Starting a Business in Thailand: Amity Treaty and Limited Liability
Thailand is located in Asia and as such, has its own set of unique requirements in the business registration process. For instance, all the company documents submitted have to be in the Thai language and the Foreign Business Act places restrictions on the activities of business foreigners can participate in. There are other complications but the information below will give you a better grasp of how it works.
US-Thai Amity Treaty
This is a special agreement that promotes the business relations of US and Thailand. Under this regulation, Americans enjoy certain business privileges not afforded to other foreigners:
- American companies may hold majority of the shares or the whole company operating in Thailand
- American companies don't have the same amount of restrictions imposed on other foreigners under the Alien Business Law of 1972
This doesn't mean there are no restrictions. American businessmen are not allowed to enter in the following businesses:
- Communications and Transportation
- Fiduciary functions;
- Banking involving depository functions;
- Land Ownership, Exploitation of land or anything related to the excavation and processing of natural resources;
- Domestic trade in indigenous agricultural products
Basic requirements include:
- An American Citizen must hold majority share of the company
- American Citizen(s) must comprise half of the board of directors
- Capital requirements is subjected to the Foreign Business Act (FBA) minimum of THB3 million
- If the business is not under FBA, the minimum capital requirement to be qualified for a treat protection is THB2 million
There are three types of business accessible to foreigners in Thailand: Ltd companies, sole proprietorship and partnerships. Of the three, Ltd is the most popular choice.
Limited Liability (ltd) Companies
This type of businesses can either be privately or publicly held. The private ltd company’s shares are held by private investors, whereas public ltd company’s shares are held by members of the public. Most foreigners opt to register private ltd companies because there is no limitations on capital investment. In order to register a private business, owners will need the support of three promoters to register the business. A minimum of three shareholders are to be maintained at all times. In order to set up a limited liability company in Thailand, you need to:
- Reserve a name for the corporation with the Commercial Registration Department of the Ministry of Commerce.
- File a memorandum of association.
- Hold a statutory meeting of all shareholders.
- Register the business within 90 days of the meeting.
- Register for corporate income tax within two months of the company’s operations.
- Register for value added tax (VAT) if the goods or services of the company are liable for VAT and the gross income of the company, per month is exceeds THB 300,000 or THB 1, 800,000 per year.
Legal reporting requirements for private companies in Thailand require that audited accounts should be prepared annually and be approved by shareholders and thereafter, filed with the commercial registration department, ministry of commerce. Corporate tax is set at 30% and is due twice a year, whereas VAT is set at 7% and is due at the end of every month.