Can a Foreigner Start Business in Thailand without a Thai Partner?

The Thai Civil and Commercial Code treats Thai and Foreign Shareholders equally when it comes to starting a business in Thailand. Due to this, foreigners are free to start their own businesses in Thailand without a Thai partner. Foreign Business Act B.E. 2542 (1999) (FBA) imposes some limitations on the types of business activities that foreign nationals may conduct in Thailand. Moreover, List 3 of FBA prohibits a majority of service activities for foreigners to start a business for. On the other hand, the Board of Investment permits up to 100% foreign ownership in businesses that engage in commercial endeavors that are crucial to Thailand’s development.

Restriction under the Foreign Business Act

List 1 of the FBA prohibits certain business activities, while Lists 2 and 3 restrict them to foreign-owned businesses. The foreign company must obtain a Foreign Business License before engaging in any of the List 2 or 3 business activities. Foreigners are increasingly choosing to form joint ventures with local partners due to the prevalent challenges and costs of obtaining a foreign business license.

Foreign Business License (FBL)

The foreign company must be able to prove that it will bring expertise and teach local staff new skills. This is one of the most important factors to apply for and obtaining an FBL. The procedure, which involves numerous questions from the authorities, lasts for about six months. A discretionary decision precedes approval.

Set up a Joint Venture

A company where foreign shareholders hold 50% or more of the share capital is a foreign company under the FBA. Therefore, a company can be a Thai company and is exempt from the FBA’s restrictions. It is possible only if Thai shareholders own 50% or more of the company’s shares. Note that, ownership of the capital is a major parameter to decide whether a company is foreign. Furthermore, control of the business is never the deciding factor for the same.

100% Foreign Ownership by the BOI Promotion

The Board of Investment of Thailand (BOI) promotes a variety of commercial activities that are crucial for the development of Thailand. This includes factories, electronics, pharmaceuticals, regional financial centers, and more recently, digital. The full list of activities eligible for a BOI promotion can be found here. One of the advantages of the BOI promotion is foreign ownership. Additionally, it grants tax regulations for hiring foreign workers with special skills and tax exemptions. It typically takes 3 to 6 months to apply for a BOI promotion.

The majority of business activities are restricted under the FBA. Therefore, the foreign investor should always confirm their eligibility for a BOI before proceeding. The business activity may not be sufficiently innovative and hence, cannot qualify under the BOI. In this case, a foreign business license is an alternative. Nevertheless, a company with a local partner continues to be the most popular investment vehicle for foreigners.

Who are Foreign Shareholders in Thailand?

Section 4 of the FBA defines a foreigner:

1. A natural person who is not of Thai nationality;

2. A juristic person not registered in Thailand;

3. A juristic person registered in Thailand, being of the following descriptions:

1.  Being a juristic person at least one-half of capital shares which are held by persons under (1) and (2) or a juristic person in which investment has been placed by the persons under (1) or (2) in the amount at least equivalent to one half of the total capital thereof; and
2.  Being a limited partnership or a registered ordinary partnership, the managing partner or the manager, of which is the person under (1).
3.  A juristic person in Thailand with at least one-half of the capital shares of which are held by persons under (1), (2), or (3) or a juristic person in which investment has been placed by the persons under (1), (2) or (3) in the amount at least equivalent to one half of the total capital thereof.

Control of the Company in Partnership with a Thai

Sections 36 and 37 of the FBA state that it is against the law to use Thai nominee shareholders. Due to the non-application of this law, there is no precise definition of what a nominee is. In reality, however, a nominee is a natural person or legal entity that holds stock in a company. The company can be partially owned by a foreign nation but does not make any direct investments in it. A Nominee cannot have the financial resources to do so nor can have a beneficial ownership interest in it. Furthermore, the nominee cannot exercise any form of control over it.

The Bottomline

However, there are other methods like setting up a Branch Office or Representative Office in Thailand. A foreigner can set up these types of organizations to represent their existing businesses in any part of the world.

But to accomplish the feat, you will need a reliable Thai law firm for your guidance and assistance. Therefore, to start your business in Thailand, contact us by emailing your requirement in detail to officer@konradlegal.com. 

How to Hire the Best Accountants in Thailand?

Are you planning to hire the best accountants in Thailand? Then there are many checkpoints that you have to pass through to make the proper selection. Accountants provide a range of services. They help your business stay compliant with Thai corporate laws and steer clear of tax blunders. Additionally, they can facilitate the numerous legal processes in both your professional and private lives.

Let us run you through the points that you must check to verify the capability and reliability of an accountant or accounting firm in Thailand. This will help you to stay assured that your accounts and financial records are maintained well enough. 

Check the Basic Qualities

What Services should you expect from Accountants in Thailand?

Company Registration in Thailand

Tax Filing in Thailand

Corporate Tax Advice

Handle Accounting Transaction

Financial Records & Statements

Payroll Services

Social Security Services

Company Audits

Business Licenses

Visas and Work Permits

Personal Tax Consulting

Judge them by the price they offer

Here you got the Best Accountants in Thailand!

