Your business setup in Thailand must meet compliance standards both before and after the incorporation. Therefore, it is critical that you adhere to these legal obligations. This article will discuss the corporate compliance criteria that a Thai business must meet.
Business Setup Requirements in Thailand
Company Name
Applicant must reserve the name of the firm with the Ministry of Commerce’s Department of Business Development (DBD).
Even though the company name is in English, it must end with the term “Limited” with registration in the Thai language.
The name will be valid for 30 days after its authorization, without any type of extension.
Director(s)
At least one director of a Thai firm must be at least 20 years old, a Thai resident or non-resident, and not incompetent or bankrupt.
Shareholder(s)
In Thailand, a company must have a minimum of three shareholders. Under certain conditions, foreign investors can own 100% of the company.
However, foreigners can own a maximum of 49% of business activities that have permission only for Thai citizens.
Memorandum of Association (MoA)
During the registration process, the company’s founders create a Memorandum of Association (MOA). It is a legal document.
The MOA should include the following information:
- Private limited company
- Company name
- Company’s valid and legal office location
- Company’s objective
- Registered capital
- Name, address, age, occupation, and number of shares that persons who start up the company reserve to buy
- Name, address, and age of two witnesses
- Public limited company
- Company name
- The purpose of the company is to offer shares for sale to the public
- The objective of the company
- Registered capital
- Location of the company
- The name, dates of birth, nationalities, and address of the promoters, and the number of shares each of them have subscribed
Display of Company Name
The company name must be prominently displayed at the office. Importantly, the company’s name must be on papers such as invoices, letterheads, and receipts. Additionally, the company’s name must be displayed together with the words Company Limited or Limited.
Registered Address
In Thailand, companies must have a registered location in order to obtain paperwork from government agencies. However, it can be any legal street address where the owner or legal tenant has given the firm permission to use the location as the registered address.
Moreover, virtual office spaces or fitted desk space solutions are available to companies that do not have a registered address.
Compliance Requirements for ongoing Business in Thailand
General Meeting of Shareholders
The first general meeting of the company should be held within six months of its incorporation. Additionally, subsequent general meetings should be held once a year.
Annual Reports
Private and public limited companies must provide the following documents at the end of each accounting period:
- Audited financial statements
- Balance sheet
- Profit and loss account
- Company name
- Director’s details
- List of shareholders
- Minutes of the annual meeting
- Type of business
Accounting & Tax Compliance Requirements
End of Financial Year or Fiscal
In Thailand, a company’s fiscal year ends on December 31. Although, the accounting period is 12 months, yet, new organizations may have a shorter accounting period.
Due to the COVID-19 crisis, the government has announced a few relaxations in the tax payment schedules and deadlines, yet, the fiscal stays the same.
Bookkeeping Requirements
Company accounts and other related papers must be retained at the company’s registered location for at least five years after the account is closed. However, the Revenue Department may extend this to seven years based on the company’s business activity.
The necessary documents, records, and statements include:
- Accounting journal
- Statement of accounts
- Records of payment and receipts
- Profit and loss statements
- Balance sheets
- Records of electronic funds transfer
- Credit card transactions
- Bank statements, including cheque records
- Internal or external audit reports
Financial statements, accounts, and papers must also be written in ink, typewritten, or printed in the Thai language. However, it can be in a foreign language accompanying translated copies in the Thai language.
Audit of Financial Statements
At the end of the fiscal year, companies must prepare audited and verified financial statements. Moreover, audit opinion is necessary when filing financial statements and tax returns. Therefore, the auditor must also express their view on the financial statement.
Corporate Income Tax (CIT) Returns
Companies have 150 days from the end of their accounting periods to file corporation tax returns (Form CIT 50) and pay taxes.
Business setup in Thailand that exclusively dispose of funds/profits from Thailand must pay corporate income tax. Additionally, they should file Form CIT 54 within seven days of the disposal date.
Employment Law Compliance in Thailand
Annual Leave
Employees who have been with the company for a year are eligible for at least six days of yearly leave.
The company and employee might agree to carry forward any unused annual leave to the following year.
Sick Leave
Each year, employees can avail 30 days of sick leave. If an employee takes more than three days off due to illness, they must provide a medical certificate to their employer.
Maternity Leave
Employees who are pregnant are entitled to 98 paid days of maternity leave. Moreover, this includes days off for prenatal checkups.
Employers will pay the entire salary of a female employee for the first 45 days of maternity leave. Additionally, social security will cover the remaining 45 days.
Paternity Leave
Only employees in the public sector are eligible for paid paternity leave of 15 days.
Social Security Fund
Social security in Thailand covers the following individuals:
- According to Section 33, an employee who is not younger than 15 years old and not older than 60 years old
- Section 39 states that an employee who is an insured person under section 33 having paid contributions for a period of not less than 12 months and ceases to be an insured person by ending to be an employee.
- As per Section 40, any other person who is not an employee under section 33 or section 39
The rate of social security contribution is 5%.
The minimum and maximum salaries for calculating social security contributions are THB 1,650 and THB 15,000. Therefore, the contributions will be THB 83 and THB 750 respectively.
By the 15th of the next month, social security contributions must be made to the Social Security Administration.
To avoid getting penalized or facing other legal consequences for your business setup in Thailand, you must adhere to all compliance standards. Please do not hesitate to contact Konrad Legal for assistance with compliance obligations. Therefore, mail us at [email protected] to book your consultation session.
