The Kingdom of Thailand is Southeast Asia’s second-largest economy with its Top 3 Fast-Growing Industries in e-Commerce, automotive and manufacturing, and infrastructure.
According to information from Harvey Law Group, an international law firm specializing in corporate immigration for founders and investors, Thailand is becoming increasingly attractive as a place for foreign companies to get work permits and set up businesses in Southeast Asia.
In 2019, Thailand’s exports and major investment projects have been progressively increasing, particularly in the infrastructure sector. Public and private investment is also increasing in the government’s megaprojects, such as those in the East Economic Corridor (EEC) investment zone, covering three provinces of Rayong, Chonburi, and Chachoengsao. This is also where the government is trying to attract foreign direct investments.For this reason, many foreign employees and contractors might be looking to work in Thailand in the near future. Here are some of its policies to help you understand the Thai labor laws for foreigners.
Here’s all you need to know about doing business in Thailand:
- Why is Thailand an attractive option for foreign direct investment?
- How to incorporate a company in Thailand?
- What are the laws, rules, and regulations for doing business in Thailand?
- Are there any measures protecting minority investors doing business in Thailand?
- Can foreign companies trade across borders in Thailand?
- What are the types of business structures available for foreigners doing business in Thailand?
- What are the investment promotion efforts taken by the government to improve foreign direct investment in Thailand?
- Are there any dedicated areas to further support the ease of doing business in Thailand from the BOI incentives?
- How long does it take to incorporate the BOI company?
- What are the advantages for businesses that are considering incorporating in both Thailand and Singapore?
- What are the impacts of COVID-19 on foreign businesses in Thailand?
Why is Thailand an attractive option for foreign direct investment?
- Gateway to Southeast Asia and Southwest Pacific, strategically located in the heart of the Mekong region with close proximity to China and India.
- Second largest economy in Southeast Asia with an open economy and participant in many bilateral FTAs in addition to the AFTA, allowing businesses to engage in virtually tariff-free or low-tariff trade.
- Government policy is favorable to free trade and investment in Thailand, with laws that protect the interest of minority investors and generous tax and non-tax incentives (BOI, EEC, IPA) offered.
- Ease of doing business in Thailand is well documented in the World Bank’s Doing Business 2020 ranking, due to the ease of company set up and clear legislation.
- Cost-effective, skilled, and diversified workforce.
How to incorporate a company in Thailand?
The most common type of a business entity for foreigners to incorporate in Thailand is a Thai Limited Liability Company (LLC). The registration for this type of company is very straightforward, and the type of activities it can engage in is broad.
Here’s a timeline of starting a business in Thailand:
What are the laws, rules, and regulations for doing business in Thailand?
After you have successfully incorporated a company, you will still have to tackle a few legal hurdles and ensure compliance with regulations. This includes:
- Minimum registered capital
- Work permits
- Foreign worker quota
- Regulations & licenses
- Financial compliance
- 20% corporate income tax
- Social fund registration
- Secretarial & administrative functions
More details in the diagram below:
Are there any measures protecting minority investors doing business in Thailand?
Unless the business has received an exemption, such as a Foreign Business License, foreign ownership in Thai companies is limited to 49%. To measure investors’ rights and role in major corporate decisions, there are Civil and Commercial Code which governs private natural and juristic persons, and also Public Limited Companies Act:
Public Limited Companies Act
- Every shareholder has the right to inspect minutes and records of company meetings and receive a copy of the company’s balance and financial statements.
- 25 shareholders representing 10% of the total number of shares sold can call for an extraordinary meeting (Section 100).
- Shareholders holding at least 5% of shares may bring an action against directors for breach of duty.
- Shareholders representing 5% of the total number of shares sold can inspect the transaction documents before filing suit (Section 128).
- At least 5 shareholders or shareholders holding at least 20% of shares may dispute a resolution of the shareholders passed in breach of the law or the articles of association of the company.
- Shareholders holding at least 10% of shares may petition to the court for a company to be dissolved.
Can foreign companies trade across borders in Thailand?
Import and export businesses or trade businesses are not restricted by the Foreign Business Act. Once a company has been set up in Thailand, it can begin import and export procedures.
Considerations for Traders
- All goods imported into Thailand must be reported to the Customs Department.
- Businesses must check if goods to import or export require license and if so, what agency they must obtain it from.
