What are the steps and fees to form a Treaty of Amity Company in Thailand?

1. As an American, you can set up a new company in Thailand, with all 3 American shareholders (or 2 American and one Thai) with a registered capital of THB 3 M (USD 10,000). This is because the foreign business law dictates the minimum capital to be THB 3 M for a company with majority foreign shareholders. One of the authorized directors will have to be in Thailand at the time of signing the registration application papers. Once the papers are signed, the company will be born the next day. In case you cannot be in Thailand at the time, you will need to have your signatures notarized in the country where you are and have the Thai embassy certify the notarization. – The government fee to register a Thai limited company with Baht 3 Million is about USD 660.
2. You 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 and protection of Thailand – USA Treaty of Amity and can operate the business in Thailand. It can take 1 – 3 weeks. – The fee to pay the US Commercial Service to issue the certification letter is within USD 100.
3. Apply for the Foreign Business Certificate with the Foreign Business Committee, Ministry of Commerce. this usually takes 3-4 weeks for the certificate to be issued. Please note 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 his visa. – The government fee for this step is around USD 750.
4. Register the new company into the Thai VAT system. This may need only one day or more if you cannot get the papers from your landlord easily. – There is no government fee for this.
5. Register the company and its employees into the social security system. It takes one day for the registration and a few days to gather the employees’ information. There is no government fee.
6. Get 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 usually takes 10 days. – The government fee for a work permit for one year is about USD 100.

Things you should know:

You do not need to set up a new company to do business in Thailand if you own an American company. (That means its majority shareholders and directors are American.) You will skip step 1 mentioned above and save on the related fees. Just start from Step 2 with your US company’s documents.

Contact MSNA for setting up your Treaty of Amity company in Thailand.

According to a recent news article that I have read, the Foreign Ministry of Thailand has agreed to allow tourists from some countries to submit their visa applications online.

This proposal by the Tourism Council of Thailand (TCT) has been considered, as the ministry wants to help soothe the crowds and long lines of tourists wanting a visa on arrival at Suvarnabhumi airport.

Foreign travelers from big countries such as China and India like to do visa on arrival, as they find it inconvenient to arrange back home as the size of their countries make it difficult to travel to the nearest Thai embassy or consulate.

Moreover, people in many emerging countries are required to seek a visa at the embassy or consulate in a third country. For instance, tourists from Algeria are required to go to France to process their Thai visa.

According to TCT, this inconvenience is blocking tourism opportunities for Thailand so online visa application will afford greater convenience to tourists, increase the number of tourists from emerging markets and ease congestion at Suvarnabhumi airport.

The ministry will also work out the details of the online visa application and inform the Tourism and Sports Ministry. It will then coordinate with the immigration police so they can prepare before the high season starts in October.

The TCT is confident that applying online will not affect national security, as the authorities can screen potential visitors from the information submitted.

Further development on the implementation of this proposal will be released by the Tourism Council of Thailand and Ministry of Foreign Affairs.

For your questions on Thailand visa and work permit, contact ThaiLawyers for assistance.

The Thai Revenue Department (TRD) has been implementing certain measures to promote investments and support to both local and foreign investors. In his recent statement, Director-General Dr. Sathit Rungkasiri has stated that the TRD has policies to support international investment by establishing a double tax agreement network, reducing corporate tax rates as well as implementing various tax policies to boost competitive capabilities for Thailand. However, TRD still ensures that the country’s benefits with regards to tax collection will be highly prioritized.

Once Thailand enters into ASEAN Economic Community (AEC) in 2015, the business operation from multinational enterprises will definitely increase. These business organizations will normally plan to reduce their tax burden to the least therefore, TRD is preparing to propose on international tax restructuring in order to strengthen Thai economy as well as to protect against improper tax avoidance such as a measurement on either of the following:

– Transfer pricing

– Thin Capitalization

– Controlled Foreign Company, and;

– General Anti Avoidance Rule

In spite of these measures, such policies must not cause too many obstacles in international investment.

Contact MSNA for your Thai accounting and tax questions.

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.

The National Anti Corruption Commission (NACC) of Thailand has recently issued a notification that directly affects businesses in Thailand that are contractors of Thai government agencies.

Effective from 1 April, 2012, individuals and companies that have projects with Thai government agencies are required to prepare and submit the “Revenue and Expense Accounts” to the Thai Revenue Department according to the Notification of National Anti-Corruption Commission Concerning Principles and Methods of Preparing Revenue and Expense Accounts of Project between Individual/company and Government Agencies B.E.2554 (A.D. 2011).

ThaiLawyers.com has summarized the essence of this notification as follows:

Value of project to be affected by this notification

1 April 2012 – 31 March 2013 => Any projects worth Baht 2 M or more.

From 1 April 2013 => Any projects worth Baht 500,000 or more.

In this notification:

“Contractors” means natural or juristic persons who have projects with government agencies.

“Government agencies” means a ministry, bureau, department, regional administration, local administration, state enterprise, public organization, administrative office of constitutional organization, or other state agency or any office where operates public business by law and funded or financial or asset invested by the government.

“Project” means

1. Contract for procurement of goods and services
2. Concession agreements,
3. Agreements of government agencies for funding of researches
4. Agreements of government agencies for funding of any activities.

It includes all memorandums of understanding or annexes or revisions to the essence of the contracts after the Notification becomes effective.

