Thailand – Q&A on Business Registration and Related Regulations bkk4ww

Answer your company’s related questions about setting up foreign-funded companies in Thailand: What are the regulations and restrictions on foreign investment in Thailand? Why is the two-tier Thai-funded local company a common foreign-invested structure?

Please refer to:  Thailand-Company Formation Services

Email: bkk4ww@evershinecpa.com

Or
Thailand Evershine BPO Co., Ltd.
1108/31 Sukhumvit Road, Phrakanong,Klongtoey, Bangkok, Thailand 10110
Contact:
Ploy Lee Thai speaks Chinese and Thai
Pay Xiao Thai speaks English and Thai
or
Headquarter Engaging Manager:
Jerry Chu, Director
Mobile: +886-939-486-835
Tel: +886-2-2717-0515 Ext: 104

Thailand’s regulations and restrictions on foreign investment?

According to the 1999 “Foreigner Business Act”, Thailand regulates the shareholding ratio and enterprise ownership of outsiders, and restricts outsiders’ participation and engagement in 42 industries.

The industry is divided into 3 major categories: Category
1 – businesses that are prohibited from operating by foreigners for special reasons:
1. Newspapers, radio stations, and television stations;
2. Rice farming, orchards, and dry land planting;
3. Animal husbandry;
4. Forestry and log processing;
5. Fishing in Thai territorial waters and special economic zones;
6. Extraction of Thai medicinal materials;
7. Operation and auction involving Thai antiques or cultural relics with historical value;
8. Making or casting Buddha statues and bowls;
9. land deals.

Category 2 – Businesses involving national security and stability or adverse impacts on art, culture, folk customs, folk handicrafts, natural resources, and ecological environment: Category
Type 1: those related to national security and stability
Production, sales, maintenance of the following products:
(a ) Firearms, bullets, gunpowder and explosives;
(b) Firearms, bullets, and accessories related to explosives;
(c) Weapons, military ships, aircraft, vehicles;
(d) Parts and equipment of all combat equipment, etc.

Domestic land, water, air and other transportation industries, including domestic aviation industry.

Type 2: Those involving art culture and traditional folk handicrafts
belong to the trading of Thai art and handicraft antiques;
wood carving manufacturing;
sericulture, Thai silk production, Thai silk manufacturing, printing;
Thai folk musical instrument manufacturing;
gold, silver, Manufacture of black silver inlays, stone-inlaid goldware, and lacquerware;

Type 3: Cane sugar production that affects natural resources and ecological environment
sea salt production, mineral salt production;
table salt production;
mining industry, stone blasting, crushed stone processing industry;

Category 3 – Businesses where Thais are not competitive with foreigners:

Rice milling, processing of rice flour and other plant powders;
aquaculture;
forestry development and management;
plywood, veneer, planed wood, and hardwood board manufacturing;
lime production;
accounting services;
legal services;
construction services;
Engineering service industry;
engineering construction, but does not include:
1) Public infrastructure construction with a minimum capital investment of more than 500 million baht by foreigners, public facilities and transportation facilities that use new machinery and equipment, special technology and professional management, etc.;
2) Other engineering constructions stipulated by ministerial-level regulations.
Intermediary agency business, but does not include:
1) Securities trading intermediary or agency, agricultural product futures trading, and securities trading services;
2) Intermediary or agency business that provides sales, purchases, and service seeking for the production and service needs of affiliated enterprises;
3) Provide intermediary or agency services for buying, selling, promoting, and seeking domestic and foreign markets for international trade companies that sell domestic products or imported products with a minimum capital investment of more than 100 million baht for foreigners.
4) Other intermediary or agency businesses stipulated by ministerial regulations.
Auction business, but does not include:
1) International auction business, where the objects of auction do not involve the auction of antiques, antiquities, and artworks with traditional Thai craftsmanship, archaeological or historical value;
2) Other auctions stipulated by ministerial regulations.

The law does not expressly prohibit international trade involving local specialties or agricultural products;
department store retail business with a minimum total capital of less than 100 million baht, or a single store with a minimum capital of less than 20 million baht;
commodity wholesale business with a minimum capital of less than 100 million baht;
Publicity and advertising industry;
hotel industry, excluding hotel management;
tour guide industry;
catering industry;
development and improvement of new plant varieties;
other service industries except those stipulated by ministerial-level regulations.
2. Thailand’s special laws on banking and finance, insurance, securities, telecommunications, aviation and transportation restrict the proportion and ownership of foreign investment.

