Setting up a Business

What You Need to Know About Setting up a Business in Thailand

The following is an overview of establishing a business in Thailand.
As in most countries, there are three kinds of business organizations in Thailand: Sole proprietorships,
partnerships, and limited companies. 
The most popular form of business organization among foreign investors is the private limited company.
Private limited companies require a minimum of three promoters and must file a memorandum of association,
convene a statutory meeting, register the company, and obtain a company income tax identity card. They must
also follow accounting procedures specified in the Civil and Commercial code,the Revenue Code and the
Accounts Act. 
A balance sheet must be prepared once a year and filed with the Department of Revenue and Commercial
Registration. 
In addition, companies are required to withhold income tax from the salary of all regular employees.
The Ministry of Industry administers The Factory Act, which governs factory construction and operation,
as well as safety and pollution-control requirements. 
In some cases, factories do not require licenses, in other instances the requirement is simply to notify officials
in advance of start-up, and in some cases licenses are required prior to commencing operations. Licenses are
valid for five years, and are renewable.
Thailand recognizes three kinds of intellectual property rights: patents, trademarks, and copyrights.
The Patent Act protects both inventions and product designs and pharmaceuticals.The Copyright Act protects
literary, artistic works, and performance rights, by making it unlawful to reproduce or publish such works without
the owner's permission. The Trademark Act governs registration of, and provides protection for, trademarks.
The Alien Occupation Law requires all foreigners working in Thailand to obtain a Work Permit prior to starting
work in the Kingdom, except when they are applying under the Investment Promotion Law, in which case they
have 30 days to apply.
Non-Immigrant visas provide the holder with eligibility to apply for a work permit, and allow the holder to work
while the work permit application is being considered.
Through the links below, you can learn more about topics such as industrial licensing, taxation, patents
and trademarks , and the cost of doing business in Thailand. You can also find out about the status of
Thai infrastructure, including facilities such as airports, deep sea ports, and highways, and the availability of
power, water and telecommunications.
In addition, there is a link to a page of statistics, which displays tables of utility, communications and labor
costs, tax rates, information about air, sea, rail and road freight pricing, and information about availability and
cost of land within industrial estates. Other charts and tables provide costs of establishing and running an office
in Bangkok, and the results of a survey of expatriate living costs in Bangkok.
This page also contains information about industrial production of selected products in Thailand, tables
breaking down Thai imports and exports by product and a table displaying interest rate movements for the past
5 years.
By the time you have finished visiting all these pages, you will have a complete picture about the business
climate in Thailand.

Forming a Company
 1.          Procedures for Establishing a Company
 1.1        Company Registration
 1.1.1     Promoters
Company promoters are responsible for registering the company with the Ministry of Commerce (MOC). The
promoters must be individuals (not juristic persons). They must be available to sign documentation during the
registration process. There must be a minimum of three promoters for a private limited company and at least 15
promoters for a public limited company.
 
The promoters of a private limited company must be 12 years of age or older; for a public limited company, the
promoters must be 20 years of age or older.
 
Each promoter of a private limited company is required to be among the company’s initial shareholders
immediately after the company’s registration and is required to hold a minimum of one share upon the
company's registration. They are generally free to transfer those shares to existing shareholders or third parties,
thereafter, if they wish. It is not required for the individuals serving as promoters to reside in Thailand.
 
The promoters of a public limited company must also be among the company’s initial shareholders immediately
after the company’s registration. All promoters must subscribe for shares, which must be paid up in an aggregate
amount equal to not less than five percent of the registered capital. Said shares may not be transferred before
the expiration of 2 years from the date of the company’s registration, unless specifically approved at a meeting
of shareholders. Nevertheless, it is required that one-half of the individuals serving as promoters have their
domicile in the Kingdom of Thailand.
 
Promoters' potential legal liability is generally limited to the par value of the shares they will hold after
registration is completed. The promoters are also responsible for paying expenses associated with the company's
registration. After registration, however, the company may choose to reimburse the promoters for those
expenses.
 
1.1.2     Timing
For Private Limited Company
The registration of the company can be accomplished on the same day as the registration of the Memorandum of
Association provided that:
(1)      All registered shares have been subscribed for;
(2)      A statutory meeting is held to transact the business with the presence of all promoters and
subscribers, and all promoters and subscribers have approved the transacted business;
(3)      The promoters have handed over the business to the directors; and
(4)      The payment of at least 25% of the total shares has been paid by the shareholders.
 
The company can apply for and obtain the company’s tax ID card and register the Employer account under the
Social Security Act with the MOC on the same day as the registration of the Company.
 
