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Archives for Doing Business in Thailand

Human Resource Outsourcing with MSNA

Like MSNA’s Accounting Staffing Solutions, we provide human resource outsourcing services to our clients both based in Thailand and overseas.

In general, we outsource HR functions such as:

  • Human resources administration
  • Payroll processing
  • Employee benefits and office administration
  • Office management
  • Others, depending on client’s business needs

Our main concern is to maintain the happiness of our clients in doing business. With
MSNA’s services, you can expect:

  1. Time and cost efficiency savings because we will handle the paperwork and process the recruitment
  2. Reducing usage of office space and stationery because we will outsource such functions
  3. Staffing flexibility because we will provide the additional resources for a fixed period of time at a consistent cost.
  4. Development of internal staff; because when we outsource such functions, we will also train the company’s staff
  5. Level of continuity and reducing the risk on management; because we will outsource such functions, there will be no high employee turnovers and risk on the company’s daily operation.

We understand how to add value to your company that is why we are here as your
partner to ease the burden of your business needs by helping you in saving your
time and costs in managing your human resources.

Please contact MSNA for your questions regarding our Human
Resource Outsourcing Service
.

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Thailand Flood Relief Loans

The Thai Cabinet on its recent meeting has approved the Baht 250 billion principal loans to flood-affected businesses: industrial companies, small medium enterprises (SMEs) and independent business operators or self-employed workers.

Out of this Baht 250 billion, approximately Baht 210 billion will be provided to SMEs while an estimated Baht 15 billion are for those flood-hit industrial parks and the rest will be provided to independent business operators and self-employed workers.

Under this scheme, the loan provided to borrower is subject to a 3% annual interest rate with repayment terms of 3 years. Baht 120 billion out of Baht 250 billion will be provided by commercial and private banks and Small Business Credit Guarantee Cooperation will guarantee the 30% of the credit for each borrower. Approximately Baht 50 billion will come from the Japan’s Bank for International Cooperation and an estimated Baht 40 billion will be from matching funds between the Government Savings Bank and commercial banks. The rest of the amount will be distributed by the Government Savings Bank.

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Tax Incentives to Promote Thailand’s Competitiveness

The Thai Cabinet has recently approved the following incentives in corporate income
tax rates in order to boost Thailand’s competitiveness:

1. Incentives in general

For companies or juristic partnerships the applicable corporate income tax rates
will be reduced from 30% to:

– 23% for the accounting period ending on or after 31 December 2012

– 20% for the accounting periods commencing on or after 1 January 2013

For small and medium enterprises (SMEs) with paid-up capital of not exceeding Baht 5 million on the last day of the accounting period and income of not exceeding Baht 30 million from sales of goods or services during the accounting period, the
applicable corporate income tax rates are as follows:

– The first Baht 150,000 of net profit is exempted from tax.

– 15% for the portion of net profit exceeding Baht 150,000 and up to Baht 1,000,000 for accounting periods commencing on or after 1 January 2012

– 23% for the portion of net profit exceeding Baht 1,000,000 for the accounting
period ending on or after 31 December 2012

– 20% for the portion of net profit exceeding Baht 1,000,000 for accounting periods commencing on or after 1 January 2013

If paid-up capital exceeds Baht 5 million or income from sales of goods or services
exceeds Baht 30 million, the normal corporate income tax rates will be applied.

2. Incentives for Listed Companies

2.1 For entities listed on the Stock Exchange of Thailand within 31 December 2009
which are entitled to 25% corporate income tax rate, the applicable corporate
income tax rates are:

– 23% for the accounting period ending on or after 31 December 2012

– 20% for the accounting periods commencing on or after 1 January 2013

2.2 For entities listed on the Market for Alternative Investment (MAI) except for
those which are still entitled to 20% corporate income tax rate until the
accounting period ending 31 December 2011, the applicable corporate income tax
rates are:

– 25% on the first Baht 50 million of net profit for accounting periods ending on
or after 31 December 2011.

Eventually, the Cabinet’s resolution does not apply on the applicable tax rates on the sum over Baht 50 million for accounting period ending on or after 31 December 2011.
However, it can be presumed the normal 30% corporate income tax rate should
apply to the sum over Baht 50 million and the reduced tax rates as applicable
to other cases should also apply going forward as follows:

– 23% for the accounting period ending on or after 31 December 2012

– 20% for accounting periods commencing on or after 1 January 2013

Contact MSNA, Thai accounting company, for your Thai tax and accounting questions.

