Thailand is the second-largest economy in Southeast Asia and the 26th-largest economy in the world. It offers many business opportunities, but for an expat, these are hidden under layers of paperwork and complicated registration procedures.
To open a business in Thailand, you will need to arm yourself with proper knowledge of the local laws, patience, and an open mind. It's also advisable to have an experienced fellow expat or a lawyer to guide you through the proceedings.
Things to consider before setting up a business in Thailand
There is great potential to start a successful business in Thailand if you have a strong business plan and ample funds. Working knowledge of the Thai language will also help you a great deal. As a consumerist society following the lead of China's growth, Thailand has a growing middle class with cash to spend, consequently creating opportunities for expatriate entrepreneurs.
However, if you are looking to start your own business in Thailand, it is essential to be patient, open-minded, and respectful of Thai culture and laws. There are strict penalties if you do not adhere to restrictions or procedures, which could result in a prison sentence and/or a substantial fine.
It is also important to consider where you want to start your business as the costs in Bangkok – especially to rent a space in a prime location – will be higher than in the rest of the country. However, depending on your business, it is also where you can potentially make the most money. Do thorough research beforehand and consider attending networking events and meet-up groups to connect with other people who can help you. It is also advisable to have a realistic exit plan in case things don't turn out exactly how you would wish them to.
Starting a business in Thailand: the legalities
Foreign businesses in Thailand are regulated under the Foreign Business Act of 1999. The Act describes a range of businesses and commercial and industrial activities that foreign companies can not engage in. These activities are divided into three “lists”.
List 1 includes activities that foreign businesses can not perform:
- publishing (newspapers) and TV and radio broadcasting;
- rice farming and livestock rearing;
- forestry and wood processing;
- extraction of Thai medicinal herbs;
- trading and auctioning of Thai antiques;
- trading in land.
List 2 has several sub-groups.
The first group includes the areas of business that are classified as “concerning national security or safety” where foreign businesses can not be involved (unless they have obtained approval from the government):
- manufacturing of firearms, ammunition, gunpowder, and explosives;
- manufacturing of ships, aircraft, and military vehicles;
- manufacturing of other forms of land, water, and air transportation.
The second group includes industries related to arts and culture, customs, native manufacturing, and handicrafts. These include:
- antique trading;
- wood carving;
- silk manufacturing;
- manufacturing of Thai musical instruments;
- manufacturing of gold-ware, silverware, nielloware, bronzeware, and lacquerware;
- making of bowls or earthenware.
The third group includes areas related to the exploitation of natural resources or the environment. These include:
- making of cane sugar;
- salt farming;
- timber processing;
- and more.
List 3 refers to businesses where foreign companies are not allowed to compete with local companies:
- flour production;
- fishery and aquatic creature breeding;
- forestry;
- legal services;
- engineering;
- architecture;
- and more.
To learn more about restricted industries, visit the Thailand Board of Investment website.
Note that a foreign company in Thailand is:
- a foreign registered company;
- a company where half or more of the capital is owned by a foreigner;
- a Thai-registered company, the majority of which is foreign-owned.
Important:
Note that non-compliance with the restrictions above can result in a hefty fine (up to THB 1,000,000) and even a jail term (up to 3 years).
Can a foreigner own a company in Thailand?
Starting a company that is in 100% foreign ownership is a possible yet time-consuming and complicated task.
There are three ways in which you can obtain full company ownership:
Obtain a foreign business license
To work in Thailand, you need to obtain a work permit. To start a company with 100% foreign ownership, you will need to get a Foreign Business License.
To obtain a foreign business license, you will need to file an application with the Business Department and have it reviewed by the foreign business committee. The success of your application depends on a variety of factors, and decisions are made on a case-by-case basis.
Apply via the Board of Investment (BOI) Promotion
Another way to start a company with full foreign ownership is to get approved by the Thailand Board of Investment (BOI). BOI is a sector of the Thai government that promotes the development of startups in areas with poor economic conditions.
