Knowledge
How To Set Up a Company in Thailand as a Foreigner (2019)
It can be a massage parlor, an agency, a bar, restaurant, club, or an import/export company. Opening a business in Thailand might seem like a lucrative idea. Nevertheless, the procedure is the same. At some point, the business will grow and so will be the risks. To legally conduct your business and moreover, to protect your business and yourself as an investor under Thai law you will need to form a company.
- Certainly, the most beneficial type of company for foreigners is a BOI company - A company certified by the Board of Investment. Here, foreigners can own 100% of the shares and, furthermore the company can own land. However, the requirements are very strict and only companies that bring benefits to Thailand (high-tech, innovative, etc.) get this certificate
- Best suited for foreigners with small businesses is a Thai majority owned private limited company.
What are the advantages of having a company in Thailand?
Certain business activities require a company
Certain business activities such as import and export in larger scales or even buying certain goods require official company documents. Especially when importing goods, it is essential to have a company to have get import permits that are required at the customs.
Legal entity - you as an owner are not fully liable in case of insolvency
A company is a legal entity, in such that you as an owner are not fully liable in case your company goes bankrupt or even has dept due to a lawsuit. Regardless of your company's huge dept you are only liable for the amount of the registered capital - no more. Nobody can touch your private savings for the amount that exceeds the registered capital of your company.
Example:
Your company's depts 3,000,000 THB
Registered capital: 600.000 THB
Your wealth: 10,000,000 THB
=> In case of bankruptcy you don't have to pay more than your registered capital (600.000 THB)
Many company expenses can be deducted from tax
As an employee, you pay your bills and expenses with the net salary after tax deductions. However, a company on the other hand is taxed for the net profit (the amount that is left after all expenses). Many expenses (even those you actually use for private purposes) can be claimed as company expenses: Car, investments, laptop, phone, property, travel expenses, rent, office materials, furniture (to some extend). And only the remaining amount from your profit is subject to corporate tax.
You can get a business visa and work permit
You can apply for a work permit through your company. That means no more visa runs, no repeated hassle at immigation.
Requirements:
- Registered capital of more than 2,000,000 THB
- employing at least 4 Thai nationals per foreigner
You can (indirectly) own land and properties through the company
Your company can own land and property, while foreign individuals can't. However, government officals strictly screen companies (with foreing shareholders) that own land and properties, to see if there is an illegal nominee structure.
Your company can get loans from banks - while foreign individuals usually can't
A Thai private limited company is a legal entity. You can consider it as a Thai individual (thus having more rights than a foreign individual). While foreigners usually can't get loans from Thai banks, a company can. Regardless of the shareholders.
Disadvantages of having a company in Thailand
The disadvantages are not intended to discourage you. Rather, it will give you an overview of things you have to bear in mind before engaging in a business in Thailand.
You need a Thai partner (real or nominee)
In order to register your company as Thai company (and therefore evade a long process) you need to find a Thai partner. This partner will hold 51% of the shares. Although you can make sure that you keep full control of your company through "preferred shares" (more on that later), you should find a trustworthy local partner. It will spare you lots of headache.
You need a lawyer to go through the registration process
In a country like Thailand, where one would think authorities try to do everything they can to promote and ease the business opening process, reduce bureaucracy, and standardize documents to attract foreign investment. However, it's quite the opposite. A company registration process (company registration, VAT registration, office contract, bank account) can take up to several weeks. You need a lawyer to prepare the documents and go to the DBD (Department of Business Development). You can't do it by yourself as you don't understand the legal terms, not to mention the fact that documents are in Thai language only.
You need an office space (no condo or apartment)
You need an actual to register your company. This can be an office, townhouse or rented building. Theoretically you could use your condo or apartment as your company address. Yet, this is very difficult because you need a permission from your landlord and juristical office of your condominium. Usually they don't allow this. A cheap option would be a virtual office type of package. Some companies are specialized to offer such an address package for company registration and mail forwarding with a small booth for as little as 3000-6000THB/month.
