The Board of Investment of Thailand has approved a 2 more year permission for 101 promoted companies to employ foreign unskilled labor.

Under the relief measure on foreign unskilled labor employment, the BOI permits 101 promoted companies to continue hiring foreign unskilled laborers until December 31, 2014. However, these 101 companies are required to propose a concrete plan to gradually reduce the number of foreign unskilled workers to BOI within February 28, 2013. During the extended period, they must implement a plan to reduce the number of foreign unskilled workers by 25% every 6 months until no foreign unskilled labor is hired by January 1, 2015. Any of these 101 companies that fail to implement the plan as proposed will have their corporate tax exemption terminated.

Inquire now with MSNA about Thailand BOI promotion and other options in doing business in Thailand.

Opening a bank account may not be easy for some foreigners who want to open an account with a local bank in Thailand. Most of the time, foreigners are required to present their passport with valid Thai visa and work permit before they can open a personal bank account. The same condition applies to those foreigners who are authorized directors, branch managers or representative office managers of their entities in Thailand whereas copies of company registration papers and other additional supporting documents are also needed before they can open a business bank account.

However, regardless of any type of business entity, foreign business owners or managers can open a business bank account since there are no restrictions on foreign firms opening a business bank account in Thailand.

Aside from major local banks, international banks such as Citibank, HSBC, Standard Chartered and UOB provide business banking services in Thailand. All of these banks are able to provide full online banking facilities and support as well. Both local and foreign currency accounts are available under similar terms and conditions.

In opening a Thailand business bank account, there is a minimum initial deposit required but usually, it is a relatively low amount. Normally, the international banks require Baht 50,000 or more (or the equivalent in foreign currency) as the initial deposit. For major Thai banks such as Bangkok Bank, Kasikorn Bank, Siam Commercial Bank, etc, the minimum initial deposit for a Thai Baht account is usually Baht 10,000 for a current bank account and Baht 500 for a savings account. However, it is advisable to know the terms and conditions of these banks before deciding to open a bank account.

MSNA can assist you in opening a business bank account in Thailand. We can help you coordinate with the respective bank officers and prepare the necessary requirements. Consult now for further information.

Why should you hire an English speaking accounting firm? We have some reasons for you:

1. Thai accountants who speak a few words of English want a very high salary, higher than a monthly fee you will pay an outsourced accounting firm who can communicate fluently with you in English.

2. With the kind of money you pay to a high quality English speaking accounting firm, which is pretty low, you cannot hire an in-house accountant who has a lot of experience and is knowledgeable enough in the Thai tax law.

3. Thai accountants move between companies easily. A lot of times they do not give you enough time in advance to find a replacement. They just leave a mess behind for the next accountant to clean up after them. With English speaking accounting firms like MSNA, your accounts will be done on time and smoothly. Accounting firms have staff turnover too, but they make sure that the clients’ accounts are uninterrupted.

Now, when you consider hiring an English speaking accounting firm, make sure you do not choose the ones that are very cheap. You know how much experience accountants cost? There is no way accounting firms can keep their good staff if they charge very low fees. The less fee you pay, the cheaper quality you get. (However, this does not mean you should pick the most expensive ones either.) Accounting firms have very high costs like your firms do too. If you are happy with the very low fee they charge you, you will be as unhappy with the quality of work they deliver. Each of their employees is responsible for tens of accounts. They make lots of mistakes and their supervisors do not have time to check their work. You will end up paying much more for tax fines and penalty than the amount you think you save from hiring very cheap Thai accounting firms. So choose wisely.

Contact MSNA for your accounting, audit and tax needs.

Thai Business Expert got a interesting question from a foreigner who wants to set up a Thai limited company, but cannot come to Thailand at the moment.

Question:

Hi, I am busy with my business outside Thailand and cannot come to sign the application form to register my Thai company any time soon. However, i need to set up this new Thai limited company very quickly, what should I do?

Answer:

We can send the forms to register a Thai limited company to you where you are. However if the forms to register a Thai limited company are signed outside Thailand, the registrar only accepts the signed forms that were certified by the Thai embassy or consul in the country where the documents were signed. And the Thai embassy will only certify the documents that have been notarized by the notary public of that country.