 

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Dormant Company – How does it work in Thailand?

A foreigner who owns a company here in Thailand has asked THAI BUSINESS EXPERT some questions regarding dormant company status.

I own a newly set up limited company here in Thailand but I’ve decided not to
continue its operation for a while as I am planning to go back home to focus on
my existing business. However, I’m a little confused because I heard from
someone that it is impossible in Thailand just to register a company and not to
have any activities. Do I need to close down this company and register anew
when I get back here? But, I also heard from somebody that I can continue my
business later and put it in dormant for the time being. How does it really
work here in Thailand? I would appreciate if you could advise me on this matter.

Answer:

A dormant company refers to a registered company with no trading activities and
accounting transactions for a certain period. It is possible to register a limited
company then keep it inactive since there is no time limit for keeping a
company in dormant status. Thus, you may choose to put your company inactive for
some time as long as you perform some administrative duties each year such as closing
of the accounting books, having them audited by a Thai CPA and filing of the
audited financial statements and corporate income tax returns by 150 days from
the accounting year-end even when you are not trading. Failure to file the
audited financial statements to Department of Business Development, Ministry of
Commerce, may result in a criminal penalty up to Baht 50,000 for the company
and Baht 50,000 for the Director.

In case your company upon its incorporation has registered with VAT and you prefer
to put it in dormant status, the company is still responsible to file its NIL
monthly VAT return. If you are planning to go back home, you should assign
somebody to assist you in filing this monthly return within the 15th
of each month. Failure to submit it on time would have a penalty of 500 per
return to be paid to the Revenue Department. However, filing NIL monthly VAT
return for many months may be the reason for the Revenue Department to visit
your company. You may choose to file Por Por 09, VAT registration form to inform
the Revenue Department of temporary cease of operation. Usually this is good
for a year. The Revenue Department may choose to erase your company from the VAT
system if you have ceased your operation for more than one year.

Eventually, if you would like to put your newly registered company limited into dormant
status for certain reasons (e.g. you are not ready to trade yet or would like
to take a break for some time), MSNA can help you on how to make it possible. Rest assured that you can always continue your trading activities later and you would not need to close down your company. We can also assist you in filing NIL monthly VAT returns if you have VAT registration. And if you decide to close it down, MSNA is the best
people you should talk to.

 

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Thailand Company Dissolution Process

Recently Thai Business Expert was asked how to close a Thai limited company.

In line with the growing trend of competition, profitability and economic stability, some business owners choose to wind down their Thai registered company either for the purpose of opening a new company or permanently cease doing business in Thailand. Whatever reasons you have for closing your Thailand business, legal, accounting and auditing assistance are required to ensure that the company will be closed in good faith. However, in closing down a registered company in Thailand, one must consider the following procedures:

1. Sending out invitation letters to all shareholders for an extra-ordinary Shareholders’ Meeting and publishing the letter in a local newspaper.

As prescribed by the Thai law, the company should hold a Shareholders’ Meeting to discuss the agenda of the company dissolution. An invitation letter for the meeting must be sent to all company shareholders by a registered post with an Advice of Delivery Service to ensure that the shareholders acknowledge the receipt of the letter. The same letter must be published in a local newspaper as well. This step must be done at least 14 days before the date of the shareholders’ meeting.

2. Registering the company dissolution at the Department of Business Development, Ministry of Commerce

Within 14 days from the closing date that the Shareholders’ Meeting has approved of, the
application form along with any required documents must be submitted to DBD to
register for company dissolution. The liquidator (either an outsider or one of
the company directors, whoever is appointed in the shareholders’ meeting) must
file the application at the Department of Business Development (DBD), Ministry
of Commerce, with a copy of his / her Thai I.D. card or passport. Once
everything is completed and accepted by the DBD, the officer will issue a
document which is a certification of the company’s dissolution showing the
closing date of the company.

3. Publishing the company dissolution and sending letters to inform creditors

Within 14 days from the date of dissolution, the liquidator must publish in a local newspaper the company dissolution at least once and send letters by registered mail to the
company’s creditors to inform them about the company dissolution.

4. Returning the VAT Registration Certificate (Por Por 20) to the Revenue Department (RD) in case the company is registered in the VAT system.

Within 15 days of the closing date, the company shall file Form Por Por 09 to return its VAT Registration Certificate to RD. In the event that the company fails to file it within the
specified time, there is a penalty of Baht 2,000.

Although the VAT certificate will be returned, the company is still responsible to submit its
monthly VAT return (Por Por 30) every month until the RD officer release their confirmation letter for deregistration of VAT.

