Thailand is fast becoming a rich northern frontier for Australian business. Additionally, it is a commanding gateway to the region’s economic powerhouses India and China. Thailand also connects well with Indochina and the Greater Mekong sub-region. So, this article aims to explain the process of how Australians can set up a company in Thailand in a hassle-free way.
Please note that Thailand ranks among the top 10 most attractive countries in the region for investment for over the last three to five years. Moreover, there are research reports demonstrating the reassurance of foreign investors by the abundance of suitable suppliers, raw materials, and development of infrastructure in Thailand.
Thailand hosts more than 300 Australian companies. Furthermore, these companies generate a two-way Thai-Australian trade revenue of over $19 billion annually, with great expansion and growth opportunities. Additionally, Australian investors are also accessing a range of additional benefits and protections under the Thailand-Australia Free Trade Agreement (TAFTA).
Key Facts One Must Know Before Starting Business in Thailand
Continuity of business is always more important than starting one. Therefore, there are some factors that you must know to ensure the stability of the business you wish to start in Thailand. The following points will help:
- Thailand is the second-largest economy in Southeast Asia.
- In 2020, Thailand ranked second in Southeast Asia for external world trade volume.
- The Thai Government is committed to significant investment in social and economic infrastructure. Therefore, the kingdom recently announced a THB 1.8 trillion infrastructure upgrade across the country.
- It is worth mentioning that Thailand is the 5th largest FDI recipient in East and South-East Asia (USD 19.5 billion), behind the economic giants of China, India, and Singapore.
- Thailand holds the world’s largest medical tourism market. Note that, this is the result of low-cost medical treatments and high-quality healthcare. Furthermore, Thailand boasts business opportunities for healthcare service providers. Additionally, the Thai government offers various investment incentives for the manufacturing of medical food and equipment.
- The World Bank Doing Business Report 2019 ranked Thailand as the 21st easiest place in the world to do business.
- CBRE continues to rank Bangkok as the least expensive market in Asia to rent prime office real estate, with an average rent of USD 27.99 sq.m. p.a.
Australian citizens and business entities may find an easier path to set up a company in Thailand through the Thailand-Australia Free Trade Agreement (TAFTA). However, TAFTA has more limitations than the US-Thai Treaty of Amity, yet, under certain conditions, permits the establishment of businesses with a majority of Australian ownership.
How Does TAFTA Help Australians to Setup a Company in Thailand?
The Thailand-Australia Free Trade Agreement has been in force since 2005. Moreover, between Thailand and Australia, TAFTA reduces and eliminates tariffs and quotas. Additionally, it grants Australian investors in Thailand special privileges.
How are TAFTA Companies different?
Most other majority-foreign-owned businesses must comply with the Foreign Business Act (FBA). Furthermore, the FBA places restrictions on the kinds of businesses that foreign companies can run. However, these restrictions are either outright banning them or necessitating the acquisition of a Foreign Business License (FBL). Therefore, companies applying for an FBL will find themselves under a great deal of scrutiny. Furthermore, there will be less risk of the Department of Business Development (DBD) denying their application. Please note that the DBD scrutiny is very stringent and any small mistake in the application will lead to its cancellation.
However, an Australian business applying for a Foreign Business Certificate (FBC) under TAFTA will have a higher chance of getting approval from the DBD. Note that, the main qualification would be the sector-specific limitations. However, the sector-specific limitations may hinder the business goal of an investor. Furthermore, the Board of Investment Promotions can help Australians Set Up Companies in Thailand with up to 100% ownership in some more sectors.
Can TAFTA Companies be 100% Australian Owned?
Unlike the Thai-US Amity Treaty, which allows 100% US ownership, TAFTA only allows 100% Australian ownership in two sectors. Furthermore, TAFTA permits 100% Australian ownership only in two sectors. Whereas, the Thai-US Amity Treaty permits 100% US ownership in many sectors. Please note that the other sectors under TAFTA can enjoy 60% Australian majority ownership. However, 60% foreign ownership is also a great share as it is not possible for foreign investors from many other nations.
A 100% fully Australian-owned company in those sectors is possible, but not under TAFTA. Therefore, this would entail submitting an FBL application. Furthermore, it is reviewed more carefully by the Department of Business Development of Thailand. Please note that this process may take some more time.
Sectors Covered by TAFTA
Businesses can apply for an FBC under TAFTA as of the time this article was published if they intend to operate in one of the following sectors:
| Eligible businesses sectors | Requirements | Maximum Australian Shareholding |
| Mining, on land or underwater | International Exhibition Center and services | 60% |
| Construction of public utilities or transportation that requires special equipment, machinery, technology, or expertise | Must require special equipment, machinery, technology, or expertise with a minimum paid-up capital of THB 1 billion | 100% |
| Luxury hotel or resort services | Minimum rooms: 100 and minimum paid-up capital of THB 800 million | 60% |
| Full restaurant services | Minimum total area: 450 sqm and a minimum paid-up capital: THB 50 million | 60% |
| General management consulting only for a Regional Operating Headquarters (ROH) | Services must be exclusively for ROH and ROH-related companies | 100% |
| Convention services, not including F&B services | Minimum total area (interior + exterior) of 4,000 sqm and Minimum interior of 3,000 sqm | 60% |
| Sales and installation support services only and the products must be manufactured in Thailand by the TAFTA company | Minimum total area (interior + exterior) of 50 rai (80,000 sqm) and a minimum interior: 25,000 sqm | 60% |
| Wholesale and retail services | Minimum total area of 10 rai (16,000 sqm) with a minimum paid-up capital: of THB 200 million | 100% |
| Post-secondary science and technology educational institute | a. Specializing in life science, biotechnology, nanotechnology, and related areas b. Located outside Bangkok and its metropolitan areas c. At least 50% of the institution’s council directors are Thai | 60% |
| Theme park or zoo | Minimum total area of 200 rai (32 hectares) with a minimum paid-up capital of THB 1 billion | 60% |
| Aquatic animal park | Minimum total area of 10 rai (16,000 sqm) with a minimum paid-up capital of THB 200 million | 60% |
| Maritime support services | Must have ship-lifting equipment, pier, and maintenance service shipyard | 60% |
Eligibility to Apply for TAFTA
Your business needs to satisfy the following requirements in order to submit an FBC application under TAFTA:
Nationality
- A juristic person is set up as a partnership or a private limited company under Thai law. Additionally, there are provisions for setting up Representative and Branch Offices in Thailand.
- The authorized director(s) are Australian or Thai. Moreover, if the entity is a partnership, there must be one Thai managing partner.
- Shareholding:
- All Australian or Australian and Thai, as the case may be
- Shareholding percentages comply with TAFTA
- Australian juristic persons must comprise over 50% of Australian shareholding.
Minimum Capital
TAFTA companies must follow capital restrictions under the FBA. Additionally, these companies must operate in the Sectors under the TAFTA section. Otherwise, THB 2 million is the basic minimum capital requirement for Australians willing to set up a company in Thailand.
KONRAD LEGAL UNDERSTANDS TAFTA
Generally speaking, the entire TAFTA FBC application procedure takes about 60 days. Therefore, Konrad Legal is happy to share all the options for Australians who want to set up a company in Thailand, whether through TAFTA or another structure. So, contact us today for your free initial consultation.