Obligatory monthly report for revenue department
Although Thailand appears to be a relaxed place, demands from the revenue department are quite strict. You need to keep books, make a monthly report and a yearly audit. Also, the time frame to submit the monthly report is quite narrow. Thus, an accountant is needed. For startups with little workload, there are accountants who can offer their service for 3000-6000THB/month. Of course, they won't be available like a full time employees.
You must follow up on everything
This is a valid rule for doing business in every country. But even more true in Thailand. You can't rely on anybody doing his/her job on time or in a properly manner. Especially if you paid them upfront. Always double check. If something takes longer, don't wait - you must follow up on it. Often there might be a document missing. Your lawyer, accountant bank officer or supplier might just have put your case aside and forgot to notify you. If you don't ask, it will be forgotten. Nobody will take care of your issues. Be polite, but keep asking for an update when the deadline comes closer. If they say they call you back, but didn't after one day, be sure they won't call anymore. You have to call back and ask.
Bureaucracy is slowing you down
You will find that even the simplest things need paperwork. It can be a form, your signature and a passport copy and require several days to process. While the process opening a company (plus bank account) takes only one day in some countries, this is certainly not the case in Thailand. Sometimes, due to the language barrier it is hard to understand certain regulations and requirements. In the end, you have to hand in missing documents later. It will cost your time.
Busy traffic in Bangkok: Thailand is a thriving, dynamic country with many business opportunities
Setting Up a Thai Private Limited Company - A step by Step guide
Side notes:
- Company registration can be done remotely - You don't even need to be in Thailand
- If you don't need an actual office, there are several companies offering a 'virtual address' for 3500 - 7000 THB per month
- Original documents with your (and your partners') signatures are required - This can be done via mail
- For the company bank account opening at least one of the shareholders must be present (requirements from Thai banks)
- Through a 'preferred share' structure you can keep control of your company, as your shares will have the majority of voting rights - despite your Thai partner owning 51% of the shares
- A majority of voting rights is needed for any decision related to your company (hiring someone, address change, opening closing bank accounts etc.)
- Up to 5M THB registered capital: foreigners don't need to show proof of sufficient funds during registration - unless the company requires a work permit
- Thai nationals have to provide proof of sufficient funds in their personal account (25% of the registered capital)
- To avoid this requirement, Thai partner's shares can be initially set to 1% (yes, it's possible for the initial registration phase), later on the share allocation can be changed to 49%/51%
- Another workaround: transfer the amount to Thai partner's bank account (temporary) to get the proof from the bank
1. Clarify the details with your lawyer
Communicate the details about of business. Your lawyer will give you a pricing based on these information. This should be between 27,000 - 60,000 THB. However, some legal firms specialized on foreign clients will have a higher pricing. Payment is usually done upfront. Furthermore, if you are not in Thailand, your lawyer will prepare all documents that need your signature. Therefore, it is important to clarify the main points right from the beginning.
What the lawyer needs from you:
- Your preferred company name (give 3 options in order of preference);
- Objectives of the company; broad statement covering all activities
- List of shareholders with passport (foreign) or ID card (Thai) copies;(must be at least 3 shareholders, including 1 Thai national)
- Director(s) of the company (minimum 1, does not need to be shareholder) (copy passport and address or ID card if Thai);
- Director's signing authority (if more than one, will they sign together? With the company seal?); it is recommended to give Thai shareholder director authority to sign government documents on your behalf
- Company logo, if any; for the company seal
- Company auditor; (accountant for the monthly report and yearly audit)
- Accounting period; e.g. January 01 to December 31 (can be chosen arbitrarily)
- Amount of capital (minimum 2 million in case a work permit is required in the future. Does not need to be shown if under 5m);
- Confirmation about investments done before set up, if any; (an accounting option)
- Signed Copy passports (or Thai ID cards) and current addresses of three shareholders;
- Division of the shares (% per shareholder); Thai shareholder at least 51%
- VAT registration needed? (required for exporting companies and if capital is more than 1.8M THB)
- Work permit needed? (requires 4 Thai nationals to be employed in your company with social security)
- Signed copy of Thai shareholder's house Registration Book (Tabien Baan)
- Proof of funds (25% of total capital) in Thai partner's bank account available? If no, set Thai shares low initially (can be changed later)
- Company address: copy of signed rental contract and permission of landlord (ask lawyer for form)
2. Company name registration (3 - 7 business days)
After you discussed the details and gave all required information and documents, your lawyer will apply for your proposed company name to the Department of Business Development (DBD). This step usually takes 3 - 7 business days. The DBD checks whether this name already exists and if it is conform with their rules (e.g. no offensive name, not insulting the crown).