Here is the Ministerial Regulations regarding Establishing the Partnership and Company Register Office, Appointing the Registrars and Prescribing Rules and Procedures for Partnership and Limited Company Registration B.E. 2549 (2006). Clause 6 specifies clearly how the forms to register a Thai company should be signed as follows:

Clause 6. In signing an application for registration, the registrant shall sign in person before the Registrar.

Where it is not possible to sign before the Registrar for any reason, the signature on an application for registration shall be deemed proper when the registrant signs in person before any of the following persons:

(1) In case of signing within the Kingdom:

(a) Administrative official or senior police officer stationed in the locality of the registrant’s domicile;

(b) Ordinary member or extraordinary member of the Thai Bar Association; or

(c) Other persons as prescribed and announced by the Central Registrar.

(2) In case of signing abroad:

(a) Authorized officer of the Thai embassy or Thai consul or chief of an office attached to the Ministry of Commerce who is in charge in that country, or an official authorized to act on behalf of that person;

(b) A person who can provide valid certification in the form of the laws of that country; or

(c) Two reliable persons who sign as certification before the Registrar that it is the true signature of that person.

Note that in practice the only way that is acceptable to the registrar is the forms that were certified by the Thai embassy or consul in the country where the documents were signed. And the Thai embassy will only certify the documents that have been notarized by the notary public of that country.

Contact MSNA for Thai company registration services.

Nominee shareholders for Thai limited companies is an issue that clients ask MSNA very often.

If a foreigner wants to set up a Thai limited company with 100% shares held by foreigners, he needs to consider Thailand foreign business law. Most likely, he will need to apply for a foreign business license, which is very difficult to get. Some foreigners may opt to have a Thai partner hold the majority of the shares for them. Many of such cases are that the Thai shareholders are nominee shareholders, who just hold the shares on behalf of the real investors – the foreigners.

Whether your Thai shareholders are nominee shareholders or not, they have to show that they have the money to invest in the company. Since August 2006, the Central Registrar specified the rules and procedures for registration of a limited partnership and a limited company in the case of registration to establish a limited partnership or a limited company as follows:

1. where the number of shares held by foreign partners or shareholders in a limited partnership or a limited company are at least 40% but less than 50% of the registered capital, or
2. where a foreigner who holds less than 40% of the registered capital in a limited partnership or a limited company is a person authorized to act on behalf of the limited partnership or limited company

the Thai partner or shareholder must submit the evidence below showing the source of capital as an attachment to the application form to register the company, and those documents must show the amount of money corresponding to the amount of money put in their shares or shareholding:

1. Copy of bank deposit book or bank statements for the last 6 months, or

2. Document issued by a bank to certify or to show the financial status of the partner or the shareholder, or

3. Copy of the evidence showing the source of the money put in the shares or shareholding.

In short, the Thai shareholders need to present the evidence that they really have the money to invest in the new Thai limited company during the registration process.

ThaiLawyers.com provides consultation on the matter of nominee shareholders for Thai limited companies.

Question:

In order to set up my Thai limited company, I am thinking of getting some loans from my friends in Europe. I will make my friends shareholders in the Thai company that I would like to set up. So, I think I will personally sell shares to them and they transfer the money to my personal bank account in Thailand. It is a normal practice in Europe especially because there is no added value yet, that there is no taxation on selling shares. I assume this is the same in Thailand?

In the articles of association should be written that the capital of the company cannot be increased without my explicit permission. The shares can be paid in one go and that they are received immediately if they are paid on a monthly basis the shares will be received after the last payment has been executed. If this sounds as a workable idea, I only have to make up a transaction agreement and we are ready to go. They can bring it in as a cost, investment, and I have, hopefully, no tax to pay on this transaction so everybody is happy.

Also my idea is to start repaying the loan after my new Thai company has started to have income.

What are your thoughts?

Answer:

You cannot write in the articles of association that way. At least 25% of the registered shares have to be paid up on the day we register the company. And because you are a foreigner, you will need a work permit, so 100% has to be paid up.

