Basic Business Laws
Any foreigner setting up a business in Thailand needs to understand the basic business laws of the country. Information below will hopefully help you familiarise yourself with requirements to ensure a successful, legal and correct platform on which to base business.
There are a number of laws relating to business operations in Thailand. If you have an international business it is possible to set up a branch office, representative office or regional office. These opportunities will allow a company to take full advantage of local business opportunities as well as possible tax advantages.
In general foreigners are prohibited by Thai law to conduct business as a sole proprietor. One exception is for citizens of the United States of America who register with the countries Department of Business Development under the U.S. – Thailand Amity Treaty. By doing this the law allows them to run sole proprietorships in most industries.
Two types of business partnerships are recognized and can be legally registered with the Commercial Registration Office. The registration fee will be assessed as 1 pct. of the registered capital and will cost between 1,000 and 5,000 Thai Baht.
These can be established by law with a minimum of 2 owners. Ordinary partnerships have no requirement to register with the Commercial Registration Office, however, many individuals involved in such a partnership do so because they wish to be taxed as juristic individuals.
These partnerships are required to issue annual financial statements and to pay corporate income taxes. If not, income has to be stated on each partner’s individual tax return.
Thai Limited Liability Partnership:
This is known as a Thai LLP and allows for 2 types of partners.
- General Partners: These individuals are permitted to manage the business. They are fully liable for the said partnerships financial obligations.
- Limited Partners: These individuals are NOT permitted to manage the business. Their financial liability is limited to the sum of capital contributed to the LLP.
These partnerships must register with the Commercial Registration Office and tax wise are classed as corporate entities. Thai LLP’s are required to make an annual financial statement.
Thai Limited Companies:
Limited companies are governed by Thailand’s Civil and Commercial Code. It is a requirement for every Private Limited company to register their Memorandum of Association and their Articles of Association.
To establish a company, 3 promoters are required before registration can be accepted. Each of these promoters must be at least 20 years old and must hold at least one share in the company. Shareholders do not have to be Thai citizens. but foreign shareholders can only hold a maximum of 49% shares in a company.
A Limited Company must have at least 3 shareholders at all times. This is a Thai law which should be adhered to.
While all shares must be subscribed to upon incorporation, only 25 pct. of these have to be paid up. There is a minimum share price of 5 Thai Baht. It is possible for some shares to have preferential voting power attached, but every share must be given at least one vote.
All businesses operating in Thailand must be registered with the Department of Business Development (DBD) under the Ministry of Commerce. The registration process involves submitting the necessary documents, including the Memorandum of Association, Articles of Association, and details of shareholders and directors.
Foreign Business Restrictions:
Some business activities are restricted for foreigners in Thailand, particularly under the Foreign Business Act. Certain sectors may require obtaining specific licenses or meeting ownership criteria to operate as a foreigner. It's essential to consult the relevant authorities or seek legal advice to ensure compliance with foreign business regulations.
Businesses in Thailand are subject to various taxes, including corporate income tax, value-added tax (VAT), and specific business taxes. Understanding and complying with the tax laws, including filing tax returns and paying taxes on time, is crucial for businesses operating in Thailand.
Thailand has specific labour laws that govern employment relationships, including minimum wage requirements, working hours, holidays, social security contributions, and employee benefits. Employers must adhere to these laws and provide a safe and fair working environment for employees.
Intellectual Property Rights:
Intellectual property protection is essential for businesses in Thailand. Patents, trademarks, copyrights, and trade secrets can be registered or protected under the relevant Thai laws to safeguard the rights of business owners and creators.
Thailand has laws to regulate fair competition and prevent anti-competitive practices, such as price-fixing, abuse of dominant market positions, and unfair trade practices. Businesses must comply with competition laws to ensure fair market competition.
Contracts and Commercial Transactions:
Thai civil and commercial laws govern contracts and commercial transactions. It is advisable to have written agreements in both Thai and English languages, clearly defining the rights and obligations of the parties involved.
While Thai business laws for foreigners may be daunting, they are certainly not insurmountable. The proof of this is the amount of successful foreign businesses and foreign workers in the Kingdom.
In-depth research and sound advice is required, but this should be the case in whichever country a business is established.
It's important to note that this is a general overview of some key aspects of Thai business laws, and specific legal requirements and regulations may vary depending on the nature of the business and other factors.
It is recommended to consult with legal professionals or seek guidance from the relevant Thai government agencies for comprehensive and up-to-date information on Thai business laws.