In recent years, the government and public sector have focused on enhancing Thailand’s role as a key business hub in Southeast Asia. This strategic positioning makes it attractive for entrepreneurs aiming to tap into Thailand’s sizable domestic market of 70 million people, as well as utilizing its trade infrastructure to access the rapidly expanding markets of CLMV (Cambodia, Laos, Myanmar, and Vietnam) and economic powerhouses such as China and India.
In this guide, we help those who are interested in doing business in Thailand by providing an overview of:
Why should you set up your business in Thailand?
Thailand stands as a dynamic economy in Southeast Asia, boasting a diverse and skilled workforce, fostering an inviting environment conducive for business expansion and development.
Here are some compelling reasons to establish your business here:
- Access to a vast and expanding market: Situated at the core of the burgeoning CLMV economies, Thailand serves as the gateway to ASEAN, offering seamless connectivity, robust business infrastructure, and rich cultural ties to the thriving Southeast Asian market, encompassing over 621 million individuals.
- Strategic global business hub: Surrounded by influential economic players, Thailand has forged free trade agreements (FTAs) and the Regional Comprehensive Economic Partnership (RCEP) with 18 nations, facilitating streamlined import and export processes. Additionally, Thailand boasts exceptional infrastructure and logistics connectivity across air, land, and sea, including a comprehensive intercity railway network.
- Competitive tax benefits: Compared to its ASEAN counterparts, Thailand maintains a favorable corporate income tax rate of 20%, below the ASEAN average of 23.64%. Its value-added tax stands at 7%, also lower than the ASEAN average of 7.7%. Moreover, the Board of Investment of Thailand (BOI) extends additional tax incentives, effectively reducing operational expenses for businesses.
- Attractive residential destination for expatriates: Thailand is regarded as a top choice for expatriates seeking a second home, with Bangkok achieving the 9th position out of 49 cities in the 2023 Expat City Ranking. Additionally, Bangkok is recognized as one of the highest-rated destinations in the Personal Finance Index, securing the 2nd spot. Most expatriates express satisfaction with the cost of living and their overall quality of life in Thailand.
How to start a business in Thailand
Step 1: Choosing the right company structure
Before proceeding, it is crucial to carefully consider the type of business establishment you intend to pursue. It’s noteworthy to be aware that, according to regulations, most of the company’s shareholders must be Thai nationals, with foreign ownership restricted to a maximum of 49%.
Thai laws allow three types to suit your goal. These types are:
Limited Company
In Thailand, there are two categories of limited companies: the private limited company regulated by the Civil and Commercial Code, and the public limited company governed by the Public Company Act.
- Private limited company
A private limited company, the preferred business structure in Thailand, is established through a registration process involving a Memorandum of Association (MOA) and Articles of Association (AOA).
This type of company requires a minimum of two shareholders, all enjoying limited liability. At least 25% of subscribed shares must be paid up. While both common and preferred shares can be issued, all must carry voting rights.
Foreign ownership is restricted to 49%, but full ownership can be attained through a Foreign Business License, Board of Investment promotion, or Treaty of Amity registration (specifically for US citizens).
- Public limited company
A public limited company in Thailand has the authority to offer shares, debentures, and warrants to the public and may choose to list its securities on the Stock Exchange of Thailand (SET). The regulations regarding offering shares to the public are governed by the Securities and Exchange Act B.E. 2535 (A.D. 1992).
For the formation and registration of a public limited company, at least 15 promoters are required. These promoters must hold their shares for a duration of at least two years before any transfer can occur, unless sanctioned by the shareholders at a meeting. Once established as a public entity, the company cannot revert to a private limited company.
The board of directors must comprise a minimum of five members, with at least half being Thai nationals. There is no specified minimum amount for registered capital, and each share must hold an equal value, with full payment required upon issuance.
Partnership
Under the Thai Civil and Commercial Code, there are two categories of partnerships:
- Ordinary Partnership
In accordance with section 1025 of the Thai Civil and Commercial Code, an ordinary partnership is characterized by the joint and unlimited liability of all its partners for the partnership’s obligations.
An ordinary partnership requires at least two individuals to establish, each partner obliged to contribute to the partnership. These contributions can be in the form of money, other assets, or services. The partners collectively determine the amount and nature of these contributions through mutual agreement.
In an unregistered ordinary partnership, there’s no legal recognition, and for tax purposes, it’s treated like an individual. All partners share complete responsibility for the partnership’s obligations.
Conversely, a registered ordinary partnership is recognized as a legal entity and taxed similarly to corporate entities in Thailand.