I think the best way to do is to have a loan agreement between yourself and the lender saying that the loan will be given to you in installments (if they don’t want to give you the whole lump sum amount at one time) and that the repayment will be done after what condition, for example:

1. The loan will be repaid in installments of $ xxx, after your new Thai company has shown a gross profit (which is gross income minus cost of sales, but before office and other expenses) of $xxxx. – This is because you said you wanted to pay back the loan when the new company has started to sell the products, or to make money.
2. The loan will be repaid with the share of the company (your shares). You will not pay them with the shares held by the Thai partner because you need to maintain 51% Thai majority for the type of business you are planning to do.

When you sell your share or repay the loan with your shares, if the value of repayment is the same as the par value of the shares, then you don’t have to pay tax. For example you will pay them with 10,000 shares, Baht 100 par value (total value is Baht 1 M) to repay the loan of Baht 1M, then you have no capital gain so you have no tax to pay. But if you give them Baht 1M worth of shares to repay the loan of Baht 2M, then you have a capital gain of Baht 1M, which will be subject to tax.

Contact MSNA for your Thai company registration questions.

Recently, some changes were made to the conditions and tax incentives of Regional Operating Headquarters (ROH). The changes are applicable to all ROH’s registered in accordance to Royal Decree No. 508, dated November 2010.

ROH’s need to always meet all of the following conditions otherwise their rights to corporate income tax reduction and exemption will be revoked retroactively, starting from the first accounting period:

1. They have to have a paid up capital of THB 10 million or more at the end of each accounting period.
2. They must provide qualifying services to their overseas associated enterprises or foreign branches.
3. Their associated enterprises must have real business operations, with a physical presence and staff, as notified to the Thai Revenue Department
4. They have to notify their ROH status in accordance with the rules, procedures, conditions and timeline prescribed by the Director-General of the Revenue Department.
5. They must pay their staff the compensation at the required level from the third accounting period onwards.

The ROH’s that fail to meet any one of the following conditions in any accounting period will lose their rights to corporate income tax reduction and exemption for that particular accounting period:

1. They must pay to recipients in Thailand operating expenses related to the ROH operations of at least THB 15 million or capital expenditures of at least THB 30 million in the accounting year.
2. Their employees must have the skills prescribed by the Director-General of the Revenue Department.
3. They must employ the required number of staff by the end of the third accounting period.

The ROH’s that are dissolved within 5 accounting periods from the date of registration as ROH will lose their rights to the corporate income tax reduction and exemption retroactively from the first accounting period.

Contact MSNA for accounting and tax consulting.

If it happens that there is the treat of land holding as an agent for an alien, the measures to the land disposal and the offender punishment shall be enforced as follows:

1) Measures on land by enforcement to dispose of the land in accordance with legal procedures.

Under Section 94 and 96 of the Land Code, stipulate the regulation when it appears that person who obtained the land as an agent for an alien or alien entity or alien who obtained the land illegitimately, he/she shall dispose of such land in the portion of his/her possession within the period of time specified by the Director-General of the Department of Lands which shall be not less than one hundred eighty days and not more than one year. The Director-General shall have the power to dispose of such land if time limit elapses.

2) Measures on individuals with criminal offense and to be punished in accordance with laws.

In the case of applying for land registration as an agent for an alien, there will be a criminal offense as follows:

2.1 Offenses against the Criminal Code Section 267 due to information the competent official to recode false statement in the official documents shall be subject to punishment with an imprisonment of not exceeding three years or a fine of not exceeding 6,000 Baht or both.

2.2 Offenses against the Land Code. The alien who commits the offenses under the Land Code Section 111, due to the acquisition of land illegitimately; shall be subject to punishment with a fine of not exceeding 20,000 Baht or an imprisonment of not exceeding two years or both. Juristic person who commits the offense under the Land Code Section 112, or Section 113 in case of Thai people; due to the acquisition of land as the agent for an alien or alien entity shall be subject to punishment with a fine of not exceeding 20,000 Baht or imprisonment of not exceeding two years or both.

Questions on enforcement and punishment of these measures, contact MSNA for consultation.

