Permanent Establishment in Thailand: All that you need to know!

 

A Permanent Establishment (PE) in Thailand refers to any type of establishment that is responsible for carrying out business activities in the kingdom. This can be set up by both Thai as well as foreign citizens. In general, referred to as “PE”, a Permanent Establishment has various legal and tax obligations which you must know, especially, if you are a foreigner. This article encapsulates the information provided by our team with more than a decade of experience in setting up Permanent Establishment or PE in Thailand.

Carrying on Business in Thailand vs Permanent Establishment in Thailand

Types of Permanent Establishments in Thailand

Activities a Permanent Establishment Can Do in Thailand

Registration Process of A Permanent Establishment in Thailand

Restrictions on Permanent Establishments in Thailand

Tax Liabilities on Permanent Establishments in Thailand

Greatest Assistance You Need!

Carrying on Business vs Permanent Establishment in Thailand

Regarding taxation, the phrases “carrying on business in Thailand” and “having a permanent establishment in Thailand” are crucial. The payment of income or profit tax in Thailand may depend on these two conditions.

In general, if a foreign corporation conducts business in Thailand, it must pay corporate income tax.If a foreign corporation has its headquarters registered in a nation that has a Double Tax Agreement (“DTA”) with Thailand, then only if that firm has a permanent establishment (“PE”) in Thailand is it subject to corporate income tax in Thailand.

Carrying on Business in Thailand

If a foreign company has a registered branch, or if an agent or employee of the company conducts business in the Kingdom of Thailand, it will be regarded as “carrying on business in Thailand”. There are two forms for the same:

1. Through a Registered Branch in Thailand: The Revenue Department of Thailand often declares that a foreign firm must pay corporate income tax when it establishes a branch in Thailand.
2. Through Agents and/or Employees: A foreign company can conduct its business in Thailand through its agents or employees. In such cases, the actions of the agents and/or employees plays a crucial role in ascertaining the process of income of the company in the nation. The allowed actions are broadly classified as:

I. On behalf of the foreign company, the agent or employee travels to Thailand to sign a sales agreement with a Thai company (even if it is just once).

II. The agent or employee merely assists in securing orders with a Thai company in Thailand on behalf of a foreign company.

Technical Assistance or Consulting activities of foreign representatives or workers may not be deemed to be taxable. Whereas, if the nature of service is related to manufacturing, construction or installation, then that gets covered under the taxation slabs.

Types of Permanent Establishments in Thailand

Permanent Establishments in Thailand is divided into 3 categories:

Asset PE

According to a Double Tax Agreement (DTA) of Thailand with any nation, an Asset PE can be establishments of the following structures:

• Management Unit
• Branch Office
• Business Office
• Factory
• Workshop
• Mine, Oil or Gas Well
• Quarry or any place of extraction of Natural Resources
• Farm or Plantation
• Warehouse or Storage Facilities

However, the Revenue Department of Thailand furthermore has some additions to thai categorization, which are: 

• Rented Offices
• Space provided free-of-charge for at least 6 months

Activity PE

According to DTAs, a foreign firm is generally regarded as having a “Activity PE” in Thailand if it finances a building site, a construction project, an installation project, or an assembly project, and these specific activities have been ongoing in Thailand for longer than six months.

It should be noted that supervision actions are not considered a “Activity PE” under the DTA between Thailand and Germany, especially for German businesses. As a result, German businesses are not required to treat sending employees to Thailand for longer than six months to provide consulting services as having a “Activity PE.”

Agent PE

As per the norms of DTAs, an Agent PE satisfies the following conditions:

• a person who regularly holds the power to negotiate and sign sales agreements on the foreign company’s behalf in Thailand;
• someone who lacks such power but consistently keeps a stock of commodities or merchandise from which he fills orders or delivers packages on behalf of the international business;
• a person who routinely obtains orders in Thailand that are completely or nearly completely for the foreign company or other businesses that it controls or that it owns a controlling interest in.

However, if business is conducted through a broker, general commission agent, or any other agent of an independent standing, a foreign firm is not considered to have a “Agent PE” in Thailand.

Every time the DTA provides a definition of an independent agent, the Revenue Department also uses it. However, if the DTA does not define an independent agency, the status of an independent agent is decided by examining whether the agent is under the control of a foreign corporation. If the agent receives more than 75% of all commission fees from the foreign corporation, it is typically safe to presume that the agent is dependent.