However, if the company does not wish to apply for the company’s tax ID card or register the Employer account
under the Social Security Act with the MOC on the same day as the registration of the Company, it can apply for
the company’s tax ID card and register the Employer account with the Revenue Department and the Social
Security Office respectively later.
 
For Public Limited Company
A Public Company Limited is required to register its Memorandum of Association with the MOC first, and, thus the
company’s registration cannot be done on the same day, as is the case for a private limited company. After the
Memorandum of Association has been registered, the promoters must offer shares for sale to the public or to any
person in accordance with the law on securities and stock exchange.
 
The promoters must submit to the Registrar a copy of the documents relating to the offer of shares for sale to
the public, which shall be prepared and submitted to authorities under the law on securities and stock exchange,
within 15 days of the date of submission to such authorities, in accordance with the rules, procedures and
conditions prescribed by the Registrar.
 
The promoters shall convene the statutory meeting when the number of subscribed shares reaches the number
specified in the prospectus or a public meeting, which must be not less than fifty percent of the number of
shares specified in the Memorandum of Association, within two months of the date on which the number of
subscribed shares reached the specified number but not later than six months from the date on which the
Memorandum of Association was registered.

In the event it is impossible to call the statutory meeting within the specified time, if the promoters of the
company wish to proceed further, they must apply for an extension of the period by providing the reason for the
delay to the Registrar not less than 7 days in advance of the expiry date of such period. If the Registrar deems it
expedient, an extension of between one and three months from the date ending such period may be granted.
 
If the statutory meeting could not be concluded within the period, the Memorandum of Association shall become
invalid upon the lapse of such period and, within 14 days from the date on which the Memorandum of
Association become invalid, the promoters shall return the payment for share subscription to the share
subscribers.
 
After having received the payment on shares up to the number of all subscribed shares, the Board of Directors
must apply to register the company within three months of the date of conclusion of the statutory meeting. The
application must provide the following particulars:
(1)      The paid-up capital, the total amount of which must be specified;
(2)      The total number of shares sold;
(3)      The names, dates of birth, nationalities, and addresses of the directors;
(4)      The names and number of directors authorized to affix signatures on behalf of the company and any
power limitations on directors that have been specified in the Articles of Association;
(5)      The location of the head office and branch offices (if any).
 
The company cannot apply for and obtain the company’s tax ID card and register the Employer account under
the Social Security Act with the MOC like a private limited company. Consequently, the company must apply for
the company’s tax ID card with the Revenue Department and register the Employer account with the Social
Security Office directly.
 
Note: If the registered company falls under the definition of “foreign” (as defined in the Foreign Business Act
(FBA)), after registration of the company, it will normally be required to obtain Cabinet approval, a Foreign
Business License, or a Foreign Business Certificate, as the case may be, prior to commencing operations.
 
1.1.3     Filings
For a private limited company, all documents associated with the company’s registration must be submitted to
the Registrar of the Department of Business Development (DBD) of the MOC; or, if the company’s location is to
be situated outside of Bangkok, it must be submitted to the Office of Provincial Business Development in the
province in which the company’s business will be situated. For a public limited company, all documents
associated with the company’s registration must be submitted to the Registrar of the Department of Business
Development of the MOC at the Central Registration office, Bangkok only, regardless of company’s location.
 
All documents associated with the registration of the company’s tax ID card (in cases where the company does
not apply for the company’s tax ID card with the MOC when registering the Company) and VAT certificate must
be submitted to the Filing Office of the Revenue Department in Bangkok; or, if the company’s location is to be
situated outside of Bangkok, to the Provincial Revenue Office where the company’s location will be situated.
However, the Company either locates in Bangkok or outside of Bangkok can also apply for the company’s tax ID
card and VAT certificate through the website of the Revenue Department.
 
All documents associated with the registration of the Employer account under the Social Security Act (in cases
where the company does not apply for the Employer account under the Social Security Act when registering the
Company) must be submitted to the Filing Office of the Social Security Office in Bangkok; or, if the company’s
office is to be located outside of Bangkok, to the Provincial Social Security Office in the province in which the
company’s business will be situated.
 
1.2        Registration Process
 
1.2.1     Corporate Name Reservation
The first step of the company registration process is name reservation. To reserve a name, the company can
either (1) submit a signed Name Reservation Form (one of the promoters is required to sign in such form) to the
Department of Business Development of the MOC or (2)fill in a Name Reservation Form and submit it through
the Department of Business Development’s website (http://www.dbd.go.th/dbdweb_en).
 
