Business Tax for Foreigners in Thailand

 

Venturing into a foreign market like Thailand presents lucrative avenues for business growth, but it also entails the responsibility of understanding and adhering to local tax regulations. For foreign businesses operating in Thailand, accurate tax filing is crucial to ensure compliance with the law and avert potential penalties. Therefore, tax registration is very crucial for global investors and expats in Thailand to start a business in Thailand.

Here’s a comprehensive guide to help foreign businesses understand their tax obligations in Thailand!

Tax Registration

Foreign businesses operating in Thailand are required to register for taxation purposes. This involves obtaining a Taxpayer Identification Number (TIN) from the Revenue Department. This is a mandatory process for all types of business in Thailand. However, Representative Offices need not apply for this registration process as they cannot perform any commercial activity. The registration process may vary depending on the type of business entity and the nature of its activities in Thailand.

Corporate Income Tax (CIT)

Foreign businesses that generate income in Thailand are subject to Corporate Income Tax. The standard corporate tax rate in Thailand is 20%. However, certain types of businesses may qualify for reduced rates or incentives under various investment promotion schemes. Check if you want to register for corporate income tax in Thailand.

Value Added Tax (VAT)

Businesses selling goods or services in Thailand may have to register for Value Added Tax (VAT) purposes. The current VAT rate in Thailand is 7%. Furthermore, businesses must file periodic VAT returns and remit the tax collected to the Revenue Department.

Withholding Tax

Foreign businesses that derive income from Thailand, such as dividends, interest, royalties, or service fees, may be subject to withholding tax. The withholding tax rates vary depending on the type of income and whether there is an applicable tax treaty between Thailand and the foreign business’s home country. Check to know all about withholding taxes in Thailand.

Transfer Pricing

Compliance with transfer pricing regulations is crucial for foreign businesses with related-party transactions. Thailand follows the arm’s length principle from the Organisation for Economic Co-operation and Development (OECD), requiring transactions between related parties to be conducted at fair market value to prevent tax avoidance.

Annual Financial Statements

Foreign businesses operating in Thailand typically need to prepare and submit annual financial statements by Thai accounting standards. These financial statements must be audited by a licensed auditor and submitted to the Revenue Department along with the tax return.

Tax Filing Deadlines

Foreign businesses need to be aware of the tax filing deadlines in Thailand to avoid late filing penalties. The deadline for filing Corporate Income Tax returns is typically within 150 days from the end of the accounting period. However, there may be extensions under certain circumstances.

Tax Treaties

Thailand has entered into double taxation agreements (DTAs) with numerous countries to prevent double taxation and promote cross-border trade and investment. Foreign businesses should review the provisions of the relevant tax treaty to determine their entitlement to tax benefits and exemptions.

Tax Compliance Services

Given the complexity of Thailand’s tax regulations, many foreign businesses opt to engage the services of tax advisors or professional accounting firms with expertise in Thai tax law. These professionals can guide tax planning, compliance, and dispute resolution.

Penalties for Non-Compliance

Failure to comply with Thailand’s tax filing mandates can result in penalties, fines, and even criminal prosecution. Foreign businesses should prioritize tax compliance to avoid legal and financial repercussions.

In conclusion, foreign businesses operating in Thailand must familiarize themselves with the country’s tax filing mandates to ensure compliance and avoid potential pitfalls. 

By understanding their tax obligations and seeking professional advice when necessary, foreign businesses can navigate the complexities of Thailand’s tax system successfully and focus on achieving their business objectives in the vibrant Southeast Asian market. For complete support on any of these mentioned fields, email us at officer@konradlegal.com.

As a leading tax firm in Thailand, we will be happy to help you with all types of tax registration, accounts audit, and tax filing processes.

Mistakes to avoid before Starting Foreign Business in Thailand

 

Are you a foreign investor with plans of starting a business in Thailand? There are numerous great reasons for foreign investors to start a business in Thailand, due to which the kingdom is growing rapidly as the business hub of Southeast Asia. However, in our practical experience, we have seen global investors committing great mistakes due to which they either fail to incorporate their business or operate it properly in Thailand.

Surprisingly, the mistakes are done mistakenly!

Yes, and the primary reasons behind these mistakes are as follows:

1. Complex Thai Civil and Commercial Code
2. Unclear assumption of the Foreign Business Act of Thailand
3. Inability to adhere to the documentation protocols
4. Complex licensing and tax registration standards
5. Difference in International Financial Revenue Standards (IFRS) and Thai Financial Revenue Standards (TFRS)

Many other uncertain causes compel foreign investors to make mistakes in the process of starting a company in Thailand. These causes depend on the level of knowledge and personal preferences of the investors. Therefore, finding out the accurate cause is pretty difficult.

