Information
Work Permit
Forming a Company
FAQ
Establishing
a Bisiness in Thailand
Visas and Migration
.....................................................................................................
FORMING A COMPANY
1.
Forming a Company
In order to set up a limited company in Thailand, the following
procedures should be followed:
A. Corporate Name Reservation
The name to be reserved must not be the same or close to that
of other companies. Certain names are not allowed and therefore
the name reservation guidelines of the Business Development Office
in the Ministry of Commerce should be observed. The approved corporate
name is valid for 30 days. No extension is allowed.
B. File a Memorandum of Association
A Memorandum of Association to be filed with the Business Development
Office must include the name of the company that has been successfully
reserved, the province where the company will be located, its
business objectives, the capital to be registered, and the names
of the seven promoters. The capital information must include the
number of shares and the par value. At the formation step, the
authorized capital, although partly paid, must all be issued.
Although there are no minimum capital requirements, the amount
of the capital should be respectable enough and adequate for the
intended business operation.
The Memorandum registration fee is 50 baht per 100,000 baht of
registered capital. The minimum fee is 500 baht, the maximum 25,000
baht.
C. Convene a Statutory Meeting
Once the share structure has been defined, a statutory meeting
is called during which the articles of incorporation and bylaws
are approved, the Board of Directors is elected and an auditor
appointed. A minimum of 25 percent of the par value of each subscribed
share must be paid.
D. Registration
Within three months of the date of the Statutory Meeting, the
directors must submit the application to establish the company.
Company registration fees are 500 baht per 100,000 baht of registered
capital. The minimum fee is 5,000 baht; the maximum is 250,000
baht.
E. Tax Registration
Businesses liable for income tax must obtain a tax I.D. card and
number for the company from the Revenue Department within 60 days
of incorporation or the start of operations. Business operators
earning more than 600,000 baht per annum must register for VAT
within 30 days of the date they reach 600,000 baht in sales.
Back to Top
.....................................................................................................
2. Reporting Requirements
Firms must keep books and follow accounting procedures specified
in the Civil and Commercial Code, the Revenue Code and the Accounts
Act. Documents may be prepared in any language, provided that
a Thai translation is attached. All accounting entries should
be written in ink, typewritten, or printed.
Specifically, Section 1206 of the Civil and Commercial Code provides
rules on the accounts that should be maintained as follows:
"The directors must cause true accounts to be kept:
1. Of the sums received and expended by the company and of the
matters in respect of which each receipt or expenditure takes
place;
2. Of the assets and liabilities of the company."
A. Imposition of Taxes
Companies are required to withhold income tax from the salary
of all regular employees.
A value-added tax of seven percent is levied on the value added
at each stage of the production process, and is applicable to
most firms. The VAT must be paid on a monthly basis.
A specific business tax is levied on firms engaged in several
categories of businesses not subject to VAT, based on gross receipts,
at a variable rate ranging from 0.1 – 3.0 percent.
Corporate income tax is 30 percent of net profits and is due twice
each fiscal year. A mid-year profit forecast entails advance payment
of corporate taxes.
B. Annual Accounts
A newly-established company or partnership should close accounts
within 12 months from the date of its registration. Thereafter,
the accounts should be closed every 12 months. The performance
record is to be certified by the company auditor, approved by
shareholders, and filed with the Business Development Office,
Ministry of Commerce, within five months of the end of the fiscal
year, and with the Revenue Department, Ministry of Finance, within
150 days of the end of the fiscal year.
If a company wishes to change its accounting period, it must obtain
written approval from the Director General of the Revenue Department.
C. Accounting Principles
In general, the basic accounting principles practiced in the United
States are accepted in Thailand, as are accounting methods and
conventions as sanctioned by law. The Institute of Certified Accountants
and Auditors of Thailand is the authoritative group promoting
the application of generally accepted accounting principles.
Any accounting method adopted by a company must be used consistently
and may be changed only with approval of the Revenue Department.