The promoter is required to supply the requested company name together with two alternative names. The
registrar will then examine the application in order to ensure that:
a.        No similar company names have previously been reserved; and
b.        The names do not violate any ministerial rules.
 
If the applicant’s intended name is in conflict with either of the above, that name will be rejected and the
registrar will consider the alternative names submitted. This process can normally be completed within 2-3
working days. If all three names submitted are rejected, the applicant will be required to re-submit the form with
three new names.
 
The registrar has considerable discretion with regard to the matter of company names. Many times, the first
name or even the first two names are rejected due to the violation of one of the two rules stated above. Once
the name is approved, the corporate name reservation is valid for 30 days, with no extensions. However, after
the name has expired, the promoter can still re-apply for Name Reservation again and again if the name is still
available.

1.2.2     Filing a Memorandum of Association

After the name reservation has been approved, the company must then submit its Memorandum of Association
(MOA) to the Department of Business Development of the MOC. For a private limited company, the MOA must
include the Company’s name (the same as the name reserved); the location of head office (located at which
province); (3) objective of the company; registered capital must be divided into each share with the same value
(each share’s value must be at least 5 Baht); the name, address, age, occupation and number of shares that
persons who start up the company reserve to buy the shares); and the name, address, age of two witnesses.
The capital information must include the number of shares and their par value. At the formation step, the
authorized capital, although partly paid, must all be issued.
 
For a public limited company, the MOA must at least include the name of the company; the purpose of the
company to offer shares for sale to the public; the objective of the company (which must specify clearly
categories of business); the registered capital including the type, number and value of shares;,  the province
where the company will be located; the names, dates of birth, nationalities, and addresses of the promoters and
the number of shares for which each of them has subscribed.
 
The official fee for registration of the MOA for a private limited company is 50 baht per 100,000 baht of
registered capital. A fraction of 100,000 baht is regarded as 100,000 baht. The minimum fee is 500 baht and the
maximum fee is 25,000 baht.
 
For a public limited company, the official registration fee is 1,000 baht per 1,000,000 baht of registered
capital. A fraction of 1,000,000 baht is regarded as 1,000,000 baht. The maximum fee is 25,000 baht. Although
there are no minimum capital requirements, the amount of capital should be respectable and adequate for the
intended business operation.
 
However, if the company falls under the definition of “foreign” under the FBA, before commencing its business,
the following rules shall be applied:
 
             If the company engages in activities specified in the FBA, its minimum registered capital would be
greater than 25% of the estimated average annual operating expenses of the operation, calculated
over 3 years, but not less than 3 million baht.
             If the company does not engage in activities specified in the FBA, its minimum registered capital
would be 2 million baht.
If the company intends to employ foreigners, other minimum registered capital requirements may also be
applied.
 
1.2.3     Convening a Statutory Meeting
Once the share structure has been defined, a statutory meeting is called, during which the following are
determined:
(1) The adoption of the regulations of the company, if any;
(2) The ratification of any contracts entered into and any expenses incurred by the promoters in promoting the
company.
(3) The fixing of the amount, if any, to be paid to the promoters;
(4) The fixing of the number of preference shares, if any, to be issued, and the nature and extent of the
preferential rights accruing to them;
(5) The fixing of the number of ordinary shares or preference shares to be allotted as fully or partly paid-up
otherwise than in money, if any, and the amount up to which they shall be considered as paid-up;
(6) The appointment of the first directors and auditors and the fixing of their respective powers;
 
Note: No resolutions of the statutory meeting are valid unless passed by a majority including at least one half of
the total number of subscribers entitled to vote, and representing at least one half of the total number of shares
to such subscribers.
 
After the statutory meeting is held, the promoters must hand over all businesses to the directors of the company.
 
1.2.4     Registration
Within 3 months of the date of the statutory meeting, the directors must submit the application to establish the
company. If not registered within the specified period, the company’s statutory meeting shall be voided and if
the company wishes to register again, the promoters shall arrange the meeting for persons who reserve to buy
the shares again.
 
During the registration process, the promoters will be required to supply the name, license number, and
remuneration of the auditor whom the company is planning to hire.
 
The company registration fee for a private limited company is 500 baht per 100,000 baht of registered
capital. A fraction of 100,000 baht is regarded as 100,000 baht. The minimum fee is 5,000 baht and the
maximum fee is 250,000 baht.
 
For a public limited company, the company registration fee is 1,000 baht per 1,000,000 baht of registered
capital. A fraction of 1,000,000 baht is regarded as 1,000,000 baht. The maximum fee is 250,000 baht.
 
