1 - 3.0%.

    Corporate income tax is 30 percent of net profits and is due twice each fiscal year. A mid-year profit forecast entails advance payment of corporate taxes.
  2. Annual Accounts
    A balance sheet must be prepared annually. The performance record is to be certified by the company auditor, approved by shareholders, and filed with the Department of Revenue and Commercial Registration.

Labor Regulations

Employment legislation has a direct bearing on labor practices for each type of business. Investors should seek appropriate advice to determine which legislation applies to their line of business.

Labor Protection

Work hours and holidays are stipulated, depending on the nature of the work. Employees are also entitled to medical leave (not more than 30 working days per year) and maternity leave (90 days leave, with pay of 45 days). In addition, there are restrictions on the kind of work women and children can perform. Guidelines are set for wages and overtime, and labor-management disputes are handled through formal administrative channels. Employers must pay workers compensation if an employee suffers injury, sickness or death in the course of work.

Thai law also requires employers to provide welfare facilities, including medical and sanitary facilities. Firms with more than ten employees must establish written work rules governing working conditions.

Minimum wages regulations apply to all businesses and rates depend largely on the location of the workplace. Regular employees are also entitled to severance pay. Conditions for termination of employment are also laid out, and a code governs unfair practices and unfair dismissals. Employee Associations and Labor Unions must be registered at the Labor Department, and require a license for operation. Finally, there is a Labor Court formed specifically to settle employment disputes.

The Stock Exchange of Thailand

The Stock Exchange of Thailand (SET) is a well-developed financial institution which welcomes foreign investment.

Brand-name, Patent Trademarks & Copyrights

The Kingdom of Thailand respects all international laws regarding copyrights and trademarks.

To register a copyright or trademark contact the Department of Intellectual Properties, Ministry of Commerce. (Tel : (662) 221-9872 or 221-2851)

Tax

Individual income tax is calculated on progressive rate, maximum 37%. Corporate income tax rate is 30%. All income earned in Thailand is subject to standard levels of taxation. For individual and corporate non-double-taxation, refer to your country's own government or the Revenue Department in Bangkok regarding reciprocal tax agreements.

Working Hours

Typical business hours are :

Banks and Financial Institutions, Monday - Friday 9:30 a.m. - 3:30 p.m.
Government offices, Monday -Friday 8:30 a.m. - 4:30 p.m. (closed noon - 1 p.m.)
Private business, Monday - Friday from 8:30 p.m. - 5:30 p.m.

Holidays & Festivals

Thailand's calendar is filled with colourful festivals which recall modern Thailand's agricultural origins.

Songkran, the traditional Thai New Year in the middle of April, finds enthusiastic revelers all around the Kingdom celebrating the end of the hot season.

Chinese New Year is also widely celebrated. Loy Krathong, a serene thanksgiving occasion, is another example of Thai's picture-perfect festivities. Thais celebrate approximately 15 public holidays throughout the course of the calendar year.

Public Holidays:

January 1 New Year's Day
April 6 Chakri Day
April 13-15 Songkran Festival Day
May 5 Coronation Day
August 12 H.M.The Queen's Birthday
October 23 Chulalongkorn Day
December 5 H.M. The King's Birthday
December 10 Constitution Day
December 31 New Year's Eve