Business in Thailand. Starting your own business in Thailand would. A Free Report

Transcription

1 A Free Report Starting your own business in Thailand would require you to do a lot of research and planning. This primer aims to inform every interested entrepreneur, such as yourself about the fundamentals of setting up your own business in Thailand. HOW TO BEGIN Obtaining a local partner, such as an agent or distributor, is still the most popular method of entering the Thai market for the first time. This method is efficient and effective as it capitalizes on the local partner s market knowledge and network to reach its intended Thai buyers. With the agent acting in behalf of the foreign investor, it is easier to facilitate and expedite the market entry, especially in Thailand where successful business transactions are dependent on the business culture which is, in turn, greatly influenced by interpersonal relationships. Though Thai laws do not require use of local agents and distributors, most foreign investors follow this practice as it is more convenient for them. Having local agents that are familiar to local business practices and requirements is a big asset for any starting business. Apart from this, they can also take care of regulatory affairs and other business needs such as securing import permits for foreign exporters. It is also recommended to participate in trade exhibitions in Thailand. This is a good way to get a feel of the market and locate agents and distributors in Thailand who are also looking for new products and services.

2 BUSINESS TYPES It is also important to identify which business type you would be establishing in Thailand as requirements may vary from case to case. The basic types are: sole proprietorship, partnership, limited company, joint venture and representative office. PARTNERSHIP - Thai and Western concepts of partnership are broadly similar. Thailand provides for three general types of partnerships: Unregistered ordinary partnerships, Registered ordinary partnerships and Limited partnerships. LIMITED COMPANY - This is the most common business structure in Thailand. There are two types of limited companies, i.e., private or closely held companies, and public companies. The first is governed by the Civil and Commercial Code, the second by the Public CompanyAct. Private Limited Companies Formed through a process which leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (Bylaws), as its constitutive documents. A minimum of seven shareholders is required at all times. A private limited company may be wholly owned by aliens. Activities reserved for Thai nationals, aliens participation is generally allowed up to a maximum of 49 percent. The registration fee for a private limited company is 5,500 baht per million baht of capital.

3 Public Limited Companies Offer shares, debentures and warrants to the public and may apply to have their securities listed on the Stock Exchange of Thailand (SET). A minimum of 15 promoters is required for the formation and registration of the memorandum of association of a public limited company. Promoters must hold their shares for a minimum of two years before they can be transferred. The Board of Directors of a public limited company must have a minimum of five members, at least half of Them are Thai nationals. The registration fee is 2,000 baht per million baht of capital for a public limited company. JOINT VENTURE - A joint venture may be described in accordance with general practice as a group of persons (natural and/or juristic) entering into an agreement in order to carry on a business together. It has not yet been recognized as a legal entity under the Civil and Commercial Code. However, income from the joint venture is subject to corporate taxation under the Revenue Code, which classifies it as a single entity. REPRESENTATIVE OFFICE - Lastly, a representative office is limited in engaging in non-profit activities. In order to form a representative office, at least one of the following purposes would need to be sought for the purposes of limited non-trading activities: to check the quality and quantity of the product ordered by the headquarters overseas, to give advices to the headquarters about the goods to order, to supply the information of the headquarters products to the customers in Thailand, or to report the economic movement in Thailand to the headquarters.