For a private limited company, the directors shall then cause the promoters and subscribers to pay forthwith
upon each share payable in money such amount, not less than 25%, as provided by the prospectus, notice,
advertisement, or invitation.
 
For a public limited company, each promoter and subscriber must pay 100% of their subscribed shares.
 
The company is then registered as a legal entity (or juristic person).
 
1.2.5     Registering for Tax Documents
A company liable for corporate income tax must obtain a tax ID card and number from the Revenue Department
within 60 days of its date of incorporation or, in the case of a foreign company, from the date it begins carrying
on business in Thailand. Companies that have turnover in excess of 1.8 million baht must also register for VAT
with the Revenue Department within 30 days of the date the annual turnover exceeded that threshold.
 
1.2.6     Registering for Employer account under the Social Security Act
If the company has at least one employee, the company has a duty to register the Employer account under the
Social Security Act with the Social Security Office within 30 days of the start of employment. The process for
registration of the Employer account under the Social Security Act can normally be completed within 1 day
provided that all required information and documents are fully submitted to the Social Security Office.
 
2.          Reporting Requirements
 
2.1        Books of Accounts and Statutory Records
Companies must keep books and follow accounting procedures as 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 12 of the Accounts Act of 2000 provides rules on how accounts should be maintained:
 
“In keeping accounts, the person with the duty to keep accounts must hand over the documents required for
making accounting entries to the bookkeeper correctly and completely, in order that the accounts so kept may
show the results of operations, financial position according to facts and accounting standards.”
 
2.2        Accounting Period
An accounting period must be 12 months. Unless the Articles of Association state otherwise, a newly established
company should close accounts within 12 months of its registration. Thereafter, the accounts should be closed
every 12 months. If a company wishes to change its accounting period, it must obtain written approval from the
Director-General of the Revenue Department.
 
2.3        Reporting Requirements
All juristic companies, partnerships, branches of foreign companies, and joint ventures are required to prepare
financial statements for each accounting period. The financial statement must be audited by and subjected to the
opinion of a certified auditor, with the exception of the financial statement of a registered partnership established
under Thai law, whose total capital, assets, and income are not more than that prescribed in Ministerial
Regulations. The performance record is to be certified by the company’s auditor, approved by shareholders, and
filed with the Commercial Registration Department of the MOC and with the Revenue Department of the Ministry
of Finance (MOF).
 
For a private limited company, the director is responsible for arranging the annual meeting of shareholders to
approve the company’s audited financial statement within 4 months of the end of the fiscal year, and filing the
audited statement and supporting documents, including a list of shareholders on the date of the meeting, to the
Registrar no later than 1 month after the date of the shareholder meeting.
 
For a foreign company, i.e. branch office, representative office or regional office, and excluding joint ventures,
the Manager of the branch office must submit a copy of the financial statement to the Registrar no later than
150 days after the end of the fiscal year. Approval of the shareholder meeting is not required.
 
For a public limited company, the director is responsible for arranging the annual meeting of shareholders to
approve the audited financial statements of a company within 4 months of the end of the fiscal year. A copy of
the audited financial statement and annual report, together with a copy of the minutes of the shareholder
meeting approving the financial statement, should be certified by the director and submitted to the Registrar,
along with a list of shareholders on the date of the meeting, no later than 1 month after approval at the
shareholder’s meeting. In addition, the company is required to publish the balance sheet for public information in
a newspaper for a period of at least 1 day within 1 month of the date it was approved at the shareholder’s
meeting.
 
2.4        Accounting Principles
In general, the basic accounting principles practiced in the United States are accepted in Thailand, as are
accounting methods and conventions 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
asset, which has the effect of depreciating the asset over a period that may be shorter than its estimated useful
life. These maximum depreciation rates are not mandatory. A company may use a lower rate that approximates
the estimated useful life of the asset. 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 they are actually paid out to the employees, or if the fund is approved by the Revenue Department and
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 5% of annual net profit arising from the business must be
appropriated by the company at each distribution of dividends until the reserve reaches at least 10% 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.
 
2.5        Auditing Requirements and Standards
Audited financial statements of juristic entities (i.e. a limited company, registered partnership, branch,
representative office, regional office of a foreign corporation, or joint venture) must be certified by an authorized
auditor and be submitted to the Revenue Department and to the Commercial Registrar for each accounting year.
 
However, for a registered partnership with registered capital of less than 5 million baht, total revenue of no more
than 30 million baht, and total assets of no more than 30 million baht, financial statement does not need to be
certified by an authorized auditor.
 
Auditing practices conforming to international standards are, for the most part, recognized and practiced by
authorized auditors in Thailand.
 