Certain accounting practices of note include:
Depreciation. The Revenue Code permits the use of varying
depreciation rates according to the nature of the classes of assets
which have the effect of depreciating the assets over periods
that may be shorter than their estimated useful lives. These maximum
depreciation rates are not mandatory; a company may use lower
rates that approximate the estimated useful lives of the assets.
But if a lower rate is used in the books of the accounts, the
same rate must be used in the income tax return.
Accounting for Pension Plans. Contributions to a pension
or provident fund are not deductible for tax purposes unless these
are actually paid out to the employees, or the fund is approved
as a qualified fund by the Revenue Department and is managed by
a licensed fund manager.
Consolidation. Local companies with either foreign or
local subsidiaries are not required to consolidate their financial
statements for tax and other government reporting purposes, except
for listed companies which must submit consolidated financial
statements to the Securities and Exchange Commission of Thailand.
Statutory Reserve. A statutory reserve of at
least five percent of the annual net profits arising from the
business must be appropriated by the company at each distribution
of dividends until the reserve reaches at least 10 percent of
the company's authorized capital.
Stock Dividends. Stock dividends are taxable
as ordinary dividends and may be declared only if there is an
approved increase in authorized capital. The law requires the
authorized capital to be subscribed in full by the shareholders.
D. Auditing Requirements and Standards
Audited financial statements of juristic entities (that is, a
limited company, a registered partnership, a branch, or representative
office, or a regional office of a foreign corporation, or a joint
venture) must be certified by an authorized auditor and submitted
to the Revenue Department and (except for joint ventures) to the
Commercial Registrar for each accounting year.
Auditing standards conforming to international auditing standards
are, to the greater extent, recognized and practiced by authorized
auditors in Thailand.
Back to Top
.....................................................................................................
3. Types of Business Organizations
Thailand recognizes three types of business organizations:
A. Partnership
Thai and Western concepts of partnership are broadly similar.
Thailand provides for three general types of partnerships:
• Unregistered ordinary partnerships,
in which all partners are jointly and wholly liable for all obligations
of the partnership
• Registered ordinary
partnerships. If registered, the partnership becomes a legal entity,
separate and distinct from the individual partners
• Limited partnerships.
Individual partner liability is restricted to the amount of capital
contributed to the partnership. Limited partnerships must be registered.
B. Limited Companies
There are two types of limited companies, i.e., private or closely
held companies, and public companies. The first is governed by
the Civil and Commercial Code, the second by the Public Company
Act.
Private Limited Companies in Thailand have basic characteristics
similar to those of Western corporations. A private limited company
is formed through a process which leads to the registration of
a Memorandum of Association (Articles of Incorporation) and Articles
of Association (By-laws), as its constitutive documents.
Shareholders enjoy limited liability, i.e., limited to the remaining
unpaid amount, if any, of the par values of their shares. The
liability of the directors, however, may be unlimited if so provided
in the company's memorandum of association or the articles of
incorporation. The limited company is managed by a board of directors
according to the company's charter and by-laws.
All shares must be subscribed to, and at least 25 percent of the
subscribed shares must be paid up. Both common and preferred shares
of stock may be issued, but all shares must have voting rights.
Thai law prohibits the issuance of shares with no par value. It
also stipulates that only shares with par value of five baht or
above may be issued. Treasury shares are prohibited.
A minimum of seven shareholders is required at all times. A private
limited company may be wholly owned by aliens. However, in those
activities reserved for Thai nationals, aliens’ participation
is generally allowed up to a maximum of 49 percent.
The registration fee for a private limited company is 5,500 baht
per million baht of capital.
Public Limited Companies registered in Thailand may, subject to
compliance with the prospectus, approval, and other requirements,
offer shares, debentures and warrants to the public and may apply
to have their securities listed on the Stock Exchange of Thailand
(SET).
