Assistance in enlisting and operating an enterprise in Thailand

Open your own business in Thailand Not only local residents, but also foreigners can. Creating a business entity allows you to earn money in a state that has shown enormous growth in recent years. Moreover, its convenient location relative to other Asian countries simplifies the search for international partners.

The popularity of this jurisdiction for financial and economic activities is due to strong government support for entrepreneurs and access to the inexpensive labor market. The country has developed sufficient infrastructure that facilitates work in various areas of business.

However, legal regulation company registration in Thailand has its own characteristics. Ignorance of them will not allow a non-resident to open a legal entity or will significantly complicate this task. If the participant does not know the specifics of local legislation, it is better to use the help of intermediaries.

Why choose this jurisdiction

Establish an enterprise in Thailand propitious for operating within Southeast Asia. The monarchy’s governance provides congenial occupational circumstances to captivate the attention of external financiers. Equally paramount is an advantageous geographic positioning, straightforward and comprehensible indigenous jurisprudence.

The Kingdom of Thailand shares borders with Cambodia, Myanmar, Malaysia and Laos. In addition, the country has a fairly long coastline, which increases logistics opportunities for commodity volume.

Let's take a closer look at the main advantages of registering a business in Thailand.

The governmental initiative for the establishment of SEZs is being actualized to allure capital inflow and amplify mercantile interactions within the peripheral territories of the state. Moreover, it is anticipated that such zones will foster the augmentation of the hospitality, conveyance sectors, and agronomics.

Separately, we can note the rapid development of the information technology sector. In Thailand, new crypto projects, e-commerce programs, and medical technologies are being developed and launched.

Thailand can be used not only as a location for your main business. Investors view this kingdom as a tool for diversifying their investment portfolio and reducing possible risks of losing their invested funds.

Basic Requirements

For company registration in Thailand and subsequent work, a legal entity must meet several criteria:

• The primordial endowment must constitute no less than 2 million Thai baht (57 thousand greenbacks or 52 thousand euros);
• The endeavors of the juridical entity must be orchestrated by a superintendent who is an indigene;
• A minimum of two originators may establish an enterprise, with no ancillary stipulations regarding their nationality or domicile;
• To administer a firm, one necessitates a statutory domicile and a bureau wherein the annals of the juridical body shall be archived..

When establishing an enterprise, it is requisite to allocate pecuniary resources to the charter capital. The minimum quantum is contingent upon the selected juridical structure of the organization. For instance, should an alien wish to inaugurate a commercial endeavor in Thailand under the guise of an LLC, a pecuniary provision of 2 million baht is mandated. For a public limited corporation whose equities are circulated on the stock market, this requisite ascends to 3 million.

Legislative regulation

Incorporation of an enterprise in Thailand by an extraterritorial individual is executed whilst adhering to a plethora of distinct statutes and stipulations. The cornerstone of this framework is the Foreign Business Act, which attained enforceability in 1999.

The principal peculiarity is that alien enterprises are precluded from engaging in certain spheres of economic endeavor. These encompass piscary, extraction, and specific branches of husbandry.

Nevertheless, the nation still harbors an ample array of domains amenable to capital infusion and accruing gain. Furthermore, there exist bespoke fiscal stimuli, and it is feasible to establish consortia to obviate particular prohibitions.

Organizational forms of legal entities

The choice of the general physical structure in the country determines the features of regulation of the activities of a legal entity and its management. The following types of companies are available in the kingdom:

A classic option that is suitable for small and medium-sized businesses. The analogue in Ukraine, Russia, Belarus and other countries is a limited liability company.

The singularity lies in the fact that members bear responsibility for the encumbrances of the enterprise solely to the degree of the endowment allocated to the chartered capital. Pursuant to indigenous stipulations, a limited liability company may be constituted by a sole individual or a consortium of originators; however, the entity must appoint a minimum of one managing officer.

The LLC remits levies on its proprietary gains. Furthermore, emoluments acquired by the proprietors of the establishment in the guise of dividends are liable to exaction.

Traditional open pension fund for large companies, including international ones. It is a joint stock company in which capital is distributed among investors who purchased shares. According to local legislation, at least three founders are required to create it. The rights and obligations of participants and the procedure for transferring shares are determined by the adopted charter.

These forms provide for the association of several partners who pursue the same goal or are engaged in a specific project. Participants can be both legal entities and individuals. The interaction between them is determined in the concluded agreement.

The option the partners choose determines whether they have full or limited liability.

The inclinations of extraneous enterprises within the dominion may be advocated through subsidiaries and consular subdivisions. In the inaugural instance, inscribing a corporation within the confines of Thailand becomes superfluous. A subsidiary lacks autonomy as a juridical entity when scrutinized under external statutory provisions. Its operations are orchestrated by an overseas conglomerate. Nonetheless, the prerogative to execute mercantile endeavors, vend commodities, and render utilities under the aegis of the progenitor organization remains intact.

A consular subdivision, contrarily, is constituted solely to undertake specific roles within the territorial purview. Concurrently, pecuniary and fiscal undertakings are abstained from. Such an adjunct may pursue investigative scrutiny of commercial landscapes, extend technical assistance to patrons, and discharge ancillary obligations.