3.          Types of Business Organizations
Thailand recognizes 3 types of business organizations: partnerships, limited companies and joint ventures.
 
3.1        Partnerships
According to the Civil and Commercial Code (CCC), the partnerships can be divided into 2 types:
(1)      Ordinary Partnerships
(2)      Limited Partnerships
 
3.1.1     Ordinary Partnerships
In an ordinary partnership, all the partners are jointly and wholly liable for all obligations of the partnership.
Ordinary partners may contribute money, other property, or labor to the partnership. These partnerships may be
registered or unregistered. Therefore, an ordinary partnership can be divided into 2 types:
(1)      Non-registered Ordinary Partnership – has no status as a juristic person and is treated, for tax
purposes, as an individual.
(2)      Registered Ordinary Partnership – is registered with the Commercial Registrar as a juristic person and
is taxed as a corporate entity.
 
3.1.2     Limited Partnerships
The limited partnerships must have 2 kinds of partners as follows: 
(1)      One or more partners whose individual liability is limited to the amount of capital contributed to the
partnership, and
(2)      One or more partners who are jointly and unlimitedly liable for all the obligations of the partnership.
 
The limited partnerships must be registered and are taxed as a corporate entity.
 
3.1.3     Partnership Registration
When two or more people agree to invest in one of the aforementioned types of partnership, the appointed
managing partner is responsible for registering the partnership with the commercial registration office of the
province that the head office of the partnership is located in. Limited partnerships must be only managed by a
partner with unlimited liability.
 
The fee for registering a partnership is 100 baht per 100,000 baht of registered capital. A fraction of 100,000
baht is regarded as 100,000 baht. The minimum fee is 1,000 baht and the maximum fee is 5,000 baht.
 
3.2        Limited Companies
There are 2 types of limited companies: private limited companies and public limited companies. The first is
governed by the Civil and Commercial Code and the second is governed by the Public Limited Company Act.
 
3.2.1     Private Limited Companies
Private Limited Companies in Thailand have basic characteristics similar to those of Western corporations. A
private limited company is formed through a process that leads to the registration of a Memorandum of
Association (Articles of Incorporation) and Articles of Association (By-laws) as its constitutive documents.
 
The shareholders enjoy limited liability, i.e. limited to the remaining unpaid amount, if any, of the par value of
their shares. The liability of the directors, however, may be unlimited if stipulated as such in the company's MOA.
 
The limited companies are managed by a board of directors in accordance with the company laws and its Articles
of Association. In the board of directors’ meeting, director’s proxies and circular board resolution are not allowed.
 
All shares must be subscribed to, and at least 25% 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 a par value of less than five baht. Treasury shares are prohibited.
 
A minimum of three shareholders is required at all times. Under certain conditions, a private limited company
may be wholly owned by foreigners. However, in those activities reserved for Thai nationals under the Foreign
Business Act, foreigner participation is generally allowed up to a maximum of 49% capital shares. The
registration fee for the MOA and establishing the company is 5,500 baht per million baht of registered capital.
 
The 49% capital shares limited in certain reserved businesses can be exceeded or exempted if a Foreign
Business License is granted. If the desired business is unique, does not compete with Thai businesses, or
involves dealings among members of an affiliated company, the chance of approval is more probable. Conditions,
such as minimum capital, transfer of technology and reporting requirements, may be attached to Foreign
Business Licenses.
 
3.2.2     Public Limited Companies
Subject to compliance with the prospectus, approval, and other requirements, public limited companies
registered in Thailand may offer shares, debentures, and warrants to the public and may apply to have their
securities listed on the Stock Exchange of Thailand (SET).
 
Public limited companies are governed by the Public Limited Company Act B.E. 2535 (A.D. 1992), as amended by
Public Limited Company Act No. 2 B.E. 2544 (A.D. 2001) and Public Limited Company Act No. 3 B.E. 2551 (A.D.
2008). The rules and regulations concerning the procedure of offering shares to the public is governed by the
Securities and Exchange Act B.E. 2535 (A.D. 1992) and the amendments thereto, under the control of the
Securities and Exchange Commission (SEC). All companies wishing to list their shares on the SET must obtain the
approval of and file disclosure documents with the SEC, and then obtain SET approval to list their shares.
 
For public limited companies, there is no restriction on the transfer of shares (except to satisfy statutory or policy
ceilings on foreign ownership); director’s proxies are not allowed; circular board resolutions are not allowed;
directors are elected by cumulative voting (unless the MOA provides otherwise) and the board of directors’
meetings must be held at least once every 3 months. Directors’ liabilities are substantially increased.
 
