There is no better time than now to expand your business in Thailand, especially when it has been relaxing its nationalistic business policies recently. This article will give you some useful tips you should know in your endeavour.

Growing Economy

 

Thailand’s economy is growing rapidly. From a low income economy in 1980, its GDP has increased more than 8 times today. As a result, it was upgraded to the status of ‘upper-middle income economy’ by the World Bank since 2011. This trend is set to continue as Thailand is fast catching up to its peers in Asia.[1]

Favourable investment landscape

Image result for boi thailand

Since year 2015, the Thailand Board of Investment (BOI) has incepted a 7-year long investment promotion strategy which seeks to promote investment in Thailand. With BOI promotion, some of the attractive benefits that an eligible foreign business stands to gain includes years of huge tax exemptions, permit to own land, and free movement of foreign employees and capital from your company overseas. Hence, the application for BOI promotion is a popular among foreign business seeking to expand into Thailand.[2]

Foreign Business License

Unless you choose to incorporate your business with more than 51% Thai shareholders, your business would most likely require a Foreign Business License (FBL) before it is allowed to operate. According to Thailand Foreign Business Act B.E. 2542 (FBA), there are 3 lists of business activities which are subject to such a license, with various routes of approval. You can download a copy of the FBA here. The process of applying for a FBL takes about 2 months.[3]

It is important to engage a Thai lawyer to evaluate the application process together, especially as translation of legal documents and forms is often required too.

Type of Company

Before deciding which type of company to incorporate, you can refer to the table below for some similarities and differences between a Private Limited and a Branch. These are the 2 most common forms of corporate entities for foreigners in Thailand.

Private LimitedBranch Office
LiabilitiesSeparate Legal EntityForeign Main Company subjected to Civil, Criminal and Tax Liabilities
Tax20% tax rate on income derived from its business operations in Thailand
FeesRegistration of MOA: 50THB per 100,000THB capitalApplication Fee: 2000THB
Company Registration Fee: 500THB per 100,000THB capital, Min 5000THB, Max 250,000THBGovt Fee: 5THB for every 1000THB capital, Min 20,000THB, Max 250,000THB
Minimum Registered Capital2M THB5M THB
Employment RestrictionsRegistered Capital of 2M THB/foreign employee in company, up to max 10
No restriction when company employs >100 Thai nationals or paid at least 3M THB in tax to government in the past year
Capital Flow RestrictionsPossibleProfit Remittance Tax of 10% on the amount remitted back to head office
Other commentsHead office expenses owing to branch operations can be tax deductible

At first glance, it is less costly to set up a private limited instead of a branch due to a lower minimum registered capital, and removes liabilities to the head office. However, the points stated above are non-exhaustive.

In Summary

Before you expand to Thailand, it is important for you to decide the application route first and plan ahead according to your business situation. For instance, it might be better for one business to incorporate and apply for a foreign business license first before applying for BOI promotion. This is because the approval process often takes months and the business can be running while awaiting the result.

In contrast, if timing  is not so critical for your business, it might be better to apply for BOI promotion first before incorporating, as the BOI promotion status facilitates the process of securing a foreign business license.

Make sure you have sufficient working capital

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Reference

[1] The World Bank, Thailand Overview

[2] Thailand Board of Investment, Incentive

[3] Thailand Board of Investment, Foreign Business Act of 1999 and Activities Restricted to Thai Nationals