What is the definition of a foreigner in Thailand’s “Foreigner Business Act”?

A natural person who is not a Thai citizen;
a legal person not registered
in Thailand; a legal person registered in Thailand, and has the following circumstances:
a) Has the personality of item 1 or item 2, and its shareholding or investment amount exceeds 50% ;
b) Non-Thai partners or managers registered as limited partnerships or general partnerships;
legal persons registered in Thailand, and have the personality of item 1, item 2 or item 3, and hold shares or invest above 50.

For a limited company registered under Thai laws, does it require Thai shareholders to hold more than 51% of the shares?

Not necessarily, if foreign shareholders hold more than 50% of the shares, according to the provisions of Thailand’s “Foreigner Business Law”, the nature of the company is regarded as a foreign company, which will be restricted from engaging in the first category of industries stipulated in the law, or must obtain Only foreign companies with a business license can engage in the second or third category of industries.

What operating items in Thailand restrict foreign shareholders from holding more than half of the shares?

Thailand’s “Foreigner Business Law” restricts the three major types of industries in which foreign businessmen are engaged. In principle, foreign businessmen cannot hold more than 49% of the shares;
except for the second type of industry, if they can obtain the permission of the Thailand Business Development Bureau (DBD), foreigners can hold up to 60 % of the shares. %, if the minister’s approval is obtained, the shareholding must be less than 75%; for
the third type of industry, if the approval of the Thailand Business Development Bureau (DBD) is obtained, foreign investors may hold more than half or all of the shares.
(If the foreign businessman can obtain the permission of the BOI of the Thailand Investment Promotion Committee, the second and third types of industries must hold 100% of the shares.)

What is the minimum capital for a foreign company?

Thailand’s “Foreigner Business Law” stipulates that the minimum capital of foreign companies is as follows:

For the three types of industries that are not restricted by the law, the minimum capital requirement for establishing a company is 2 million baht;
for the three types of industries that are restricted by the law, the minimum capital requirement for establishing a company is 3 million baht.

Is it necessary to fully capitalize the company’s shares registered in Thailand?

The limited company is managed by the board of directors in accordance with the company’s articles of association. All shares must be fully issued, and at least 25% of the registered shares must be actually in place. Both preferred and ordinary shareholders have voting rights. Thai law prohibits the issuance of shares without par value. It is stipulated that the denomination of issuance shall be at least 5 baht, and the implementation of treasury shares shall be prohibited.

How many types of businesses are restricted by foreign business operations under Thailand’s “Foreigner Business Law”? If a foreign businessman intends to engage in these businesses, which units need to apply for permission?

Thailand’s “Foreigner Business Law” stipulates three types of industries that prohibit and restrict foreign business operations as follows:

The first category is industries where foreign investment is prohibited for special reasons, and foreign companies are completely prohibited from engaging in such businesses.
The second category is investment activities that involve national security and stability or have adverse effects on art, culture, folk customs, folk handicrafts, natural resources, and ecological environment; if foreign investors intend to engage in these businesses, they must be approved by the Minister of Commerce of Thailand under the approval of the cabinet. license.
The third category is investment industries in which Thais are not competitive with foreigners. If foreign investors intend to engage in these businesses, they must obtain a business license from the Thailand Business Development Bureau (DBD) under the approval of the Foreigner Business Committee.

If a foreign company intends to engage in retail and wholesale business, what is the minimum capital required to be exempted from the requirement of applying for a foreign business license?

The actual capital of the company must be at least 100 million baht, and there are other regulations on the number of stores:

In the retail industry, there can be no more than 5 stores, and an additional capital of 20 million baht must be added for each additional store; in
the wholesale industry, there can only be one store, and an additional capital of 100 million baht must be added for each additional store.

Can foreigners operate sole proprietorship stores and do they need to apply for a permit?

You must apply to the Thailand Business Development Bureau (DBD), and obtain a foreign business license with the approval of the Director of Foreign Business Committee.

When foreign investors invest in Thailand, do they need to apply for company registration and investment incentives at the same time?

Investment incentives can be applied for in the name of individuals or legal entities:

Application in personal name

After the application for investment incentives is approved, the Thai company registration is carried out, and licenses are applied to relevant government units, such as: energy management committee licenses and foreign business licenses. Only then can the investment incentive certificate be obtained.

Application in the name of a legal person

First set up the company, then apply for investment incentives in the name of a Thai company, and then apply for a license from the relevant government unit before obtaining an investment incentive certificate. Once the licenses from all relevant government agencies have been obtained, the company can start operating.