A minimum of 15 promoters is required for the formation and registration of a public limited company, and the
promoters must hold their shares for a minimum of 2 years before they can be transferred, except with the
approval of the shareholders at a meeting of shareholders. The board of directors must have a minimum of 5
members, at least half of whom must have a domicile in Thailand. Each share of the company shall be equal to
value and be fully paid up.
 
Restrictions on share transfers are unlawful, with the exception of those protecting the rights and benefits of the
company as allowed by law and those maintaining the Thai/foreigner shareholder ratio. Debentures may only be
issued with the approval of three quarters of the voting shareholders. The company registration fee is 1,000 baht
per million baht of registered capital.
 
The qualifications for independent directors of listed companies and securities companies that have initial public
offerings were amended in April 2009, as follows:
(1)      At least one-third of the board’s complement should be independent directors, and in any case, the
number should not be fewer than 3. This will apply for listed companies’ annual general shareholders’
meetings from the year 2010 onwards. In the case of an IPO, the requirement for independent
directors has to be complied with from 1 July 2008 onwards.
(2)      The independent director must not have any business or professional relationship with the head office,
subsidiaries, associates, or jurist person in his own interest, whether directly or indirectly, as outlined
in the Thai Securities and Exchange Commission Circular No. Kor Lor Tor Kor (Wor) 11/2552 Re: the
Amendment of the Regulation regarding the independent director.
 
3.2.3     Scrutinization of Thai Shareholders in Limited Companies
In 2006, the Commercial Registrar prescribed new rules for the registration of the private limited companies. The
rules require that sources of investment by Thai nationals in the following two categories of new companies be
scrutinized:
(1)      A company in which the foreigners hold between 40% and 50% of the shares.
(2)      A company in which the foreigners hold less than 40% of the shares, but a foreigner is an authorized
director of the company.
 
All Thai shareholders must disclose the source of their funds to the MOC.
 
An application for the incorporation of a limited company must now be accompanied by at least one of the
following documents evidencing the source of funds of each Thai shareholder:
            Copies of deposit passbooks or bank statements disclosing transactions over the past 6 months;
            A letter issued by a bank certifying the financial position of the shareholder;
            Copies of other documents evidencing the source of funds (i.e. loan documentation).
 
In addition, the MOC has issued internal guidelines in support of the rules, which set out the following matters:
            The amounts shown in the documents of each Thai shareholder evidencing the source of funds must
equal or exceed the amount of funds invested by that Thai shareholder.
            The rules do not apply if a foreign national(s) has joint authority with a Thai national(s) to act on
behalf of the limited company.
            Copies of deposit passbooks or bank statements disclosing transactions that are less than 6 months
old may be submitted to the MOC provided that entries on at least 1 day identify a balance that is
equal to or exceeds the funds invested by the relevant shareholder.
 
Thai shareholders must provide evidence of their sources of funds regardless of the value of their shares.
 
3.3        Other Forms of Corporate Presence
 
3.3.1     Branches of Foreign Companies
Foreign companies may carry out certain business in Thailand through a branch office. Branch offices are
required to maintain accounts only relating to the branch in Thailand.
 
Having a branch office in Thailand, the foreign corporation could be exposed to civil, criminal and tax liability if
the branch office violates any law in Thailand. The foreign head office must appoint at least one branch office
manager to be in charge of operations in Thailand.
 
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 that require
special registration (e.g., VAT registration, taxpayer identification card, Commercial Registration Certificate,
Foreign Business License, etc.), either before or after the commencement of activities. Therefore, foreign
business establishment must follow generally accepted procedures.
 
It should be borne in mind that the branch is part of the parent company and therefore the parent retains legal
liability for contracts, and for tortious acts done. For tax purposes, a branch is subject to Thai corporate income
tax at the regular 20% rate on income derived from its business operations in Thailand. It is important to clarify
beforehand what constitutes income that is subject to Thai tax because the Revenue Department may consider
revenue directly earned by the foreign head office from sources within Thailand to be subject to Thai tax.
Therefore, for tax purposes, a branch office is required to apply for a taxpayer identification card and VAT
certificate (if applicable) and to file annual corporate income tax returns with the Revenue Department.
 
A branch office of a foreign entity cannot carry out any reserved business without a Foreign Business License. It
must apply for a Foreign Business License with the MOC first, and can operate in a reserved business only after
the License has been issued. If the desired business is unique, does not compete with Thai businesses, or
involves dealings among members of an affiliated company, the chance of approval is more probable. Conditions,
such as minimum capital, transfer of technology and reporting requirements, may be attached to Foreign
Business License. The minimum investment capital must be greater than 25% of the estimated average annual
operating expenses of the operation calculated over 3 years, but not less than 3 million baht.
 
