What are the challenges of doing business in Thailand?
Thailand is one of the most well-liked places in Asia to create a business, but if you’re a foreigner, there may be difficulties or limitations. This manual outlines the difficulties and suggests solutions.
Problem 1: Ownership limitations
Thai citizens hold the remaining 51% of the company’s shares, with foreign investors only allowed to own up to 49% of new Thai limited companies.
Because Thai firms offer advantages that foreign-owned companies do not, such as no company type restrictions, the opportunity to own and own land, and minimal setup charges, non-Thai people may decide to incorporate Thai businesses.
The Foreign Business Act (FBA) forbids foreign investors from utilising Thai nominee shareholders to hold the majority of the shares of a Thai limited company. Thai nationals who act as nominee shareholders are subject to fines ranging from THB 100,000 to THB 1,000,000.
There are, however, three routes for foreign business owners to acquire full ownership of a corporation.
Getting an international business licence
When a company or foreign investor wants to engage in certain types of business activity, they must first get a Foreign Business License (FBL).
There are three lists of business activities under the FBA, and they are as follows:
List 1 of occupations that are off-limits to foreigners includes radio and television stations.
- a rice farm
- farming of livestock
- Land exchange
- creating or casting monk alms bowls and Buddha images
List 2 of occupations that foreigners are not allowed to engage in without the Council of Ministers’ consent includes manufacturing, distributing, and maintaining weapons, ammunition, gun powder, explosives, armaments, ships, or vehicles used for military purposes.
- Domestic travel by road, air, or sea
- Thai manufacturers of musical instruments
- Salt production
Mining
List 3 of businesses that foreigners are not allowed to operate without the Director-approval General’s includes:
- accounts payable
- Legal assistance
- construction services
- engineering assistance
- advertising companies
- cultivation of many plant species
- Visit this page to learn more about getting an FBL.
BOI business promotion
Applying for promotion by the Board of Investment is the second option to achieve 100% foreign ownership (BOI).
The following activities are eligible for BOI promotion:
- agriculture practises and products
- Paper, plastics, and chemicals
- Industry for electronics and electrical equipment Light industry
- metal goods, machinery, and transportation machinery
- Basic metals, ceramics, and minerals
- Public services and services
A promoted company receives the following advantages from the BOI:
- the corporate income tax rate decreased from 20% to 0%.
- Completely foreign ownership
- There is no import duty on machinery.
American Treaty of Amity
Through a specific agreement known as the US Treaty of Amity, the United States of America and Thailand are able to grant American businesses full ownership of a Thai corporation, branch office, or representative office.
There are still some business limitations even though the Amity Treaty grants foreign business owners 100% ownership. Amity Treaty companies are prohibited from owning real estate, exploiting natural resources, trading agricultural products domestically, working in the transportation and communications sector, and performing fiduciary duties.
Challenge 2: BOI application
When you apply for BOI promotion, you need to make sure that you properly follow the necessities and prepare all the specified documents; otherwise, your application is also rejected.
Investors will apply for BOI promotion each before and once their company is registered, however, it’s suggested to use for BOI promotion once you’ve got registered the corporate.Applying for the promotion takes some time; thus, you’ll have time to get any necessary licenses or machinery by incorporating the corporate initial.
For the BOI promotion to be approved, there square measure bound criteria that has to be consummated, which are:
To develop completeness within the agricultural,To develop completeness within the agricultural, industrial and repair sectors, comes submitted for BOI promotion should have the subsequent qualifications:
The added of the project should not be but two hundredth of the revenue, apart from comes in agriculture and agricultural product, electronic product and elements and coil centres, that should have a added of a minimum of 100 percent of revenues.
Modern production processes should be used.
New machinery should be used.
Projects that have investment capital of ThB ten million or additional should get ISO 9000 or ISO 14000 certification of an identical international normal certification inside 2 years.
Environmental protection
Minimum capital investment of ThB one million for every projectProjects with Associate in Nursing investment of over ThB 750 million should submit the project’s practicability study.
Challenge #3: Obtaining a job in Thailand.
Foreigners who wish to work or operate a business in Thailand must first obtain a valid work permit. Working without a work permit is prohibited in Thailand, and those who are caught doing so risk fines or even jail time.
After receiving a work permit, a foreign national may only work for the organisation and place listed on the document. If the location of the business has changed, a new work permit must be sought.
You have ten days to submit your work permit to the labour department if you decide to cancel it. Your visa is terminated whenever you revoke your work permit.
Therefore, it is essential to file for a stay extension as soon as the work permit and visa are cancelled.
Problem 4: Choosing shareholders
A Thai corporation must have a minimum of three shareholders, two of whom must be Thai citizens as foreign investors are not permitted to control a majority stake in Thai corporations.
Foreign investors might not have Thai business partners, though, and it might be challenging and hazardous to recruit local investors to name as shareholders for your business. You must choose a shareholder who can be trusted because Thai stockholders will hold the majority of the company’s shares.
By owning preference shares, foreign shareholders can control the corporation with only a minority stake.
The holder of a preference share has the same, fewer, or more voting rights as an ordinary shareholder at any annual general meeting. When a corporation makes money, preference shareholders have the right to receive dividends before common shareholders.
Fifth obstacle: a language barrier
Thai is the official language of Thailand, and it is also the language of business, however English is also frequently used there.
The majority of governmental entities and legal documents are written in Thai, thus it is advised to enlist the aid of a qualified translator to assist you in creating, translating, and reviewing the paperwork.
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Conclusion
Every year, Thailand continues to draw in foreign investment and offers a range of tax and non-tax benefits to potential investors. Even though there can be difficulties, there are numerous advantages to launching a business in Thailand (insert link to benefits of doing business in Thailand). Please get in touch with Spade Survey if you are considering it.