As a leading corporate law firm in Thailand would like to point out the major mistakes that you must avoid in the process of company registration in Thailand.

Selecting Improper Business Structure

There are 6 prominent business structures for foreigners in Thailand. However, each of these business structures comes with its own set of characteristics and aspects of liabilities for the owner. Therefore, while starting your business in Thailand, you should not make any mistake in selecting the business structure, Following are a few suggestions:

• Never assume that you need a Limited Company on a mandate to start your business in Thailand. You should explore other options like limited partnerships or sole proprietorship options as well.
• If you already have an existing business in your home nation, try to go for a representative or branch office type of business structure in Thailand. This will incur less investment and is easy to incorporate.
• Try to avoid incorporating subsidiaries. The incorporation of subsidiaries follows a complex registration process and has tough compliance standards. Furthermore, it grants limited liabilities to owners.

Ignorance in the Documentation Process

To incorporate any type of business structure in Thailand, documentation and paperwork needs special attention. The complexity of the Thai Civil and Commercial Code,  Foreign Business Act, and TRFS may seem to be a maze to you. Take the help of some reliable corporate law firms in Thailand like Konrad Legal and keep in mind the following aspects:

• Cross-check and ensure that you submit all the documents as necessary for the application.
• You have to consider Thai as the official language. Although English translations are accepted officially, certain document requirements must be in the Thai language.
• You must demonstrate your financial stability. Do so by providing the correct documents as per the mandate of the application of the type of company you are incorporating.

Not Obeying the Timeframe

Many foreign business registration processes get hindered due to the lack of patience. You must remember that every application and statutory registration process in Thailand has a stipulated timeframe. Therefore, for your company registration in Thailand, you should:

• Do not rush to arrange the documents. Keep your calm and arrange for all the necessary documents.
• Avoid expecting instant results as the minimum duration of company registration can be of few weeks. In case your documentation is incomplete or lacks clarity, it may extend to months.

Remember that there won’t be any shortcuts to decrease the timeframe. Therefore, support from a corporate law firm can make the documentation process perfect which will automatically make your process adhere to the natural timeframe.

Mistaking the Compliance Obligations

If you stick to the above guidelines, you will never face any issues in registering your business in Thailand as a foreigner. But, mere registration is not enough. There are various post-registration tasks that you should never neglect.

Corporate Income Tax Registration: Your business will have a valid legal entity only if it is tax compliant. Therefore, your business must have a tax ID for which you have to apply for corporate income tax registration in Thailand.

VAT Registration: If your business anticipates annual revenue of over 1,800,000 Baht must register for Value Added Tax (VAT) with the Thailand Revenue Department. VAT registration is also mandatory for Thai businesses sponsoring foreign workers’ work permits. Additionally, Thai corporations must acquire a business permit by registering for VAT. 

Essential Licenses and Permits: Depending upon the type of business, you must equip your new company with the necessary licenses and permits after incorporation. Examples are travel licenses for tourism businesses, alcohol licenses for bars, etc. 

The Bottomline

The greatest mistake that a majority of foreign investors make while starting their business in Thailand is having an assumption of “I can handle it alone”. It won’t be possible as we have witnessed that even Thai persons make mistakes on regulatory and statutory compliances. 

Therefore, it is always a wise decision to take the support of a local Thai corporate lawyer or corporate law firm. By doing so, you will be free from the following stresses:

1. Understanding and communicating in the Thai language
2. Translation of documents from English or your native language to the Thai language
3. Notarization of documents
4. Maintaining application requirements and error-free documentation
5. Identifying the right authority to put forth your application 

There can be various other grounds on which you may seek help including the post-incorporation license and permit applications. To get a combined service of company incorporation, accounting and taxation, and payroll management, we can help you throughout. All you have to do is go on a free consultation with us. Email us at officer@konradlegal.com to book your appointment with our legal, accounting, and tax experts in Thailand.

Starting a Fintech Business in Thailand

 

Driven by the rapid expansion of fintech, the global business environment has seen unprecedented change. This transformation, fundamentally reshaping business operations worldwide, has Southeast Asia at its forefront. As a region, Southeast Asia is leading the way in embracing fintech innovations and setting new trends.

In the ongoing globalization efforts of multinational corporations, one prominent destination in Southeast Asia is Thailand. This country has emerged as a strategic hub for fintech expansion. The digital marketplace in Thailand is thriving, fueled by favorable regulatory frameworks and supportive government policies that promote the growth of fintech initiatives. Furthermore, Thailand possesses a skilled and tech-savvy workforce, making it an attractive location for fintech companies.

While Thailand presents a highly favorable environment for fostering the growth of fintech, aspiring entrants must acknowledge the inherent challenges alongside the opportunities, particularly in setting up operations. Amidst various options, this article focuses on incorporation through Thailand's Board of Investment (BOI) as a viable route for establishing a presence in this dynamic market.

