Company Incorporation in Thailand

Incorporating a company in Thailand as a foreign-majority shareholding

A foreign-majority company in Thailand is defined as an entity where foreign shareholders hold more than 50% of its shares. Establishing such a company comes with specific challenges and restrictions under the Foreign Business Act (FBA). However, there are pathways to mitigate these restrictions through treaties and government incentives.

Method #1 - Obtaining a Foreign Business License (FBL)

To operate legally in Thailand, foreign companies must apply for an FBL for activities listed under List 3 of the FBA. This application process can be stringent and time-consuming. However, businesses that are unique, do not compete directly with Thai enterprises, or are part of a group of affiliated companies have a higher chance of approval. Operating without an FBL can result in severe penalties, including fines and imprisonment.

Method #2 - BOI Company Promotion

The Thailand Board of Investment (BOI) offers an alternative pathway for foreign companies to achieve 100% ownership by promoting investment in key sectors. BOI-promoted companies benefit from various incentives, such as tax exemptions, import duty reductions, and simplified work permit processes. Eligible sectors include agriculture, electronics, chemicals, and services, among others.

BOI-promoted companies can enjoy a corporate tax rate of 0% and the ability to own land for industrial projects. The benefits extend beyond financial incentives, making it easier for foreign companies to operate in Thailand.

Method #3 - US Treaty of Amity

The US Treaty of Amity and Economic Relations allows American companies to maintain majority or full ownership of businesses in Thailand, bypassing many FBA restrictions. While certain business activities remain restricted, treaty-protected companies are treated similarly to Thai companies in most respects. These companies must still obtain an FBL, but the process is typically more straightforward and expedited under the treaty's provisions.

Method #4 - Alternative Structures: Branch, Regional, and Representative Offices

Foreign companies unable to obtain an FBL through the above methods may consider establishing a branch, regional, or representative office. These structures are suitable for companies looking to manage operations, conduct market research, or oversee regional activities without engaging in direct commercial transactions within Thailand. While these offices cannot generate income locally, they allow foreign companies to establish a presence in Thailand and support their regional strategies.

Method #5 - Different Share Classes

Another method for foreign investors to retain control over a Thai company is by establishing different share classes. By creating preference shares with enhanced voting rights, foreign shareholders can maintain control even if they do not hold the majority of the total shares. This approach allows foreign investors to comply with the local ownership regulations while still having significant influence over company decisions.

What is the structure of a company in Thailand?

Limited Company with Foreign Majority Shareholding (Foreign Business License)

Directors: A Limited Company with a foreign majority shareholding in Thailand requires at least one director. There are no nationality restrictions for directors; however, at least one director must be a resident of Thailand.

Shareholders: The company must have a minimum of three shareholders. For a foreign-majority company, more than 50% of the shares must be held by foreign nationals. The promoters, who will become the initial shareholders, must also be at least three in number.

Share Capital: The minimum registered capital for a foreign-majority Limited Company is 2 million THB, though this amount can be higher for certain restricted activities. At least 25% of the registered capital must be paid up initially.

Office Space Requirements: The company must have a registered office address in Thailand. This requirement ensures a physical presence for business operations.

Employment Requirements: The general rule for employment in a foreign-majority Limited Company is maintaining a ratio of one foreign employee for every four Thai employees. This ratio can vary depending on the industry and specific conditions of the business.

BOI Company

Directors: A BOI Company requires a minimum of one director, with no specific nationality or residence requirements. However, having a resident director can be practical for business operations.

Shareholders: The company must have at least three shareholders. A BOI Company can be 100% foreign-owned, providing greater flexibility for foreign investors. The promoters, who will become the initial shareholders, must also be at least three in number.

Share Capital: There is no specific minimum registered capital for a BOI Company, but the capital must be sufficient to support the business plan and meet BOI criteria. The paid-up capital must align with the approved investment plan and the requirements set by the BOI.

Office Space Requirements: A BOI Company must have a registered office address in Thailand. Depending on the type of business and the BOI category, additional office space requirements may apply.

Employment Requirements: The foreign-to-domestic employment ratio for a BOI Company is more flexible compared to a Limited Company with a Foreign Business License. The ratio is negotiated based on business needs and BOI approval, allowing for more favorable work permit allocations for foreign employees.

