DOING BUSINESS IN THAILAND
Since 2003, Healy Consultants has assisted our Clients with business registration in Thailand. Our services include i) Thailand company registration ii) foreign business licensing approval iii) corporate bank account opening services iv) employee recruitment v) employee visa strategies and vi) office 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$15,837||US$12,987||US$19,650||US$31,877||US$15,925||US$15,925||US$15,925||US$14,225|
|Average total engagement period?||4 months||4 months||2 months||3 months||4 months||3 months||3 months||4 months|
|Accounting and tax considerations||Amity Treaty LLC||51% LLC||Fast solution||Free zone LLC||Thai ROH||Branch||Rep office||Thai PLC|
|Statutory corporation tax payable?||20%||20%||20%||0%||10%||20%||0%||20%|
|Must file an annual Thailand tax return?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Effective corporation tax rate on net profits of US$250,000?||20%||20%||20%||0%||10%||20%||0%||20%|
|Must file annual financial statements?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Investment income is tax exempt in Thailand?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Access to double taxation treaties?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Monthly VAT reporting to the Government?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Legally tax exempt entity?||No||No||No||Yes||Yes||No||Yes||No|
|Dividends received are legally tax exempt?||No||No||No||No||Yes||No||No||No|
|Company registration||Amity Treaty LLC||51% LLC||Fast solution||Free zone LLC||Thai ROH||Branch||Rep office||Thai PLC|
|Resident director\partner\manager required?||No||Yes||Yes||No||No||No||Yes||Yes|
|Minimum number of shareholders\partners?||3||3||3||3||3||Parent company||Parent company||15|
|Minimum number of directors/managers?||1||1||1||1||1||1||1||5|
|Minimum paid up share capital?||US$60,000||US$2,900||US$2,900||US$62,000||US$285,906||US$85,800||US$85,800||US$622,000|
|Shelf companies available?||No||Yes||Yes||Yes||No||No||No||No|
|Time to incorporate a new entity?||8 weeks||8 weeks||2 weeks||6 weeks||6 weeks||6 weeks||6 weeks||10 weeks|
|Can easily convert to a local PLC company?||No||Yes||Yes||No||No||No||No||-|
|Can have preference shareholders?||Yes||Yes||Yes||Yes||Yes||No||No||No|
|Business considerations||Amity Treaty LLC||51% LLC||Fast solution||Free zone LLC||Thai ROH||Branch||Rep office||Thai PLC|
|Can invoice local customers?||Yes||Yes||Yes||No||Yes||Yes||No||Yes|
|Can hire local staff?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Can rent local office space?||Yes||Yes||Yes||Yes||Yes||Yes||Yes||Yes|
|Secures a residence visa for business owner?||Yes||Yes||Yes||Yes||Yes||No||Yes||Yes|
|Good entity for trademark registration?||Yes||Yes||Yes||No||No||No||No||Yes|
|Average monthly office rental? (US$ 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|
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Benefits and problems of registering a company in Thailand
Benefits of registering a company in Thailand
- It is possible to register a wholly foreign owned Thai limited liability company (LLC) with only i) three shareholders ii) one director and iii) a minimum capital of US$60,000 (THB2 million). The company formation procedures (click link for more details) can be completed without travel requirement for our Clients;
- Thailand is a large consumer market, thanks to i) a population of 68 million and ii) a GDP per capita of US$5,900. The country is ranked as the 22nd most attractive consumer market in the world by the World Economic Forum;
- Thailand is a good location for starting a manufacturing business because:
- Salaries in the manufacturing industry are low, averaging only US$450 per month. Click on the weblink for further information on salary levels in Thailand;
- Our Clients are able to sell their manufactured goods abroad with a good markup thanks to i) Thailand VAT exemption on all exports ii) custom duties exemption on all exports iii) low rental cost for industrial space at an average of US$12 per square meter per month;
- 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 4th 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 products.
- Our Clients like to set up their regional headquarters in Thailand because:
- A Thailand regional headquarters 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 from Thailand corporate income 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.
- The Thailand authorities want to attract foreign investors by providing attractive tax incentives, including:
- Corporate tax holidays can be granted by the Thailand Board of Investment (BOI) to companies investing in designated industries including i) agro-industry ii) alternative energy iii) automotive and iv) electronics and ICT v) fashion vi) entertainment vii) healthcare and viii) tourism services;
- A company may also 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;
- 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 Thailand special economic zone;
- All Thailand businesses can carry forward their losses for up to 5 years.
Problems with Thailand company registration
- Registering a wholly-foreign owned business in Thailand is challenging because:
- Businesses with foreign shareholding exceeding 49% are required to secure a foreign business licence (FBL) before trading in most industries;
- Securing a foreign business license takes an average of four months, due to challenging and cumbersome procedures requiring the approval of the Thailand Ministry of Commerce;
- While issuance of a foreign business license can be issued significantly faster (up to one month) by the Thai Authorities for USA companies, the process requires the USA director to travel to Thailand for endorsement by the USA Embassy in Bangkok;
- To secure the above foreign business license, foreign companies are required to have a minimum share capital equivalent to i) 9 months of planned expenditures or ii) US$60,000 whichever is higher. The actual amount required can be higher, depending on the exact business nature of our Clients’ businesses;
- While a resident director is not required by law, administrative interactions with the Thai Government still require a director to visit and sign documentation in person, for instance to register a telephone line, activate water and electricity for office premises. If required, Healy Consultants Group PLC will provide a professional passive nominee resident director until our Client appoints its own local director;
- Approximately 45 days following incorporation, officials from the Revenue Department will do a one-time inspection of the company premises;
- Despite the fact that many of our Clients will need a local national director or shareholder to be appointed, article 36 of the Thailand Foreign Business Act, prohibits the use of Thai nominee shareholders and directors.
- Companies registered in Thailand suffer significant and increasing taxes because:
- In Thailand, corporate income tax amounts to 20%, while capital gains can be taxed up to 35%. Consequently, the effective total tax rate for companies approximates 30%, including corporation tax and VAT;
- 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.
- 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;
- 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 121st country in the world for intellectual property protection;
- 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 local judicial system favors its citizens;
- To get business done, multinationals may unfortunately frequently have to bribe corrupt Government officials. About 10% of businesses have reported bribing Thai officials in 2016 and businessmen consider corruption and Government inefficiencies as the most problematic factors for Thailand-based businesses, just after political instability.
- HR management of a Thailand business can be challenging because:
- The paid up share capital must be increased by U$56,500 for every foreign employee hired. The ratio is 2 Thai employees for every USA citizen employee and 4 Thai employees for every other nationality employee hired;
- Our Clients can face labour shortages in Thailand, as the current unemployment rate is low (around 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.
- Companies in Thailand suffer 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;
- Thai translations must be provided when filing i) tax returns and ii) audited financial statements.
Best uses for a Thailand company
- Thailand is a great place to register a manufacturing company, especially in the automobile sector thanks to a skilled yet affordable workforce, generous tax incentives, ASEAN membership and a vast network of suppliers and corporate customers;
- Foreign multinationals trading customer products usually also register a local subsidiary in order to better target Thailand customers increase their share of this emerging market.
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