A minimum of 15 promoters is required for the formation and registration
of the memorandum of association of a public limited company,
and the promoters must hold their shares for a minimum of two
years before they can be transferred. The Board of Directors of
a public limited company must have a minimum of five members,
at least half of whom are Thai nationals. Shares must have a face
value of at least five baht each and be fully paid up. Restrictions
on share transfers are unlawful except those protecting the rights
and benefits of the company allowed by law, and those maintaining
a Thai/foreigner shareholder ratio. Debentures may only be issued
with the approval of three quarters of the voting shareholders.
The registration fee is 2,000 baht per million baht of capital
for a public limited company.
Back to Top
C. Joint Venture
A joint venture may be described in accordance with general practice
as a group of persons (natural and/or juristic) entering into
an agreement in order to carry on a business together. It has
not yet been recognized as a legal entity under the Civil and
Commercial Code. However, income from the joint venture is subject
to corporate taxation under the Revenue Code, which classifies
it as a single entity.
D. Other Forms of Corporate Presence
Branches of foreign companies. There is no special requirement
for foreign companies to register their branches in order to do
business in Thailand. However, most business activities fall within
the scope of one or more laws or regulations which require special
registration, either before or after the commencement of activities.
Foreign business establishments must, therefore, follow generally
accepted procedures. It is important to clarify beforehand what
constitutes income subject to Thai tax because the Revenue Department
may consider revenues directly earned by the foreign head office
from sources within Thailand as subject to Thai taxes.
As a condition for approval of an Alien Business License to a
branch of a foreign corporation, working capital amounting to
a total of five million baht in foreign exchange must be brought
into Thailand within certain intervals over a four-year period.
The branch may be allowed to operate for a period of five years,
unless a shorter period is indicated in the application as a result
of a contract to be performed in Thailand. Extension of the original
duration of the license to operate may be granted, provided the
working capital required to be brought into Thailand is met.
A representative office of foreign corporations may also be established
to engage in limited “non-trading” activities, such
as sourcing of goods or services in Thailand for its head office
or inspecting and controlling quality of goods which its head
office purchases in Thailand. Other activities can cover disseminating
information about new products and services of its head office,
and reporting to its head office on local business development
and activities.
The working capital contributions as discussed above in respect
to branches apply.
E. Regional Offices
On December 28, 2001, the Board of Investment (BOI), chaired by
Deputy Prime Minister and Minister of Finance Somkid Jatusripitak,
met and approved amendments to the investment promotion conditions
for regional headquarters (Category 7.9) with the aim of increasing
employment, the transfer of management technology and enhance
personnel practices.
The amendments brought the BOI's promotion of regional headquarters
in line with the Ministry of Finance measures to support the establishment
of Regional Operating Headquarters (ROH), announced on December
11, 2001.
Projects approved under this category (7.9) will be eligible to
receive BOI non-tax incentives, such as permission to own land
and permission to bring in foreign experts and technicians, as
well as an attractive range of tax-based measures that will be
awarded by the Revenue Department at the Ministry of Finance.
Conditions for approval have been liberalized to make Thailand
more attractive as a site for establishment of ROHs. The previous
condition requiring a company to supervise activities in at least
five countries has been reduced to three countries, and the requirement
that companies invest a minimum of 40 million baht in real estate
has been eliminated.
Promoted projects will be required to have paid up registered
capital of at least 10 million baht and overseas revenue must
account for at least half of a project's annual income. Below
is a brief description of the ROH. For complete information, check
with the Ministry of Finance.
Back to Top
Description
A regional office of a multinational corporation may also be established
to coordinate and direct the operation of the branches and affiliates
of the head office in the region on behalf of the head office.
A regional office has the ability to coordinate and supervise
the company's branches and its affiliated companies in the region
on behalf of the head office. The regional office may provide
these branches and affiliated companies with:
• Advisory and management
services
• Financial management
services
• Training and personnel
development services
• Marketing control
and sales promotion plans
• Product development
• Research and development
services.