Activities a Permanent Establishment Can Do in Thailand

Types of Activities	Asset PE	Activity PE	Agent PE	Not a PE
Office, Factory or Workshop in Thailand
Service Activities in Thailand
Have Persons to Conclude and Execute Contracts in Thailand
Have Persons to Secure Orders in Thailand
Start a Subsidiary in Thailand
Have Independent Agents in Thailand to Sign Contracts & Secure Orders
Have fixed space in Thailand for stock and storage of goods

Registration Process of A Permanent Establishment in Thailand

To register a Permanent Establishment in Thailand, you have to follow the processes defined by the following bodies:

1. Revenue Department of Thailand
2. Department of Business Development of Thailand
3. Board of Investment Thailand

Under the regulations of the said bodies, you can register the following types of business entities:

1. Private Limited Companies
2. Public Limited Companies
3. Branch Office
4. Factory or Production Unit
5. Representative Office
6. Regional Office

The process of forming any of the above types of business entities in Thailand involves a streamlined process that is similar in most of the stages. However, a few steps vary depending upon the nature of the business, the nationality of the shareholders, and the region of the establishment of the business. Please note that you can start your Permanent Establishment in Thailand with minimum investment if your business supports the promotion the Royal Thai Government offers in the target industries. To avail of this, you have to abide by the regulations of following:

Board of Investment of Thailand – Click to know more

Start Business in Free Trade Zones – Click to know more

Do Business in Special Economic Zones – Click to know more

However, the process of forming a PE in Thailand is equivalent to company registration in Thailand that [pertains to the following steps:

• Search, Reserve, and Register the Name of the Company
• File Memorandum of Association with the following details:
  • Name and Objectives
  • Registered Office of the Business
  • Declaration on the minimum capital and liability of the company
  • Names and other information on the shareholders and directors of the company
• Have Statutory Meet
• Company Registration
• VAT & Tax Registration
• Registration for Social Security 

Restrictions on Permanent Establishments in Thailand

Although Permanent Establishment in Thailand, when formed by foreign entities helps them enjoy business liberties quite similar to Thai natives, yet, there are some limitations as well. A PE in Thailand may not be deemed to perform the following activities:

• the use of spaces purely for the purpose of displaying or storing commodities or merchandise that belong to the business;
• the maintenance of a stock of goods belonging to the business that are only used for show or storage;
• the maintenance of a stock of the company’s goods or items purely for the purpose of processing by another company;
• the management of a permanent location of business used just for gathering data or making purchases of commodities or merchandise for the business;
• the maintenance of a permanent location of business only for the purpose of conducting any other preliminary or auxiliary activity for the enterprise;
• the management of a permanent place of business exclusively for any combination of the activities indicated in sub-paragraphs (a) to (e), so long as the overall activity of the fixed place of business arising from this combination is of a preparatory or auxiliary nature.

Tax Liabilities on Permanent Establishments in Thailand

Status	Residents of DTA Countries	Residents of non-DTA Countries
Tax Eligibility	Have a Permanent Establishment in Thailand	Conduct any type of trade or business in Thailand
Base Tax Rate	20% on all profits earned in and from Thailand	20% on all profits earned in and from Thailand
Withholding Tax Rate	Depending upon the type of business, WHT varies between 1%, 3%, and 5% for a Permanent Establishment in Thailand** 0% if no PE in Thailand	Depending upon the type of business, WHT varies between 1%, 3%, and 5% for carrying on business in Thailand** 15% for not carrying on business in Thailand

**a. The WHT is 1% if paid by the Thai Government or any government agency or organization.

   b. WHT is 3% if paid by any foreign juristic company or partnership with a permanent office in Thailand. In contrast to “permanent establishment,” a foreign legal entity or partnership has a “permanent office” if it:

• is the proprietor of a business in Thailand; or
• Is conducting additional business in Thailand in addition to completing contractual work, that is, legally conducting additional business on a regular basis, such as trade;
• has a provident fund established in Thailand for its employees in compliance with Section 65 of the Revenue Code.

   c. The WHT is 5% for foreign juristic companies or partnerships carrying on business in Thailand without a permanent office.

Greatest Assistance You Need!

