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100% Foreign Owned Company to Sell Software in Thailand

Many foreign companies want to enter the Thai market to sell their software or platform. Some want to just hire an employee in The Kingdom and do the business. Others want to set up 100% foreign owned company to sell software in Thailand. Both violate the Foreign Business Law. If you want to retail or wholesale your software and do not want to have majority Thai partners in your company, you will need to obtain a Foreign Business License for your 100% foreign owned company to sell software in Thailand. Most likely you will not get approved because Thai majority companies can sell software too. You need to be able to prove why Thailand needs your foreign majority company to do the business that Thai people can do.

Now we want to point out the law; Numbers 14 and 15 from Schedule 3 annexed to Thailand Foreign Business Law, are about retail and wholesale of goods:

14. Retail of goods of all kinds having the total minimum capital less than Baht 100,000,000 or having the minimum capital of each shop less than Baht 20,000,000; and

15. Wholesale of goods of all kinds having the minimum capital of each shop less than Baht 100,000,000.

If you can have Baht 100M capital, then you can have 100% foreign owned company to sell software in Thailand. However, most likely, you do not want to set up a company with Baht 100M capital. That means you will not be able to own the majority of your company in Thailand for doing such business.

Now, if you want to develop software or platforms in Thailand, you may be eligible to apply for the Board of Investment promotion, which will allow you to sell the software you make. Read here for how we answered questions about Thailand BOI companies for software developers.

Talk to MSNA Group today to discuss many solutions that we have for you.

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Companies From India Got BOI for 100% Foreign Ownership

Some of our clients, companies from Indore, India, got BOI to operate as 100% foreign ownership companies, with MSNA Group’s assistance. One got the BOI promotion for software activity for the software development business. Another one got the Board of Investment approval to operate in Thailand with 100% foreign ownership in the Trade and Investment Support Office category for their telecommunication engineering business. Hear what our clients say about working with MSNA Group:

“We are entities based in Indore, India, in the businesses of Software, Digital translation and Telecom Network Infrastructure.  We have been using Thai Lawyers Ltd./MSNA Group to set up our Thailand BOI companies since 2017. It is always a wonderful experience with the many services offered by MSNA Group. – Mr. Manmohan Saxena, Financial Controller, Diaspark Infotech Private Limited

We thank you so much for your business. Our team enjoy working with you too. We strive to have our clients’ most satisfaction.

Foreigners looking to have 100% foreign ownership in their business in Thailand, please contact ThaiLawyers or MSNA Group. We have solutions for you. Whether you are in the service business, IT, manufacturing, engineering, etc., you may be able to get a BOI company, which will allow 100% foreign ownership and many work permits.

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Making Payment to a Singapore Company from Thailand

Today we got a question about making payment to a Singapore company from Thailand. The invoice is for research services rendered in Singapore for use in Thailand. For this we look into the double taxation treaty between Thailand and Singapore. The vendor does not have a permanent establishment in Thailand, so in this case Singapore, not Thailand, should get the tax from the business profits. Therefore when the Thai company makes payment to the Singaporean company, it does not have to withhold tax to submit to the Thai Revenue Department.

The next thing to really consider is whether the Thai company has to submit VAT on behalf of the Singaporean company. Since the research services were rendered in Singapore and the result of the work was to be used in Thailand, VAT must be submitted with Form PP36 by the 7th of the month following the payment. If the Thai company is VAT registered, it can use the receipt of PP36 as one of its input tax invoices and claim back the amount of VAT in the Form PP30 of the same month as PP36 submission.

Looking for a great team of Thai accountants who speak fluent English at reasonable prices? Contact us today.

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Writing Off Debts By Companies

Here we want to talk about writing off debts by companies which can happen when the creditors are related to the company (shareholders, group companies, etc). Thai accountant should know how to treat writing off debts by companies on the accounting books. You have to recognize the amounts as the company’s income. They are part of the profit to calculate corporate income tax for the year.

When you are closing down a Thai limited Company, most likely the company still has liabilities in its accounting books. You need to send a registered mail to each creditor to let them know you have decided to close down. This is so that if they have money owed by the company, they will know where to contact the liquidator. If you do not pay any of the debts, it will become an income. The treatment is the same as writing off debts by companies.