To effectively penetrate the thriving digital market of Thailand, the BOI application emerges as the optimal choice for fintech companies. This article presents a comprehensive overview of the substantial benefits offered by the BOI application. We will explore tax incentives, promoted industries, business categories within fintech, regulatory hurdles, and the application process. By gaining a thorough understanding of the advantages and intricacies of the BOI route, fintech companies can strategically navigate the landscape and capitalize on the immense potential of Thailand's digital market.

Fintech Landscape of Thailand

Thailand's fintech sector has witnessed a notable trajectory of growth in recent times. This remarkable development owes itself to a combination of factors. Supportive government policies, a tech-savvy and adventurous population, and a thriving startup ecosystem have all contributed to Thailand's success in the fintech domain. Presently, Thailand is ranked fifth in terms of fintech funding among Southeast Asian countries. The nation is focused on strengthening its digital monetary systems through the active engagement of commercial banks and the central bank.

Over the past three years, the nation has experienced exponential growth in digital financial transactions. E-wallets and mobile payment platforms have gained immense popularity, while peer-to-peer lending networks have emerged as a reliable alternative to traditional bank loans, enhancing the accessibility and convenience of credit.

Thai government support, including funding, mentorship, and incubation programs, has spurred the fintech sector's growth. Thailand 4.0 initiative promotes financial infrastructure development and fintech growth. Measures like tax benefits, R&D funding, and special economic zones encourage investment and innovation.

The central bank plans to enhance its infrastructure for electronic banking and fintech. Adopting the ISO 20022 standard simplifies electronic invoicing and factoring, empowering businesses to utilize transaction data.

The Bank of Thailand introduced a consultation paper on virtual bank licensing. Virtual banks will provide new financial solutions through digital channels. The bank plans to finalize regulations and start the application process in 2023, with a maximum of three licenses granted initially.

Acknowledging the vast opportunities in Thailand's fintech market, multinational companies are keen to capitalize on them. To do so effectively, many strategically leverage the benefits provided by the BOI (Board of Investment) application for fintech. This approach enables them to smoothly and efficiently enter this thriving market, maximizing their potential for success.

Benefits of BOI certification for the fintech sector

For foreign fintech companies seeking to enter the Thai market, the BOI certification offers a multitude of benefits that make it a compelling choice. These advantages encompass both tax incentives and non-tax incentives, creating a favorable environment for business growth and expansion.

BOI Tax Incentives

Corporate Income Tax exemption: Among the prominent advantages of acquiring BOI certification is the availability of lucrative tax incentives. While numerous BOI initiatives emphasize manufacturing and industrial sectors, BOI-approved fintech companies can enjoy substantial tax exemptions or reductions for a period of up to eight years. The duration of tax benefits is influenced by both the level of investment and the nature of business activities conducted. Relevant tax incentives include:

• Exemptions from corporate income taxes for a duration of three to eight years
• Exemptions from taxes imposed on dividends sourced from promoted projects during the corporate income tax holiday period
• Permission to carry forward losses as deductible expenses for a period of up to five years

The details of the BOI tax incentives can vary depending on the specific product or service offered by the promoted project. Additionally, the BOI aims to reduce regional disparities within Thailand. Therefore, the project's geographic location can affect the level of benefits it receives.

BOI Non-Tax Incentives

Foreign Ownership: In Thailand, certain fintech companies certified by the Board of Investment (BOI) could potentially bypass conventional restrictions and be granted the privilege of complete foreign ownership. This allowance offers enticing opportunities for international investors looking to establish a presence in the Thai market and could prove beneficial to those seeking to tap into the country's growing fintech industry

Easy Work Permit and Visa Processes: Companies certified by the BOI (Board of Investment) can enjoy expedited procedures when obtaining work permits and visas for foreign executives, professionals, and skilled workers. This streamlined process is aimed at facilitating the recruitment and retention of international talent, which contributes to a more diverse and skilled workforce. As a result, these certified companies can benefit from an enhanced ability to attract and retain top-notch international talent, leading to a more competitive and dynamic workforce.

Support and Facilitation: Certified fintech companies receive support and facilitation services from the BOI. These services assist businesses in efficiently navigating regulatory requirements, obtaining necessary licenses, and establishing connections with relevant government organizations.

Land Ownership: A unique privilege granted to BOI-certified companies is the authorization to possess land in Thailand for business purposes, a privilege not afforded to non-BOI applicants.

Repatriation of Profits: Entities certified by the BOI have the privilege of repatriating profits and investment-related funds with no restrictions.

Foreign Currency Remittance: With BOI certification, international businesses can remit money in foreign currencies, facilitating seamless financial operations and enhancing their global reach.

