Dezan Shira in Thailand

Dezan Shira & Associates have maintained an Alliance partner in Thailand since 2013 and provide pre-entry advisory, corporate establishment, tax planning, accounting, compliance and audit services throughout the country, managed from offices in Bangkok. Our Alliance Partner firm employs umerous local legal, tax, accounting and audit staff to support this function and are one of the largest firms in the city.

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A unified Thai kingdom was established in the mid-14th century. Known as Siam until 1939, Thailand is the only Southeast Asian country never to have been taken over by a European power. A bloodless revolution in 1932 led to a constitutional monarchy. Since 2005, Thailand has experienced several rounds of political turmoil including military coups in 2006 and 2014.

With a well-developed infrastructure, a free-enterprise economy, generally pro-investment policies, and strong export industries, Thailand has achieved steady growth due largely to industrial and agricultural exports – mostly electronics, agricultural commodities, automobiles and parts, and processed foods. The country’s unemployment stands at less that one percent of the labor force, which has resulted in upward pressure on wages in some industries. The Thai government implemented a nation-wide 300 baht (US$10) per day minimum wage policy in 2013 and deployed new tax reforms designed to lower rates on middle-income earners. On average, depending on the type of business, it takes around 27.5 days to set up a business in Thailand.

The Thai economy has weathered internal and external economic shocks in recent years. The global economic recession severely cut Thailand’s exports, with most sectors experiencing double-digit drops. In late 2011, Thailand’s recovery was interrupted by historic flooding in the industrial areas in Bangkok and its five surrounding provinces, crippling the manufacturing sector. The government approved flood mitigation projects worth US$11.7 billion, which were started in 2012, to prevent similar economic damage, and an additional US$75 billion for infrastructure over the following seven years. This was expected to lead to an economic upsurge but growth has remained slow, in part due to ongoing political unrest and the resulting uncertainties.

The creation of 12 development zones across the country has been put out to tender by the Thai government who has also announced a policy of developing processing zones on its borders with Malaysia and Myanmar and joint ventures with China in Nanning and Kunming to process and repackage Southeast Asian goods for the Chinese market. The new industrial zones are meant to prepare the country for the ASEAN Economic Community in 2015.

Please find the full contact information of our Malaysian Asian Alliance Partner here.

Dezan Shira Asian Alliance Member in Thailand

Honor Audit & Advisory Co., Ltd.
8th Floor Maneeya Center Building,
518/5 Ploenchit Road,
Lumpini, Pathumwan,
Bangkok 10330
Thailand

Foreigners looking to work in Thailand need to apply for both a visa and work permit. The nonimmigrant “B” visa is the appropriate visa for anyone looking to conduct business or investment activity within Thailand. There are three “B” visa options based on duration of stay, these include:

  • Single entry valid for three months
  • Multiple entry valid for one year
  • Multiple entry valid for three years

The maximum duration of stay per visit for a non-immigrant “B” visa is 90 days, but may be extended upon approval by the Immigration Bureau in Bangkok.

In order to work in Thailand under “B” visa status, the applicant must also posses an officially issued work permit. In order to complete a successful application, both the foreign worker and domestic employer must submit the required paperwork to the Department of Employment. To sponsor a work permit for foreign directors or employees, the company is required to have a minimum capital of 2,000,000 Baht per work permit. The company will also need to employ four Thai staff in order to support one work permit. A work permit can be generally be obtained within one month.

Investment vehicles available to foreign investors

Generally, foreigners are prohibited from the majority of business activities in Thailand. The definition of a foreigner under Thai law includes the following:

  • Natural person not of Thai nationality
  • Juristic person not registered in Thailand
  • Juristic person registered in Thailand having half or more of the juristic person’s capital shares
  • held by a non-Thai person or entity.

Minimum financial investment requirements

Types of Entity Capital Requirement
Limited Company No minimum capital requirement. However, if the company needs to sponsor a work permit for foreign employee, a minimum registered capital must be at least 2,000,000 THB, declared as paid up.
Representative Office 3,000,000 THB
Treaty of Amity Company 3,000,000 THB
BOI Company Depends on the conditions under the approval

Additional requirements

Banking operations and setting up

Once the company has registered with the Ministry of Commerce, a corporate bank account can be opened. Most of the banks in Thailand require the physical presence of the signatories as part of their due diligence procedure in opening a bank account. If the signatory is a foreigner, a work permit of such foreigner is required to open a corporate bank account.