Do you need to pay VAT on the income recognized from writing off debts? Thai Tax Law does not impose VAT on revenue from forgiven debts as it is not compensation from selling goods or services. To summarize, when writing off debts by companies, you need to consider how much corporate tax the company will pay. In case of closing down the company, if you choose to leave the liabilities on the books, the Thai revenue department will make you recognize them as incomes which may make the company have a profit, thus pay tax, anyway.

For accounting, audit, closing down companies, etc., contact MSNA Group now.

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Thai Nominee Shareholders Stealing From The Company

Foreigners having business in Thailand should beware of Thai nominee shareholders stealing from the company. Many want to set up their business in the Kingdom, but cannot own their company 100% because Thailand Foreign Business Law does not allow foreigners to do so. It allows only a few activities, like exporting products from Thailand, having a manufacturing plant to produce goods to export or sell them in Thailand, etc. Most businesses need to have Thai majority ownership and many unethical lawyers would provide some Thai names to hold the 51% shares for the foreigner.  Or the foreigner may have a Thai employee to hold shares on their behalf. Thai nominee shareholders stealing from the company is not the only risk you have. Using nominee shareholders is breaking the Foreign Business Law. Penalty can be a big fine and a jail term.

Here are some cases we see from Thai nominee shareholders stealing from the company. Thai employees who hold majority shares for the foreigner will demand millions from you in order for them to give back the ownership later. Many of them are also authorized directors of the company and they sign checks to themselves. One of our clients is a property developer and bought a lot of land in Chiang Mai. The Thai director (who is also the nominee shareholder) told them that the Land Department needed the company to have only Thai shareholders and Thai directors. So the company took of the foreign director who is the real owner of the company and the money. Later our client learned that the Thai director actually bought the land in her own name and refused to transfer the land to the company. She even sold some land and did not return all the proceeds to the company. We hope that these cases of Thai nominee shareholders stealing from the company will open the investors’ eyes. Do not practice nominee shareholding. Talk to us, we have solutions for you. If you need to have Thai shareholders, you need to protect your investment. Use good lawyers who will provide your protection so you do not have Thai nominee shareholders stealing from the company later.

MSNA Group of companies have helped foreigners setting up their business in Thailand for 25 years. We have seen it all. You may be eligible to have Board of Investment promotion (see List of Business Activities Eligible for Thailand BOI Promotion). You may be able to obtain a Foreign Business License to operate your business as a foreign company, or to get the protection of the Treaty of Amity if you are American. Save yourself from Thai nominee shareholders stealing from the company. Talk to us now for all your business needs in Thailand. We are a one stop shop who can help you from setting up your new company, payroll outsourcing, accounting, tax filing, auditing, or even due diligence for your next merger and acquisition.

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Work Permit for Working Anywhere in Thailand

At MSNA Group, we get quite often an inquiry about a work permit for working anywhere in Thailand.

In each work permit, it shows the name of your employer company, your work position and a brief job description. In addition, it says the province where you work, which is the province where your employer’s registered address is.

As a foreign employee, you need to be able to show your work permit to a police officer or a Labor officer when asked for. The Alien Working Act B.E. 2551 (2008) says you have to have your work permit on your possession or at the place where you are working, during work hours, otherwise, you may need to pay a fine of up to Baht 10,000.

Many foreigners think that they can work anywhere in Thailand when they have a work permit. Or they can work legally in different jobs to earn more incomes because of having just one work permit. No, it is not that simple. Your work permit can have more than one job or one employer. That means, all of the jobs and all of the employers need to be listed on your work permit. Now, it is not going to happen that easily. You will find that many employers are not able to sponsor your work permit. This is because each employer needs at least Baht 2M paid up capital and 4 Thai employees, both per expat employee they hire. Only BOI promoted companies may have different ratio, but then you cannot add a BOI company as one of your employers. If you get caught working where you do not have a work permit, you could face up to 5 years jail term or a fine of Baht 2,000 to 100,000 or both. Plus, you may be deported.

Now, let’s talk about working for the only employer listed on your work permit. Most likely the area you can work is the same province where your employer’s official address is. Some companies have branches in different provinces. If your work permit lists those provinces as the areas you will be working in, then you are okay. Section 52 of Foreigner Working Act, B.E. 2551 (2008) stipulates a fine of not more than Baht 20,000 if a Thailand work permit holder works in jobs or places other than at his official employer. So please make sure, if you are sent to work in different places, that they are listed in your work permit book.

Talk to us at MSNA Group. We can assist you with all your work permit needs. Whatever your scenarios are, we will have a solution for you.

