When it comes to a business establishment, Thailand ranks as one of the more attractive options in Southeast Asia. Additionally, tax rates are low, allowing Thailand to compete with Hong Kong and Singapore. Companies frequently choose Thailand as their regional headquarters because of the low tax rate and decent living circumstances. Moreover, it is growing out to be one of the most favorable spots for foreign investors who seek 100% foreign-owned company in Thailand.
A company can establish an entity in Thailand in a variety of ways, and the type you choose will be decided by your specific needs. The following are the most common:
- Representative Office
- Branch Office
- Board of Investment (BOI)
- Treaty of Amity (US Citizens)
Representative offices enable businesses to have a presence in Thailand without having to sell anything. In Thailand, the branch office can operate fully with a sales function. However, the Amity Business Treaty allows for 100% ownership and functions similarly to a Thai limited company. Finally, the BOI provides a variety of incentives for businesses to set up shop in Thailand, with a focus on manufacturing, technology, biotech, and other areas on the cutting edge of science and technology.
Representative Office for 100% Foreign-owned Company in Thailand
A representative office is a facility that allows doing administrative work only. It takes six weeks to set up a representative office.
Activities of a Representative office
- A representative can acquire information on the company’s marketing. They can learn about new items, services, and product prices.
- Companies can use the representative office to retain a presence in Thailand for inspections, product research, and other purposes.
- The representative office can act as a link between potential clients and the corporate headquarters.
- They can look for and provide a source of raw materials for the corporate office in Thailand.
- The representative office is also important for quality control because it may cross-check products to ensure the compliance of standards.
What you cannot do from a Representative Office
- The representative office does not engage in any type of buying or selling. They are unable to make payments, accept payments, or carry out requests.
- Maintenance and installation services for the company’s goods are available.
- They are completely focused on their own items, hence they do not provide advice or information regarding other firms’ products.
- They are not permitted to participate in talks or contract conditions on behalf of the head office with any entity.
Failure to follow the above prohibition can result in a variety of punishments. Representative offices that buy, sell, and conduct negotiations for the head office have to pay tax on any generating revenue. Because the representative office does not engage in commercial activity, a foreign business license is not mandatory. One will compulsorily need a head office by Thai legislation to remit a certain amount of money to Thailand. The money will be the representative office’s treasury base’s capital.
Branch Office
Foreign companies that wish to expand to Thailand can do so by establishing a branch office. The branch office can carry out commercial activities such as buying and selling. The procedure can take between 2-4 months. The mode of operation is similar to that of Thai Limited company without the ownership requirements.
- The head office must first apply for a foreign business license and must stipulate how their business will be beneficial to Thailand.
- Just like in the representative office, the Branch office must show a minimum of investment into Thailand. (3 million baht)
- There is no exemption from tax payments. The branch office must pay corporate tax for income earned.
- Investment volume of the least amount should not be lower than 3 million baht.
Branch offices do not require directors or shareholders as they are wholly owned by the head office.
Board of Investment for 100% Foreign-owned Company in Thailand
The Board of Investment (BOI) is a critical platform for providing individuals with tax benefits. Additionally, expats can take advantage of tax rebates, cheaper tax payments, and other essential benefits through the BOI. Moreover, the need for a BOI qualification is straightforward. However, the leeway for the BOI application process is registration as a Thai limited business. The application process is complex, and it necessitates the assistance of professional and expert lawyers and accountants.
Application for BOI
The application for BOI requires the submission of a number of documents at the time of registration.
Document Requirements
- The certificate of business registration. The submitted copy should be current and should not be older than 6 months.
- A report indicating all the shareholders in the company, the shares as well as shareholding report.
- The financial statements and reports indicating the financial standing of the company.
- The company must indicate the names of authorized signatures to the power of attorney.
- Copies of the passport or identity cards
- The total number of future employees
- Financial forecasts and projections.
- It is imperative to present a report showing the impacts of the company activities on the environment if manufacturing is part of the application.
- Once the documents are tendered and the application made, the BOI will meet with the owners of the company and seek to find out more information. The company will have to show evidence of a minimum capital. Importantly, it is mandatory for all companies to show at least 1 million baht as capital investment. However, the minimum capital is exclusive of working expenses, cost of assets such as land or working capital. Additionally, there is a check of the debt rate as well. In this case, it is mandatory for the debt to equity ratio to be a minimum of 3 to 1.
BOI Eligible Activities
The BOI ensures that only eligible activities are carried out and as such are qualified for market and promotion in the following areas:
- Agro-industry and agricultural products
- Bio-technology
- Minerals, ceramics, and basic metals
- Light industry
- Metal products
- Machinery and transport equipment
- Electronic and electrical appliances
- Chemicals, plastics, paper
- Service and public utilities
- Technology and innovation development
- Creative product design and development centers
- Electronic design
- Software
- Cloud services
- Research and development
- Biotechnology
- Engineering design
- Bio and Medical Industries
- Creative and Digital Industries
Tak, Mukdahan, Sa Kaeo, Songkhla, Trat, Nong Khai, Narathiwat, Chiang Rai, Nakhon Phanom, and Kanchanaburi are some of Thailand’s Special Economic Zones (SEZs). However, companies having BOI permission can hire foreign expatriates, according to Section 26 of the Investment Promotion Act.
Treaty of Amity for 100% Foreign-owned Company in Thailand
The Amity Treaty allows American people to own and operate businesses in Thailand. Additionally, citizens of the United States now enjoy the freedom to engage in commercial activities with little or no limitations as a result of this act. On May 29, 1966, the United States and Thailand signed a treaty allowing US companies and citizens to own companies, open branches, and own a majority of the company’s shares. In this situation, the Alien Business Decree of 1972, which prohibits foreign enterprises from engaging in certain activities, has no bearing on US individuals.
Restrictions
- US companies with Amity approval is not mandatory to own land, landed properties, or natural resources.
- They cannot engage in buying and selling Thai local agricultural products.
- They may enjoy exemptions from depository banking activities, transportation businesses as well as fiduciary functions.
Application Requirements
- Firstly, if the company is sole proprietorship in nature, the Applicant must be a US citizen by birth or by naturalization.
- Secondly, for sole partnership, joint partnership, or limited venture, the majority of the shareholders must be US citizens and they must be involved in management activities.
- Finally, you must make an appointment with the US embassy to get a notarized copy of your passport to submit with your amity registration documents.
By any of these methods, you can set up a 100% foreign-owned company in Thailand as a foreigner. But, even if you qualify in any of the mentioned criteria, you will need legal help to materialize your intent. For this reason, you need to communicate with us your requirements and business idea of which you are seeking a 100% Foreign-Owned Company in Thailand. Therefore, simply email us at [email protected] to get the best legal solutions along with accounting support henceforth.