A brief procedure for creating a legal entity in the kingdom

You can open a business in Thailand on your own or with the help of an intermediary company. The second option allows you to go through the necessary procedures faster and avoid personal presence in the country to submit documents and obtain the necessary certificates.

The whole process includes the following steps:

Subsequently, enrollment with fiscal overseers and affiliation with the societal indemnity fund become requisite should you intend to employ indigenous laborers.

Some nuances of registration

The duties of the chronicler in the realm are executed by the Division of Mercantile Advancement. It answers to the nation's Directorate of Commerce, which constitutes a segment of the realm's governing apparatus.

Prior to the inscription of an enterprise in Thailand, it is imperative to designate the organizational archetype of the prospective juridical entity and devise a scheme of commercial proliferation. Upon consummation of the formalities, the proprietor must establish a monetary repository for immaterial remittances. Should the pursuit necessitate authoritative sanction, it is obligatory to procure a warrant of approbation.

It is necessary to select a general physical structure for a future company depending on the planned income and business sector. The legislation of the kingdom imposes certain legal restrictions and requires compliance with rules regarding the management of a legal entity. In addition, taxation, repayment of obligations in bankruptcy, as well as the possibility of attracting foreign capital depend on the legal form.

The correct choice of FPP can protect the rights of participants and allow you to more effectively manage current financial activities.

A business plan is a document that describes the purpose of creating a company, strategy and plans for its development. It can also reflect an analysis of the target audience and competitive environment, a marketing plan, and forecast the company’s income and expenses taking into account various factors. The business plan also indicates possible risks, ways to prevent them or minimize potential damage.

Among other things, a business plan helps to attract foreign investment and additional partners.

Package of documents

In order to start your own business, the owner provides such documents:

• An application drawn up on a standard form according to the established template;
• The official charter of the company indicating all the important nuances of the legal entity’s activities;
• Copies of personal documents of the business manager and founders;
• Official document. which confirms that the company has a legal address. This could be a certificate of purchase of real estate or a lease agreement.
• Permission to establish a company
• Receipts for payment of fees required by law.

The package may also include other documents depending on which organizational and legal form of the enterprise the founders have chosen for themselves.

The official address is indicated in all company documents and is used by government agencies to send notices.

Which industries are profitable to do business in?

The government imposes minimal restrictions on businesses with foreign capital, so the founder can choose the areas of activity of his company almost freely. But the most profitable areas are:

• IT Thousands of information technology companies operate successfully in Bangkok. However, there is little competition in this area due to the international focus of the business. Capital owners can profitably invest available funds in the development of startups, application software development, and launch of cloud services. Successful projects quickly pay off and bring big dividends.
• Healthcare Thailand is known for its unique methods of treatment and prevention of various pathologies. Medical care in the country is not inferior in quality to European countries. But at the same time their cost is much lower. Investments in this area may be promising in both the near and distant future.
• Manufacturing sector The country's domestic market is saturated with consumer goods, but its favorable location on the map makes it possible to organize the shipment of products to other countries of the world. Businesses in the country produce a large number of agricultural products, vehicles, and electronics. The government welcomes investment in these areas and creates the most comfortable conditions for businessmen from abroad with their own capital.
• Energy sector Local companies extract minerals and use them as energy sources. In addition, the field of solar, wind and other types of energy is developing rapidly. However, local restrictions regarding the amount of foreign capital in firms in the energy sector must be taken into account.
• Tourism This is one of the most common areas of activity due to Thailand's high popularity among international tourists. Businessmen can invest in the construction of hotels, catering establishments, transport systems and related destinations. Moreover, the time to return on investment is reduced, and the potential profit increases.

Thanks to special conditions for investment, low wages and developed infrastructure, Thai companies gain a competitive advantage and increase profits compared to entities in other countries.

Taxation

The types and rates of tax in the kingdom generally replicate similar systems in other countries, with some differences in the amounts of payments. Let's take a closer look at them.

Income tax

According to tax legislation, legal entities within the country pay 20% of the profits received to the budgets. Moreover, if it is received from the sale of company assets. the rules don't change.

If the paid-up authorized capital of the company does not exceed 5 million baht (about 143 thousand dollars), and income from the sale of goods and services does not exceed 30 million baht (856 thousand dollars). The following rate applies:

• Income up to 300 thousand. baht — 0%;
• Income up to 3 million baht - 15%;
• Income over 3 million baht - 20%.

Withholding tax on income

When transferring dividends, tax liabilities are accrued at a rate of 10%. When paying interest and royalties, the interest rate is 15%. At the same time, obligations to the budget can be reduced within the framework of agreements with other states on the prevention of double taxation.

Value added tax

VAT or VAT is charged on the sale of goods and services that are produced or provided within the country or imported from other countries. Payers can be any company, regardless of public funds. Moreover, if their annual income from the sale of products is 1.8 million baht or more, they must become payers of this tax.

Currently, payers transfer 7% of the added value generated from the sale of goods and services. If exported outside Thailand, a zero rate applies. This is a temporary tax benefit that may not apply in the future.