Applying for investment incentives is not the same as applying for a company business license. It can only obtain tax incentives and non-tax incentive licenses stipulated in investment laws and regulations. Subsequent matters such as company registration still need to be handled in accordance with relevant application procedures.

Relevant regulations for setting up an office in Thailand?

According to the Thailand Business Development Bureau (DBD), currently setting up an office in Thailand (Representative Office) does not need to apply to the bureau for a foreign company license; however, according to Thailand’s “Foreign Business Law”, the office can only engage in non-profit business behavior and cannot have any business income.

The scope of business permitted by the above-mentioned foreign business laws is as follows:

Purchase goods or services
for the head office or related companies in Thailand; check and control the quality and quantity of goods purchased or manufactured in Thailand for the head office or related companies;
provide the head office or related companies with information on all aspects of distributors or consumers in Thailand Consulting suggestions (for example: providing the attributes, methods of use and explanations of problems);
assisting the head office or related companies in the promotion of new products or services;
providing the head office or related companies with business environment reports in Thailand;

Minimum capital amount under the Foreign Business Act: Even though the office is no longer required to apply for a foreign company license, the minimum capital is still not less than 2 million baht. In addition, the office is still subject to other laws and taxes in Thailand, including the obligation to declare tax in Thailand and the business scope of the office.

Why is a two-tier Thai-owned local company usually foreign-owned?

It is very difficult to set up a general (non-manufacturing) subsidiary in Thailand for your parent company.
Unless it is a US shareholder, 100% exports, or certain industries have gone through complicated BOI application procedures,
it requires a paid-up capital of more than 100 millions Thai dollars (about usd 3.5 millions).
It is also difficult to set up a Representative Office derived from it.

The general choice is to establish a two-tier Thai-funded local company, BKK1 and BKk2.
BKK1 has 51% Thai shareholders plus 49% of your company. The capital is about 2 million Thai currency.
Then use BKKI to hold 51% of BKK2, plus 49% of your company to invest about 1 million Thai currency.
The final investment is about 3 million Thai currency, and your shareholder ratio has reached 74%.

What should I do if I need to hire someone before the establishment of a Thai company?

In some cases, the two-tier local company structure may be too complicated for your initial stage in Thailand.
If you do not want to receive Thai currency invoices in Thailand, but you need to hire someone, we recommend that you use our temporary Employment Outsourcing Service before setting-up subsidiary in Thailand .
This service means that the personnel you recruit are temporarily recruited by Evershine in Bangkok. Due to some reasons, your parent company has not yet established a foreign subsidiary in Thailand, but there is a demand for personnel.
Yonghui will arrange the employees you recruit according to the laws and regulations of wages, labor and personal income tax in Thailand

How to calculate the operating costs of foreign companies in Thailand?

Operating costs take into account many variables such as the size of the business, type of activity, industry or service sector, proportion of expatriate employees, and industry. However, in order to assist foreign companies, the Thailand Investment Commission will publish a report on the operating costs of foreign companies in Thailand every year. The reference URL is as follows:

Can I apply for more than two preferential investment projects at the same time?

If it is necessary to apply for two or more preferential investment projects at the same time, each project must be a new investment, and machines cannot be used together, unless permitted by special conditions.

Can I apply for more than two investment incentive projects for the same type of product?

If applying for two or more preferential investment projects of the same type of product, each project must be a new investment, and machines cannot be used together, unless permitted by special conditions.

If the company plans to invest in stages, for example: produce parts in the first year; produce finished products in the second year. How should the company apply for preferential projects?

If the company plans to invest in stages, there are two ways to apply for investment incentives:

− Submit the application separately, first submit the application for the part to be produced, and then submit the application for the finished product if the finished product is ready to be produced later.

− For a combined application, the machine investment plan for parts and finished products must be clearly indicated, and the stage of machine import can be stipulated according to the company plan (each stage is 30 months), but the company’s income tax exemption must be obtained from the application project. Calculated from day one (not from when revenue is earned for parts or finished goods, respectively).

If it is necessary to increase investment to expand the production capacity of the original project, should a new preferential application be submitted or the original preferential application be changed?

Regarding increasing investment to expand the production capacity of the original project, there are two ways to apply for investment incentives:

− Make a new offer application

 New machines must be invested, and the machines of the original project cannot be used together.

 The production capacity of newly applied preferential projects can only be calculated from the machines with increased investment.

