The Advantage of doing Business in Thailand
You might have heard about the benefits of registering a company in Thailand, such as being able to buy a property through said company. This is the main reason why we thought of making a nice and simple Business Guide for foreigners and Thai nationals on how to successfully create and own a business in Thailand.
What you should know before starting a business in Thailand?
Before going ahead with the greatest business plan you ever prepared, you have to be acquainted with the Thailand laws concerning the business properties and lands. You have to know because if you are caught, even if you didn’t know you were doing illegal activities, the punishment can be quite severe. We are talking about several years in prison and/or a huge fine that will be hard to swallow for you and your family. So keep on reading, we will tackle the most important laws and their meanings, as well as what kind of VISA you will need and general (but very important) stuff on Thailand businesses.
What type of activities are allowed to be performed by foreign businesses in Thailand?
There are many endeavors that you won’t be able to undertake in Thailand, as a worker and as a business owner. For example, this goes for anything related to fishery, farming, radio and television businesses. You can have access to the full list of activities that are restricted to Thai Nationals only, in the Foreign Business Act of 1999 (FBA)
What types of company can I register in Thailand?
There are 3 main categories depending on what you wanna do:
- A normal Registration or a Limited Partnership
- A Representative Office, or a Regional Office or a Branch Office
- A Limited Company
You can register a company as a Minority Shareholder of a Thai Company (the less complicated route), or as the owner of a Foreign Business, which is a lot more complicated and expensive... I hear you, now you would like to know what are the pros and cons on both sides… Next point.
Thai Company or Foreign Company, what’s the best option?
This is very important because, yes, foreigners are allowed to be part of a Thai company, but in order to be legal, they have to be a Minority Shareholder with stakes or interest in the company. In other words, you cannot own 100% of a Thai company. By law, the company will be own by 51% of Thai nationals, and 49% by foreigners.
Why is it better to have less stakes in a company you may ask? Simply because the paperwork is a lot easier, and you will need a lot less money for the initial investment when registering the company, which is around 2M baht or 1M baht if you have a Thai spouse.
Also, it is completely legal to buy a land and therefore, a property, under the Thai company, thus why it is very useful to any foreigners looking for a way to stay legally in Thailand and own a house or a land.
All that said, be careful to not dive into a deal too quick, because there is a big difference between a Minority Shareholder and a Nominee Shareholder. The latter happens when a person is just there as a name in the company, nothing more, and that is completely illegal for foreigners in Thailand. As an alien coming from another country, you have to have stakes in the Thai company that you want to create, which brings us to our next point.
How much does it cost to open a Foreign Company in Thailand and how does it work?
Now that we know the easier route, maybe this is not for you because you actually want to own 100% of your foreign business, which is understandable. Be aware that the process can be difficult, and that it’s gonna cost you around 3M baht per activity that your Foreign Company is gonna perform, plus all the adjacent fees related the license, VISA and other paperwork. You will have to get a Foreign Business License under the FBA, which is essentially like a Work Permit.
There is also BOI companies, which is a promotion managed by the Board of Investment who are helping startups and other projects to flourish in different areas that could be interesting for Thailand’s economy.
Finally, US citizens have what we could call, a special treatment, since they are allowed to own a majority of an American Company or have full ownership by registering the latter under the Treaty of Amity. This treaty is an agreement that has been written in 1966, and although it makes the process easier, there are still restrictions and conditions to be aware of. You can consult the full Treaty.
Work Permit? VISA? What do I need exactly to own a business in Thailand?
Other than the Foreign Business License, you will need a Non-Immigrant B VISA, or sometimes called the Business VISA, which is the VISA required in order for an alien to be able to work in Thailand. This VISA will cost around 2k baht, good for 3 months, or 5k baht if you take the multiple entries version, good for a full year.
Bank, payments, loans and taxes, how do they work?
It is possible to get a Thai bank account but you might not get a checking account, only a saving account if your company is small. Same goes with the ATM card, you won’t get one if you are registering a company.
Foreigners need to go with someone at the bank with the stamp of the company and your signature on the withdrawal or pay slips. If you want to pay the client, you will need to pay in cash or by deposit through transfers from foreign currency, similar to what we do when buying a property like a condo for example.
If you need any loans, you will have to provide solid paperwork and proofs of stability. Since it is not easy at all for foreigners to get a loan in Thailand, it is recommended to approach the bank from your home country.
To conclude, on the Tax side, yes there are a few tax fees to consider in Thailand. The Corporate Income Tax or CIT is the one that is paid by companies making direct or indirect income from Thailand.
- Tax is withheld on interest paid to associations or foundations, rate of 10%.
- Royalties that are paid to associations and foundations are subject to 10% withholding tax.
- Government agencies have to withhold tax at the rate of 1% on all types of income paid to companies.
There is also the personal income tax, but you don’t have to worry about it if you don’t make more than 150k per year.
Corporate taxes will vary between 2% and 20%, depending on your total net profit amount in one year, and on the type and nature of the company. To know more you can consult all the details here.