Some companies are exempt from charging and paying VAT. These include companies that operate in the field of agriculture, livestock, fertilizers, media, medicines and chemicals, transport services, and some types of international transport.

When making payments, business entities are required to prepare and submit tax invoices. If the data in them does not match, the tax authorities may assess additional VAT amounts.

Property tax

Owners of land and real estate pay municipal tax to local budgets once a year. Tax rates are set depending on the characteristics of the property and range from 0.015% of its value. The maximum existing tax rate is 3%.

Double taxation and exchange controls

Thailand has almost 50 agreements with other countries that avoid double taxes on income received. These countries include Australia, members of the European Union, UAE, Hong Kong, Scandinavian countries, Turkey, USA, Ukraine, Japan and many others.

In addition, the country's government has acceded to the Multilateral Convention, which was adopted by several states to counteract base erosion. It came into force in early summer 2022.

An additional feature of local legislation is strict regulation of the purchase and sale of currency. The state centralizes and controls these operations to avoid the transfer of capital outside the kingdom. Thus, current regulations establish mandatory repatriation of currency and its sale, and regulate the purchase of foreign currency for international trade and investment.

Banks

In order for the company to operate it is necessary to open a corporate account to make payments between counterparties. You can use Bangkok Bank for this purpose. In addition, businessmen often turn to the services of Siam Commercial Bank or other institutions.

Banks process payments in local currencies, as well as dollars and euros, Chinese yuan, pounds, Australian and Canadian dollars and currencies of some other countries. Exceptions include the Russian ruble, Turkish lira and UAE dirham.

Advantages of accounts in Thai financial institutions:

• Absolute transparency of operations. The financial sector is strictly regulated by government authorities. All organizations servicing accounts are distinguished by increased liquidity and are as reliable as possible.
• Convenient interaction. You can make payments and order banking services using the website.
• Payment cards. For business clients, upon separate request, the bank can issue a plastic card in local currency.
• Cheap cash withdrawals. When withdrawing money from your account, a small fee of up to 250 baht is charged, excluding the size of the transaction.

A bank card is always used in daily payments. If the owner or manager of a company plans to permanently reside in the country, he will definitely need a personal account.

The cost of opening an account varies depending on the banking institution and is about 500 baht. They charge up to 10 baht monthly for its service. In this case, individual payments are subject to a commission:

• Receipt of funds - 0.25% of the amount, but not more than 500 baht;
• Outgoing payment - from 0.25% for the dollar to 0.5 for the euro and pound, the minimum commission is 500 baht, the maximum is not limited.

Please note that opening an account requires a personal visit to the bank and placing a deposit of at least $5,000 with the financial institution.

The process of opening a bank account includes the following steps:

1. Selecting a financial institution. Intermediaries who are involved in opening companies in Thailand can provide comprehensive information about any bank, taking into account criteria important to the client.
2. Drawing up an application. Its form and content depend on the selected bank.
3. Preparation of documents. The contents of the package for opening a corporate company account are listed below.
4. Visit to the bank. Thai regulations require that you visit a banking institution in person to submit documents.

To open a company account, its director must submit an application along with the charter of the legal entity. Also to the bank representative a complete list of company participants and a certificate issued by the registrar are provided.

Additionally, an extract from the register of registration data and the decision of the meeting of owners (shareholders) to open an account are provided. This document must indicate the type of account and the banking institution (including the name of the branch) where it is going to be opened.

The package of documents also includes copies of the founders’ passports, an identification card of a legal entity and a seal impression.

If a legal entity registered outside Thailand is going to open a bank account, the same package of documents will be needed. But they must be legalized in the prescribed manner at the registrar and at the country’s embassy.

The opening procedure takes up to 5 working days. However, the financial institution provides access to online banking after 2-6 weeks from the date of application. Please note that to authorize on the site, some banks require you to use a local mobile phone number to which a verification SMS is sent

Accounting services

A legal entity that operates in the kingdom must submit reports to regulatory authorities. Only citizens of the country who have received the appropriate education and are accredited can maintain company accounting records.

Reports are prepared in Thai or any foreign language, but accompanied by Thai. They are rented monthly or once a year at the request of the manager.

Financial statements include reports on financial position, profits and losses, changes in the amount of capital, and the movement of funds in the current account.

At the end of the year, the financial statements are checked by an independent certified auditor, after which he certifies them with his signature. This rule applies to all business entities, regardless of whether it is a joint-stock company.

Companies in the LLC form must hold an annual meeting of owners to approve accounting documents. This must be done no later than 4 months from the end of the reporting year. All reports are submitted to the Department of Revenue within 30 days from the date of certification.

Conclusion

Registration of a company in Thailand can be considered as a way to enter the Southeast Asian market and the opportunity to conduct foreign economic activity with other countries through seaports. Local authorities provide certain tax benefits to entrepreneurs and help attract investment into the country.

But to quickly open a company in the country, it is better to use the services of consultants. YB Case is ready to take on all issues related to registering a business and opening accounts in banking institutions. To get help, just contact a representative in any convenient way.