5. Completing and auditing of the accounts and the Financial Statements until the closing date.

The company must prepare and complete its accounts and financial statements of the current accounting period until the date of dissolution registration and must have them
audited by a Thai auditor. The liquidator of the company must sign on the financial statements as well as the Corporate Income Tax Return Form (Por Ngor Dor. 50) for submission to the Thai Revenue Department within 150 days after the company closing date.

6. Returning the company’s Tax I.D. card to the Revenue Department

The tax I.D. card of the company must be returned to RD as well. The officer in this unit
will accept the application to return the Tax ID card only if a copy of the filed corporate income tax return and the receipt issued by the Revenue Department is attached to it.

7. Liquidating company’s assets, clearing company’s debts and returning the remaining cash to the shareholders

After step no.2 has been done, the liquidator of the company has to liquidate all assets of the company (converting them to cash), pay off the companies’ creditors and
divide the remaining cash and return it to the company’s shareholders according to the shareholding ratio.

8. Filing liquidation reports and registering the completion of liquidation process with the Department of Business Development

The liquidator has to file a liquidation report to the DBD every three months until the liquidation process is finished and the Revenue Department has issued a letter to the DBD certifying that the company owes no taxes, which will happen after step no.5. When this happens, the liquidator has to register the completion of the liquidation process with the DBD as well as submit the last liquidation report. The DBD will issue a document to certify that the company’s liquidation has been completed.

The above summary of Thai company closure procedures is intended for information purpose only. However, one must seek professional consultation before proceeding to dissolution because there are still a lot of details in the process such as closing of all bank accounts, submission of VAT on the book value of company’s fixed assets as of the closing
date within the 7th of the following month and what to do if the company’s assets’ value is not enough to cover its debts. Careful planning of the whole process until the completion of liquidation of the company is strongly advised.

Basically, the dissolution process should take about a month to complete. However, if the company has VAT registration, it takes around 6 months to obtain the acceptance letter for
deregistration from the Revenue Department. Thus, for bigger companies, the whole process may be completed within a year or two, depending on how long the company had been in operation and whether its books of accounts were properly maintained and all tax returns were filed as required by the Thai law. The tax authorities may also invite the liquidator (or his representative) to discuss the tax matters of the company upon its liquidation.

Being highly knowledgeable and well-experienced in Thailand Business Set Up Process, we at MSNA can also assist you in the process of Thailand Company
Dissolution. We can also represent you in negotiation with the tax authority (Revenue Department).

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Registration of a Representative Office in Thailand

Application for registration of a representative office in Thailand of a foreign company engaged in international trading business

Scope of Activities of a Representative Office

As required by the Thai law, the business activities that a representative office can carry out in Thailand are limited to five business activities concerning:

  • Sourcing of goods or services inThailand for head office
  • Checking and controlling the quality and quantity of goods purchased or hired to manufacture in Thailand by the head office
  • Giving advice concerning goods of the head office sold to agents or consumers in Thailand
  • Propagation of information concerning new goods or services of the head office
  • Reporting on business trends in Thailand to the head office.

The above activities are regarded as service activities under List 3 (21) of the Thailand Foreign Business Law, and thus the registration of a representative office requires a Foreign Business License from the Director-General of the Department of Business Development.

General Characteristics of a Representative Office

  1. It has non income-generating activities;
  2. It has no authority to accept purchasing order or to make offer for selling or to negotiate for carrying out of business with person or juristic person in the country in which it is registered;
  3. All of its incurred expenditures must be shouldered by its head office;
  4. Normally, it is not subject to Corporate Income Tax, in accordance with the Revenue Code except for deposit interest of remitted funds from the head office has to pay tax.

Out of scope activities of a Representative Office

The following are the services that a representative office is not permitted to do otherwise it will be considered as an entity doing business here in Thailand and may be subject to the revocation of its license:

  1. Purchasing order or payment of goods on behalf of the head office or its affiliated companies or any activities concerning purchasing;
  2. Shipment of goods of the head office or its affiliated companies already purchased;
  3. Checking and controlling the quality and quantity of goods for any companies that are not the head office nor its affiliated companies;
  4. Executing after sale service concerning installation and maintenance;
  5. Performing advice concerning goods that were not produced nor sold by the head office or its affiliated companies;
  6. Receiving purchase order or service on behalf of the head office or its affiliated companies;
  7. Coordinating in purchasing or selling on behalf of the head office or its affiliated companies;
  8. Propagation of information concerning previous goods or services that are already sold inThailand;
  9. Carrying out activities as middleman or agent between customers in Thailand
    and head office or its affiliated companies;
  10. Planning and coordinating with any organization in terms of business on behalf of the head office or its affiliated companies;
  11. Being a representative in making any contracts or activities on behalf of the head office or its affiliated companies;
  12. Reporting information to any companies that are not the head office nor its affiliated companies

