Doing Business in Thailand
The US News and World Report ranked first the Kingdom of Thailand in the 2020 Best Countries for Starting a Business global perception-based survey. The survey related to these five attributes: affordability, bureaucracy, low manufacturing costs, global connection and access to capital.
The survey took note of the several factors why Thailand is the best country for starting a business. Firstly, Thailand has been considered one of the most visited countries. It has a very stable agricultural sector as well as a booming and competitive manufacturing industry. Thailand is also the world’s largest exporter of rice and a leader in textiles, tin, and electronics.
The above survey was likewise corroborated with the data of Trading Economics ranking countries in the Ease of Doing Business. Thailand is ranked 21 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The Ease of Doing Business index ranks countries based on how the regulatory environment is conducive to business operations, stronger protection or property rights. Being considered as the second-largest economy in Southeast Asia, Thailand is conveniently a business hub for the ASEAN region.
Business in Thailand continues to expand from time to time attracting more and more foreigners to invest or set up an enterprise. Foreigners not only invest in existing companies or put up their own establishment in Thailand. They also venture into the expansion of their branches.
Needless to say, Thailand continues to boom since its government consistently gives incentives to the business world. These incentives include the permission to own real estate property in the country upon satisfaction of all the requirements. Further, joint ventures are also encouraged thus giving business organizations more profitable options.
Doing Business in Thailand
Business organizations in Thailand are classified into companies and partnerships. Other classifications include a branch office, a representative office or a regional operating headquarters. To decide on the most appropriate business organization to establish, the knowledge, expertise and experience of a Thailand lawyer are required. They are equipped with the rudiments of Thailand laws as well as the realities of business practice. Also, they can be of valuable assistance in business registration, the first requirement that all businesses should comply with. Preparation of all the documentary requirements and proper filing with the concerned government agencies will be a breeze.
For foreigners doing business in Thailand, it is important to note that a different set of rules applies to a foreign-owned business established or operating in Thailand under the Foreign Business Act. A foreign business is defined to be a business with over 49% foreign ownership. If the type of business in Thailand you wish to operate falls under the categories set out in the Act, you may either be restricted from operation all together or will need to apply for a Foreign Business License (FBL) before you can commence operations and obtaining any business or industry-specific licenses with the Ministry of Commerce or apply for a business promotion with the Board of Investment (BOI) or if the investor is of US nationality, company registration under the US-Thai Treaty of Amity can likewise be an option for a foreigner to own more than 49% of the shareholding of the company.
Company Limited Thailand
The most common company structure in starting a business in Thailand is a limited company. A company limited is one which is formed with a capital divided into equal shares, the liability of the shareholders being limited to the amount of the shares respectively held by them.
- Thai majority-owned company limited
In a Thai majority owned company, Thai nationals must own at least 51% of the shareholding of the company. Since the majority of its shareholding is Thai, then, a Foreign Business License (FBL) is not required. A limited company that is majority-owned by a Thai national generally does not encounter restrictions.
- Foreign majority-owned company limited
A Foreign business is defined to be a business with over 49% foreign ownership. The business operations and activities involving foreign nationals and entities are governed by the Foreign Business Act. Business entities of majority foreign ownership are required to obtain a Foreign Business License before commencing its operations in Thailand.
Thailand Foreign Business Act
The Foreign Business Act (FBA) regulates the activities in which companies designated as “foreign” may engage in. A foreign company under Thai law is a company registered under the following laws:
- The laws of another country (including branches, representative offices and regional offices of companies abroad operating in Thailand)
- Thai law, but where 50% or more of its shares are held by foreign individuals.
The FBA identified three lists of activities in which foreign participation may be prohibited or restricted.
- Activities stated in List 1 are designated as business in Thailand that foreigners are not permitted to conduct for special reasons. Foreign companies are completely restricted from engaging in the activities contained in List 1.
- Activities stated in List 2 are designated as businesses related to national safety or security, activities affecting arts and culture, traditional and folk handicraft, or natural resources and the environment. Foreign companies may only engage in the activities stated in List 2 with prior Cabinet approval.
- Activities stated in List 3 are designated as businesses in which Thai nationals are not yet ready to compete with foreigners. To engage in activities stated in List 3, the foreign company must apply for and obtain a foreign business license prior to the commencement of its company operations.
Companies promoted by the Thailand Board of Investment (BOI) are permitted to engage in certain business activities restricted under the Foreign Business Act by obtaining the foreign business certificate prior to doing business in Thailand.
Board of Investment (BOI) Thailand
The Board of Investment (BOI) or BOI Thailand provides investment incentives for both foreign and local entrepreneurs who are interested in doing business in Thailand and investing in the BOI Thailand promoted activities. BOI Thailand has formulated criteria for projects applying for incentives and privileges. To be eligible for a BOI promotion, your business in Thailand has to fall within the categories set by the Board.
US-Thai Treaty of Amity
The Treaty of Amity aims to provide significant advantages for U.S. corporate and individual investors who are doing business in Thailand. In particular, the Treaty of Amity provides U.S. investors with two major trade advantages:
- The Treaty of Amity permits U.S. nationals to hold either majority shares or all the shares of a Thai limited company, or to establish a Branch Office or Representative Office in Thailand without having to apply for a Section 17 Foreign Business License; and
- U.S. nationals may engage in business on the same basis as Thai nationals, and are exempt from most of the restrictions of foreign investment imposed by the Foreign Business Act of 1999.
Branch Office in Thailand
A branch office is another company structure to do business in Thailand. It is similar to that of a company limited. However, a branch office does not have a separate legal entity from its head office overseas but merely an extension. A branch office, being foreign-owned, is subject to Foreign Business License (FBL) requirement.
Representative Office and Regional Office
The representative office and regional office are company structures different from those of branch office and company limited. Both representative offices and regional offices are not allowed to earn income and engage in trading activities and are strictly regulated to perform specific functions designated by statute on behalf of their head offices overseas.
Hiring Siam Legal in Starting a Business in Thailand
In matters of starting a business in Thailand, Siam Legal is a reliable ally. Its team of Thailand and foreign lawyers can assist clients in every step of the process, from the simple process of business registration to the complex offshore investments. Not only that, but clients also receive a premium for getting the help and assistance of foreign lawyers who can take care of their affairs in their home country. Therefore, in case problems of securing documentary requirements from the home country arise, such can be resolved easily.
Siam Legal can also extend valuable assistance in handling the tax liabilities of companies. They have lawyers who are experts in the field; thus, can afford clients protection from an incorrect assessment of tax liabilities, overcharging and other similar occurrences. Tax exemptions and incentives provided by the Thai government can also be explained clearly to clients in terms easily understandable to them.
Indeed, using any of Siam Legal's services in doing business in Thailand is worth the investment. Efficiency, as well as cost-effectiveness, is assured in every step of the process. Clients have the luxury to sit back and relax as they witness the unfolding of their company, partnership, limited company, representative office or any other business entity in Thailand.