Benefits from Establishing a Regional Office
Companies establishing regional offices are eligible to receive
BOI non-tax incentives, such as permission to own land and to
bring in foreign experts and technicians, as well as an attractive
range of tax-based measures awarded by the Revenue Department
at the Ministry of Finance. Inquire at the Ministry of Finance
for details. Such companies are not required to be registered
or incorporated as juristic persons in Thailand, and do not have
to submit any financial statements to the Department of Commercial
Registration. The Department will assist in customs clearance
of the personal effects of transferred foreign staff and in their
applications for further temporary stay in the Kingdom or change
in visa type. Work Permits for aliens performing work in the regional
office will be granted for up to 5 persons depending on necessity
and volume of work in each particular case.
Conditions for Permission to Establish a Regional Office:
• Regional Office must
not:
– Derive any income
from its activities. Expenditures incurred by the regional office
shall be borne by the head office
– Have the power to
accept a purchase order or make a sales offer
– Negotiate or enter
into business arrangements with any natural or juristic person
within the Kingdom.
A permit to establish a regional office, valid for five years,
can be granted after application with the Alien Business Section
of the Department of Commercial Registration at the Ministry of
Commerce. The fee is five baht per every 1,000 baht of registered
capital, not to exceed 5,000 baht.
When a permit to establish a regional office is issued, it may
be subject to the following conditions:
• The total debt financing
used in the business shall not exceed seven times the portion
of the capital owned by shareholders or the owner of the business
• Money used in the
regional office shall be remitted from abroad and shall not be
less than a total of 5,000,000 baht. During the first year period,
at least 2,000,000 baht of the total must be remitted, at least
half of which must be remitted within the first six months. Then,
no less than 1,000,000 baht should be remitted each succeeding
year until the full 5,000,000 baht has been transferred. Documents
verifying this transfer must be presented to the Department of
Commercial Registration
• At least one person
who is responsible for operating the regional office must have
their domicile in the Kingdom.
The Director-General of the Department of Commercial Registration
is also authorized to impose any conditions on a business permit
granted under the rules.
Back to Top
F. Regional Trade and Investment Support Offices
In April, 1996, the Board of Investment announced the establishment
of trade and investment support offices would become a new category
of activities eligible for investment promotion.
Projects in this category are eligible for BOI non-tax incentives,
including:
• Permission
to own land for an office
• Permission to bring
in foreign nationals to undertake investment feasibility studies
• Permission to bring
in as many foreign technicians and experts as required
• Permission to take
or remit foreign currency abroad
• No limit on number
of shares owned by foreigners.
• The range of activities
eligible for promotion are:
• Controlling and advising
affiliated companies
• All types of consulting
services, except those engaged in:
– Buying and selling
securities
– Foreign currency
exchange
– Accounting
– Advertising
– Legal affairs
– Architecture
– Civil engineering.
Note: Exceptions may be granted by permission from the Department
of Commercial Registration or concerned government agencies
• Information services
related to sourcing and procurement, but not brokerages or agencies
• Engineering and technical
services, except these related to architecture and civil engineering
• Testing and certifying
standards of products, production and services standards
• Exporting of all
types of products
• Wholesaling of all
types of products within the country, excluding local agricultural
products, arts & crafts, antiques, and natural resources
• Provision of training
on the use of machinery, engines, tools, and equipment
• Installation, maintenance,
and repairing of machinery, engines, tools, and equipment
• Calibration of machinery,
engines, tools, and equipment
• Computer software
design and development.
If there are any other activities deemed appropriate for investment
promotion under the Establishment of Trade and Investment Support
Offices, the Office of the Board of Investment will consider them
on a case-by-case basis.
Eligibility for regional trade and investment support offices.
Applicants must be either companies established under Thai law,
or companies planning to establish under Thai law.
Conditions for regional trade and investment support offices:
• Operating licenses
must have been acquired from all relevant government agencies
• Operating expenses
must amount to no less than 10 million baht per year, which shall
consist of sales and administrative expenses, as set forth in
the Revenue Code
• Operating plans must
be approved by the Board of Investment
• Majority or total
foreign ownership is allowed
• Non-tax privileges,
only, will be granted.
Back to Top