Government Fees for a Representative Office

Application fee (nonrefundable) is THB 2,000. If the application is approved, the government fee will be set at the rate of THB 5 for every THB 1,000 or a fraction thereof of the registered capital, with a minimum of THB 20,000 and a maximum of THB 250,000.

Tax Position of Representative Office

The representative office is required to obtain a corporate tax identification number and submit income tax returns and balance sheets, even if there was no transactions in the past accounting period.

Individual aliens and all local staff of a representative office are required to obtain taxpayer cards and pay personal income tax.

At MSNA, we can assist foreign companies in the Thailand business setup process.

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Common Types of Business Structure in Thailand

There are many types of business structure to choose from if you would like to set up your own business. These include sole proprietorships, cooperatives, partnerships, limited liability companies, corporations and other forms of organization. However, these types often vary on each country based on its legal systems of setting up business. Thus, here in Thailand, the following are the common types of business structures:

  1. Partnership
  2. Joint Venture
  3. Company Limited

1. Partnership

A partnership is a type of business owned by two or more people. Normally, each partner has unlimited liability for the debts incurred by the business. There are three common types of partnerships inThailand:

1.1 Unregistered ordinary partnerships whereas all partners are jointly and wholly liable for all debts of the partnership.

1.2 Registered ordinary partnerships whereas the partnership becomes a legal entity and its legal personality is separated and distinct from the individual partners.

1.3 Limited partnerships whereas the liability of each individual partner is restricted to the amount of capital invested to the partnership. Thus, limited partnership must be registered.

2. Joint Venture

A joint venture may be defined as a group of persons (natural and/or juristic) entering into an agreement in order to carry on a business together. Although it has not yet been recognized as a legal entity under the Civil and Commercial Code, income from this
business structure is subject to corporate taxation under the Revenue Code
which recognizes it as a single business entity.

3. Company Limited (Limited Liability)

A company limited is a type of business that has a separate legal personality from its shareholders. There are two types of limited company: private company and public company.

A private limited company is the most famous type of business structure in Thailand and is formed through a registration process which includes registration of a Memorandum of Association and Articles of Incorporation and other legal documents. It is managed by a
board of directors according to the company’s by-laws or articles of incorporation. At least three shareholders are required to form a private company limited whereas their
liability is limited to the remaining unpaid amount, if any, of the par values of their shares. Meanwhile, the liability of the directors may be unlimited if so provided in the company’s the Articles of Incorporation.

At MSNA, we make sure that we provide quality services especially in ensuring that you can register a private limited company in Thailand easily and legally. For more information, please read further on Thailand Company Registration.

A public limited company registered in Thailand may, subject to
compliance with the 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).

Other types of business structure

Branch Office

To operate a branch of a foreign company, one has to study Thailand
Foreign Business Law
. In some cases, a certificate to operate business
(issued by the Ministry of Commerce in Thailand) is enough, while others, a
license to operate business is required. If the branch of a foreign company is
to do only export or manufacturing, it does not need a certificate or license
to operate the business. It is also important to become familiarize on what
constitutes income subject to Thai tax because the Revenue Department may
consider income directly earned by the foreign head office from sources within
Thailand as subject to Thai taxes.

Regional Operating Headquarters (ROH)

ROH is a newly type of business recognized in Thailand that provides
benefits to investors who set up a regional headquarter in the country while
performing “qualifying services” to branches or associated companies located
within or outside Thailand. Read more on Regional Opearting Headquarters or ROH here.

Representative Office

It is a type of business that can be set up by a foreign company in Thailand with
the purpose of providing advice or service to its head office only. Thus, no
revenue must be incurred and recognized by this type of business. However, to
set up a representative office, one also has to consider the Foreign
Business Law of Thailand
.

 

 

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Fees to Set Up a Business in Thailand

To set up a business in Thailand, what are the fees you can expect to pay if you hire a full service professional firm?

