DOING BUSINESS IN THAILAND
Since 2003, Healy Consultants has been efficiently and effectively assisting our Clients with i) Thailand business registration ii) business licensing iii) Thailand corporate banking solutions iv) visa options and staff recruitment strategies and v) workspace rental solutions.
|Summary||Amity Treaty LLC||51% LLC||Fast solution||Free zone LLC||Thai ROH||Branch||Rep office||Thai PLC|
|Best use of company?||US Citizens company||Trading company||Quick setup||Production company||Supervise subsidiaries||Bank Branch||Marketing, research||Trading Company|
|Legally tax exempt if properly structured?||No||No||No||Yes||Yes||No||Yes||No|
|Corporate bank account location?||Kasikorn Bank||SCB||ANZ||HSBC||ANZ||Kasikorn Bank||ANZ||ANZ|
|Client must travel to Thailand?||No||No||No||No||No||No||No||No|
|Can secure trade finance?||Yes||Yes||Yes||Yes||Yes||Yes||No||Yes|
|Limited liability entity?||Yes||Yes||Yes||Yes||Yes||No||No||Yes|
|VAT payable on sales to local customers?||7%||7%||7%||0%||7%||7%||0%||7%|
|Withholding tax on payments to overseas shareholders?||15%||15%||15%||15%||15%||10%||0%||15%|
|Average total engagement costs?||US$14,887||US$12,987||US$19,650||US$13,087||US$15,925||US$15,925||US$15,925||US$13,275|
|Average total engagement period?||4 months||4 months||2 months||3 months||4 months||3 months||3 months||4 months|
|Average monthly office rental? (US$ per sq m)||$25|
|Minimum statutory monthly salary?||$198|
|Average monthly US$ salary for local employees?||$386|
|THB deposit interest rate? (1 year average)||2.80%|
|US$ deposit interest rate? (1 year average)||1.4%|
|Overseas remittance currency controls?||No|
|Public register of shareholders and directors?||Yes|
|Multi-currency bank accounts available?||Yes|
|Corporate visa debit cards available?||Yes|
|Quality of e-banking platform?||Excellent|
Benefits and problems of registering a company in Thailand
Benefits of Thailand company registration
- It is possible to register a wholly foreign owned Thai limited liability company (LLC). It is especially easier for our American Clients to do so, thanks to the US-Thailand Amity treaty. Hence, if possible, Healy Consultants recommends using USA citizens as shareholders and directors for your Thai company. For the majority of our international Clients, Healy Consultants supplies passive USA nominee shareholders and/or directors; consequently, these Thai entities can invest in the majority of the country’s industrial sectors without a foreign business license;
- The Thai Government provides several tax incentives including:
- Subject to the Board of Investment (BOI) approval, zero corporation tax is levied on companies who invest in designated industries including i) agriculture and agro-industry ii) alternative energy iii) automotive and iv) electronics and ICT v) fashion vi) entertainment vii) healthcare and viii) tourism services;
- Business losses can be carried forward for up to 5 years;
- A company may claim a 200% rebate on R&D costs, and a 200% deduction for job training expenses and for expenditure on salary paid to disabled employees;
- Exports do not suffer VAT, customs or excise duties. Import duty imposed on materials imported for the production of goods that are then exported can be refunded by the Customs Department. Furthermore, exemption from customs duties on imported goods is granted when the goods are taken through a Free Zone.
Problems with Thailand company registration
- Most businesses in Thailand require a majority of Thai national shareholders because majority foreign owned companies are restricted from doing business in several sectors. Healy Consultants will supply passive nominee shareholders and/or directors for our Clients. An Amity Treaty LLC can circumvent this requirement. While it is possible to apply for a Foreign Business License(FBL) and hence avoid appointing Thai shareholders, it is rare for the Government to grant approval for an FBL;
- Registering a company in Thailand is difficult because:
- Companies with over 50% share capital held by foreigners are required to obtain a foreign business license before conducting business activities including i) tourism ii) sale of food and beverages iii) communications iv) legal services and v) construction. To secure this license, foreign companies are required to have i) share capital equivalent to 9 months of planned expenditures or ii) US$94,000 whichever is higher;
- Foreign companies conducting non-restricted business activities are requested to inject at least US$63,000 paid up share capital;
- Our Clients will find it difficult to register a Thai public limited company (PLC) because they require at least i) 15 shareholders and ii) 5 directors, half of whom must be Thai nationals. Furthermore, a PLC must inject a minimum share capital of US$622,000 before listing on the SET Index.
- Companies registered in Thailand suffer significant and increasing taxes because:
- In Thailand i) corporate tax is 20% ii) withholding taxes are up to 15% iii) capital gains can be taxed up to 35% iv) the effective total tax rate for companies approximates 30% including corporation tax and VAT;
- Our Clients incorporating in Thailand should be aware that taxes in Thailand might increase in 2016 because the government has committed to reducing its budget deficit since rating agencies are threatening a downgrade of Thailand’s debt;
- A 10% branch remittance tax is imposed on after-tax profits repatriated to the overseas parent company;
- Withholding taxes on payments to overseas parent companies suffer i) 10% on dividends ii) up to 15% on royalties and iii) up to 15% on interest even after the benefits of Thailand’s 56 double taxation treaties.