Aspect	Limited Company (Foreign Business License)	BOI Company
Directors	Minimum 1, at least one must be a resident in Thailand	Minimum 1, no specific residence requirement
Shareholders	Minimum 3, majority must be foreign	Minimum 3, can be 100% foreign-owned
Promoters	Minimum 3	Minimum 3
Share Capital	Minimum 2 million THB	No specific minimum, must meet BOI criteria
Paid-up Capital	At least 25% of registered capital initially	Must align with investment plan
Office Space Requirements	Must have a registered office address	Must have a registered office address
Foreign to Domestic Employment Ratio	1 foreign employee for every 4 Thai employees	More flexible, based on business needs and BOI approval
Ownership Restrictions	Majority foreign ownership requires FBL	Can be 100% foreign-owned
Work Permit Allocation	Stricter ratios	More favorable and flexible

Documents required for a company formation in Thailand

To incorporate a company in Thailand, you need to prepare and submit various documents. These documents are essential to comply with Thai regulations and ensure your business operates legally. The documents will be used in KYC due diligence procedures, application preparation, and stage of documents submission to the authorities.

Proposed Company Details:

1. Proposed company name.
2. Detailed description of the company’s purposes and objectives.
3. Share Details: Number of shares, share classes (if any), rights attached, and nominal value.
4. Power of Attorney: Signed by each shareholder for submission.
5. A copy of the company’s Memorandum of Association (MOA) and Articles of Association (AOA)
6. Minutes from the statutory meeting approving the MOA and AOA.
7. Copies of the shareholders’ and directors’ passports or Thai ID cards
8. A copy of the lease agreement or title deed for the company’s registered office

Personal Documents for Directors, Shareholders, and Promoters:

1. Copy of colored passport with at least 18 months of validity.
2. Thai ID (for Thai nationals)
3. National identity card, if available. (for foreigners)
4. Proof of a residential address.
5. Resume and contact information.
6. Recent passport-sized photo with a red background.

Corporate Documents for Corporate Shareholders:

1. Certificate of Incorporation.
2. Memorandum & Articles of Association/Constitution and Amendments.
3. Certificate of Incumbency.
4. Proof of the registered address.
5. Board of Directors structure and corporate chart.
6. Corporate representative details and board resolution.
7. Financial statements.

Additional Requirements:

1. Written confirmation that directors, shareholders, and other key individuals are not Politically Exposed Persons (PEPs).
2. Principal place of business address.
3. Source and origin of funds used in the business.
4. Expected location of the company’s customers and suppliers.
5. Information on the beneficial owner if different from the named shareholder.

How do I incorporate a company in Thailand?

Step 1 - Reserve a Company Name

The first step in the company registration process is reserving your company name with the Department of Business Development (DBD). The name must not be identical to or resemble the name of an existing registered company, either in English or Thai. It is recommended to propose three names ranked by priority to maximize the chances of approval. The name will be registered in both languages and will be valid for 30 days, during which the next steps must be completed.

Step 2 - Prepare and Sign Documents

For both Limited Companies with foreign majority shareholding and BOI Companies, the necessary documents must be prepared and signed. This includes the Memorandum of Association (MOA), which must contain the name of the company, the location of the registered office, the company's objectives, the amount of share capital, and details of the promoters and shareholders. At least three promoters are required, who will become the initial shareholders. The statutory meeting must be convened to adopt the MOA, approve the Articles of Association, and appoint directors and auditors.

Step 3 - Register the Company

The application to register the company must be submitted to the DBD. The registration fee for a private limited company is THB 5,500 per THB 1 million of the registered capital. For BOI Companies, additional requirements may apply depending on the type of business and the BOI category.

Step 4 - Register for Corporate Income Tax and VAT

Within 60 days of incorporation or the commencement of operations, the company must apply for and obtain a corporate tax ID card from the Revenue Department. Companies exceeding a yearly revenue of 1.8 million THB must also register for VAT. Documents required include the owner's business premises documents and a copy of the lease agreement.

Step 5 - Social Fund Registration

Both Thai and foreign employees need to be registered with the Social Security Fund (SSF) within 30 days of hiring the first employee. This registration requires copies of ID cards, workplace photos, and details of salaries and positions. Foreigners legally working in Thailand are entitled to the same benefits as Thai employees.