Conditions to be complied with by the Branch Office after Obtaining Permission for Operation
A Branch Office that is permitted to operate the business must comply with the following conditions:
1.     There must be the minimum capital to be remitted to Thailand for the commencement of business
operation as stipulated by law. Details of remitting the minimum capital are as follows:
(1)     First 25% of minimum investment within first 3 months;
(2)     Another 25% of minimum investment within first year;
(3)     Another 25% of minimum investment within second year; and
(4)     Last 25% of minimum investment within third year.
2.     The total of loans utilized in the permitted business operation must not exceed 7 times the inward
remitted funds for the permitted business operation;
           Loans mean the total liabilities of the business, notwithstanding the liabilities incurred by any
form of transaction but excluding trade liabilities occurred from the ordinary course of business,
such as, trade creditors, accrued expenses.
3.     At least one person of the responsible persons for operating the business in Thailand must have a
domicile in Thailand;
           Domicile means the contactable residence in Thailand which can be the place of business,
excluding temporary residence such as hotels.
4.     The document or evidence relating to the permitted business operation must be submitted when the
official sent the summons or inquiry.
5.     There must be the preparation of account and financial statements to be submitted to the Department
of Business Development.
 
Fees for Branch Office
Application fee (non-refundable) is 2,000 baht. If the application is approved, the government fee will be set at
the rate of 5 baht for every 1,000 baht or fraction thereof of the registered capital of the parent company, with a
minimum of 20,000 baht and a maximum of 250,000 baht. A fraction of 1,000 baht in capital is regarded as
1,000 baht.
 
3.3.2     Representative Offices of Foreign Companies
The operation of Representative Office in Thailand in order to render the service to its head office or the
affiliated company or the group company in foreign country is the operation of business under the business listed
in List 3(21) attached to the Foreign Business Act B.E.2542 i.e.  Other Service Businesses. If the foreigner wishes
to operate such business, the permission by the Director-General, Business Development Department with the
approval of the Foreign Business Committee is required.
 
The minimum investment capital must not be less than 25% of the estimated average annual operating
expenses of the operation calculated over 3 years, but not less than 3 million baht (same as branch office).
 
The Foreign Business Operation Committee has determined the guidelines for approval as follows:
 
Characteristic of Representative Office
The Representative Office must have all 3 characteristics as follows:-
1)      Be the juristic person established in accordance with the foreign law and established an office in
Thailand in order to operate the service business to the head office or the affiliated company or the
group company in foreign country only;
2)      Renders services to the head office, affiliated company or group company without receiving income
from service, except for funds to cover the expenses of the Representative Office that are received
from the head office;
3)      The Representative Office has no authority to receive purchase orders or to offer for sale or to
negotiate on business with any person or juristic person.
 
Scope of Service of the Representative Office
In operation of business as the Representative Office, the scope of service is permitted to be rendered in any or
all of the following 5 categories, depending upon the objectives and business characteristics of the
Representative Office:
            Finding sources of goods or services in Thailand for the head office.
            Checking and controlling the quantity of goods purchased in Thailand by the head office.
            Providing advice and assistance concerning goods of the head office sold to agents or consumers in
Thailand.
            Disseminating information concerning new goods or services of the head office.
            Reporting on business developments in Thailand to the head office
 
If the representative office engages in other activities for which permission is not granted, such as buying or
selling goods on behalf of the head office, it will be regarded as doing business in Thailand and may be subject
to Thai taxation on all income received from Thailand. Also, the representative office may not act on behalf of
third persons. Any such business or income-earning activities could amount to a violation of the conditions of the
license to establish and operate a representative office, which in turn could result in revocation of that license.
 
A representative office that undertakes one or more of the approved activities in Thailand without rendering any
service to any other person, and which refrains from prohibited activities, is not subject to Thai taxation. Such a
representative office is understood to be receiving a subsidy from the head office to meet its expenses in
Thailand. Gross receipts or revenues received by a representative office from the head office are not
characterized as revenue to be included in the computation of juristic person income tax.
 
Even though they are not subject to taxation in Thailand, all representative offices are still required to obtain a
Corporate Tax Identification number and submit income tax returns and audited financial statements to the
Revenue Department. They are also required to submit the same to the Department of Business Development.
 
