Business entities in Thailand
Healy Consultants will assist our Clients with choosing the optimum corporate structure and completing all procedures required for Thailand business setup. Forming a wholly foreign owned company in Thailand is subject to a significant amount of red tape, due to the requirement to obtain a foreign business license (FBL), which can take up years to be granted by the Ministry of Commerce.
Fortunately, it is possible for foreigners to register a company in Thailand without the need for a FBL. The main solutions to do so are to:
- register an export oriented business – foreign-owned companies that only offer products and services to overseas customers are not required to secure a FBL and are fairly simple to register;
- form a company with a Thailand or United States joint venture partner – with a USA partner owning at least 51% of its shares, the company is then legally able to bypass the FBL requirement by applying under the Thai USA Amity Treaty;
- apply for Board of Investment Promotion – foreign invested companies receiving the approval of the Thai Board of Investment (BOI), also known as “BOI companies” can benefit from a fast track procedure to secure the FBL or can be exempted from such licensing requirement;
- apply for regional headquarters status – companies which only purpose is to offer management services to overseas subsidiaries are exempted from the requirement to secure a FBL and can benefit from numerous tax incentives.
If our Client is unable to use one of the following strategies described above, securing a foreign business license then becomes necessary. All Thai business entities must also be registered with the Department of Business Development and for tax purposes with the Revenue Department. Please below further details on the different types of business entities available in Thailand.
The Thai Limited Liability Company
- A Thai limited liability company (LLC) is governed by the Civil and Commercial Code and requires a minimum of 3 shareholders and 1 director. It is possible to have a wholly foreign owned company. However, in most cases, at least 51% of the shares are held by Thai citizens because several business activities are restricted for companies that are majority foreign owned. At least 25% of share capital must be paid up when registering the company. The minimum share capital required for a majority Thai owned LLC is US$1;
- Thai LLCs wishing to hire expatriates must inject a minimum share capital of i) US$ 94,000 in restricted industries and ii) US$ 63,000 in other sectors. If a foreign company intends to engage in restricted activities, it must apply for a Foreign Business License, subject to Government approval.
The Thai BOI Company
- Foreigners forming a company in Thailand can submit an application to secure promotion status from the Board of Investment, that is to say the local Government Agency in charge of attracting foreign investment. While the minimum level of capital to secure BOI approval is theoretically set at US$30,000 (THB1 million), the BOI will usually require a minimum investment of up to US$500,000 (THB200 million), as well as evidence of technology transfers and job creations. See this page for further details on the procedures to obtain BOI promotion status;
- Companies obtaining approval from the BOI are either exempted from the requirement to obtain a foreign business license, or benefit from a fast track procedure. They also benefit from tax incentives including i) a corporate tax holiday of up to eight years ii) reduced or waived custom duties on imported raw material and equipment. They also can sponsor their skilled foreign employees for Thai work permits.
The Amity Treaty LLC
- An Amity Treaty LLC can be 100% owned by American citizens,i.e. all 3 shareholders can be Americans. At least 51% of an Amity treaty LLC must be owned by Americans. If required, Healy Consultants will provide passive American nominee shareholders and directors;
- At the time of company setup, all initial shareholders must be “natural persons”, because a company cannot be a founding shareholder. However, following legal company registration, shares can be transferred to a USA LLC. Amity approval allows our Client to only engage in all business activities outlined in List Three;
- The Amity Treaty LLC must have a paid up share capital of US$67,000. There are only seven sectors that are restricted for even Amity Treaty companies. If an Amity treaty company intends to engage in any of these seven activities, the minimum paid up capital must be US$94,000.
The Thai Public Limited Company
- A Thai public limited company (PLC) is governed by the Public Company Act and requires i) at least 15 shareholders and ii) at least 5 directors, half of whom are Thai residents. The minimum share capital required is US$1;
- PLCs in Thailand are allowed, but not required to list on the SET. A PLC requires i) minimum paid up share capital of US$622,000 to list in the Market for Alternative Investment (MAI) or ii) a minimum registered capital of US$9.3 million to list in the Stock Exchange of Thailand (SET).
- A multinational can establish a branch office in Thailand to complete a project lasting a maximum of 5 years. A renewal of the branch license may be granted, provided the working capital required to be brought into Thailand is met. While a Thai branch office can be 100% foreign owned, our Clients generally find it cumbersome to open a branch office, as they will be required to i) obtain a foreign business license renewable every 5 years and ii) remit a minimum of US$156,000 into Thailand to cover future expenses. Furthermore, they also need to obtain a i) VAT registration number ii) a taxpayer identification number and iii) a Commercial Registration Certificate;
- Income earned from branch office activities is subject to the normal Thai corporate income tax, but the company will not be taxed on income earned outside Thailand and unrelated to the business activities of the Thailand office. A remittance tax of 10% applies to profits transferred from a Thailand branch to its head office overseas (except to Hong Kong). Tax payment must be made within seven days of the date of remittance. The branch manager must be a Thai citizen.
- While a representative office in Thailand can be 100% foreign owned, it is not allowed to make direct sales within Thailand. Consequently, this entity can only engage in i) market research and ii) promoting the business of the parent company iii) finding sources to purchase goods or services in Thailand and iv) controlling the quality and quantity of goods purchased or manufactured in Thailand;
- Although not subject to corporate tax, representative offices must i) obtain a Corporate Tax Identification Number ii) submit income tax returns and iii) submit audited financial statements to the Revenue Department. The manager of the representative office must be a Thai citizen.