Compliance requirements post-incorporation

Financial Statements:

All Thai Limited Companies must prepare financial statements monthly and have them audited annually by at least one auditor. The financial statements must be approved at the ordinary shareholders' meeting within four months of the financial year-end and submitted to the Department of Business Development (DBD) within one month of approval.

Shareholder Lists:

Directors must prepare and submit a list of current shareholders and those who ceased to be shareholders since the last annual meeting to the DBD within 14 days of the annual shareholders' meeting.

Annual General Meetings (AGM):

An AGM must be held within six months of the company's registration date and subsequently every 12 months. During the AGM, share certificates and a shareholder registration book must be prepared, and any changes in the head office location must be filed with the registrar.

Ongoing Business Compliance Requirements

General Meeting of Shareholders:

The first general meeting of shareholders must be held within six months of incorporation, with subsequent meetings occurring annually. Key documents such as audited financial statements, balance sheets, profit and loss accounts, company name, director details, shareholder lists, and meeting minutes must be prepared and presented.

Accounting and Tax Compliance:

The financial year-end for companies in Thailand is typically December 31st, with the accounting period being 12 months. Newly incorporated companies may have an initial accounting period of less than 12 months. Companies must maintain their accounts and relevant documents at their registered address for at least five years, extendable to seven years depending on business activity.

Bookkeeping Requirements:

Essential documents include accounting journals, statements of accounts, records of payments and receipts, profit and loss statements, balance sheets, records of electronic funds transfers, credit card transactions, bank statements, audit reports, and other financial documents. These must be kept in Thai or a foreign language accompanied by Thai translations.

Audit of Financial Statements:

Companies must prepare audited and certified financial statements at the end of each fiscal year. The auditor's opinion must accompany these statements when submitting them along with tax returns.

Corporate Income Tax Return:

Corporate tax returns (Form CIT 50) must be filed, and taxes paid within 150 days of the accounting period's end. Companies engaged in disposing of funds or profits must file Form CIT 54 and pay taxes within seven days of disposal.

Employment Law Compliance:

Annual Leave: Employees are entitled to at least six working days of annual leave after one year of employment. Unused leave can be carried forward by mutual agreement.

Sick Leave: Employees are entitled to 30 days of sick leave per year, with a medical certificate required for leave exceeding three days.

Maternity Leave: Pregnant employees receive 98 days of maternity leave, with the employer paying for the first 45 days and social security covering the rest.

Paternity Leave: Public sector employees are entitled to 15 days of paid paternity leave.

Social Security Fund: Contributions are 5% of income, with minimum and maximum limits. Contributions must be submitted by the 15th of the following month.

Compliance with Social Security Fund (SSF)

Social Security Fund (SSF):

Social security in Thailand covers employees aged between 15 and 60 years. The contribution rate is 5%, with minimum and maximum salaries for calculating contributions set at THB 1,650 and THB 15,000, respectively. Contributions must be submitted to the Social Security Office by the 15th of the following month.

Penalties for Non-Compliance

Non-compliance with post-registration requirements can result in fines and penalties. Fines for failing to submit audited financial statements can be up to THB 50,000, and failure to register shareholder changes can result in fines up to THB 10,000. Underestimating profits by more than 25% may incur a 20% surcharge, which can increase to 200% for incorrect filings or failure to file returns.

Non-B Visa and Work Permit for foreign founders and employees

Non-Immigrant B Visa

The Non-Immigrant B Visa is essential for foreigners seeking employment or conducting business activities in Thailand. It is specifically designed for those who wish to work, conduct business, or invest in the country.

Foreigners who intend to work or conduct business in Thailand, including investors and business owners, are eligible for the Non-Immigrant B Visa. The applicant must have an offer of employment or a business to operate in Thailand.

Types of Non-Immigrant B Visas:

1. Single-Entry Visa: Valid for 90 days and allows a single entry into Thailand.
2. Multiple-Entry Visa: Valid for one year and allows multiple entries, with each stay lasting up to 90 days.

Work Permit:

A work permit is mandatory for all foreigners intending to work in Thailand. It is issued by the Ministry of Labour and allows the holder to legally work in the country.

To be eligible for a work permit, the foreigner must have a Non-Immigrant B Visa and an offer of employment from a Thai company. The employer must be registered in Thailand and meet certain criteria.