A foreign business can operate in Thailand by obtaining a Foreign Business License. Hence, the foreign business applicant that has a good chance to be granted a “Foreign Business License” has to have all these 3 characteristics:

1. Being a juristic person (company) registered overseas or Thailand (for example, a Thai registered company with majority foreign ownership).
2. Going to operate business to provide products or services to the private sector, including the private parties that have contracts with government agencies or with other private parties.
3. Having a service contract or sale contract that specifies the name of the foreign business applicant as the contractual party with another private party and the products or services to be provided must involve high-level technology or require specialized skills.

If the applicant is certain that its business has all the above characteristics, here are some criteria to meet in order to be successful in getting the Foreign Business License:

a. The foreign business products or services should involve high-level technology or require specialized skills, which are beneficial for technology transfer to the Thai people;

b. The foreign business products or services should contribute toThailand’s basic public utilities which are beneficial to its socio-economic development (for example, transportation system, tele-communication system)

c. The foreign business should know what industries will most benefit from its products or services and what industrial sectors will the products or services help to grow and become more competitive and more successful.

d. The foreign business needs to have a sales or service contract with the name of the client as the contractual party with the company, showing the scope of the sales or services, terms and conditions and the length of the sales or service period.

Contact MSNA, your business partner in Thailand to your company a Foreign Business License.

Today, Thai Business Expert summarizes the steps on how we can set up an American owned company in Thailand taking advantage of the Treaty of Amity between USA and Thailand.

Step 1. We will set up a new company in Thailand for you, with all 3 American shareholders (or two Americans and one Thai) with a registered capital of THB 3 M. This is because the foreign business law dictates the minimum capital to be THB 3 M for a company with majority foreign shareholders. Please note that all 3 shareholders will have to be in Thailand at the time of signing the registration papers. Once the papers are signed, the company will be registered the next day, only if the registered address is in Bangkok.

Step 2. We will apply with the US Commercial Service for a letter certifying that the shareholders of the company are American and so the company is entitled to the right (per Thailand – USA Treaty of Amity) to operate the business in Thailand. This step usually takes 1-2 weeks for the US Commercial Service to issue the certification letter.

Step 3. We will submit all the papers to the Office of Foreign Business Committee, Ministry of Commerce, to get the Foreign Business Certificate. It usually takes 3-4 weeks for the certificate to be issued. Please not that the director who will be responsible for Thailand operation has to have a non-immigrant business visa to enter Thailand and we will need the copy of this visa.

Step 4. We will register the new company into the Thai tax system (including VAT). We need only one day to do this step.

Step 5. We will assist in getting a work permit for an authorized American director so that he can be authorized signatory for the bank accounts and he can sign any papers to bind the company. This takes 10 days to process.

IMPORTANT POINTS:

You can use your US company (if its majority shareholders and directors are American) to do business in Thailand without setting up a new company in Thailand and that means we can skip step 1 and save on the related professional fee and government fees. If you choose to go that route, we will need to draft an affidavit for your US Company and you will need to have the US Company’s documents and affidavit notarized before we can start step 2.

Also if you choose to register a new company (which means we need step 1), but want your US company to be the major shareholder, we will need to draft an affidavit for your US company and you will need to have the US company’s documents and affidavit notarized. Then we can continue on to step 2.

Contact MSNA for your business needs and questions on Treaty of Amity and Thailand company registration.

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.

It’s time for foreigners in Thailand to file their personal income tax. MSNA is always chosen by expats living in Thailand to help prepare and file their tax returns for the income they earned the previous year. We have worked with foreign tax payers from all over the world to determine what income must be included as their taxable income in their Thai tax returns, what and how much expenses are allowed by law, what tax related deductions they are allowed to take, and how much tax they have to pay while considering the double taxation treaty their home country has with Thailand.

If you were in Thailand more than 180 days in 2010, you are considered a tax resident and need to find out if you must file your income tax for 2010 within 31 March 2011. Please contact us for consultation.

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 you are a foreign majority owned company, you will need to obtain a License to Operate Business. If you are a US majority owned company, because of the Treaty of Amity between Thailand and USA, you will request for a Certificate of Business Operation. Some Australian and Japanese citizens and companies may not have to apply for a Foreign Business License (thus only have to request for a Certificate of Business Operation) if certain conditions are met under the Thai – Australian Free Trade Agreement or the JTEPA (Japan Thailand Economic Partnership Agreement). An application must be submitted to the Bureau of Foreign Business Administration, Department of Business Development of the Ministry of Commerce, Thailand with applicable fees. Usually it takes a few months to get a Foreign Business License but only less than a month to get a Certificate of Business Operation in case of American majority owned companies or Australian or Japanese under the trade agreements mentioned above.

The application usually contains details of your company’s profile, type of applied business, characteristics of business and stages of operation, capital structure, business structure, size of business, technology transfer plan, and employment. You may want to hire a lawyer or a good Thai accounting firm with lots of experience in the field like MSNA to obtain the Foreign Business License for you. It is not an easy task if you do not do it all the time to prepare such an application.

In June 2010, the Department of Business Development issued an application preparation handbook to help foreign businesses understand what they need to submit to get the Foreign Business License.

The following is an overview of establishing a business in Thailand. There are 4 forms of establishment you can choose to operate your business in Thailand:

1. Sole Proprietorships. This is not the form of business we recommend since the sole owner is exposed to unlimited liability of the business.
2. Partnerships. A partnership can be registered and unregistered. Again partnerships are not recommended for foreigners wanting to do business in Thailand for the same reason as sole proprietorships.
3. Limited Companies. The most popular form of business organization among general investors is private limited companies due to the fact that the liability of the investors is limited to the amount of unpaid shares subscribed by them.
   A private limited company requires a minimum of three promoters who file a memorandum of association, convene a statutory meeting and register the company. Once the company has been registered, it needs to obtain a tax identity card. Some companies are required to register into the VAT (Value Added Tax) system, depending on the types of business and the level of their gross income. They must also follow accounting procedures specified in the Civil and Commercial Code, the Revenue Code and the Accounting Act. Companies are required to close their accounts and have an auditor audit their books and file their audited financial statements once a year with the Revenue Department and the Department of Business Development.
4. Branch Office . You may choose to operate your existing foreign company in Thailand as a Branch Office. Or you can choose to set up a representative office, which is a form of Branch Office but you cannot earn income in Thailand.

In order to operate a business in Thailand as a foreigner, you need to consult Thailand Foreign Business Law (Alien Business Act). Certain types of businesses do not have to apply for a Foreign Business License while most types do require that you get the Foreign Business License before you start the business operation.

Contact MSNA for any questions about setting up a business in Thailand.

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.