Are you a foreign investor with plans of starting a business in Thailand? There are numerous great reasons for foreign investors to start a business in Thailand, due to which the kingdom is growing rapidly as the business hub of Southeast Asia. However, in our practical experience, we have seen global investors committing great mistakes due to which they either fail to incorporate their business or operate it properly in Thailand.
Surprisingly, the mistakes are done mistakenly!
Yes, and the primary reasons behind these mistakes are as follows:
- Complex Thai Civil and Commercial Code
- Unclear assumption of the Foreign Business Act of Thailand
- Inability to adhere to the documentation protocols
- Complex licensing and tax registration standards
- Difference in International Financial Revenue Standards (IFRS) and Thai Financial Revenue Standards (TFRS)
Many other uncertain causes compel foreign investors to make mistakes in the process of starting a company in Thailand. These causes depend on the level of knowledge and personal preferences of the investors. Therefore, finding out the accurate cause is pretty difficult.
As a leading corporate law firm in Thailand would like to point out the major mistakes that you must avoid in the process of company registration in Thailand.
Selecting Improper Business Structure
There are 6 prominent business structures for foreigners in Thailand. However, each of these business structures comes with its own set of characteristics and aspects of liabilities for the owner. Therefore, while starting your business in Thailand, you should not make any mistake in selecting the business structure, Following are a few suggestions:
- Never assume that you need a Limited Company on a mandate to start your business in Thailand. You should explore other options like limited partnerships or sole proprietorship options as well.
- If you already have an existing business in your home nation, try to go for a representative or branch office type of business structure in Thailand. This will incur less investment and is easy to incorporate.
- Try to avoid incorporating subsidiaries. The incorporation of subsidiaries follows a complex registration process and has tough compliance standards. Furthermore, it grants limited liabilities to owners.
Ignorance in the Documentation Process
To incorporate any type of business structure in Thailand, documentation and paperwork needs special attention. The complexity of the Thai Civil and Commercial Code, Foreign Business Act, and TRFS may seem to be a maze to you. Take the help of some reliable corporate law firms in Thailand like Konrad Legal and keep in mind the following aspects:
- Cross-check and ensure that you submit all the documents as necessary for the application.
- You have to consider Thai as the official language. Although English translations are accepted officially, certain document requirements must be in the Thai language.
- You must demonstrate your financial stability. Do so by providing the correct documents as per the mandate of the application of the type of company you are incorporating.
Not Obeying the Timeframe
Many foreign business registration processes get hindered due to the lack of patience. You must remember that every application and statutory registration process in Thailand has a stipulated timeframe. Therefore, for your company registration in Thailand, you should:
- Do not rush to arrange the documents. Keep your calm and arrange for all the necessary documents.
- Avoid expecting instant results as the minimum duration of company registration can be of few weeks. In case your documentation is incomplete or lacks clarity, it may extend to months.
Remember that there won’t be any shortcuts to decrease the timeframe. Therefore, support from a corporate law firm can make the documentation process perfect which will automatically make your process adhere to the natural timeframe.
Mistaking the Compliance Obligations
If you stick to the above guidelines, you will never face any issues in registering your business in Thailand as a foreigner. But, mere registration is not enough. There are various post-registration tasks that you should never neglect.
Corporate Income Tax Registration: Your business will have a valid legal entity only if it is tax compliant. Therefore, your business must have a tax ID for which you have to apply for corporate income tax registration in Thailand.
VAT Registration: If your business anticipates annual revenue of over 1,800,000 Baht must register for Value Added Tax (VAT) with the Thailand Revenue Department. VAT registration is also mandatory for Thai businesses sponsoring foreign workers’ work permits. Additionally, Thai corporations must acquire a business permit by registering for VAT.
Essential Licenses and Permits: Depending upon the type of business, you must equip your new company with the necessary licenses and permits after incorporation. Examples are travel licenses for tourism businesses, alcohol licenses for bars, etc.
The Bottomline
The greatest mistake that a majority of foreign investors make while starting their business in Thailand is having an assumption of “I can handle it alone”. It won’t be possible as we have witnessed that even Thai persons make mistakes on regulatory and statutory compliances.
Therefore, it is always a wise decision to take the support of a local Thai corporate lawyer or corporate law firm. By doing so, you will be free from the following stresses:
- Understanding and communicating in the Thai language
- Translation of documents from English or your native language to the Thai language
- Notarization of documents
- Maintaining application requirements and error-free documentation
- Identifying the right authority to put forth your application
There can be various other grounds on which you may seek help including the post-incorporation license and permit applications. To get a combined service of company incorporation, accounting and taxation, and payroll management, we can help you throughout. All you have to do is go on a free consultation with us. Email us at [email protected] to book your appointment with our legal, accounting, and tax experts in Thailand.
