Thailand has always been one of the most attractive business locations in Southeast Asia region. Here we are at the center of economic and business interactions among ASEAN member countries, with a wide range of customers and business opportunities. The most cost-effective and common way would be opening a limited company. This is similar to LLC – Limited Liability Companies in other countries. With well-prepared documents and professional guidance, limited company can be set up in as little as several days.
As a general rule, a Thai limited company limits foreign business ownership to a maximum of 49%, meaning foreigners can hold no more than 49% of the shares. Inexperienced or misinformed investors may try to get over this obstacle by engaging Thai nominee shareholders to hold a 51% stake in the business on their behalf, however, this action is in violation of the Foreign Business Act established in 1999 and should be treated with caution.
How To Incorporate A Company In Thailand?
STEP 1: Company Name Reservation
The first step in setting up a company in Thailand is to reserve your company name. The name must not be the same name or resembles the name of any existing registered company in Thailand. The company name must end with the word “Limited”. The reservation of the company name can be done online at the Department of Business Development (DBD) website. The application for name reservation is normally approved within 1-3 days.
STEP 2: Filing Of Memorandum Of Association
A Memorandum of Association (MOA) must be filed with the Department of Business Development (DBD) in the Ministry of Commerce and must include the name of the company that has been successfully reserved, the province where the company will be located, its business objectives, the capital to be registered, and the names of the promoters. Although no minimum capital requirements have been set up, the amount of the capital should be adequate and reasonable enough for the intended business operations.
STEP 3: Convene A Statutory Meeting
A statutory meeting is convened to make all the appointments once the share structure for the company has been defined, the Memorandum of Association and the Articles of Association are approved, the Board of Directors is elected and an Auditor is appointed.
STEP 4: Registration
The Company Directors must submit the application to establish the company within 3-months of the date of the Statutory Meeting, together with Company registration fees.
STEP 5: Tax Registration
After the company registration and within 60 days of incorporation or the commencement of operations, you will need to apply for and obtain a company corporate tax ID card from the Revenue Department.
STEP 6: Opening A Company Bank Account
Companies can open a corporate bank account in Thailand after they have been officially registered. Which bank and branch, what type of accounts the company requires, and who will sign are some of the information needed to open a company bank account.
How Can A Foreigner Owns A Majority Or Even 100% Shares In Thai Co.?
There Are Two Ways To Achieve 100% Ownership In A Thai Company:
1. Obtain A Foreign Business License
A Foreign Business License (hereinafter referred to as “FBL”) can be loosely understood as a Work Permit for companies. Just as foreigners in Thailand can only engage in certain occupations and are required to have a Work Permit to be able to work, foreign companies can also operate merely in the selected categories and need an FBL.
FBL only allows you to operate the permitted business type in Thailand. There are other requirements like registered capital.
The Business Lists under the Foreign Business Act B.E.2542 (1999)
- Business List 1: covers Business which foreigners are not allowed to operate.
- Business List 2: foreigners can operate business if permitted by the Minister of the Ministry of Commerce with the approval of the Cabinet.
Foreign companies that wish to engage in business activities under list 2 can apply for the FBL by meeting the following criteria:
- Minimum capital of THB 3 million
- Not less than 2/5 of the total number of directors must be Thai nationals.
- A minimum of 40% of Thai shareholding. The Minister together with the Council of Ministers’ approval may reduce the requirement, but to not less than 25% for certain cases.
Once the requirements are met, the foreign company can apply for the FBL through the DBD by submitting the application and supporting documents. The Minister shall consider whether to approve within 60 days from filing the application. Once the Minister has approved the application, the license shall be issued within 15 days from the approval date. However, the full process may take up to four months. If the Minister refuses to give permission to the foreign company, the Minister shall notify the foreign company and state the reason of refusal in writing and within 30 days. In the case that the foreign company has received approval to engage in activities under List 2 from the BOI or a foreign trade agreement, the foreign company will only need to apply for the foreign business certificate.
Application Fee for Business List 2: 10 Baht for each registered capital of 1,000 Baht with the minimum of 40,000 Baht and the maximum of 500,000 Baht.
- Business List 3: foreigners can operate business if permitted by the Director – General of the Department of Business Development with the approval of the Committee
The criteria to be met for foreign companies seeking to engage a List 3 business are:
- A minimum capital of THB 3 million
- At least one authorized director or member residing in Thailand
- The foreign company must submit the application and necessary documents to the Director-General of the DBD.
The Director-General shall approve within 60 days of filing the application, and the Director-General shall issue the license within 15 days after the approval date.
If the Director-General does not approve the foreign company operating activities in List 3, the Director-General shall notify the foreigner and state the reason for such refusal in writing and within 15 days.
Similarly, to List 1 and 2, a foreign company that received approval to operate under List 3 by the BOI or under a foreign trade agreement only needs to apply for a foreign business certificate.
Application fee for Business List 3: 5 Baht for each registered capital of 1,000 Baht with the minimum of 20,000 Baht and the maximum of 250,000 Baht.
We would strongly advise you to discuss with our attorney to provide you with comments and evaluate which type of company is best suited for your business operation in Thailand.
2. Board Of Investment (BOI) Promotion
The Thailand Board of Investment (hereinafter referred to as “BOI”) is a division of Thai government that promotes business start-ups and projects in areas that are deemed desirable for the economic outlook of Thailand.
Nowadays Thailand Board of Investment offers promotional privileges in 8 key sectors:
- Agriculture and agricultural products
- Minerals, ceramics, and basic metals
- Light industry
- Metal products, machinery, and transport equipment
- Electronic Industry and the electrical appliances
- Chemicals, paper, and plastics
- Services and public utilities
- Technology and Innovation Development
Tax incentives given to promoted entities by Thailand BOI can be separated into two different categories:
- Activity-based incentives that depend on the type of activity
- Additional merit-based incentives that are provided to projects benefitting the country.
Some of the most important Tax and Non-Tax Incentives under BOI include:
- Corporate Income Tax exemptions for a minimum of 3 years to a maximum of 8
- Exemption of Import duties on machinery
- Exemption of import duties on raw materials used in R&D
- Permission to bring to Thailand skilled workers and
- Permit to own land
- Permit to take out or remit money abroad in foreign currency
To receive the BOI investment promotion certificate, the applicant must establish a Thai company within six months of acceptance approval. The following documents must be submitted to the OBOI offices in due course:
- Application form for BOI promotion certificate
- Memorandum of association
- Certificate of company registration
- Certificate stating the registered capital, authorized directors indicating signing authority and the registered address
- Shareholder list
- Evidence of the transfer of funds from overseas, or an investment certificate issued by the Bank of Thailand
- A Joint ventureagreement, licensing or franchise agreement, technical assistance contract and/or technology transfer contract.
If the applicant is unable to submit the documents within the required time frame, an explanatory letter must be sent to the BOI, which will consider extending the deadline by 4 months at a time, up to a maximum of three times. The BOI will issue the investment promotion certificate after receipt of all specified documents, and the promoted company must follow the conditions laid out in the BOI investment promotion certificate.
Foreigners who want to own 100% of their business should consult with our BOI attorney on how to maximize your chance of success and get the most out of these incentives.
Finally, please be reminded that the BOI Application and Set up Company Limited are separate process and separate government unit to handle the application. The BOI Application belongs to the Board of Investment, the company limited belongs to the Department of Business Development. You have a choice to submit the application for BOI privilege then register the company after you get approved (we suggest to go on with this choice, because you can be assured that you will be granted privilege before proceeding). Or you can also set up the company, then submit the application for BOI under the company’s name.