Features of company registration in Thailand

The relevance of Thailand’s jurisdiction lies in the fact that it ranks second in terms of the economy in Southeast Asia. The reason for this is a well-developed infrastructure, the economy of free enterprise, and support for small and medium-sized businesses at the state level. Thailand is a great option for entrepreneurs who want to scale and enter the Asian market. In addition, the country carries out a number of actions in order to maintain a good reputation on the international arena. In particular, Thailand has ratified the Convention on the Implementation of Measures Related to Tax Agreements in Cooperation with the OECD. Thus, the country’s government aims to cooperate and achieve compliance with international taxation standards. Nevertheless, the jurisdiction has many nuances that should be familiarized with before registering a company in Thailand.

Peculiarities of corporate taxation in Thailand

One of the main nuances of the jurisdiction is the determination of the tax residence of the company, which directly affects the payment of corporate tax. So, any company registered under the laws of Thailand is a resident company and liable to pay tax on worldwide income. Therefore, even if you do not operate in Thailand, your company is subject to income tax without any exemptions.

The corporate income tax (CIT) rate in Thailand is progressive and depends on several factors. As a general rule, companies pay 20% of all profits. If the paid-up capital of the company does not exceed 5 million THB, and the income varies from 300 thousand to 3 million THB, then the tax rate in this case will be 15%. Small businesses whose revenues do not exceed 300,000 THB are exempt from taxation.

VAT

According to Thai law, value added tax is levied on the sale of goods and the provision of services at a rate of 10%. The country’s government lowered the VAT rate until September 30, 2023, and therefore at the moment it is 7% with a possible extension of such a benefit. Exports are zero-rated, while a number of goods and services are exempt from VAT altogether (e.g. some food, education, healthcare, real estate leasing, real estate sales, etc.).

Conditions of company registration in Thailand

One of the shortcomings of the corporate law of Thailand is the condition regarding the citizenship of the founders of the company. Thus, 51% of the company’s shares must be owned by a Thai citizen/citizens, while foreign citizens are allowed to own no more than 49% of the company’s shares. If this condition is not met, that is, foreigners own the majority of shares, it is necessary to obtain an FBL – foreign business license.

In addition, Thailand’s Foreign Business Law contains a list of activities that are strictly prohibited for companies with 100% foreign ownership. Among them are farming, horticulture, agriculture, animal husbandry and other activities close to Thai culture.

If the company is going to hire foreign workers, it must comply with the following requirements:

1. The minimum registered capital of the company is 2 million THB.
2. The company hired 4 Thai workers on one foreigner to obtain a work permit.

Thus, in order not to fall under the specified restrictions, it is necessary to carefully select the types of activities that are not prohibited for companies with a foreign element.

Non-residents, as a rule, register companies with the organizational and legal form of Limited Company. The structure of the specified company must have at least 1 director and 3 shareholders of any nationality. The advantage of a Thai company is its remote and fast registration procedure. However, opening a corporate bank account requires a personal visit to Thailand by the person who will manage it.

Advantages of the company in Thailand

By registering a company in Thailand, you will receive:

• Access to the Asian market in a jurisdiction with a developed and stable economy;
• Possibility of exemption from taxation or reduced rates for small and medium-sized businesses, low VAT rate;
• Low taxes on passive income – 10% on dividends, 1% on interest, 3% on royalties.
• Corporate account in the country of company registration;
• Absence of currency control and stamp duty.

Disadvantages of the company in Thailand

Among the disadvantages of opening a company in Thailand, we can highlight:

• The company is recognized as a resident and pays tax on worldwide income, regardless of whether it operates in Thailand;
• The legislation contains a number of restrictions on company registration by foreign citizens;
• If a foreign business license is needed, the procedure for obtaining it is quite complicated and takes up to 4 months;
• Thailand has signed a CSR agreement and will exchange financial information with regulatory authorities from September 2023;
• To open an account in a Thai bank, the personal presence of the account holder is required.

Therefore, Thailand’s jurisdiction for doing business is quite controversial, as the country’s laws contain quite a lot of obstacles for foreign investors/founders. However, in contrast to all the nuances, Thailand is steadily in demand among entrepreneurs thanks to comfortable conditions for starting and developing their own business. Thus, it is worth getting to know the possible issues in more detail so that the disadvantages of the jurisdiction do not outweigh its advantages in your particular case.

A team of Azola Legal Services specialists will help you to resolve legal issues and support your business in Thailand!