Now as you know the importance of having a Permanent Establishment in Thailand, you must also know how to incorporate the same. The most primary and mandatory requirement is to have the knowledge and experience in Thai regulations. As a foreigner in Thailand, it is not possible for you to have in-depth analyses of the same. Here is where you must seek help from a reliable and reputed law and accounting firm in Thailand. 

Without local legal support, you won’t be able to proceed in your process due to the following reasons:

1. Law and Accounting professionals in Thailand understand the protocols better than you.
2. You can expect local references from these firms that can be useful for your business.
3. Their contacts can help you select the best property for your office.
4. They can take care of the entire application, documentation and certification process.
5. The knowledge of by-laws is very essential in business operations which can be acquired only through experience.
6. Get round-the-year accounting, taxation and payroll support

We can cover all of these facilities when you come in for a brief round of free consultation with us. Therefore, if you are planning to set up a Permanent Establishment in Thailand, can email us their requirements at officer@konradlegal.com.

Smart Ideas to Start Business in Thailand

In South-East Asia, Thailand is a popular tourist destination. It is popular for its beautiful landscapes. Every year, a lot of tourists come to the nation from all over the world to take in its amazing beauty and spend time in nature. Another factor that continuously attracts travelers to it is the lovely weather. Therefore, any venture you plan in Thailand that focuses on and around the tourism sector will be a smart idea to start a business in Thailand.

Bangkok is one of the top cities with a lot of tourists all year round. Starting a business in Thailand is beneficial since there are more business options due to the increase in tourism. Some businesses are having trouble in 2021 as a result of the prolonged pandemic lockdown, but they have started recovering rapidly. It is a pride to state that Thailand is one of the most rapidly recovering nations from the COVID-19 crisis.

The local population depends heavily on tourism for their way of life. Being a popular tourist destination, it is obvious that there are several business options there. Some of these opportunities have a direct connection to tourism, while others do so indirectly.

There are other business prospects as well if tourism-related ventures are not your thing. Surf through the list of ideas below to select the one that suits your choice to start a business in Thailand.

Customized Restaurants

The requirement for authentic food establishments to serve up traditional dishes is quite important because Thailand receives a lot of tourists each year. To draw clients and increase revenue, you can open a business in customized eateries. Customized restaurants include both restaurants that provide regional cuisine and those that serve Thai cuisine in its original, unaltered form.

If you want to launch a business in this field, make sure to pick a busy area with a lot of foot traffic. You can cater to foodies in general rather than just specific demographic groups. Depending on the market niche you are targeting and the needs of the client, you can tailor your services.

Yoga Centers

The opening of yoga and meditation facilities is another popular business venture in Thailand. You can open a yoga studio with a small investment. First, hire a few training experts to teach your clients how to practice yoga and meditation correctly. Henceforth, you can arrange for your trainers to undergo some of the qualified training and receive official certification from the relevant government agencies.

Additionally, Thailand is also one of the most popular Wellness Tourism destinations in the world. your Yoga Centre can easily penetrate this industry and grab a market share.

The instructors must have the authorization to work and instruct in Thailand.

On-call Chefs

Restaurants occasionally employ chefs. If you have a passion for cooking, you should try to start an on-call catering service where you can be hired by restaurants to prepare some of their delectable delicacies. To please both visitors and locals, these foods must always have an authentic Thai flair.

You can apply for a position in a popular restaurant or market your services so that people call you to prepare specific recipes for them. It’s possible that you won’t get a quick return on your investment in this company.

However, you won’t be able to start making money with both hands until your reputation among the restaurant and hotel community grows and you start receiving more orders. It is a fantastic opportunity to feed your love of cooking and make a decent living at the same time.

Hospitality Services

There is a fantastic scope to start a business in Thailand in the hospitality industry. By providing hotels and restaurants with their everyday necessities, you can indirectly participate in it. You can also directly participate in the hospitality services.

Additionally, a hotel needs electronic and furniture items that can be rented or purchased. You can sell these furniture pieces and electronic items in bulk to hotels. Additionally, you might rent out furniture and electronics to these hotels and eateries while making a healthy profit.

You can also offer the services that hotels and restaurants occasionally need. Plumbing, electrical repair, interior design, housekeeping, floor cleaning, and other services are among them. All of these services have cheap up-front costs and significant yields.

