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SETTING UP BUSINESS IN THAILAND
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General Aspects Thailand is one of the largest countries in Southeast Asia with the population estimated at 69 million. It shares borders with Myanmar, Lao PDR, Cambodia and Malaysia. Although the official language is Thai but English mostly used for business life. Business Entity in Thai has been authorized and governed mainly by Department of Business Development Ministry of Commerce (DBD).
Legal Forms of Business Entities Legal form
Feature
Branch Office
be also subject to other regulations which Foreign Company can establish Branch to conduct business Branch may in Thailand by registered branch at DBD. At least one branch require special registration (e.g., VAT registration, taxpayer office manager shall be appointed in charge of operations in identification card, Foreign Business License, etc.). Thailand. Branch will not be a separate legal entity with the Foreign Head Office. Thus, Foreign Head Office will be liable for any action of the Branch under Thai law. However, Branch is a separated tax entity. The Branch shall be taxed as the corporate income tax.
Representative Offices (RO)
Representative Office (“RO”) in Thailand is established in order to render the service to its head office or the affiliated company or the group company. However, RO can engage in limited non-revenue earning activities. In this regard, RO is exempted from tax in Thailand.
Sole Proprietorship
This is the simplest form of business owned by one person with Foreigners are generally prohibited from conducting business in unlimited liability for any claim against the business. Thailand as a sole proprietor.
Ordinary Partnerships
All the partners are jointly and wholly liable for all obligations Registered ordinary partnerships are required to issue an annual of the partnership. The ordinary partnerships can be registe- financial statement and pay corporate income taxes. Otherwise, red with a minimum of two owners. income must be reported on the partner’s individual tax returns.
Limited Partnerships
There are 2 types of partners in Limited Partnership (LLP); (1) partners whose liability is limited to the amount of capital contributed and (2) partners who are jointly and unlimitedly liable for all the obligations of the partnership.
Private Limited Compan
Similar to Western corporations, the limited companies are A minimum of 3 shareholders is required at all times. Besides, managed by a board of directors and shareholders in accordance if foreigners own more than 49% of the shares, the company is with the company laws and its Articles of Association. The subject to the restrictions of the Foreign Business Act. shareholders enjoy limited liability and shall get return in form of dividend.
Remarks
RO merely receives a subsidy remitted from the overseas head office to cover all expenses of such RO in carrying on the business activities in Thailand. *Please note that some of the requested documents shall be notarized at the host countries (not Thailand).
General partners are allowed to manage the business and are fully liable for the Partnerships financial obligations while limited partners are not allowed to manage the business, but their liability is limited to the amount of capital they contributed to the LLP.
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Public Limited Companies
Mostly like the Private limited company, they managed by board of directors and shareholders receive the dividend. However, they can offer shares, debentures, and warrants to the public and may apply to have their securities listed on the Stock Exchange of Thailand (SET).
Organizational Questions Topic
Feature
Commercial Register
Companies, Branch Office, Representative Office and Sole Foreign Entity such as Proprietorship must be registered at DBD. • Company registered in Thailand which have more than 49% of share owned by foreigner • Branch from foreign head office required to have Foreign Business License (FBL) in order to conduct some of business activity under Foreign Business Act. FBL shall have applied at and approved by DBD and Foreign Business Committee.
Tax Register
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Remarks
An individual who does not has Thai identification number must obtain a tax identification number from the Thai Revenue Department within 60 days of the date of receiving taxable income. Company’s registration number shall be the same as its tax ID. Thus, the company is not further required to obtain taxpayer identification number or card. All entities that have annual turnover exceeding THB 1.8 million must register for VAT within 30 days of the annual turnover exceeding the threshold, unless specifically exempt.
Bank Account
To open a bank account, individuals need a valid passport and one other official identification document. In case of company account, the director who has authorized signatory of the account shall be present physically at the Bank. In addition, Official corporate documents issued from the commercial register and the minute of the shareholder meeting are required.
Transfer of Goods and Machinery
Import and export license is required if Goods and Machinery There are some exceptions for import to be considered. have been transferring into or out of the country.
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Transfer of Capital There is no limit to the amount of funds that can be transferred However, senders must specify the purpose for every transfer, from other countries into Thailand. as commercial banks are required to report this to the Bank of Thailand on the client’s behalf. Visa and Residence permit
A foreigner who intends to work in Thailand must obtain a NonImmigrant Category “B” visa outside Thailand before entering the country. Non-working family members normally can obtain a Non-Immigrant Category “O” visa covering the same period.
Visa is generally valid for use within one year from the date of issue and can be extended to 3 months on or before the visa expiration date while the foreigners who hold Permanent Residence can live permanently in Thailand with no requirement to apply for an extension of temporary stay.
Employment Topic
Feature
Remarks
Work permit
Before commencing employment in Thailand, all foreigners must obtain a work permit from the Ministry of Labour and Social Welfare. In order to acquired work permit for one employee, the company is required to • have at least 2,000,000 THB in registered capital • have four Thai employees registered in social fund • Already registered for VAT registration¡
A work permit is normally valid for a period of one year from the date of issue but is subject to the expiry date of the visa. If a visa terminates before expiry of the work permit, the work permit must be renewed.