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Deposit is not an Income

The money you receive for your goods or services as a deposit is not an income per Thai accounting law. A deposit received is treated as a liability on your books because it is an unearned income. Once you have delivered the goods or rendered the services, the deposit amount has become “earned”. Thus, it will be moved from being a liability in the statement of financial position to income in the profit and loss statement. However, per tax laws, the value added tax incurs when you receive money or when you deliver goods, whichever comes first. When you receive a deposit, you need to issue a tax invoice and submit the output VAT on the deposit in the VAT return of the month that you receive the deposit.

Deposits received is a reason why your total income reported in the accounts is different from the total income reported in the VAT returns throughout the accounting period. After you close the year’s accounts, your accountant should prepare a reconciliation of the revenues per books against the total revenues reported in the VAT returns of the same period. The Thai Revenue Department may ask to see it.

Contact MSNA Group for your tax and accounting needs in Thailand.

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When to issue a tax invoice

In Thailand, when a VAT registered company is in the business of selling goods (wholesale or retail), the value added tax (VAT) point occurs when you deliver the goods or when you get paid whichever comes first. VAT point determines when to issue a tax invoice. For more clarification:

  1. When you deliver goods, even when you have not received payment, you need to issue a tax invoice.
  2. If a customer just makes a deposit, though you have not delivered the goods, you need to give them a tax invoice (and a receipt) for the amount you got.

Now, for service businesses, when to issue a tax invoice? The VAT point occurs when you receive payment, whether or not you have rendered the service. So make sure you issue a tax invoice and a receipt for the amount of money you receive. If you just send an invoice to your client asking them to pay you, you don’t have to prepare a tax invoice yet.

Please note that not everyone can register in the VAT system. Some business activities are exempt from VAT. Others can register in the system, but if they have not reached Baht 1.8 M in gross sales, they may choose not to be in the VAT system yet.

If an individual or a company is not registered in the VAT system, they cannot issue a tax invoice and they cannot claim the 7% VAT they pay to vendors.

Contact MSNA Group for tax planning, accounting and tax compliance services.

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When landlords don’t agree to rent withholding tax

Normally when you (as a company) rent an office space, you need to deal with rent withholding tax of 5% (to submit to the Revenue Department in the following month). You will pay the landlord only 95% in cash amount and prepare a withholding tax certificate for the amount of 5% that you withhold and give it to the landlord. If the landlord is a company, they may not have any problem receiving the amount of 95% from you in cash and 5% in a withholding tax certificate because they can use the withholding tax certificate as a proof of their prepaid corporate income tax at the end of their accounting year. However, when the landlord is an individual, many of them normally do not report their rental income on their personal income tax return. They will demand 100% rent amount from their corporate tenants. They will make you submit the rent withholding tax from your own pocket. If you do not accept it, they will probably not want to rent their space to you. Of course, they are wrong. You are just doing what the Thai tax law requires you to do. Most individual landlords whose properties are in high demand will not care. They want their rent in full amount or else you should find another place to set up your shop or office. It is your choice to see what they will do if you give them only 95% payment and a certificate showing the rent withholding tax of 5% . Most tenants will give in because they have already spent a lot of money renovating the space to suit their business needs and cannot afford to move to a place whose owner will accept that they need to pay tax on their rental income. Some individual landlords specify in the rental agreement that the tenants will pay for any taxes, including withholding taxes. In that case the tenants know from the beginning that the 5% rent withholding tax will come from their own pocket.

Talk to Thai accounting and tax experts at MSNAGroup today for the best advice.

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BOI Company for Sale

Why someone got a BOI promotion for their business and want to sell it? We have some foreign clients who came to Thailand to apply for BOI so that they can own their business 100% without Thai nominee shareholders. Even though we work quickly with the clients to prepare the BOI application, sometimes, the BOI people have too many cases on their hands and they cannot approve a business project within 40 business days as promised on their website. Some applicants wait for 10 months or one year before they finally get the approval letter from the BOI.

Waiting to enter the market in Thailand for too long, many investors have changed their business expansion plan. Many of them do not want to open their BOI company here anymore after they got the certificate.

This is why once in a while, we have a BOI company for sale. If you do not have time to wait that long in order to operate your business and enter the Thai market, check with us. Contact MSNA Group now for a chance to buy a BOI company that has never been in operation.

When you buy a BOI company from us, we understand that you trust us. We will guarantee that the company you buy will not have any problems.

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