Digital Marketing Business

Attracting visitors and educating more and more clients about what Thailand has to offer through websites for major businesses. You can assist clients by offering web development and digital marketing services. These customers could include small to large travel agencies, online booking sites, taxi companies, and others.

You can provide web development for tourism businesses, assisting them in bringing tourists to the nation at large.

Medical Services

To give clients access to medical care, you do not need to open a hospital or clinic. By setting up on-call physicians for hotels and resorts catering to tourists, you might launch a medical services enterprise. You can get clients from hotels and resorts in medical emergencies. They can also contact you by phone to arrange for medical services at the resort.

Additionally, you can charge a fee to deliver medications to certain hotels and resorts.

Event Organizers

Why not take part in events when they are very common in Thailand? You can start an event management business and assist your customers with event planning. Many cultural events, parties, dance shows, music shows, concerts, etc. are held in Thailand. With the approval of the authorities, you can plan these events for them.

There are occasionally spiritual gatherings in Thailand, and you can plan these as well. The startup costs for these firms are modest, but the rewards are big and immediate.

Food Processing

People’s lives revolve around food, so if you start a firm in the food processing sector, there’s a good chance you’ll make a sizable return on your investment. Both locals and visitors adore the processed foods that are popular in Thailand. Thailand imports and exports food products that have been processed.

You will need many clearances from the local and governmental authorities in order to launch this firm. You will also need the government’s approval to import processed food from abroad. With a respectable profit margin, you can sell the imported manufactured goods to neighborhood markets and shops. You won’t believe how much money one may make from exporting on a yearly basis.

The Bottomline

These are a few of the low-investment business opportunities. There are numerous others, and industries besides tourism are expected to grow strongly in the years ahead. These and other options are available to you if you want to start a business in Thailand but do not want to invest a significant amount of money.

You can choose your business and develop your talents to start making a solid return from it based on your skill set and investment. Thailand offers enormous opportunities for business to everyone, making it more than just a destination for tourists.

But to start a business in Thailand, you will surely need the assistance of a local Thai law firm. It is because you will have to go through a company registration process or get appropriate licenses and permits. For the best results, avail of our free consultation by emailing us at officer@konradlegal.com.

Who Are the 10 Top Accounting Firms in Thailand?

Difficult to answer as the largest not always mean the best. Moreover, experiences vary from city to city and client to client. However, I have tried to jot down top 10 accounting firms in Thailand based on my study and experience.

Here goes;

1.  Konrad Legal: Extremely professional, timely delivery and a group of expertise; these are the USPs. Importantly, they have over 15+ experience and have served a wide number of clients. Aside, they offer services at quite a competitive price. Though, my personal favorite is Konrad Legal for a lot of reasons apart from the mentioned above, since the article is about top 10 accounting firms here are some other options. However, you need to meet Konrad Legal and team to know why they are liked by so many, including me of course.

2.  Mazars:  One of the biggest advantages is that they offer a multinational composition of the advisors. Like Konrad Legal, they too offer solutions globally. They provide a full-range service including payroll, audit, company secretarial, business advisory service and legal.

3.  HLB (Thailand) Ltd: It’s been more than 10 years; this company has been in business. They are one of the many accounting firms operating under HLB International that is again a member of Forum of Firms.

4.  B-Accounting: They are familiar enough with the International rules and regulations so that their clients can put their trust in them. As the company has multi-lingual experts they can communicate with the clients in almost all the languages.

5.  M&E (Thailand) Co., Ltd: This German-Thai organization has their close association with the accounting software supplier companies like MAC5 and Quickbooks.

6.  Interactive Associates: The best part about them is that though they have a handful of employees with them they are rendering services to clients globally.

7.  Panwa Group: Apart from accounting, they offer a number of other services too as their experience has led them to a better understanding of the Thai market and culture.

8.  MSNA Group: They have made quite a place for themselves, serving the reputed business organizations in Thailand as well as internationally.

9.  Administration Outsourcing Co., Ltd:  They believe in directing the limited resources of the clients to a productive market area. They are constantly pushing their limits to become one of the top Thai accounting companies.

10. PKF Thailand: One of the oldest accounting companies in Thailand who works with a vision; “Right People. Right Size. Right Solution".

Did You Just Realize Your Tax Consultant has Made a Mathematical Goof? Question Your Hiring Process First!