Exceptions of the Notification

1. This notification does not affect the projects signed before 1 April 2012 unless there is an amendment on the essence of the contract.
2. It does not affect the contracts made between 2 government agencies, except the ones that have to file corporate income tax returns.
3. It does not affect the contracts with overseas contractors who are juristic persons established under foreign law with no branch, agents or representative in Thailand and whom the contracting Thai government agency makes payment directly to abroad and the goods or services are delivered in Thailand.

Method of Payment:

Contractors have to receive or make payments via current bank accounts (except payments under Baht 30,000).

How and When to File

Contractors are required to electronically submit the Revenue and Expense Accounts to the Revenue Department within below timeline.

(1) Individual contractors:

(a) In the case where all receipts and payments of the projects are completed in the same tax year, the contractors have to submit the accounts together with Personal Income Tax Return of that year.

(b) In the case where all receipts and payments of the projects are not completed in the same tax year, the contractors have to submit the accounts of each tax year together with Personal Income Tax Return of the year.

(2) Company contractors:

(a) In the case where all receipts and payments of the projects are completed in the same fiscal year, the contractors have to submit the accounts together with Corporate Income Tax Return at the end of that fiscal year.

(b) In the case where all receipts and payments of the projects are not completed in the same fiscal year, the contractors have to submit the accounts of each fiscal year together with Corporate Income Tax Return at the end of the fiscal year.

However, if the contractors have not been approved by the Revenue Department to file taxes online yet, they can submit the Revenue and Expense Accounts together with the paper tax returns.

Contractors are required to submit the Revenue and Expense Accounts to the Revenue Department as per (1) and (2) until the ends of obligations under the projects.

Audit of Revenue and Expense Accounts by the Revenue department

If the Revenue Department finds that the contractors do not submit the accounts, it shall report to the NACC for further appropriate action.

The Revenue Department may audit the accounts of projects during the audit of companies’ annual financial statements or audit of personal income tax or corporate income tax, and if it finds that a contractor may engage in corrupt activities of state officials or does not present the accounts properly or completely, it shall report to the NACC for further appropriate action.

Penalty

The contractors who fail to submit the Revenue and Expense Accounts nor fail to present proper and complete accounts under this Notification will be considered lacking qualifications to be contractors with government agencies. Government agencies are prohibited to enter into any contract or have a project with the contractors who are on the blacklist.

Measures for Government Agencies

1. Government agencies that process their procurement via e-Government Procurement (e-GP) are required to record data of their contractors (who are required to submit the Revenue and Expense Accounts) in that electronic system as well.
2. Other government agencies that do not process their procurement via e-GP need to report data of their contractors (who are required to submit the Revenue and Expense Accounts) to the NACC and Revenue Department.

Government agencies shall define conditions and qualifications of individuals or companies that wish to engage in their projects as follows:

(1) Individual or company contractors neither fail to submit the Revenue and Expense Accounts nor fail to present proper and complete accounts under this Notification;

(2) Individual or company contractors who engage in e-Government Procurement (e-GP) need to register themselves for e-GP at Thai Government Procurement website; and

(3) Contractors have to receive or make payments via current bank accounts (except payments under Baht 30,000).

What contractors have to do

1. Prepare and submit the Revenue and Expense Accounts together with Corporate Income Tax Return at the end of the fiscal year in format annexed to the Notification (Form Bor Chor 1).
2. Record the receipts and payments of each project separately (no need to submit).
3. Keep the records and supporting documents at the place of business for at least 5 years or until after the audit by the NACC has been completed (in case of getting audited before the 5 year period).
4. Receive or make payments via current bank accounts (except payments under Baht 30,000).
5. Register in e-Government Procurement (e-GP) at Thai Government Procurement website.
6. Register with the Revenue Department to file taxes online (optional).

Contact MSNA for any questions you have concerning your doing business in Thailand.

The Thai government has recently acknowledged the implemented and proposed policies and support provided to the industrial sector as follows:

1. Support provided to the public affected by heightened cost of living

2. Remedial measures for 7 industrial estates in Ayudhaya and Pathumthani that were affected by flood

3. Renovation of large factories and SMEs outside industrial estates that were affected by flood

4. Project to support flood affected industrial sector:

4.1 Industrial shelter center

4.2 Safety, environment and industrial waste management project in flood affected area

4.3 Water quality, soil quality and contamination testing both inside and outside industrial estates

4.4 Vocational training center for flood victims

4.5 Repair center for units under the Ministry of Industry that are affected by flood

4.6 Environment quality management in flood affected area project

4.7 Restoring Thailand’s image project

4.8 Industrial clinic to restore flood affected SMEs

Contact MSNA for any questions regarding the implemented business measures by the Thai government.

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.

A factory means a building, place or vehicle which uses a machine from five horse powers or an equivalent thereof or more or which employs seven workers or more with or without any machine for manufacturing, producing, assembling, filling, repairing, maintaining, testing, improving, altering, transporting, keeping, or destroying anything in accordance with the type or kind of factory as provided for in a ministerial rule.

Establishing a factory in Thailand is governed by Factory Act, B.E. 2535 (1992). Under this Act, factory is categorized into 3 types:

1. The first type of factory can operate or manufacture any time upon desire of the manufacturer. However, the manufacturer has to follow the regulation under ministerial regulations.
2. The second type of factory can start manufacturing after the manufacturer has notified to the officer. The manufacturer has to follow the regulation under ministerial regulations.
3. The third type of factory has to get an approval or permit from the officer before operating a factory.

Eventually, the total amount of horse power and the total amount of employees are all required in order to be able to determine the type of factory business in Thailand.

All types of factory can be established anywhere except in the restricted places such as residential areas and near public places such as schools, temples, hospitals, etc.