- Limited partnership
A limited partnership consists of two types of partners:
- Those whose liability is limited to the amount they commit to contribute to the partnership.
- Those who share joint and unlimited liability for all partnership obligations.
Limited partnerships require registration, and until registered, they’re treated as ordinary partnerships. Partners with limited liability must contribute funds or assets.
The managing partner must be one with unlimited liability. If this managing partner is a foreigner, they need a non-immigrant business visa and a work permit. Foreign ownership in limited partnerships is capped at 49%, with a Foreign Business License necessary if the foreign partner’s investment exceeds this threshold.
Sole proprietorship
In Thailand, a sole proprietorship, like in many other places, is owned and managed by a single individual who bears unlimited liability. These businesses can include various permitted business activities as dictated by law.
Eligibility to register a sole trader business structure in Thailand depends on your nationality. For instance, a citizen of the United States can register a sole proprietorship due to the Treaty of Amity between Thailand and the United States. However, individuals from other countries might encounter restrictions on certain business structures.
Step 2: Registering your company
Reserve your company name
Thai companies aiming to register their names must initially reserve them through the Department of Business Development (DBD). As mandated by Section 1098 of the Thai Civil and Commercial Code, the proposed company names must invariably conclude with the term « limited ».
This reservation process can be conveniently carried out online via the DBD website, with approvals typically granted within 1-3 days. Company names are subject to the regulatory guidelines set forth by the Business Department. Upon approval of the company name, it must be utilized in the incorporation documents required for company registration.
Filing the Memorandum of Association
After registration with the Ministry of Commerce (MOC), the company can proceed with the registration of its memorandum of association. At this stage, it is imperative that all shares are fully paid. Prior to engaging in foreign business activities, approval from the cabinet must be obtained.
The memorandum of association includes:
- The proposed company’s name
- The province within the Kingdom where the company’s registered office will be located
- The company’s objectives
- The proposed amount of share capital for registration
- Details of the promoters, including their names, addresses, occupations, and signatures (at least two individuals, not corporate entities)
- Information regarding the shares subscribed to by each promoter, including their value, number, paid-up status, and whether they are ordinary or preference shares
- The name and address of the registered director(s)
- The registered office address, along with any branch offices
- Personal details of the ultimate shareholders or corporate registration details for corporate shareholders.
The Statutory Meeting
The company is required to submit its by-laws and articles of incorporation, which must be formulated during a statutory meeting. This meeting also appoints the company’s board of directors and auditors. Other matters addressed during the statutory meeting include:
- Approving any company regulations, if applicable.
- Confirming contracts and expenses incurred by promoters.
- Determining any payments to be made to the promoters.
- Establishing the quantity of preference shares, if applicable.
- Deciding on the allocation of fully or partly paid-up ordinary or preference shares.
- Appointing the initial directors and auditors and defining their respective authorities.
Submit a registration application
The company registration must be filed on the same day as the registration of the Memorandum of Association at the Ministry of Commerce, given that the Statutory Meeting has been convened. The application for registration must be lodged within 90 days from the date of the statutory meeting at the latest.
Registering for Value-Added Tax (VAT) and Income Tax
Following company registration, within 60 days of incorporation or the start of operations, you must apply for and acquire a corporate tax ID card from the Revenue Department.
Thailand has enforced Value Added Tax (VAT) since 1992, which is levied on the value added at each stage of production and distribution. Any business entity that consistently supplies goods or services in Thailand with an annual turnover surpassing 1.8 million baht must register for VAT. Furthermore, if you intend to obtain a work permit, immediate VAT registration for your company is required.
Conclusion
While the above process pertains to establishing a private limited company, different types of companies necessitate slightly varied procedures.
- Sole proprietorship and unregistered ordinary partnership: These do not require formal registration.
- Registered ordinary partnership and limited partnership: These skip steps 2 and 3 and directly submit the registration application to the DBD office in the respective area.
- Public company limited: Additional documents authorized by the Securities and Exchange Commission (SEC) are needed from step 2 onwards.
For more comprehensive information on business registrations, refer to the DBD business registration resources.
To summarize, Thailand’s strategic location and established infrastructure as a regional economic hub present a compelling opportunity for foreign investors seeking expansion in Southeast Asia. While the company registration process demands meticulous attention to detail, Thailand’s demonstrably profitable environment and robust economic fundamentals offer a strong foundation for long-term success.
By partnering with RBA’s experienced professionals to navigate the registration process, your company can ensure a smooth entry into this dynamic market, unlocking its full potential for sustainable growth and achieving its strategic objectives.