Safeguarding of Investments: Firms accredited by the BOI gain protection against nationalization, ensuring the safeguarding of their investments and business operations.

BOI promotion schemes for the tech industry in Thailand

Amongst the BOI-promoted activities, various tech sectors categorized within BOI Category 5 qualify for the promotion schemes offered by BOI. Some of the renowned tech industries that fall under this category include:

• Category 5.7: Under this category, two distinct types of software industries are eligible for BOI promotion:
• Category 5.8: E-Commerce
• Category 5.9: Digital Services (Including fintech). Digital services cover a vast spectrum of offerings, such as software platforms, managed services, and digital architecture design. These services also extend to various industry-specific fintech domains, encompassing insurtech, regtech, medtech, agritech, and more.

A Fintech company can qualify for BOI promotion on meeting the following conditions:

• Before applying for BOI Thailand investment promotion, one must secure approval from Thailand's Ministry of Digital Economy and Society.
• The project should involve hiring digital specialists and have a capital investment (excluding land and working capital costs) of at least 1 million baht (approx. USD 28,000).
• Projects must incorporate digital services into their offerings.
• Projects with investments of 10 million baht or above (excluding land and working capital expenses) must obtain ISO2000 certification or other quality standards approved by Thailand's Ministry of Information and Communication Technology within two years of commencing full operations.
• Revenue generated from sales or services directly related to the promoted digital services business will be considered revenue for the promoted business.

Promoted business categories within the fintech sector in Thailand

Acknowledging the pivotal strategic significance and potential of the fintech sector to stimulate robust economic growth in the country, the BOI actively supports and promotes investments in specific segments of the industry. Within the fintech sector, some of the encouraged business categories are as follows:

Digital payments and e-wallets: Among the fintech sectors that attract the Bank of Thailand's (BOI) attention is the realm of digital payments and e-wallets. The BOI's framework provides incentives to companies that specialize in delivering reliable and convenient digital payment solutions. These incentives not only drive innovation in payment technologies but also make digital financial services more accessible and user-friendly for the Thai population.

Peer-to-peer (P2P) lending platforms: The BOI provides backing to fintech companies involved in facilitating peer-to-peer lending endeavors. This sector holds significant promise in broadening access to finance and empowering individuals and small enterprises to obtain loans or investments from a community of peers. Aligned with its mission to mitigate regional inequalities, the BOI fosters investment in P2P lending platforms, thus enhancing the diversity of Thailand's financial sector and fostering increased financial participation. These platforms benefit from regulatory oversight, assistance in expanding their activities, and acknowledgment of their contribution to advancing alternative lending options.

Blockchain technology: The BOI also champions the integration of blockchain technology within the fintech sphere. It actively promotes companies utilizing blockchain for diverse purposes, including supply chain management, smart contracts, and identity verification. The transparency, security, and efficiency inherent in blockchain can transform industries beyond finance. Through its support of blockchain-focused enterprises, the BOI fosters innovation and enhances Thailand's technological prowess.

Insurtech: The BOI acknowledges the profound impact technology can have on the insurance industry, prompting it to advocate for investments in insurtech startups. These startups specialize in creating and delivering innovative insurance solutions powered by state-of-the-art technologies. BOI's support offers various benefits, such as customized regulatory assistance for insurtech's distinctive hurdles, access to financing and strategic partnerships, and the chance to collaborate with established players in insurance. This not only spurs innovation within the insurance realm but also bolsters the resilience and efficiency of Thailand's financial services sector as a whole.

Regulation hurdles

Challenges in Obtaining and Maintaining BOI Certification

The procedure for obtaining the BOI certification is intricate and demands a substantial commitment in terms of time and effort. Securing approvals for business operations and staffing can present obstacles. Even after the establishment, adhering to the BOI's operational requisites often proves demanding.

Common hurdles in achieving and maintaining compliance include:

• Drafting and presenting a comprehensive feasibility study for the approval process
• Providing evidence of the necessity for specific expat managerial and staff roles
• Submitting compelling justification for the capabilities and work history of foreign employees
• Ensuring strict compliance with Thai accounting and financial reporting regulations

How Konrad Legal can help?

Amidst these complexities, Konrad Legal, a leading corporate law firm in Thailand, stands out as a highly experienced partner for facilitating BOI certification in Thailand. Our team offers comprehensive support to guide businesses through the BOI application process, including submitting required documents, engaging in crucial interviews, and fulfilling compliance obligations, ensuring a seamless experience.

In partnership with Konrad Legal, fintech companies can overcome regulatory challenges, including crafting compelling feasibility studies, substantiating key roles, and fulfilling stringent accounting requirements.

Embark on a journey of growth, innovation, and success in Thailand's thriving fintech ecosystem with Konrad Legal by your side.