Border & Documentary Compliance
The process is very straightforward. Here are the lists of documents that are required for importers and exporters to submit during customs formalities:
What are the types of business structures available for foreigners doing business in Thailand?
Foreign Business License
Thai law regulates the activities that majority foreign owned companies are allowed to engage in under the Foreign Business Act (FBA). According to the FBA, the term “foreign company” means:
- Natural person not of Thai nationality.
- Juristic person not registered in Thailand.
- Juristic person registered in Thailand having the following characteristics:
- Having persons under (1) or (2) investing 50% of the total capital of the juristic person.
- Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager.
- Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2), or (3).
The advantage of a foreign business license is that foreigners can hold 100% of the company’s share value.
US Treaty of Amity Company
The US-Thailand Treaty of Amity and Economic Relations (AER) allows US citizens and businesses incorporated in the US or in Thailand that are majority-owned by US citizens, to engage in business on the same basis as Thai companies. This may exempt them from most restrictions on foreign investment imposed by the Foreign Business Act.
The representative office is a Thailand-based office of a foreign company that is in the business of international trade. It helps to facilitate the import and export of goods by its head office and is characterized by the following features:
- Representative office does not receive any revenue from providing services.
- It can’t receive any purchase orders or make sales or negotiate business with third-parties.
- Its expenses are paid entirely by the head office.
- It is not subject to any corporate income tax (except for interest).
What are the investment promotion efforts taken by the government to improve foreign direct investment in Thailand?
The Board of Investment (BOI) Thailand is the principal government agency for encouraging investment in Thailand by offering tax incentives and non-tax incentives to eligible companies. The BOI incentives aim at enhancing competitiveness and facilitating investments by offering attractive packages. Among them are:
Eligible Activities for BOI Incentives
In order to qualify for BOI requirement, a company must engage in at least one of the eligible business activities listed by the board. The categories from BOI requirement activities are:
BOI Requirement Criteria for Granting Investment Incentives
There are two types of BOI incentives: activity-based and technology-based incentives. The criteria are stated below:
Are there any dedicated areas to further support the ease of doing business in Thailand from the BOI incentives?
Industrial Estates in Thailand
Regulated by the Industrial Estate Authority of Thailand (IEAT). There are also industrial parks and zones that are privately-owned and operated by the developers.
Special Economic Development Zones (SEZ)
The SEZ are in border areas contiguous to Myanmar, Laos, Cambodia, and Malaysia. There are 13 industrial groups supported by BOI incentives within these zones.
Eastern Economic Corridor (EEC)
The EEC is an ASEAN-leading economic zone for industrial, infrastructure, and urban development across the three provinces of Chonburi, Rayong, and Chachoengsao.
How long does it take to incorporate the BOI company?
BOI license may be a rather complex process to undergo. The timeline can be between 3-6 months depending on the complexity of the business and the responsiveness of the applying company. MPG suggested incorporating the company as a Thai LLC first while waiting to get the BOI license, so said company doesn’t need to wait for months to operate the business in Thailand.
What are the advantages for businesses that are considering incorporating in both Thailand and Singapore?
- Skilled and cost-effective labor force in Thailand, especially in the manufacturing industry.
- Tax efficiency as taxes in Singapore are the lowest in Asean region, zero percent tax divide on capital gains.
- Thailand and Singapore are parties to an agreement that allows them to trade without incurring double taxations.
What are the impacts of COVID-19 on foreign businesses in Thailand?
- There has been a contraction of GDP around 9-10%, as Thailand relies heavily on tourism which contributes around 18% of the Thai GDP.
- Thai government has been given a swift measure to ease the company registration in the COVID-19 situation. Most company incorporation applications and even general meetings of companies can be held online.
- Medical tourism is something that may surge in Thailand, and could be a rethinking of the business model post-pandemic for those that are in the hospitality management industry.
Watch the full webinar session here:
Since April, at Greenhouse we have been working closely with our network of service providers and partners across Southeast Asia to launch a series of webinars on topics like:
- Adaptation to COVID-19
- Business opportunities
- Fast-growth markets
- Market entry strategy
- Opportunities in emerging markets
- Venture Capital
Reach out to us for any questions about this session!
All experts who have shared on this panel are actually partners of Greenhouse, and their company profiles are listed on our platform. To see a comprehensive profile of each company and approach them, click here