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.

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.

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.

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.

The companies that rent out building space and provide water, electricity and security to the tenants within the rented building usually have their tenants sign two separate contracts. One is for rental of space. The other is for purchases of water, electricity and services.

There are a few things related to taxes that need to be addressed as follow:

1. Withholding tax

1.1 The contract for rental of space: when the lessee company pays rent to the lessor company (landlord), it needs to withhold 5% tax from the rental amount.

1.2 The contract of purchases of water, electricity and services can be separately considered as follow:

(1) Payments for water and electricity in accordance with actual monthly usage is considered buying of intangible goods. The tenants are not required to withhold tax.

(2) When the lessee company pays for services (the landlord provides services to the common area e.g. security services, cleaning, toilet provisions and usage of electricity and water), it needs to withhold 3% tax from the service fee amount.

2. Stamp duty

2.1 A contract for rental of space is required to be affixed with stamp duty by the lessor.

2.2 A contract for purchases of water, electricity or services is not subject to affixation of stamp duty.

Furthermore, if the rental agreement is of more than 3 years, the company has to register the lease with the Land Department.

In Part 2 and Part 3, THAI ACCOUNTANT explained about Regional Operating Headquarters or ROH and its tax privileges, old scheme and new scheme.

Again Regional Operating Headquarters or ROH is a company registered in Thailand providing managerial, administrative and technical services as well as other supporting services to ROH’s foreign branches or its associated enterprises.

What does “Associated enterprise” mean?

The Revenue Department has the following criteria in determining whether a company is an ROH’s associated enterprise.

1. Shareholding basis. A company shall be regarded as ROH’s associated enterprise if:

i. ROH holds at least 25 percent of that company’s issued capital; or

ii. The company holds at least 25 percent of ROH’s issued capital; or

iii. The company holds at least 25 percent of ROH and other company’s issued capital. In this case, ROH and the other company are regarded as associated enterprises.

2. Control basis. A company shall be regarded as ROH’s associated enterprise if:

i. ROH has control over that company; or

ii. The company has control over ROH; or

iii. The company has control over ROH and the other company. In this case, ROH and the other company are regarded as associated enterprises.

“Control” in this context is used in accordance with General Accepted Accounting Principles.

The services provided by Regional Operating Headquarters or ROH to its associated enterprises or its branches that qualify for tax privileges are as follows:

Managerial services, administrative services, technical services, and supporting services. Supporting services include:

1. General administration, business planning and coordination
2. Procurement of raw materials and components
3. Research and development of products
4. Technical support
5. Marketing and sales promotion planning
6. Personnel management and regional human resource training
7. Financial advisory services
8. Economic or investment research and analysis
9. Credit control and administration
10. Any other activities stipulated by the Director-General of the Revenue Department

If you have any questions regarding tax and accounting, please contact MSNA, a Thai accounting firm that provides accounting services to SME’s in Bangkok Thailand.

Today THAI ACCOUNTANT wants to explain more about Regional Operating Headquarters or ROH and its tax privileges. This is Part 2 of 3. In part 1, THAI ACCOUNTANT talked about the old scheme ROH. In this Part, we will look at the new scheme ROH which was officially enacted on 6 November 2010. The new scheme is in addition to the old ROH incentives scheme. An ROH company has to choose only one from the two schemes in order to get the tax benefits from the selected tax incentive scheme.

New Scheme Regional Operating Headquarters

Tax privileges

ROH Company

1. Exemption of corporate income tax on qualifying income earned from the services provided to associated enterprises outside Thailand
2. 10% corporate income tax on qualifying income earned from the services provided to associated enterprises in Thailand
3. 10% corporate income tax on interest income and royalty income for the use of R&D products developed by the ROH in Thailand received by the ROH from Thai and/or overseas associated enterprises
4. Corporate income tax exemption on dividends received from Thai and/or overseas associated enterprises
5. Withholding tax exemption on certain dividends of the qualified ROH company distributed to overseas corporate shareholders

The tax privileges under items 1, 2, 3 and 4 will be granted for 10 consecutive accounting years and extendible to 15 consecutive accounting years if the qualified ROH is continuously entitled to corporate income tax exemption/reduction for 10 accounting years and at the end of the tenth accounting year, it has accumulated operating expenses paid in Thailand of more than THB 150 million.

1. Only 15% personal income tax imposition for 8 consecutive years for qualified expatriates registered with the Revenue Department as top executives or specialized professionals
2. Personal income tax exemption for qualified expatriates assigned to work overseas

To qualify for the above tax privileges, ROH must meet the following criteria:

1. ROH must have a paid-up capital of at least THB 10 million.
2. Services must be provided to its associated enterprises in at least 3 foreign countries whereby ROH must provide services to at least one foreign country in the first and second accounting years, at least two foreign countries in the third and fourth accounting years, and at least three foreign countries from the fifth accounting year onwards.
3. ROH must incur operating expenses or have capital expenditure paid to Thai nationals of at least THB 15 million or THB 30 million per accounting year, respectively.
4. All associated enterprises must have real operations with physical presence and staff.
5. ROH must have skilled staff with minimum knowledge as prescribed by the Director-General of the Revenue Department.
6. Starting from the third accounting year onwards, the ROH must have at least 75% skilled staff and pay annual staff benefits of at least THB 2.5 million per person to at least 5 staff
7. To be eligible for the corporate income tax benefits under items 3, 4, and 5 and the personal income tax benefits, at least 50% of the total income of the ROH company must be generated from qualifying service income or qualifying royalty income from overseas.
8. ROH must register with the Revenue Department within 5 years from the date to be announced by the Director-General of the Revenue Department.

If the ROH cannot meet one of the above conditions in any accounting year, it will be disqualified for tax incentives retroactively starting from the first accounting year.