Glad that you are not one of those who would first take up the taxation work all by themselves and then suffer. But not being careful when choosing the one isn’t good too. So if you see your tax consultant in Thailand making mistakes, do not be amazed. Ask yourself these questions and try to find the answer. If you have done these already, ensure not repeating the same;

1. Did you choose your tax consultant because he is an ex-Thailand Auditor? Just because someone is an ex-Thai auditor that only doesn’t guarantee his expertise always. Even though you have all the faith in him, it is suggested to always check his testimonials and client base. 
2. Did you not consider the bigger picture?  Your company is more than just taxes. Hence, the tax strategy you choose should be a part of the larger business strategy. You must understand that the best solution for a tax problem may not be the ultimate solution for the business as a whole. Your tax consultant or preparer should have enough business knowledge as well.
3. Was your decision based on price alone? Definitely, the price is, important, but that cannot be the only deciding factor, for obvious reasons. Not all service providers that charge high delivers high-quality service and vice versa. Hence, the price should come into consideration when everything else is equal. 
4. Did you choose your tax consultant depending on a single phone call? Well, there are good speakers and there are good service providers. Not all good speakers can be good service providers or vice versa. So deciding one simply based on the phone call might not be a wise thing to do. 
5. Did you choose someone who didn’t guarantee satisfaction? Each tax consulting firm should be completely accountable for their job. In case you aren’t pleased with the service in all the way, you shouldn’t pay for it. So, always ask if they guarantee satisfaction and ensure that guarantee is in writing. 
6. Did you not check the clients’ review? Most service providers, be it a tax consultancy agency or any other will say anything about their former works. Sadly, some of those may not be true. So, your Thai tax consultant must be willing to share references or at least you must be able to read the shared reviews. 

Before the tax time looms, it is vital to keep the tax records updated and ready to avoid submission of a sloppy form. Who would even want to scramble for documentation last minute? While doing your business taxes yourself is not advisable, especially when you do not have any hands-on experience, you must and should seek a professional, provided you do not make these mistakes. 

8 Tips to Choose the Right Thailand Lawyer

Are you finding it difficult to choose a Thai lawyer? I can understand the amount of confusion you have to go through to select the one. Since there are so many, searching for the one is always a daunting task. Whether you want to raise a visa or extend it, willing to get married to a Thai or file a divorce and buy a property or sell, you will be in need of legal expert. While choosing the first, the first and foremost thing that you must do is identify what kind of legal service you want and then proceed;

1. Ask your friends or business associates about a Thai lawyer. A word of mouth can be quite helpful when you have no idea where should you go. They can tell you about their experience.

2. You must filter your search to English speaking professionals. There will be many who though offer legal services, are not adept in English. If you are a foreigner, hiring such a professional wouldn’t do any good to you as then you may have to pay extra for a translator.

3. Join public forums and other online and offline communities. By doing this you will get to speak to strangers who can guide you well as whom to choose. You can even befriend some Thais who can take you through to the legal process and suggest you the best service provider. You might find a lot of them discussing different law firms and legal experts, making the search a little easier for you.

4. Instead of checking on the law firms haphazardly, it is better to choose any five at first and gather information about them.

5. Deciding between a law firm and an independent working professional. While choosing a law firm will ensure that you are never without a Thai lawyer, an independently working professional may deny you providing services.

6. When you are looking for a law firm you must consider its expertise. Know how long they have been working in this field plus the different types of legal experts they are working with. I mean you cannot work with a divorce lawyer if you need someone to assist you in property related matters.

7. You must see how professional the experts are. One should maintain a proper communication with the clients. There shouldn’t be anything hidden from the clients, which means there should be much clarity and transparency. You must know what your law firm is willing to do.

8. Next is their fee. It must be within your budget, right? You can seek a free quotation from them considering the services you need. Once you have ensured these, you can now go ahead with the hiring process.

What should You Expect from a Law Firm in Thailand?

I understand the level of difficulty a foreigner has to face to realize the complexities of Thai laws. Deciding to open a business in Thailand is not enough as there are so much more beyond. The first and foremost thing that you need to do is know your eligibility. And then prepare a business plan and find a financier. In order to start a business in an alien country, it is suggested to look for a law firm in Thailand.

