knowledge and practical thai legal information

Thai limited company

Setting up a business in Thailand

When it comes to the intent to operate a business as a foreigner in Thailand the approval requirement under the 'Alien Business Act B.E. 2542 (A.D.1999)' must be complied with. Foreigners can be granted a foreign business license for certain business categories (or may be granted an exemption based on a treaty or specific act (investment promotion)).

Often foreigners chose to circumvent foreign business licensing procedures and operate a business in Thailand under a majority Thai owned limited company. A majority Thai owned (in shareholding) limited company is considered a Thai entity and therefore not restricted by foreign ownership and business limitations. Such arrangements are not straightforward and foreigners are under the Foreign Business Act (section 36 and 37) prohibited from using Thai nominee shareholders.

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General procedure for the formation of a Thai limited company:

1 The first step in the formation of a Thai company is the reservation of a company name. Not more than 3 names (ranked by priority) can be submitted at the time. After approval of the company name, the company registration must be completed with 30 days. Failure with the company registration within 30 days after approval of the name, the second reservation of the company name is required again. The approved name is valid for 30 days, and can registered for another 30 days period each time until the company is registered.

2 The Memorandum of Association has to be filed with the Commercial Registration Department 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, the names of the at least 3 company promoters, and the company must have a business address which it owns or rents.

If the nature of the business of the company is restricted under the Foreign Business Act or other laws then foreign ownership in the percentage of shares must be less than 50% for the company to remain a Thai juristic entity. For some business licensing procedures a lower shareholding may be required and/ or Thai managing director before a specific business license is issued under other specific laws. Under the latest 2012 business registration regulations, when a company formation is requested and submitted with the Department of Business Registration and there is any foreign involvement in the company the Thai shareholders will be investigated to assure that they are not nominee shareholders acting on behalf of the foreigner, irrespective the number of company shares subscribed by the foreigner.

3 Following a statutory meeting is called during which the Articles of Association (by-laws) are approved, the Board of Directors is elected and an auditor appointed. Generally, there are no restrictions as to the nationality of the directors, except for companies that are engaged in certain commercial activities. The Articles of Association are the regulations of the company concerning its internal affairs.

4 A newly established company in Thailand must keep books and follow accounting procedures specified in the Civil and Commercial Code, the Revenue Code and the Accounts Act and is liable for income tax and must obtain a tax I.D. card and number for the company from the Revenue Department within 60 days of incorporation or the start of operations. If it is expected that its gross income will exceed 1.8 million baht per annum it must register for Value Added Tax (current VAT rate is 7%) within 30 days of the date they reach 1,8 million baht in sales.

The general corporate tax rate in Thailand is 30% for companies with a paid up share capital of more than 5 Million Thai Baht. The government has reduced corporate tax rates to promote specific business sectors and small and medium enterprises. The tax rate for companies with a paid up share capital not more than 5 Million Thai Baht at the end of its tax year shall be taxed at rate of: 15% over the first one million Thai Baht profit; 25% over the profit between one million and three million and; 30% for profits over three million Thai Baht.

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