FORMS OF DOING BUSINESS IN THAILAND
Under Thai Law majority share ownership by foreigners in
a Thai company, although not forbidden, is severely restricted . As
a result most non-Thais will opt for a majority Thai shareholding
(51%) in their company. Exceptions are made for American Nationals
(under the Thai American Treaty of Amity) or businesses with BOI (Board
of Investment) privileges (mostly manufacturing plants) in which case
100% foreign ownership is allowed subject to certain conditions. The
Thai majority shareholder(s) does, however, not necessarily have to
be a director or have any signatory rights for that matter. A non-Thai
may in theory engage in business in the form of a single proprietorship,
limited company, limited partnership, a joint venture, a branch of
a foreign corporation, a representative office or a regional office.
Practically speaking however, as explained in the following paragraphs,
only the last five options are worth considering.
The three types of partnership in Thailand differ principally
in the liability attached to each.
An unregistered ordinary partnership has partners who are
jointly liable, without any limitation on the partnership's total
obligations. A new partner becomes liable for all obligations incurred
by the partnership before or after his association with the partnership.
This type of partnership is not a legal entity and is subject to taxation
as if it were an individual.
A registered ordinary partnership is a juridical
entity having a separate and distinct personality from each of the
partners by virtue of its registration with the Commercial Registrar.
A registered ordinary partnership is treated as a corporate entity
for tax purposes.
A limited partnership is one in which there are one
or more partners whose individual liabilities are limited to their
respective contributions and one or more partners jointly liable without
any limitation on all the obligations of the partnership. A limited
partnership is taxed as a corporate entity.
PRIVATE LIMITED COMPANY
The Thai private limited company is basically similar to
what is commonly referred to as a corporation. In Thailand a corporation
must have at least seven shareholders. In theory the company may be
wholly owned by aliens (as Thai law calls all foreigners). However,
in those business activities reserved for Thais nationals (the other
99.99%), an aliens participation is generally limited to 49%.
However, this obstacle is routinely circumvented by the use of Thai
nominees who sign blank share transfer certificates at the start-up
of the company (usually for a small fee).
The liability of shareholders is limited to the amount of
their contribution to the capital. The liability of the directors,
however, can be unlimited if so stipulated in the articles of incorporation.
Although there is no required minimum level of capitalization,
the private limited companys capital must be sufficient to accomplish
its objectives. All of the shares must be subscribed to and at least
25% of the subscribed shares (authorized capital) must be paid up.
Shares must have a minimum value of 5 Baht, there must be a minimum
of seven shareholders and the issuance of non-voting stock, common
or preferred, is not allowed.
A public limited company with an authorized capital of 2
billion Baht may, after five years, be turned into a public limited
company by offering shares to the public.
A joint venture may be described in accordance with general
practice as a group of persons (natural and/or juristic) entering
into an agreement in order to carry on a business together. It has
not yet been recognized as a legal entity under the Civil and Commercial
Code but is nevertheless taxable as a corporation under the Revenue
OF A FOREIGN CORPORATION
A company incorporated under foreign laws may establish a
branch office to do business in Thailand. It is important, however,
to clarify beforehand what constitutes income subject to Thai tax
as the Revenue Department may consider revenues directly earned by
the foreign head office from sources within Thailand as subject to
Thai tax. Working capital must be 5 million Baht and brought into
the country. The branch is permitted to operate as such for a period
of five years.
REPRESENTATIVE or REGIONAL OFFICE OF A FOREIGN CORPORATION
A foreign entity may establish a representative
office in Thailand to engage in limited non-revenue-earning
activities such as research, marketing etc. Working capital must be
5 million Baht and brought into the country. The representative office
is permitted to operate as such for a period of five years.
CORPORATE REGISTRATION PROCEDURES
Before registering a limited company, the chosen corporate
name must first be registered and approved by the Commercial Registrar.
A memorandum of Association is then filed which contains: the approved
name of the company, its business address, its objectives, personal
details about the promoters, capital and the shares subscribed by
The next step is to hold a statutory meeting of shareholders
during which the Articles of Incorporation are approved, the board
of directors is elected and the auditor appointed. The director(s)
may then register the company with the Commercial Registrar. Note
that the a director does not necessarily have to be a shareholder.
Documents required: (signed) copies of passports of shareholders
and director(s). For juristic entities a copy of the commercial registration
certificate or its local equivalent.
Branch, Representative of Regional Office:
Foreign corporations wishing to do business in Thailand through
a branch or representative office must submit the following documents,
which should be notarized and certified by the local Thai consulate
or embassy. These documents must not be more than six months old at
the time of submission to the Commercial Registrar. These documents
Articles of Incorporation or Memorandum of
By - laws or Articles of Association.
An affidavit of the manager or corporate officer,
stating the following:
- Name of the corporation, registration number,
and date of registration;
Address of the registered office;
Jurisdiction under which the corporation
Name, address, nationality, age and race
of each director; number of shares held by each; and identification
of the director(s) with the power to bind the corporation;
- authorized capital stock of the corporation, number
of shares and par value of each, and amount of paid-up capital
- total number of shareholders, their nationalities,
and number of shares owned or held by each national group.
- A power of attorney for the manager in Thailand, giving him, in
addition to the normal powers, the power to register the branch
or representative office with the pertinent Thai Government authorities
and to act as the manager thereof.
The above documents must be submitted to the authorities
who, sometimes, may require additional documents, depending on the
All persons about to start a business must register with
the Revenue Department. In addition, if annual turnover exceeds 1.2
million Baht registration for Value Added Tax is also required. Withholding
Tax on salaries and services as well as VAT filings must be submitted
and settled to the Revenue Department on a monthly basis.
Currently corporate tax is at a flat rate of 30% of net profits,
tax on dividends is 10% and VAT is at 7%. Personal income tax varies
according to income, marital and parental status with a maximum of
37% for annual income exceeding 4 million Baht (US$ 100,000) after
deductions and allowances.
AND FINANCIAL REPORTING
Generally, the basic accounting principles practiced in the
U.S. are recognized and accepted in Thailand. The Institute of Certified
Accountants of Thailand is the authoritative group promoting the application
of generally accepted accounting principles (GAAP). In addition, however,
the basic financial statements (balance sheet and income statement)
must be audited by a Thai CPA annually.
European Accountants’ fees depend on the
type of service required and are preferably negotiated as a package.
Other fiscal or financial services on a consultancy basis are typically
charged as follows:
Senior Partner: Euro 125/hr
Senior Accountant: Euro 100/hr
Staff Accountant:Euro 75/hr