4 BUSINESS REGISTRATION & WORK PERMIT Foreigners wishing to do business in Thailand must first register with the Department of Business Development at the Ministry of Commerce. Businesses with activities engaging in production need to register specifically with the Ministries of Industry and Labor and Social Welfare. Foreign investors may enter Thailand without a visa for visits of up to thirty days only. To apply for a work permit, a foreigner must enter Thailand on a non-immigrant visa for a stay of three months or, for foreigners with well-defined work or business plans, for a stay of one year. While the issuance of the three-month visa usually is done within two or three days; the one-year visa requires approval from the Immigration Bureau of the Royal Thai Police in Bangkok and would therefore take longer. Upon obtaining a work permit, a holder of a three-month visa may apply for a one-year visa, which generally can be extended every year. Foreigners holding nonimmigrant visas who have lived in Thailand for at least three consecutive years may apply for permanent residence in Thailand, provided that they meet strict criteria regarding investment or professional skills. WORK PERMIT APPLICATION REQUIREMENTS 1. Passport 2. Non-Immigrant Visa 3. Departure Card 4. Education Degree 5. Transcript 6. Resume 7. Photos (5x6cm with full face and taken wearing business attire, must have been taken within 6 months prior to application, provide 3 copies) 8. Marriage Certificate (if married to a Thai National), including original and signed photocopies. Also include wife s Thai ID card, birth certificates of children, and household registration.

5 As an employer, you would need to submit the following documents as well: 1. Commercial Registration Department Certificate 2. Shareholders List certified by the Commercial Registration Department 3. Factory License (if required) 4. VAT Certificate 5. Recent tax documents LAND OWNERSHIP In general, non-thai businesses and citizens are not allowed to own land in Thailand unless the land is on governmentapproved industrial estates. You may refer to the list below to see how the law has changed in response to the growing market for property and real estate for the past years. The 1999 amendment to the Land Code Act allowed foreigners who invest a minimum of 40 million Baht (approximately US$1.2 million) to buy up to 1,600 square meters of land for residential purposes with the permission of the Ministry of Interior. However, if the required land is not used as a residence within two years from the date of acquisition and registration, the Ministry has the power to dispose of the land. The 1999 Condominium Act, allowed non-thais to own 100 percent of a condominium building, given that the purchase was made between April 28, 1999 and April 28, The more recent Condominium Act of 2007 limits foreign ownership in a condominium building to up to 49 percent of the total space of all units in the building only, except for those purchased between 1999 and 2004.

6 ADVERTISING, MARKETING, AND INTELLECTUAL PROPERTY RIGHTS Although advertising and trade promotion are among the most important marketing tools in Thailand, viral marketing through the internet has also proven to be a more dynamic and effective tool and can be developed more as a selling medium in almost every industry. Electronic advertisements serve as channels to target a broader client base, and at the same time develop stronger customer relations, generate customer feedback, and reinforce or strengthen a company s image. With regard to intellectual property rights, it is imperative that foreign companies understand that intellectual property is primarily a private right and that their respective foreign governments cannot enforce rights for private individuals in Thailand. Therefore, foreigners must exercise a proactive stance to responsibly register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. It is advisable for interested foreign investors to obtain qualified legal advice. Since Thai business regulations are predominantly governed by criminal, not civil law, it would be wise to retain the services of an expert property and real estate lawyer to avoid legal sanctions. While foreigners are rarely jailed for improper business activities, violation of Thai business regulations can carry heavy criminal penalties.

7 THAILAND BOARD OF INVESTMENT (BOI) The Thailand Board of Investment(BOI) was set-up by the Thai government to provide investment incentives to both foreign and local investors who intend to invest in promoted activities. The incentives depend on whether your chosen activity is deemed priority or not, and on the specific investment zone where your investment is located. Thailand BOI Privilege Types Tax privileges this includes income tax exemption, tariff exemption or reduction on import machinery and raw material Non-tax privileges such as permission to own land, permission to bring foreign expert to work on the promoted projects, exemption from rule restricting foreign ownership of companies, and exemption from work permit and visa rules Important Benefits of Investors from the BOI: Reduced risks associated with the investment Initial investment costs are reduced, and at the same time overall rate of return of investment is increased Services are supported at all times Thailand BOI Project / Activity Classification Agriculture and Agricultural Products Mining, Ceramics and Basic Metals Light Industry Metal Products, Machinery and Transport Equipment Electronic Industry and Electric Appliances Chemicals, Paper and Plastics Services and Public Utilities

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