Siam Legal | Understanding Corporate Compliance in Thailand

To open a business in Thailand, founders must ensure that they meet the government’s corporate compliance requirements in order to be approved and avoid penalties. Not only must Thai companies comply with Thai laws and regulations, but they must also prove compliance with specific evidence.

This article covers corporate compliance in Thailand, strategies for meeting requirements, and the role of corporate legal teams in the compliance process.

Legal Reporting Requirements in Thailand

Businesses in Thailand must report on a wide variety of compliance requirements to an equally diverse set of government entities. Key information and evidence of compliance must be provided to relevant agencies both at the company’s founding and regularly throughout the company’s operations.

Here is a list of the major legal reporting requirements for businesses in Thailand:

Reporting Requirements During Company Setup

When opening a business in Thailand, founders must provide certain information to the government to ensure corporate compliance and approval for the company’s formation. The requirements vary slightly by company type, but in general, the following is required:

• The company’s name
• Personal details for the director
• Identity information on at least the minimum of two shareholders is required
• The Memorandum of Association (MOU)
• The company’s registered address
• A bank certificate confirming adequate funds in the Thai shareholder’s bank account, where Thai shareholders will hold shares among foreigners.

Again, additional information must be reported based on the type of company being started. A corporate lawyer with knowledge of Thailand’s regulations can provide guidance.

Labor Law Compliance 

Thai businesses must prove that they follow local labor laws by reporting to the Department of Labor about the treatment of their employees. This involves providing information about topics, including but not limited to:

• Minimum wages
• Working hours
• Safety measure
• Enrollment in the Social Security system
• Benefits and workers’ rights
• Mandatory public holidays

Financial Reporting Requirements

One of the most important financial compliance requirements in Thailand is the annual financial statement. All juristic persons, partnerships, foreign company branches, and joint ventures must prepare financial statements for each accounting period. 

This statement must be audited by a certified auditor and filed separately with the Commercial Registration Department of the Ministry of Commerce (MOC) and with the Revenue Department of the Ministry of Finance (MOF).

Corporate Governance Best Practices

Consistent and thorough compliance efforts are necessary to avoid penalties and legal action, and the best way to achieve this is by improving corporate governance. To achieve effective corporate governance that equips a business for success and growth, corporate lawyers and company leaders in Thailand recommend following these best practices:

• Adoption of rigorous and binding corporate governance policies
• A diverse and qualified board
• Fostering transparent communication and collaboration at regularly scheduled board meetings, ideally around five to seven per year
• Mandatory attendance of board meetings, by teleconference if necessary
• Yearly evaluations of the performance and effectiveness of the board
• A clear succession policy to detail the process by which senior management positions will be vacated and filled
• Having a corporate lawyer draft a shareholder agreement to protect minority shareholders and provide direction for the company

Ensuring Tax Compliance

Compliance with Thailand’s tax regulations is a key consideration for companies of all sizes and industries. Failure to abide by Thailand’s tax corporate tax laws results in significant fines or even the dissolution of the company and legal action against company leadership.

The amount of tax and how frequently it must be paid depends on the type of business a company engages in and how much income it generates. Businesses are not required to register for corporate income tax (CIT) seperately, as this is now done automatically, and the company’s Company Registration Number acts as its Tax Identification Number (TIN). Businesses are required to register for value-added tax (VAT) with the Revenue Department and regularly file returns, but only after the company’s revenue exceeds 1.8 million baht, if ever.

Other key considerations for complying with Thai tax regulations include:

• All businesses must file CIT returns (Form CIT 50) and pay the tax owed within 150 days after end date of their accounting periods.
• In general CIT filings must be done annually, but VAT filings must be completed each month.
• VAT registrants have up to 15 days after the last day of the month to remit any VAT payable to the RD.
• The standard tax rate on corporate profits is typically 20%. Small and medium enterprises (SMEs) are eligible for reduced progressive rates ranging from 0% to 20%.
• The payment of VAT is required for commercial entities with revenue exceeding 1.8 million THB. Once registered, the company must file VAT monthly, regardless of their income.
• Certain kinds of businesses must pay the Specific Business Tax (SBT)in Thailand each month. The rate depends on the type of business. The types of businesses required to pay SBT include but are not limited to:
  • Banks
  • Financial services providers, securities traders, and credit financiers
  • Life insurance providers
  • Pawnbrokers
  • Businesses with regular transactions similar to commercial banks
  • Businesses that sell immovable property in a commercial or profitable manner
  • Sellers of securities in a securities market

Role of Corporate Lawyers in Compliance

Navigating Thailand’s complex business regulations and compliance requirements can be difficult even for local business leaders. As such, it is even harder for foreign entrepreneurs without high-level Thai language skills. Fortunately, due to Thailand’s status as a regional commercial hub, a sizeable industry of bilingual corporate lawyers dedicated to serving expatriate clients has grown to serve the high demand for legal guidance.

Corporate lawyers assist companies in Thailand with achieving compliance by leveraging deep knowledge of the law and industry standards to provide expert guidance. Their understanding of Thai business law also enables them to draft legally sound and compliant contracts as well as advise on necessary paperwork that must be submitted to various Thai government agencies.

Without an experienced corporate lawyer to guide a business through Thailand’s legal and regulatory landscape from its founding, there is a high risk of noncompliance penalties, denial of a company’s formation, or even legal action against the company’s leadership. The Thai government does not accept ignorance as an excuse for noncompliance, so a corporate lawyer’s insight and legal knowledge are invaluable to businesses of all kinds in Thailand.

Expert Corporate Law Services for Foreign-Owned Businesses in Thailand

If your business needs sound legal advice and guidance on achieving and maintaining compliance with all of Thailand’s laws and regulations, contact Siam Legal. Our experienced corporate legal team has been assisting foreigners open businesses in Thailand and achieve success for over 22 years.

With our knowledgeable lawyers on your team, your business can avoid costly or even fatal penalties from the government and you can operate your company with peace of mind knowing you are fully compliant and protected.

Category: Blog