 Issuing new preferential licenses.

 New discounts must be managed and used separately from the original discounts.

−Change the original preferential items

 The change application must be submitted before the project is fully implemented.

 The increase in production capacity shall not exceed 30% of the original project, and the same discount as the original project can only be obtained by applying for a new preferential project.

 Can enjoy the remaining discount of the original project.

 Only the preferential license of the original project will be changed, and no new license will be issued.

Assuming that after setting up a factory in Thailand for production, due to factors such as materials or orders, there are differences from the project proposal submitted to the Investment Promotion Board (BOI), can the investment amount be changed or the time for remittance of the investment amount be extended?

Extension of operating hours

Generally, companies that have received investment incentives may apply for an extension of their business hours, but not for more than one year; if the company is still unable to operate as scheduled after the first extension, it should notify the BOI unit to seek a solution before the end of the extension period, and BOI will respond to each case for consideration.

If the conditions stipulated by the project cannot be complied with, for example: the problem of registration of investment amount before operation.

If the company obtains the preferential investment license, there are problems with the above-mentioned investment amount registration or BOI finds that the company has violated the relevant conditions stated on the preferential investment license, there are two solutions as follows:
apply for changing the project;
apply for cancellation of the preferential investment license.

Is there an expiry date for the Thai Investment Incentive (BOI) license?

There is no deadline for the Thailand Investment Incentive (BOI) license. Companies that have obtained the Investment Incentive (BOI) license can continue to enjoy preferential rights provided that they do not violate relevant conditions, such as: land ownership, the introduction of foreign professionals, or import duty-free raw materials.

The BOI license will be terminated due to the following situations: cancellation of the BOI license by the
company; cancellation of the BOI license
due to violation of relevant conditions.

If the BOI license is canceled or revoked, the company may be required to pay import taxes on machines, raw materials or corporate income tax.

After canceling or being revoked the investment advantage (BOI) license, the company can still continue to operate in the status of not enjoying investment incentives, but it must not violate other relevant laws and regulations.

Investment incentives offered by Thailand’s Eastern Economic Corridor (EEC)?

Exemption from corporate income tax for up to 15 years;
exemption from import duties (import R&D and production of raw materials or machines for export);
capital subsidies (target industries for investment, R&D, innovation or human development);
allow land holding;
allow lease of state-owned land for long- term Up to 50 years, and can be extended for 49 years;
personal income tax 17% (managers, experts and researchers);
one-stop service (OSOS) to facilitate investment;
work visa (Work Visa) is valid for up to 5 years.

Is there a classification of factory licenses in Thailand?

Factories are divided into three categories:

Factories that do not require a permit. Factories
that only need to notify the relevant departments
before starting operations. Factories that need to obtain a permit before starting operations. According to the instructions of the Industrial Engineering Bureau of the Ministry of Industry, the operator must

Before obtaining the license, some factories can be built if the relevant departments can obtain the consent.

At the discretion of the Ministry of Industry of Thailand, before issuing a factory license, operators may be granted a certificate allowing them to construct parts of the factory. Operators or factories of the above three types must notify the competent authority 15 days before the start of trial operation and the start of actual production.

Note: In general, the degree of government regulation is related to environmental protection. The greater the impact on the environment, the greater the degree of regulation.

** Please note the following:
The above content is a summary of Evershine R&D and Education Center (abbreviation: Evershine RD) in October 2021.
Regulations change over time, and different situations have different options.
Please contact us or consult a professional you trust before selecting an option.
** Recruiting content supervisors
If you find that the above web content needs to be added, corrected or modified, please notify us, and if adopted, a small reward of USD50 will be offered to express our gratitude.
And you will be listed in the Evershine RD talent pool, and have the opportunity to become a part-time RD and partner.
Welcome email: th.company.rd.tc@evershinecpa.com

Contact us

Email: bkk4ww@evershinecpa.com

Or
Thailand Evershine BPO Co., Ltd.
1108/31 Sukhumvit Road, Phrakanong,Klongtoey, Bangkok, Thailand 10110
Contact:
Ploy Lee Thai speaks Chinese and Thai
Pay Xiao Thai speaks English and Thai
or
Headquarter Engaging Manager:
Jerry Chu, Director
Mobile: +886-939-486-835
Tel: +886-2-2717-0515 Ext: 104

Additional Information

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Besides, Evershine is Taiwan local Partner of ADP Streamline ®.
(version: 2024/07)

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