Conditions to be complied with by the Representative Office after Granted Permission to Operate
A Representative Office that is permitted to operate the business must comply with the following conditions:
     1.            There must be the minimum capital to be remitted to Thailand for the commencement of business
operation as stipulated by law. Details of remitting the minimum capital are as following:
(1)   First 25% of minimum investment within first 3 months;
(2)   Another 25% of minimum investment within first year;
(3)   Another 25% of minimum investment within the second year; and
(4)   Last 25% of minimum investment within the third year.
     2.            The total of loans utilized in the permitted business operation must not exceed seven times the inward
remitted funds for the permitted business operation;
        Loans mean the total liabilities of the business, notwithstanding the liabilities incurred by any
form of transaction but excluding trade liabilities occurred from the ordinary course of business,
such as, trade creditors, and accrued expenses.
     3.            At least one person of the responsible persons for operating the business in Thailand must have a
domicile in Thailand;
        Domicile means the contactable residence in Thailand which can be the place of business,
excluding temporary residence such as hotels.
     4.            The document or evidence relating to the permitted business operation must be submitted when the
official sent the summons or inquiry.
     5.            There must be the preparation of account and financial statements to be submitted to the Department
of Business Development.
 
Fees for Representative Office
Application fee (non-refundable) is 2,000 baht. If the application is approved, the government fee will be set at
the rate of 5 baht for every 1,000 baht or a fraction thereof of the registered capital of parent company, with a
minimum of 20,000 baht and a maximum of 250,000 baht. A fraction of 1,000 baht in capital is regarded as
1,000 baht.
 
Tax Position of Representative Office
The representative office is required to obtain a corporate tax identification number and submit income tax
returns and balance sheets, even if nil.
 
Individual aliens and all local staff are required to obtain taxpayer cards and pay personal income tax.
 
3.4        International Headquarters (IHQ)
On 1 May 2015, Thailand introduced an International Headquarters (ITC) scheme to help boost Thailand's
competitiveness and make Thailand the economic hub of Asia. The IHQ program replaces the Regional Operating
Headquarters scheme that will expire on 15 November 2015.
 
Thailand defines International Headquarters (IHQ) as a company incorporated under Thai law that provides
any of the following activities to their branches or “associated enterprises”, whether located in Thailand or
overseas:
 
(1)       Managerial services or technical services
(2)       Supporting services engaged in:
2.1       General management, business planning, and business coordination
2.2       Procurement of raw materials and parts
2.3       Research and development
2.4       Technical support
2.5       Marketing and sales promotion
2.6       Human resource management and training
2.7       Financial advisory services
2.8       Economic and investment analysis and research
2.9       Credit management and control
2.10    Any other supporting services stipulated by the Director-General of the Revenue Department
(3)       Financial management, including:
3.1       Financial management by corporate treasury centers approved under The Exchange Control Law.
3.2       Borrowing and lending in Thai Baht for the following cases:
3.2.1     Borrowing in Thai Baht from financial institutes in Thailand or associated enterprises in Thailand
3.2.2     Managing Thai Baht obtained from 3.1 or 3.2.1 by lending in Thai Baht to associated
enterprises in Thailand
(4)   International Trading Centers (ITC), which refers to companies incorporated under Thai law that purchase
and sell goods, raw materials and parts or that provide international trading related services to juristic
persons incorporated overseas. International trading related services include:
4.1   Sourcing of goods
4.2   Warehousing and inventory services prior to delivery
4.3   Packaging activities
4.4   Transportation of goods
4.5   Insurance on goods
4.6   Advisory, technical and training services on goods
4.7   Any other services stipulated by the Director General of the Revenue Department.
 
An associated enterprise refers to companies or juristic partnerships which are related to the International
Headquarters, as follow:
1.     A company or juristic partnership that holds direct or indirect shares in the International Headquarters of not
less than 25% of total capital
2.     A company or juristic partnership in which the International Headquarters is a shareholder or a partner with
not less than 25% of total capital
3.     A company or juristic partnership in which the company or juristic partnership specified in number 1 is a
direct or an indirect shareholder or partner with not less than 25% of total capital
4.     A company or juristic partnership which has the power to control or supervise the operation and
management of the International Headquarters
5.     A company or juristic partnership in which the International Headquarters has the power to control or
supervise the operation and management
6.     A company and juristic partnership in which the company or juristic partnership under number 4 has the
power to control or supervise the operation and management.
 
1.     Revenue received from the purchase and sale of goods overseas 1) without importing goods into Thailand or
2) that are imported into Thailand through border crossing or transshipment according to customs laws.
2.     Revenue from providing services in relation to foreign trade to juristic persons established under foreign laws
or revenue received overseas or generated overseas.
 
Personal Income Tax
Personal income tax for expatriates at the specialist or executive level working in an ITC is reduced to 15%.