  • Limited Liability Company
    • The most common type of business entity registered in Thailand is a private limited liability company. The registration of the limited liability company formation must be conducted with the Ministry of Commerce, Department of Business Development.
    • Time line: approximately one to two weeks upon receiving all required information and documents
  • Joint Venture
    • A JV with Thai partners is often the most straightforward way for foreign investors to enter the country. There are two main options for the JV structure:
    • Enter into a JV agreement with a Thai partner to form a new JV Company to operate the business. It is recommended that a Shareholders agreement between the Thai and foreign shareholders be created in order to govern the operation of the business.
    • Acquisition of shares in the existing local company. In this event, a due diligence process would be compulsory to ensure no hidden liability.
    • Time line: depending on the structure, approximately two months.
  • Wholly owned
    • Treaty of Amity (only available to American Nationals):
    • Allows a U.S. national to own the majority of shares in a company.
    • In order for a U.S. national to hold 100 percent of the shares, the company must receive Treaty of Amity approval and a Foreign Business License.
    • The U.S. entity must be fully owned by American nationals. Any foreign element will disqualify this privilege under the Treaty of Amity.
    • Time line: approximately one to two months upon receiving all required information and documents.
    • Board of Investment Approval (BOI):
    • Allows foreigners to own the majority of shares in a company in Thailand by seeking the Board of Investment’s approval.
    • If the company is approved, it may be entitled to tax and non-tax privileges, which would be provided to the company on a case-by-case basis (the approval would depend on the type of your business, the 5-10 years business plan, the contribution which the company would bring into the Kingdom, etc.).
    • A Foreign Business License is also required to allow the company to operate in Thailand as a foreign owned entity.
    • Timeline: approximately two to three months.
  • Representative Office
    • To set up an RO in Thailand, the following must be completed:
    • Apply for establishment of the RO with the Ministry of Commerce’s Department of Business Development.
    • Apply for a license to operate business activities as an RO (the RO of a foreign company is also considered to be a foreign company, and is restricted to operating various activities unless it has obtained a Permit under the NEC Announcement No. 281).
    • The business activities that an RO can carry out are limited to at least one of the following five activities:
    • Source for goods or services in Thailand for the head office.
    • Checking and controlling the quality and quantity of goods purchased or hired to manufacture in Thailand by the head office.
    • Giving advice concerning goods of the head office sold to agents or consumers.
    • Propagation of information concerning new goods or services of the head office.
    • Report on business trends in Thailand to the head office.
    • The general characteristics of an RO are as follows:
    • Non-revenue generating activities.
    • No authority to accept purchasing orders or to make offers for selling, or to negotiate carrying on business with persons or juristic persons in the country in which it is established.
    • All expenditures incurred by the RO must be borne by the head office.
    • Not subject to corporate income tax, however deposit interest on remitted funds from the head office are liable to tax.
    • Time line: approximately three months

Businesses operating in Thailand are subject to a range of taxes. These include Corporate Income Tax (CIT), a direct tax levied on juristic companies and partnerships carrying on business in Thailand or not carrying on business in Thailand but deriving certain types of income from Thailand. CIT is levied at a rate of 20 percent. However, small companies with revenues of less than 30 million baht may qualify for lower CIT rates.

Certain types of income paid to companies are subject to withholding tax at the source. The withholding tax rates depend on the types of income and the tax status of the recipient. For example, the withholding tax rate on royalty payments to Thai or foreign companies located in Thailand is three percent. Whereas the tax on royalty payments to foreign companies located

Types of Entity Capital Requirement

  • Limited Company No minimum capital requirement. However, if the company needs to sponsor a work permit for foreign employee, a minimum registered capital must be at least 2,000,000 THB, declared as paid up.
  • Representative Office 3,000,000 THB
  • Treaty of Amity Company 3,000,000 THB
  • BOI Company Depends on the conditions under the approval
    dezan shira & associates’ doing business in asean 78 abroad is 15 percent. Dividends are taxed at a rate of 10 percent no matter what type of company they are paid to.

Corporate Income Tax

  • Rate: Reduced from 23 percent to 20 percent for the two accounting periods from 2013 to 2015
  • Residence: If the company is registered under Thai law then all income is subject to CIT. Foreign companies are taxed on their net profits arising from business carried out in Thailand.
  • Compliance: A self-assessment system is used for filing income tax returns and CIT is paid in two installments throughout the year.
  • Incentives: A double deduction is available for qualified R&D expenses and tax exemptions are possible on license fees.

Indirect Tax

Generally, unless specifically exempt, every person who conducts business in Thailand is liable to pay VAT, regardless of whether the business is conducted by an ordinary person, group of persons, partnership, company, or any other juristic person. The standard VAT rate is 10 percent. However, the current VAT rate is seven percent, which is a reduced rate for a temporary period. Additionally, certain types of goods and services, such as goods intended for export, are eligible for a zero percent VAT rate.

  • Rate: The current VAT rate has been reduced from 10 percent to seven percent. Some goods and services are exempt or zero-rated.

Individual Income Tax

  • Rate: Income tax is charged at progressive rates of up to 35 percent.
  • Thailand has a social security fund that employers and employees contribute to in equal portions. The current rate is five percent of the employee’s salary up to THB750 per month.

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