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Wednesday, 27 October 2010 22:20

Open your company in Thailand

When you decide to start business in Thailand you should be aware that many activities are prohibited for foreigners, both individuals and foreign companies. There is a special list that defines what kind of activities are available to foreign nationals, and which are forbidden. This list is called the Foreign Business Act and it includes a number of fully or partially banned activities, including such popular businesses as hotels, tourism, construction, etc. Therefore, in many cases it is advisable to register yourself in the country as a Thai company. In such case the fractional part of the participation of Thai nationals should be no less than 51%.

It should also be noted that Thailand has certain restrictions applied to foreigners willing to purchase real estate. Most cases of direct land purchase for foreigners are prohibited. You can buy  property with  full registration of all property rights to yourself only in the case of buying a studio or condo in a condominium and only if the total share of units purchased by foreigners in this particular condo does not exceed  49%. In all other cases, there are two options: taking land or real estate leases (which is allowed for up to 30 years with further prolongation) or  registering your purchase into the name of your Thai company.

Currently, investment in the Thai real estate is a good option for investing money, even after 2007 recession. The house or villa in resort areas like Phuket, Hua Hin or Pattaya  is not only a comfortable place to live or enjoy your vacation, but also an opportunity to earn money on rental returns. Besides the cost of real estate in popular areas of Thailand is constantly growing, so if you sell the house a few years later you most likely will get good return on your investment. However, it should be noted that in case of leasing plot of land with house or villa on it you will not benefit in such way. Therefore, the full investment benefits from Thai land and property are only possible in case of purchasing the rights of ownership and registration of all documents into your Thai company name.  An additional benefit in this case is also that if you plan to start business in Thailand some time later, you will already have your own company with  tax history.

Currently there are many kinds of legal entities in Thailand: partnerships, companies, private entrepreneurs, branches, regional offices and representative offices of foreign companies. For private businesses – foreign individuals and companies that are divisions of foreign companies, there are all limitations on activities as well as acquisitions of real estate. In most cases the best option for business or real estate land) purchase in Thailand for foreigners is a local limited liability company, or a Limited Company (Co., LTD). This type of legal entity requires a minimum of three founding shareholders and Thai capital share must be not less than 51%. In the case of real estate acquisition, depending on the region of Thailand, sometimes it may require higher proportion of local capital (60-70%). After completion of the acquisition of property and completion of the registration of all paperwork, agreements that convey rights to capital and asset management and a written assurance to the waiver of property claims can be obtained from Thai shareholders. Another way to guarantee your control over company management and activities is preferred shares, which have voting right 10 times higher than ordinary shares, so you have more votes holding fewer shares.

To set up a company in Thailand one needs to rent a place for the office, write a letter to local authorities for permission to register and, come up with three options for the company name. After that you must arrange for two Thai shareholders. Registration costs include fees for registration of the share capital (10.000 baht plus 500 baht for every 100.000 of registered capital), for filing documents (2.000 baht), payments of duties and duty stamps, company stamp, issuance of shares, opening a local bank account etc. For Thailand's permission to work (Work Permit) it is in most cases necessary to employ four Thais and obtain a special Non-Immigrant business visa. It is also worth mentioning that for each additional  work permit needed the authorized capital of the company should be increased by 2 million baht. Most all of these issues will be resolved through a local legal or consulting company, services of which will cost you approximately 20.000-40.000 baht. It is quite possible that costs will increase a bit while moving toward the ultimate goal of company registration. You also have to spend a lot of your personal time to sort all these issues out.

In order to optimize your financial and time costs during company registration and to protect yourself from possible various problems in the future, we would suggest you to use local legal and consulting companies which specialize in such services and are widely represented in Thailand. Depending on need for Work Permit, share capital, type of activity and other factors, their fees for seting up your company may vary between 50.000 and 90.000 baht (approx.  1.200-2.200 Euro). Naturally, the price may  vary depending on which company you deal with. Your most significant benefit from employing a consulting company to handle registration process will be your saved time. For example registration of all paperwork with the participation of Digifox (Asia)consultants takes no more than 4-8 weeks (including work permits).

It is worth noting that by contacting the reputable consulting, legal and accounting company you do not only save time and nerves, but also are able to receive significant economic benefits in the future. For instance, they will advise you, depending on your type of activity, on your minimum registered share capital amount needed, which may be from  1.000.000 to 3.000.000 Baht. After some time you may be required to deposit a certain amount (usually 25% of the registered capital) into your company bank account. They will also advise you  that if your company profit is less than 1.800.000 baht in one year, registration for  VAT payments with revenue department is not necessary.

Knowing these nuances of Thai law will help you to significantly reduce your costs, especially at first. Concluding this article we strongly recommend you to employ only reputable companies with  proven  reputation for assisting you with setting up your business in Thailand there are plenty of them around and you will find them after a bit of your own research.

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