Starting a Business in Thailand: FBA & Corporate Entities
We discussed the US-Thai Amity and details on setting up an Ltd company. In that same article, we mentioned the Foreign Business Act (FBA). FBA FBA is the primary legislation that sets the regulations on all foreign businessmen. In particular, businesses were broken down to 43 categories and grouped into three schedules. The schedule dictates the restrictions of the business:
- Schedule 1: Majority foreign ownership is not allowed
- Schedule 2: Majority foreign ownership is possible up to 60 per cent. It may go up to 75 per cent but 3/5 of the board of directors must be a Thai
- Schedule 3: Full ownership is possible subject to the FBA Registrar approval
Businesses may be one of the three: Ltd, Corporate Entities, and Single Proprietor.
Corporate entities Public companies are regulated by the Public Companies Act, whereas private companies are regulated by the Civil and Commercial code.
There are no limits on capital investment. Foreigners can own up to 100% of the shares under this category of company. Though, there are certain business types where foreigners are not allowed to own a majority of the shares, according to the Foreign Business Act. At least three promoters are required to register this type of business and a minimum of three shareholders is required to be maintained at all times. Companies must observe accounting procedures, and maintain records as specified by the Civil and Commercial Code, the Accounts Act and the Revenue Code. These accounts should be maintained and filed in the Thai language.
They are more technical to set up due to complex requirements on the number of shareholders, minimum capital, the public offering of shares and accountability to share holders. One of the major requirements for setting up this type of company is to have 15 promoters for the memorandum of association, half of which must be Thai residents. The Civil and Commercial Code allows for private companies to be transformed into a public company.
Foreigners are not allowed to run sole proprietorships in Thailand, unless they are granted exemption under the United States-Thailand treaty on amity and economic co-operation. A sole proprietor pays income tax at rate bands of 10 to 37 percent on the net profits, the same income tax rates that apply to individuals.