27 Sept 2017
Establishing a Presence in Thailand
Thailand’s Board of Investment (BOI) was established in 1997, with the aim to encourage foreign direct investment (FDI) in primarily activities-based projects in industries that will bring benefits to Thailand’s economy. The BOI also oversees Thailand’s One-Stop Service Centre for Visas and Work Permits, which allows foreigners meeting BOI guidelines to obtain the necessary work documents within three hours.
There are two routes available to a Hong Kong company seeking to establish a presence in Thailand:
1. Set up a foreign-owned company
2. Open a branch, representative office or a regional office
Thailand encourages FDI with the exception of investment in sensitive industries. The Foreign Business Act (FBA) sets out three lists of activities in which foreign participation is prohibited or restricted:
- List 1 activities – No FDI is allowed. Activities include newspaper businesses, trade of Thai antiques and making/casting of Buddha images.
- List 2 activities – FDI companies may only engage in these activities with prior Cabinet approval, which include transportation, mining of certain minerals and manufacturing specific Thai products.
- List 3 activities – These activities are areas where Thai nationals are not yet ready to compete with foreigners. To engage in such activities, the foreign company must obtain a Foreign Business Licence prior to commencing the activity. Activities include accountancy, legal services, advertising and tourism. Restriction also applies to the foreign enterprises intending to engage in retailing of any kinds of goods, with a total capital of less than 100 million Thai baht (THB, or about US$3 million) or each retail outlet having the minimum capital of less than THB 20 million (about US$600,000).
Full details on activities on each list are available on the BOI website.
Setting up a Foreign-owned Company
All foreign companies must satisfy the following conditions:
- If the company engages in List 2 or 3 activities as specified in the FBA, its minimum registered capital must be greater than 25% of the estimated average annual operating expenses, calculated over three years, but not less than THB 3 million (about US$90,000).
- If the company does not engage in FBA-specified activities, its minimum registered capital must be THB 2 million (about US$60,000).
In Thailand, a foreign company can set up either a partnership or limited company. The table below highlights the specific requirements and registration fees applicable.
Type of Company
Private Limited Company
To register the MOA:
THB 50 (about US$1.5) per every THB 100,000 (about US$3,000) of registered capital, subject to a minimum fee of THB 500 (about US$15) and a maximum of THB 25,000 (about US$750).
To register the company incorporation:
THB 500 (about US$15) per every THB 100,000 (about US$3,000) of registered capital, subject to a minimum fee of THB 5,000 (about US$150), and a maximum of THB 250,000 (about US$7,500).
Public Limited Company
To register the MOA:
THB 1,000 (about US$30) per THB 1 million (about US$30,000) of registered capital. The maximum fee is THB 25,000 (about US$750).
To register the company incorporation:
THB 1,000 (about US$30) per THB 1 million (about US$30,000) of registered capital. The maximum fee is THB 250,000 (about US$7,500).
THB 1,000 (US$30) per every THB 100,000 (US$3,000) of the capital. The maximum fee is THB 5,000 (US$150).
Procedures to Follow to Set up a Company
The World Bank’s 2017 Doing Business report ranks Thailand as the second-ranking country after Singapore in terms of starting a business in the ASEAN region (while it ranks 78th out of 190 economies) – it is reported to take about 22 days and requires the following five procedures:
Thailand is improving its company registration process and since April 2017 has set up an E-registration system (in Thai language only), allowing company registration to be electronically submitted. In order to use the E-registration system, a Hong Kong company must apply in person at a Department of Business Development (DBD) office, or appoint someone through a power of attorney, in order to verify identity and obtain a username and password. This process is currently in early developments and will likely be further enhanced in the future.
The Institute of Certified Accountants and Auditors of Thailand is the authoritative body. Basic accounting principles practiced in the US are accepted in Thailand. Any accounting method adopted by a company must be used consistently and it may be changed only with approval of the Revenue Department.
Setting up a Branch, Representative Office or Regional Office
A Hong Kong company can choose to open a branch, representative office (RO) or regional office, and the choice is largely dependent on the level of activity required in Thailand. The table below provides an outline of the different requirements/scope of the three options.
There is no official registration procedure for these options, although the FBA requires that a Foreign Business Licence is obtained from DBD before commencing any activity. The application process can be found on the DBD website, attracting the following fees:
- An application fee of THB 2,000 (about US$60).
- Once application is approved, the applicable government fee will be between THB 20,000 (about S$600) and THB 250,000 (about US$7,500).
A foreign company can establish a regional office if it is a transnational corporation and has at least one branch in Asia. The following conditions must be met:
The BOI through the Investment Promotion Act provides certain incentives to encourage foreign investment in Thailand. These include:
- Tax incentives such as tax holidays for up to eight years and exemption/reduction in import duties on imported machinery, raw materials etc.
- State guarantees against nationalism, state monopolisation etc.
- Non tax incentives such as the employment of foreign experts
To benefit from BOI incentives, foreign companies must either be located within the Investment Promotion Zones or invest in activities which the BOI are keen to promote (e.g. investment in high-tech activities). All activities must meet the criteria for approval, which include the following:
- The value added must be at least 20% of sales revenue, except for projects that manufacture electronic products and parts for processing agricultural produce, and other projects granted special approval by the BOI
- For newly established projects the debt-to-equity ratio should not exceed 3:1
- New production processes and new machinery must be used unless BOI’s prior approval
- The BOI may prescribe special conditions on the project’s location, type of pollution treatment and environment protection systems
- A feasibility study on the project must be carried out if the investment capital is to exceed THB 750 million (about US$2.2 million)
Further details can be found on the BOI website within Investment Promotion webpages.
- Regulatory Environment
- Establishing a Presence
- Intellectual Property Protection
- Staff Recruitment
- Tax Considerations
- Import/Export Procedures
- Further Information