Regional Operating Headquarters (ROH)
- A foreign enterprise can establish a regional office in Thailand to own and supervise Group subsidiaries in Asia. The activities which a ROH is permitted to undertake include i) consulting and management of Asian operations ii) training and personnel development in Asian offices iii) financial management for the Region iv) marketing control and sales promotion planning for the Region v) product development and vi) research and development;
- A Government approved ROH enjoys a corporation tax rate of 10% on income received from subsidiaries including royalties, interest, intellectual property and management fees. Dividends received from overseas subsidiaries are legally tax exempt in Thailand. Furthermore, employees of an ROH suffer income tax at a flat rate of 15%. To enjoy these benefits, the entity must apply for i) investment promotion from the BOI and ii) a foreign business license;
- To enjoy ROH status, the Thai LLC must i) maintain at least US$310,000 paid-up share capital ii) provide services to at least 3 overseas affiliated companies in at least three different countries. In the first three years of operation, only one third of the ROH’s revenue can come from overseas subsidiaries, the remainder from local Thai sales. From year four onwards, at least half of the revenue booked by the ROH must be derived from service provision to its overseas affiliated companies and/or branches.
The Thailand foundation
- Thai regulations allow foreigners to form private and charitable foundations in Thailand, with a minimum capital of US$15,000 (THB500,000). Half of the amount must be paid in cash, while the other half can be a contribution in kind (for instance, the transfer of assets to the foundation);
- In accordance with Thailand regulations, the foundation can then be registered with the Thailand Ministry of Interior with i) at least one owner and ii) a Board of Directors including a minimum of one member, who must be ordinarily resident in Thailand. Other Board members are allowed to be living in other countries;
- Most Thailand foundations are managing a portfolio of assets and using the derived income to finance projects related to the purpose(s) of their creation. Nothing prevents them for also trading, but they then fall under trading regulations, with notably the requirement to secure a foreign business license if they are owned by a majority of foreign owners. Thailand charitable foundation are lastly eligible to a reduced corporate income tax rate of 1%.
The Thailand Limited Partnership
- A Thailand limited partnership requires at least one limited partner and one general partner to be registered. Although 100% foreign ownership is permitted of this entity, due to restrictions on foreign participation in certain business activities in Thailand under the Foreign Business Act (FBA), a majority of Thai partners may be required in certain instances;
- A Thailand Partnership is deemed foreign if at least 50% or more shareholders are foreign nationals or where the managing partner is alien. The entity in this case will be considered foreign and is subject to foreign ownership restrictions under FBA;
- This entity is required to submit annual audited financial statements to the Revenue Department if i) its total revenue exceeds THB30 million (US$870,000) or ii) the registered capital is 5million baht (US$150,000) and above or iii) its total assets exceeds 30million baht (US$870,000).
Table of Comparison between Thailand entities
|Amity Treaty LLC||Majority Thai LLC||Thai ROH||Thai Branch||Representative Office||Private Foundation|
|Average total engagement period||14 weeks||19 weeks||14 weeks||12 weeks||12 weeks||1 year|
|How long to legally incorporate the company?||3 weeks||8 weeks||5 weeks||6 weeks||6 weeks||1 year|
|How long to open company bank account?||3 weeks||4 weeks||3 weeks||3 weeks||3 weeks||4 weeks|
|Thai bank signatory required||No||No||No||No||No||Yes|
|Wholly Foreign owned?||Yes||No||Yes||Yes||Yes||Yes|
|Maximum foreign ownership allowed?||100%||49%||100%||100%||100%||100%|
|Minimum share capital required?||US$63,000||US$1||US$63,000||US$63,000||US$63,000||US$15,000|
|Average Government license approval period||6 weeks||5 weeks||5 weeks||6 weeks||6 weeks||1 year|
|File annual tax return?||Yes||Yes||Yes||Yes||Yes||Yes|
|Tax Identification Number required?||Yes||Yes||Yes||Yes||Yes||Yes|
|Corporate Bank Account?||Kasikorn Bank||SCB||SCB||Kasikorn Bank||Kasikorn Bank||SCB|
|Does our Client need to travel?||No||No||No||No||No||No|
|Resident director required?||No||No||No||Yes||Yes||Yes|
|Resident shareholder required?||No||51%||No||No||No||No|
|Minimum directors allowed?||1||1||1||1||1||1|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes||Yes||Yes|
|Corporate director(s) allowed?||Yes||Yes||Yes||Yes||Yes||Yes|
|Public register of shareholders and directors?||Yes||Yes||Yes||Yes||Yes||Yes|
|Thailand Corporate Tax Rate?||20%||20%||10%||20%||0%||20%|
|How long to secure VAT registration||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|Annual financial statements required?||Yes||Yes||Yes||Yes||Yes||Yes|
|Statutory independent audit required?||Yes||Yes||Yes||Yes||No||Yes|
|Allowed to issue sales invoices?||Yes||Yes||Yes||Yes||No||Yes (with FBL)|
|Allowed to sign contracts?||Yes||Yes||Yes||Yes||No||Yes|
|Allowed to import and export goods?||Yes||Yes||No||No||No||No|
|Can rent an office in Thailand?||Yes||Yes||Yes||Yes||Yes||Yes|
|Can buy Thai property?||Yes||No||No||No||No||No|
|Can own equity in other Thai companies?||Yes||Yes||Yes||No||No||Yes|
|Estimate of engagement costs||US$14,887||US$12,987||US$15,925||US$15,925||US$15,925||US$22,350|
Frequently asked questions
Which government authority deals with Thailand company setup?
I am a foreigner interested in Thailand business setup. Do I need a local shareholder?The Government of Thailand does require local Thai shareholders to own at least 51% of a company. However, a Thai company can be 100% foreign owned if i) it gets a promotion from the Board of Investments ii) can obtain a Foreign Business License or iii) the majority of the shares are held by American citizens.