According to Section 86 of the Land Code, a foreigner may purchase land in Thailand only by virtue of the provision of a treaty providing him with the right to own immovable property. Obtaining such acquisition is subject to the provision of the Land Code and the Ministerial Regulations issued under the Code, and the permission must be obtained from the Ministry of Interior. Before the termination of the treaty which was made on February 27th, 1970, there were 16 countries bided to the treaty ; USA, England, Switzerland, Germany, Denmark, Norway, the Netherlands, France, India, Belgium, Sweden, Italy, Japan, Burma, Portuguese, and Pakistan. Since then, Thailand has no longer made any treaty with any country to allow an alien to acquire land in Thailand by virtue of a treaty.

However, the Land Code has been amended with Section 96 bis providing that since January 19, 2002, a foreigner is allowed to purchase land in Thailand for residential purpose and the land to be purchased shall be not more than one rai in area, and the following rules and conditions must be met:

1. Bringing money not less than Baht forty million into the Kingdom for investment and maintaining the investment not less than five years;

2. Permission must be obtained from the Minister of Ministry of Interior;

3. Money brought into the Kingdom shall be invested in one of the following businesses or activities;

3.1 To purchase bonds of Thai Government, bonds of Thai National Bank, bonds of State Enterprise or bonds which the Ministry of Finance secures the capital or interest,

3.2 An investment in a property mutual fund, a property mutual fund or a mutual fund for resolving financial institution problems established under the law on Securities and Stock Exchange,

3.3 An investment in share capital of a juristic person, who is granted permission of investment under the law on promotion of investment,

3.4 An investment in an activity as declared by the Board of Investment to be an activity eligible to be granted promotion of investment under the law on promotion of investment;

4. The land to be purchased shall be located in Bangkok Metropolis, Pattaya City, or Tessaban (Municipality), or in the area specified as residential zone according to the law on Town and Country Planning and shall not be located in a military safety zone according to the law on Military Safety Zone;

5. A foreigner, who is granted permission, shall utilize the land only for residence for his/herself and the family in a way that is not contrary to the local custom or good living of the local community;

6. If a foreigner, who is granted permission to purchase such land, does not comply with the rules and conditions specified, he/she shall disposes of such land in the portion of his/her possession within the period of time specified by the Director General of the Department of Lands which shall be not less than one hundred eighty days and not more than one year. If the time limit elapses, the Director General shall have the power to dispose of such land;

7. If a foreigner, who is granted permission to purchase such land, does not utilize the land for residence within two years as from the day the registration for land acquisition is made, the Director General shall have the power to dispose of such land.

Besides the aforementioned rules and conditions, a foreigner may purchase land by inheritance as statutory heir, in this instance, the land devolved when combined with the land already purchased shall not exceed that specified by law, for examples, land for residential purpose not exceeding 1 rai per household, land for commercial purpose not exceeding 1 rai, land for industrial purpose not exceeding 10 rais, and land for agricultural purpose not exceeding 10 rai per household.

A foreigner whose spouse is a Thai national either legitimate or illegitimate, that Thai national can purchase land but the foreigner spouse of that Thai national must give a joint written confirmation that the money which that Thai national will expend on purchasing the land is wholly the separate property or personal effects of that Thai national and not the Sin Somros or jointly acquired property.

Contact MSNA for land acquisition in Thailand questions.

Question:

We have previously sold our products in USD to a Thai customer. Now that we have incorporated our Thai company, is there any legal restriction on the local customers to continue paying us in USD because we need to pay USD overseas to import the products. Our Thai company hopes to avoid USD exchange rate risk. If it is in USD, how do we convert the exchange rate to calculate the withholding tax amount in Thai Baht?

Answer:

Please make sure you let the customers know that the price and payment will only be in USD even though they will pay you in THB (using the exchange rate on the day they pay the USD amount owed).

The invoice and tax invoice to issue will show the amount in USD in parenthesis only, the THB amount has to be shown on the tax invoice using the rate of the day before. When the customer pays, they will pay in THB (using the USD amount appeared on the tax invoice with the rate of the day). The difference in the Baht amounts on the day they pay and on the tax invoice will be gain/loss from exchange rate.

There is no withholding tax involved when it is sale of goods. Only when it is service fee will there be withholding tax.

Contact MSNA for your Thai accounting and tax questions.