Learn more about this option on the Thailand Board of Investment's official website.
For US citizens only: register your company via the Treaty of Amity
If you are a US citizen, there is yet another option for registering a company in your full ownership.
You can use the Thai–US Treaty of Amity and Economic Relations, which allows American companies to maintain the majority shareholding in a company in Thailand.
In all other cases, you will need to have a Thai partner who will be the majority shareholder in the company — for instance, you will own 49% of company shares while your Thai partner will own 51%.
Registering a Thai majority company is much simpler than registering a company in full foreign ownership. Additionally, a Thai-owned company will have access to activities that a foreign-owned company wouldn't have access to — like purchasing land.
Important:
When researching the process of registering a company in Thailand, you may come across the term “nominee shareholder”. This term is used to describe someone who acts as a shareholder in the company (when you need to have a Thai business partner) but doesn't have any actual interest or stake in the business.
While having a nominee shareholder may seem like an easy solution to opening a company in Thailand, it's not a good idea.
Note that under Thailand's Foreign Business ACT 1999, the practice of having a nominee shareholder is illegal and may result in heavy fines or imprisonment.
Types of companies in Thailand
There are three main company types you can open as a foreigner in Thailand:
- limited partnership;
- representative office/regional branch/branch office;
- limited company.
Partnership
The concept of partnership in Thailand is not far enough different from that of Western countries. In Thailand, there are three types of business structures for partnership:
- unregistered ordinary partnership – partners are both liable for all responsibilities of the partnership;
- registered ordinary partnership – if the partnership becomes a legal entity, it creates a separate and distinct unit for both parties;
- limited partnership – the individuality of partners is restricted to the amount of capital they have contributed only.
Representative office and regional office
Both representatives and the regional office are not allowed to earn income in Thailand. Their operations are limited to non-trading activities.
For instance, a representative office is limited to the following:
- reporting on business operations;
- offering advice on products and services offered to customers and distributors;
- sourcing goods and services;
- providing information on new goods and services;
- inspecting goods and services;
- and so on.
A regional office operates a business in Thailand on behalf of the head office in another country. The office activities are limited to the following:
- communication and direction on behalf of the head office;
- operation of local branches;
- offering consulting and management services (including financial management);
- product development and marketing;
- personnel training;
- R&D;
- and so on.
Branch office
The main difference between representative and regional offices and branch offices is that branch offices are not limited to performing non-trading activities and can earn income in Thailand.
Limited companies
There are two types of limited companies in Thailand:
- privately held companies are governed by civil and commercial codes, which are the same as those of Western corporations. They are formed through a process that leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (by-laws);
- public companies governed by the Public Company Act must comply with prospectus, approval, and other requirements, offer shares, debentures, and warrants to the public, and may apply to have their securities listed on the Stock Exchange of Thailand (SET).
Good to know:
Thai limited companies are the basic Thai corporate structure and must follow strict financial requirements. Annual financial statements must be certified by an auditor, approved by the shareholders, and filed with the Commercial Registration Department and the Revenue Department. Small limited companies may be exempt from this requirement.
How to set up a business in Thailand
The Thailand Board of Investment provides details in English as to how to set up a company.
Procedures include the following:
- reserving a corporate name;
- filing a Memorandum of Association;
- convening a statutory meeting;
- registering the company within 3 months of this statutory meeting;
- and, finally, registering for tax documents and an employer account under the Social Security Act.
Please note that the minimum capital requirement for opening a limited Thai majority shareholder company is currently THB 2 million if you don't need a foreign business license. If you need a foreign business license, the capital is THB 3 million.
Be aware that several administrative procedures leading to the creation of your company come with fees.
Important:
Thailand also has strict labor regulations that you must adhere to once your business has been established, and the majority of your workforce must be Thai.
Useful links:
Siam Legal – Requirements for opening a company in Thailand
Thai Embassy – Business Types
Thai Embassy – Business forming
We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