In Part 3, THAI ACCOUNTANT will talk about the definition of associated enterprises and the definition of qualifying services by Regional Operating Headquarters.

Today THAI ACCOUNTANT wants to explain about Regional Operating Headquarters or ROH and its tax privileges. This is Part 1 of 3.

Regional Operating Headquarters or ROH is a company registered in Thailand providing managerial, administrative and technical services as well as other supporting services to ROH’s foreign branches or its associated enterprises.

Regional Operating Headquarters or ROH incorporated in Thailand will enjoy certain tax privileges. Currently Thailand has 2 schemes of ROH tax privileges. An ROH company has to choose between the old scheme (which was granted on 16 August 2002) and the new one (enacted on 6 November 2010).

Old Scheme Regional Operating Headquarters

Tax privileges

ROH Company

1. Corporate income tax at the rate of 10 percent on net profits for income derived from services provided to ROH’s foreign branches or associated enterprises;
2. Corporate income tax at the rate of 10 percent on net profits for royalties derived from ROH’s foreign branches or associated enterprises for the use of Research and Development (R&D) done by ROH in Thailand. This benefit is also extended to royalties received from a third party providing services to ROH’s branches or associated enterprises using ROH’s R&D;
3. Corporate income tax at the rate of 10 percent on net profits and interest received from ROH’s foreign branches or associated enterprises for loans granted, provided that such loans are made from other sources and extended to ROH’s branches or associated enterprises;
4. Tax exemption for dividends received by ROHs from associated enterprises;

5. Tax exemption for dividends paid out of ROH’s concessionary profits to its shareholders not carrying out business in Thailand;
6. Accelerated depreciation for buildings at the rate of 25 percent on the date of acquisition. The residual value can be depreciated within 20 years.

Expatriates working for ROH

1. Expatriate may opt to be taxed at 15 percent of gross income. By doing so, the income received must not be calculated together with other income and cannot claim for refunds. This privilege is available only to expatriates employed by ROH and are limited to their first four years of employment in Thailand. It does not matter how extensively the beneficiaries have to travel abroad during the employment period. To be entitled for the benefits once again, expatriates have to discontinue employment with any ROH in Thailand for more than 365 days.
2. Expatriates who are sent to work in another country by ROH will receive a tax exemption in Thailand on their income paid by the foreign company for services rendered abroad, provided that such income is not directly or indirectly deducted as ROH’s nor its associated enterprise’s expenses in Thailand.

To qualify for the above tax privileges, ROH must meet the following criteria:

1. Its paid-up capital must not be less than 10 Million Baht at the end of each accounting period;
2. Provide services to its branches or associated enterprises in at least 3 countries;
3. Half of its total income is derived from administrative, technical and other supporting services provided to its branches or associated enterprises in other countries and royalties received outside Thailand for the use of ROH’s R&D. This criterion can be mitigated to one-third of the total income in the first three accounting periods of its operation as ROH. In the case of force majeure, the Director-General of the Revenue Department may lower the income threshold for one accounting period; and
4. It must notify the Revenue Department about the incorporation as ROH. Benefits will be given once the accounting period has been notified.

In Part 2, THAI ACCOUNTANT will talk about the new scheme ROH.

Remember if your foreign majority owned company does exports from Thailand or manufacturing of goods in Thailand, you do not need to obtain a Foreign Business License. And if you are Australian or Japanese or American, you may not have to obtain a Foreign Business License but please read on..

Australia

Thailand and Australia have Thai – Australia Free Trade Agreement. The persons who conduct the business according to the Foreign Business Act and who are under Thai – Australia Free Trade Agreement condition can request for the Certificate of Business Operation from the Bureau of Foreign Business Administration, Department of Business Development details of which are included in Guideline for Requesting Business Operations Certificate according to Section 10 of Foreign Business Acts B.E.2542 under Thai – Australia Free Trade Agreement

Here is the full version of Thai – Australia Free Trade Agreement.

Japan

Since Thailand and Japan have the JTEPA agreement, the persons who conduct the business according to the Foreign Business Act and who are under JTEPA condition can request for the Certificate of Business Operation from the Bureau of Foreign Business Administration, Department of Business Development details of which are included in Request for Business Operations Certificate under JTEPA.

Here is the full Japan – Thailand Economic Partnership Agreement.

USA

Thailand and the USA signed the Treaty of Amity (the Treaty of Amity and Economic Relations between the Kingdom of Thailand and the United States of America) on 29 May 1966. Because of the Treaty of Amity, American citizens and American majority owned companies can operate their business in Thailand without having to have a Foreign Business License. However, they still have to request for the Certificate of Business Operation from the Bureau of Foreign Business Administration, Department of Business Development of the Ministry of Commerce, Thailand.

Here is the full version of Treaty of Amity between Thailand and U.S.A.

If your company is Thai majority owned, you can do almost any kind of legal business. However, if yours is a foreign majority owned company, set up inside or outside of Thailand, you can do business with the following conditions:

(1) Non-restricted Businesses
General rules are that if your foreign majority company does export (from Thailand) or manufacturing businesses, it can operate the business without having to apply for a Foreign Business License.

(2) Restricted Businesses
Nearly all types of service and retail businesses are restricted to foreigners. As a foreign majority company you may obtain exemptions through getting a Foreign Business License or a Board of Investments (BOI) promotion, or in case of US companies or American majority companies, registration under the Treaty of Amity and Economic Relations between the United States of America and the Kingdom of Thailand. It should be noted that for some types of businesses, exemptions cannot be obtained.

Click for more information of Thailand Foreign Business Law or for the full version: https://msnagroup.com/thailand-business-company/thailand-foreign-business-law.