Image: Lumphini Park, Bangkok - Company registration process can be time consuming in Thailand
3. Company Registration (3 - 7 business days)
After the company name has been approved, the actual company setup process starts. The lawyer will prepare all required documents which need to be signed by you and your partners. Then, we will go to the DBD to submit the documents on your behalf. After 3-7 business days, the registration is complete. You will get a government handed official document stating:
- Certificate of incorporation
- Memorandum of association
- Affidavit stating company objectives
- Address
- Shareholders
- Share allocation
- Registered capital
- Director(s)
- Minutes of statutory meeting
- other details (e.g. who has the director's signing authority)
4. Corporate Bank Account opening (2-5 hours; online banking: 5-10 business days)
For this step, it is the first time that at least one shareholder needs to be present. Visit the bank and get information regarding their offered corporate account packages. Recommended banks: Kasikorn Bank, Bangkok Bank, SCB or UOB. Banks don't accept power of attorney for the corporate bank opening process. You or your lawyer needs to prepare a minutes of meeting (can be Thai or English) that states following points:
- Date and Time
- Shareholders present
- shareholders agreed to open a bank account (specify exact account type: savings, current, internet banking, foreign currency account etc.)
- who (of the shareholders) will be present for the account opening
Documents you need to bring to the bank:
- Minutes of meeting (original and signed & company seal)
- copy of all shareholder's passports; can be copy of ID card for Thai national (all original signature)
- Original passport of the shareholder who is present for account opening
- Signed copy of Thai shareholder's house Registration Book (Tabien Baan)
- Signed copy of company affidavit
- Initial deposit: required by certain banks
- Company seal (needed when signing documents at the bank)
This process takes much longer (3-5 hours) than the usual personal account opening. The bank officials will go through every detail in the affidavit, check all shareholders bank history from a worldwide database (similar to a criminal record). If everything is okay, you will need to make an initial deposit. The amount depends on the bank. In addition to that, online banking activation can take 5 - 10 business days. You can give the power of attorney to collect the online banking password & token on your behalf.
5. VAT registration (3-5 days)
The last step for a basic company set up is the VAT registration. This can only be done after bank account opening. A signed copy of the last updated balance of your Thai baht corporate account passbook is needed. Along with it, the VAT application documents (about 60+ pages) need your (or any company director's) signature. Hand these to along with signed copies of each shareholder's passport to your lawyer. He will prepare the documents and submit them to the responsible government department. Again, this step will take 3-5 days for approval. You will get a VAT approval (PP.01).
After an additional 10-14 days, you will receive the final VAT certificate (PP20).
6. For Import & Export Companies: Get a "paperless" customs license (2-4 days)
If your company is exporting or importing goods, your company needs to get a customs license - also known as 'paperless' license. Best option is to let your lawyer handle it since everything is in Thai. Again you need to sign several forms. However, here you will also need to hand in your original passport for further processing. It takes 2 -4 days.
Important: Obtaining a customs license doesn't mean your company can import all kinds of goods. For certain products there is a special import permit needed from the Food and Drug Administration (FDA) in Thailand. These products are for instance: Food, pharmaceuticals and medical devices.
Summary
Setting up a company in Thailand is a straightforward process if you hire a lawyer to do it on your behalf. He/She will handle the process remotely. However, you need to be present for the corporate account opening. Nevertheless, it might take up to several weeks. Also, put into account that small mistakes will delay the process.
This can be a page without your signature or a missing document that your lawyer forgot to let you sign. Thus, always ask the estimated duration and don't forget to follow up. Also, it is wise to let other Thai speaking people to check the details on the forms you sign. A detail might have been written wrong, so it is a good idea to double check.