Labour law
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Social system
Thailand’s employment laws administered by the Department of Labour, Protection, and Welfare. The maximum number of work hours is eight hours a day, or 48 hours per week. Employees are entitled to a minimum of 13 national holidays a year, plus a minimum of 6 vacation days after one year of consecutive work. Thailand’s new minimum wages, ranging from 313 baht to 336 baht per day depends on the location. Company was required to register as an employer at the Social Security Office (SSO) after the first employee has started to work for Company. Employers who have 10 employees or more must draw up work regulations and announce such regulations to its employees. If an employer wishes to terminate a non-fixed-term period contract with an employee, a termination notice is required to be given to an employee within a minimum period of one prospective payment period but for no more than three months unless otherwise specified in the employment contract.
The Social Security Fund (SSF) was established to provide employment security and stability for Thai citizens. An employee, being over 15 years of age and not more than 60 years of age, shall be classed as an insured person. The Government, an employer and an insured person shall each pay contributions to the Fund for payment of benefits relating to sickness, maternity, disability, death, child allowance, retirement and unemployment.
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Taxation In Thailand, taxes are collected in two ways. There are direct taxes (personal and corporate income taxes) and indirect taxes (value-added tax, customs duties, stamp duties, and specific business tax).
Tax
Feature
Corporate Income Tax
The standard CIT rate in Thailand is up to 20% of net Corporate income tax exemption on the revenue may apply to profits. A progressive tax rate applies to small and medium- a company being promoted from the Board of Investment of sized enterprises (SMEs) (at 0 – 300,000 and 300,001 Thailand (BOI). – 3,000,000THB Net profit, the tax rate is null and 15% respectively) However, once profits are distributed to the shareholders, shareholders must pay personal income tax or compensation tax on the dividends.
(CIT)
Trade Tax
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Remarks
Tariff duties on goods are levied on a value (according to Exemption/reduction of import duties on machinery and material including raw material may apply to BOI promoted companies. value) or a specific rate basis. The majority of goods imported into Thailand are subject to rates ranging from 10% to 60%. Goods imported for re-export are generally exempt from import duty and VAT Export duties are imposed on only a few items, including rice, hides, skins and leather, scrap iron or steel, rubber, teak and other kinds of wood.
Personal Income Tax
Thai individual income tax rates are progressive. The rate of personal income tax starts at 5% for an annual income exceeding the taxable income of 150,001 THB and the range for the top rate of 35% starts at income over 5 million.
Personal Income Tax in case of partnerships
Registered a limited partnership or a registered ordinary partnership is liable to corporate income tax. However, unregistered ordinary partnerships is not a legal entity, and therefore, for tax purposes, is treated as an individual.
Penalties and Surcharge
Taxpayer who fails to pay tax within specified times is liable to pay • Penalty of criminal charge no more than 1,000 – 4,000 THB. • Surcharge accruing at the monthly rate of 0.1% - 1.5% of due taxes
Value Added Tax (VAT)
Any person or entity that regularly supplies goods or provides Failure to file VAT Return or Late submission, taxpayer shall be services in Thailand, and has an annual turnover exceeding subject to Criminal fines, Surcharges and Tax Penalties depend THB 1.8 million net profit, is subject to VAT in Thailand. VAT on the due tax. is currently levied at a rate of 7% on gross receipts. VAT shall be filling monthly .
Everyone will be classed as a resident taxpayer if they have lived in Thailand for more than 180 days in a year. For non-residents who have been in Thailand for less than 180 days of the year will only pay taxes on what was generated in Thailand.
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Real Estate Transfer Tax
In Specific Business tax (SBT), selling of immovable property and real estate shall be taxed up to 3% of a gross revenue.
House and Land Tax
Property owner (including Land, Building and Condominium units) in Thailand is annually liable to House and Land Tax. Ceiling tax rates vary depending on how the property is used —agricultural, residential, commercial, vacant and other with the rate of 0.15%, 0.30%, 1.20% and 1.20% respectively. However, due to the Covid-19 ,the tax on land and buildings was cut by 90% on 2021. Please note that in Thailand, foreigner cannot own the property, only the condominium.
Non-resident Taxation
Taxable income for Non-Resident •
Non-residents are taxed on their assessable income derived from employment or business carried out in Thailand, whether or not such income is paid in Thailand.
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A company registered under foreign law and conducting business in Thailand is subject to tax on the profit arising in Thailand.
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A company registered under foreign law and NOT conducting business in Thailand but derives certain categories of income (e.g. Brokerage, Service fees and Royalties) in Thailand is subject to a final withholding tax.
Double taxation of this income is avoided by double taxation agreements between Thailand and other countries. Withholding tax is generally applied at a rate of 10% for dividends, and 15% for interest and royalties. However, for some DTA countries, the lower withholding tax rate is provided, under the condition that the recipient of dividends, interest, and royalties does not have a PE or fixed base in Thailand.
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This guide has been prepared by R.W.T LAW, an independent member of Antea R.W.T LAW Bhiraj Tower at Emquartier, 32 nd Floor 689 Sukhumvit Road, Klongton Nuea Wattana, Bangkok, Thailand 10110 kevin.h@rwtlaw.co.th www.rwtlaw.co.th
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This publication is intended as general guide only. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied on as a substitute for such an advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, not Antea Alliance of Independent Firms neither its members accepts no responsibility for any errors or omission it may contain whether caused by negligence or otherwise, or forany losses, however caused, sustained by any person that relies upon it. © 2021 ANTEA