Professional Fees:

1. Setting up a new company in Thailand, including getting a tax ID and VAT registration

– Professional fee: Baht 40,000 – 100,000

2. Getting a foreign business license (or certificate to operate business) for your newly set up company. (You can skip this part if you have a Thai partner who will hold more than 50% of the shares in the new company since it will be considered a Thai owned company.)

– Professional fee: Baht 50,000 – 100,000

Government fees:

Government fees are related to the amount of registered capital of the company. And to know how much registered capital the company should have, we need to consider a few things:

  1. If a company has Thai majority shareholders and it will not hire any foreigner, then the registered capital can be as little as Baht 5 per share and because a company needs at least 3 shareholders, the registered capital can be as low as Baht 15. However, the government fee to register a company in Thailand is the same for Baht 15 capital or Baht 1M capital. Thus the government fee to set up a Thai company is about 7,000 for Baht 1 M registered capital.
  2. If a company has Thai majority shareholders and will hire a foreigner to work for it, then the registered capital has to be at least Baht 2M (or Baht 1M if the foreign employee is married to a Thai national). Basically for each work permit the company sponsors, it needs Baht 2M in registered capital. Thus the government fee to set up a Thai company is about 12,000 for Baht 2M registered capital plus about Baht 6,000 for each additional million.
  3. If your new company has foreign majority shareholders, you need to have at least Baht 3M registered capital for each kind of business you want to operate in Thailand. And with each Baht 3M capital, you can sponsor one work permit. So if you want to operate just one business, your new company needs to have Baht 3M registered capital and it can sponsor one work permit. In this case the government fee to set up the company is about Baht 18,000. And the government fee for getting a license to operate a foreign business in Thailand is about Baht 35,000.

For more information on doing business in Thailand, visit www.msnagroup.com.

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Foreigners Doing Business in Thailand Need English Speaking Thai Accountants

Foreigners doing business in Thailand need Thai accountants who speak good English to be able to communicate with them and consult with them for the best use of accounting and tax planning and avoiding costly mistakes. Because of being naive, many foreigners in Thailand trust their Thai accountants even though they cannot communicate with them efficiently. Many more just want to go the cheap way because they think accounting does not make money and they choose non English speakers for they charge lower fees. If you are a foreigner doing business in Thailand or thinking of establishing a business in Thailand, you really want to consider the popular saying; you get what you pay for. The truth is accounting and especially knowledgeable Thai accountants who speak good English can help you save a lot of money down the road especially by tax planning and making sure you pay your tax due correctly to avoid hefty but unnecessary interests and tax fines.

One of our clients just referred one of his friends to us, who has a manufacturing business in a rural area of Thailand. His company has been having tax problems with the Thai tax authority and the court has ordered the company to pay millions of Thai Baht in taxes and fines. The root of the problem is that their accountant is not knowledgeable and the client could never tell because the accountant does not speak enough English. When he found out the mistakes he made, he could not communicate the problems in English to the management who could have otherwise made better decisions on how to deal with the problems. He chose to fix things in his own way which later on proved to make the problems worse and more costly. This client will have to sell his manufacturing facilities and property to pay for the taxes and fines. The lesson learned here is that foreigners doing business in Thailand need English speaking Thai accountants as part of their successful business undertaking.

MSNA is a English speaking Thai accounting firm based in Bangkok, Thailand, who works with foreign businesses from all over the world. Our Thai accountants are knowledgeable and speak English fluently. Please contact MSNA Ltd. for accounting and tax services.

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Notice for Annual General Meeting or AGM in Thailand

The law requires that all companies publish their notice for their shareholders’ meeting in a local newspaper and send to their shareholders a copy of the notice by returned receipt registered mail at least 7 days before the meeting date. Failure to do so may result in a fine of up to Baht 20,000.

One of the shareholders’ meetings that all companies are required by law to hold is called the Annual General Meeting (AGM), where the company has to have its shareholders approve the Financial Statements of the previous fiscal year and appoint the auditor for the current year. This meeting must be held within 4 months from the accounting year-end. The Ministry of Commerce issued some announcement to stress that companies need to really follow the AGM procedures prescribed by law or they will face some penalties.

If the company’s accounting year-end is 31 December 2010, then the AGM must be held within 30 April 2011. The last day to publish the Notice for AGM is AGM date minus 8 = 22 April 2011. This is also the last day the company can send the copy of the notice for AGM to your shareholders by returned receipt registered mail at the post office.

Usually most companies use cheap newspapers that are in circulation specifically for this purpose of publishing notices for AGM only.

If your company does not have the manpower to take care of the notice for AGM, MSNA can handle it for you for a minimal fee.

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