Foreigners who wish to conduct business activities in Thailand should be made aware of several key prohibitive restrictions prior to considering commencement of their business, however, this is not meant as a discouragement of doing business in Thailand, and indeed, notwithstanding the recent economic and political changes, Thailand still remains a very vibrant economy and possesses lucrative business opportunities (relative high GDP growth, low income and educated work force, good transportation and communication and good facilities to support business activities).
For illustrative purposes, to name but a few key notable prohibitive restrictions placed on foreigners in the areas of: services (IT, leisure, consultancy, etc.), property and real-estate (developers, construction, hotels, trading, etc.), retail/wholesale, etc. In addition to such, there are further restrictions on key sensitive sectors such as: finance, insurance, communications, aviation, etc. which require further special approvals. In order to be able to conduct any of these restricted activities foreigners are faced with 4 choices:
(a) Obtain an exemption via a Foreign Business License or a Business Operating Certificate – not very popular and favorable option as it imposes several additional requirements, takes a long time to obtain and unless for special circumstances unlikely to be granted; or
(b) Obtain an exemption under the Board of Investment scheme (“BOI”) – this exemption is reserved for specific preferred and desired business activities which Thailand places priority on for its national interest and in addition provide incentives and rewards for such business activities; or
(c) If you are either a US or Australian national or you wish to conduct your business in a designated Industrial Zone – for these categories there is some easing of the restrictions
(d) Set-up a Thai company- a Thai company is not subject to any of these restrictions and is indeed the most popular option (especially for those who do not qualify for a BOI exemption or do not wish to conduct their business in an Industrial zone).
Setting up a company in Thailand is relatively straight forward, easy and takes only about a few weeks at the most, however, the ‘catch’ here is that you have to partner up with a local Thai national and he has to hold the majority of shares (50% and more) in order for the company to qualify as a Thai company. Nevertheless, the company can be structured is such a way that the foreign shareholder will maintain ‘control’ over the company by retaining: (i) higher ratio of voting rights; (ii) right to all dividends; (iii) rights to all profits; and (iv) right to nominate directors.
In addition, a few basics to note about a Thai company:
- Shareholding – minimum of 3 shareholders/founders (one of which must be a Thai national holding at least more than 50% of the shares in the company)
- Directors – minimum 1 director (if foreign director, it must have obtain a Work Permit)
- Minimum Capital Requirements – Baht 100,000 (company without a foreign employee); Baht 2-3 million, depending on the type of business activity (company with foreign employee). For every additional foreign employee, additional Baht 2-3 million will have to be injected. The injected capital amount can be used for operating and capex expenses of the company.
- Minimum Employment Requirement – None (company without a foreign employee); 4 Thai employees for every 1 foreigner ratio (company with foreign employee). A foreigner working in a Thai company as a director or otherwise, must obtain a Work Permit, topic which is discussed separately under the article: ‘Want to work in Thailand- these are few of the things you must consider and be aware of’.
There are obviously other matters which require consideration with regards to setting up a company in Thailand such as: contracts and relationships, tax, employment, etc., however, such matters are beyond the scope of this article. Although Thailand is ranked at 49th place according to the ‘ease of doing business 2016’ scale, as long as you get good and knowledgeable advisers to assist you overcoming the maze of Thai bureaucracy and environment, you should be able to slide in with relative ease.