A law firm usually works with experienced practitioners who provide legal solutions to clients. Not only do they work as advisors but also they get all your legal works done to make things little easier for you. Having a legal advisor by your side will help you to have a better understanding of the law and at the same time concentrate more on your business’ works.

Your lawyer can help you with everything from company registration, BOI promotion to corporate tax. So, if you are in need of a legal assistance you can always come to us. Our representatives are dedicated to serving our clients with professionalism. Not only do we assist in setting up a business in Thailand, but also can help in other legal matters too, like immigration, adoption, marriage, and divorce.

The lawyers not only have in-depth knowledge about how the laws work but also know how it is implemented. They will patiently try to listen to everything you have to say. Legal experts believe in maintaining a level of transparency and make sure everything is stated crystal clear and nothing is kept hidden: so, you will always be notified of what they are doing and how.

However, one of the biggest challenges is going to be how you find a good law firm in Thailand. In that case, you can always turn to the online and offline business communities in Thailand. They can suggest you with a good law firm for sure. You can simply look into the search engines to find a few. Once you have shortlisted you must check their company’s profile along with the reviews they have got. This will give you a clear picture about the service providers. In fact, you can even ask for testimonials.

What I Learnt during Submission of Annual Financial Statement to Thai Government

Submission of annual financial statement to Thai government is crucial for any limited and public limited companies. I was aware of this already. But the problem I faced was getting the details documented in Thai language. Me being a Russian, I had no clue of the language. However, it is then I found Konrad Legal. They assisted me in submitting my annual financial statements to the Ministry of Commerce. 

However, it needed to be submitted within one month of the Annual General Meeting approving the financial statement. Note, the AGM needs to be held with 4 months of the end of the fiscal year. Joint ventures, registered partnerships and foreign companies doing business in Thailand should submit the annual financial statements within 5 months of the closing of the accounting period. 

The annual financial statement was prepared based on the accepted accounting principles. Failing to submit your audited financial statement within the tenure is liable to fine of around 50,000 baht. There is exception too. Option such as case-by-case allows you some more time to submit the statement. 

Alongside your company’s annual financial statement, the annual income tax return must be filed with the Department of Revenue within 150 days after the fiscal year ends. But, you have a dormant company, how to file the annual financial statement in that case? While choosing Konrad Legal I spoke to one of their clients to confirm their services and he told me that he opted for accounting, auditing and corporate income tax services for his dormant company in Thailand and he seemed to be very satisfied. In that case, the legal firm offered them services like; 

• Prepared the annual audit financial statement in both Thai and English version 

• Prepared accounting records like general ledger, financial statement, journal and trail balance in both languages. 

• Prepared secretarial documents, consisting of Sor.Bor.Chor. 3 and Bor.Oor.Jor.5

• Prepared yearly corporate income tax return and much more

In my case, they even gave me a copy of the legal documents in Russian language on request. 

Two Businesses in Bangkok That Can Bring You Success

If you are already in love in Bangkok, then there is no way escaping. And you know better what I am trying to mean. Each year tourists flock here in hundreds and thousands and what they eventually end up with is either extending their tourist visa or applying for something more concrete. Low cost of living, profitable business opportunities and lifestyle are enough to admire Thailand. By doing something concrete I meant business in Bangkok. In fact, if you are considering staying for longer period in the country you can always buy a business in Bangkok and make some money. 

However, the only issue is that people often get into the market without proper planning and research. To begin with, you can approach your reliable relatives or friends and discuss the idea of investing in a bi-national business. Initially, you should be concentrating on preparing the ground and then think something large. Though manufacturing business is in huge demand in Thailand, you might not have that much capital to invest. Here are some business ideas to go with; 

Bar Business 

Bars earn a huge amount every night in Thailand and when you are here you will surely want to own one. Although, a lot of money is yielded by this business, running this is not that easy. If you are one of the US citizens, then you must have a Thai business to begin. Additionally, you should get regulatory licenses, as well as clearances, done. Similarly, there are many legal formalities too that can be handled by a law firm in Thailand. 

Restaurant Business

It is yet another promising business if tapped properly. Since Bangkok is a booming tourist destination, restaurants earn a huge turnover. For this, you will need to get a food license, alcohol license, and permission for playing music. 

Apart from these two, you can also think of starting a driving school or a guesthouse. But make sure you have sufficient capital.