- Multinationals’ investments in Thailand are uncertain because:
- Thailand is politically unstable following a coup in September 2006. Since then, Thailand is coping with a mini civil war that could jeopardize the security of existing and future foreign investment. To exacerbate this risk, the King of Thailand is in poor health and it is feared the Thai military will take complete control of the Government after his death;
- Environmental disasters in Thailand have a tremendous impact on business operations. For example, devastating floods in 2011 cost resident businesses i) US$46 billion in damages and ii) up to 6 months of lost sales;
- Our Clients should also be aware that bidding for government contracts is currently risky because i) Thailand is currently ruled by an unelected military junta ii) the next government may void contracts awarded since the May 2014 coup and iii) 86 year old King Bhumibol Adulyadej’s impending death could lead to even more political turmoil.
- Our Clients find Thailand a corrupt place to conduct business because:
- It is common for employees and competitors to counterfeit foreign company products. Thailand is indeed ranked as the 104th country in the world for intellectual property protection;
- Unfortunately to get business done, multinationals may frequently have to bribe corrupt Government officials. About 25% of businesses have reported bribing Thai officials in 2013 and businessmen consider corruption the most problematic factor for Thailand-based businesses;
- When running into contractual problems with i) suppliers ii) customers and iii) business partners, multinationals cannot rely on Thai courts. Like most emerging markets, the judicial system favors its citizens.
- Thailand based companies find it difficult to hire quality employees because:
- For each expatriate hired by a Thai limited liability company i) the company paid up share capital must increase by US$62,000 and ii) four Thai employees must be employed;
- Our Clients face labor shortages in Thailand, as the current unemployment rate is low at 1%;
- Foreign entrepreneurs may furthermore have trouble communicating with their employees, as only 30% of the population speaks English;
- Firing a Thai employee is often an expensive decision. Severance pay represent on average 36 weeks of pay, the 11th highest figure in the world.
- Companies in Thailand suffer excessive administrative Government red tape including:
- All outward fund remittances in foreign currencies must secure preliminary-approval from the bank after submission of an approval form and supporting information;
- Multinationals can only import goods in Thailand for resale either retail or wholesale after i) the Thai subsidiary is granted permission by the Ministry of Commerce and ii) paid up share capital of at least US$3.3 million. There are no restrictions on the import of raw materials for manufacturing;
- At the time of incorporation, all shareholders must be “natural persons”. However, after incorporation, shares can be transferred to a corporation;
- Thai translations must be provided when filing i) tax returns and ii) audited financial statements;
- Approximately 45 days following incorporation, officials from the Revenue Department will do a one-time inspection of the company premises;
- Each calendar year, employers with 100 or more employees must arrange training for at least 50% of their employees, by headcount.
Best uses for a Thailand company
- Our Clients like to set up a Regional Head Office in Thailand because:
- The Thai head office enjoys a mere 10% corporation tax on income received from subsidiaries including royalties, interest, and intellectual property and management fees. Dividends received from international subsidiaries are free of Thai corporation tax;
- An ROH (regional operating headquarters) i) is permitted to own land in the country ii) is free of any currency controls and overseas remittance restrictions and iii) is free to employ unlimited expatriate talent;
- Thai office rental costs and local staff salaries are low.
- Thailand is ideal for starting a manufacturing business because:
- Our Clients are able to sell their manufactured goods abroad with a higher markup thanks to i) VAT exemption on all exports ii) custom duties exemption on all exports iii) low rental cost for industrial space at an average of US$6 per square foot per year;
- Foreign investments in many sectors including i) electronic ii) chemical iii) paper iv) plastics and v) metal products will benefit from i) a corporation tax holiday of up to 8 years ii) exemption from import duties on machinery and raw materials iii) simplified customs procedures and iv) permission to own land;
- Our Clients will find it easy to transport their goods because Thailand’s transportation network is considered the 3rd best in South East Asia including rail, sea, road and air;
- Our Clients who incorporate in Thailand’s 12 Free Trade Zones enjoy advantages including i) VAT exemption ii) no import/export duties iii) up to 8 years of tax holiday for promoted activities and iv) permission to own land;
- The Customs Department can refund import duties on materials imported for the production of goods which are then exported. In addition, if a manufacturing firm exports its products, it is possible, with certain guarantees and fees, to procure import duty exemption on materials to be incorporated in products manufactured under bonded warehouse status;
- Exporters may obtain financial assistance from commercial banks in the form of packing credits, by means of promissory notes discounted at the rate prescribed by the commercial bank;
- For all the reasons above, Thailand is Southeast Asia’s largest manufacturer of i) automobiles ii) hard disk drives and iii) rubber.
Frequently asked questions
What are the foreign company options in Thailand?A Thailand resident company can be fully foreign owned if i) it gets a promotion from the Board of Investment ii) gets a foreign business license from the Ministry of Commerce or iii) majority shareholders are American citizens.
Is a Thai national or resident director required for the company registration process?No. Generally, there are no nationality or residency requirements for the director of a limited liability company. The exception to this rule is for companies seeking permission to conduct businesses listed under the US-Thai Amity treaty. In such cases, a minimum of 50% of the directors must be US Citizens.
What is the corporate tax rate in Thailand?The standard corporate income tax rate in Thailand is 20%. A limited liability company is considered resident if it is incorporated in Thailand. Residents are taxable on worldwide income while non-residents are taxed only on Thailand-source income. Corporate income tax is only imposed on net profits.
Useful links for Thailand
Government and public authority websites:
- Tax Authority
- Central Bank of Thailand
- Stock Exchange
- Investment Authority
- Chamber of Commerce
- Thailand airports
- Visiting Thailand
- Thailand KPMG – Doing Business in Thailand
- Thailand KPMG – Taxation on Cross Border for Thailand
- Thailand PWC – Tax Guide for Thailand
- Doing Business In Thailand
- Thai Business Visa
- Costs Of Doing Business In Thailand
- Bank of Thailand Act
- Immigration Act Thailand