Basic Qualities to Check to Hire the Best Accountant in Thailand

Thai accountants will be responsible to create your financial accounts and taxes if you own a business in Thailand. To execute this action, the accountant must have the following basic qualifications:

• Have recognized degrees in accounting
• Have a proper understanding of Thai corporate laws, norms, and tax laws
• Knowledge and expertise to complete the necessary paperwork to incorporate your company 
• Have practical experience in compiling financial accounts to prevent submitting taxes wrongly
• Capability to undertake yearly company audits

Professional accountants are listed as certified accountants by the Department of Business Development in accordance with Thai law. 

Please note that you have to hire an auditor every year to check the financial records and statements of your company. If the accountant or accounting firm you hire for the regular services is unable to prepare the documents and do the filings properly, auditors will decline to audit your company. 

Services That You Must Get From the Best Accountants in Thailand

An accountant will be the best only if they can provide a wide array of services to keep you away from legal and accounting needs. This will help you to focus on the operations and growth of your business in Thailand. This wide array of services must include the majority or all of the ones mentioned below:

Company Registration in Thailand

When you wish to register a company in Thailand, you can also hire an accountant in addition to a corporate lawyer. Most accountants are able to register businesses. Give them the relevant details, and they’ll take care of the paperwork.

Additionally, accountants can provide broad guidance on corporation legislation. Speak to a lawyer about complex topics. You can engage another accountant to handle your financial accounts and taxes after using one accountant to register your business.

However, using the same accountant throughout is simpler.

Tax Filing in Thailand

Tax Preparation is an accountant’s primary duty. Your business must file taxes according to Thai revenue codes at particular intervals based on the sort of tax you are subject to. Because you must accurately compute your taxes and file them on certain dates, filing taxes is challenging.

For instance, you must submit Forms PP 30 and 36 each month. But just PND 50 and PND 51 are required to be filed, with PND 50 due in the middle of the year and PND 51 due at the start. You could have to file additional taxes, depending on your business. If you don’t, you may have to pay penalties or go to jail.

Give your bills and receipts to the accountant you hired to file your taxes, and they’ll take care of the rest. And you can make simple dishes.

Corporate Tax Advice

Thailand’s Corporate Tax Laws and Processes are intricate, especially if your business receives a BOI promotion. You might not be familiar with the tax laws and regulations that apply in Thailand. For instance, when paying for services in Thailand, VAT-registered businesses must present their Withholding Tax Certificate, or WHT, to the business.

Additionally, each month the WHT must be paid for and turned in to the Revenue Department. Even worse, withholding taxes vary depending on the services you purchase. Depending on the services, withholding taxes are typically in the range of 2% to 5%.

Invoicing, payroll, and other accounting procedures that your business handles are not included in this. Neither are personal income tax and personal property tax forms.

You risk receiving a fine, having your property seized, or even going to jail if you break these rules and regulations. Furthermore, it won’t help if you claim that you weren’t aware of these laws and rules. You can seek guidance from accounting firms on how to file taxes, how to legally reduce your taxes, and how to get a tax refund from the Revenue Department.

They can assist you in avoiding paying excessive taxes. Because it might take years for the Revenue Department to refund any overpayments. The Revenue Department may contact you occasionally to ask you questions and to have a conversation.

The Revenue Department may occasionally want to speak with you and inquire about your situation. And they might visit your office to look around. Accountants can assist you in these circumstances and respond to inquiries on your behalf so you don’t provide incorrect information that might get you in trouble.

Handle Accounting Transactions

Your company’s income and costs, such as office rent and wages, must be supported by receipts and invoices. Cash cannot be given or received without a paper trace. Additionally, you must demonstrate to the Revenue Department where you obtained the funds and how you used them.

This transactional justification is required. Without a valid reason, you cannot transfer money to another person. For that particular form of revenue or expense, you must account for your income and expenses correctly. Additionally, every source of income and expense operates in a different way.

You must demonstrate to the Revenue Department how you accounted for them, so knowing this is crucial. You could have to give these accounting transactions to the Revenue Department yourself if your accountant isn’t in charge of them. However, an accountant should provide you with guidance, provide you with examples, and ensure that your transactions are accurate.

Manage and Maintain Financial Records & Statements

In Thailand, running a business involves making and spending money simultaneously. It’s not always possible to see your income or the amount of money you have set aside for upcoming tasks.

You can see where your hard-earned money is coming from and going each month when you engage with an accountant who creates your financial statements. Accountants also provide information about your income and operating expenses.

However, these services might not be paid for by accountants at standard accounting rates. Therefore, to find out what is included in your accounting fees, be sure to contact your accountant.

Payroll Services

Accountants assist you with the payroll services for your business. Payroll services, among other things, entail:

• paying your staff each month
• paying for Social Security, 
• calculating and reporting personal income taxes, and,
• providing pay slips and tax certificates

Some accountants will even pay your staff after you’ve given the go-ahead for their compensation.

Social Security Services

Your employees must be registered with Thailand’s Social Security System. Health insurance, pensions, and unemployment benefits are provided by Social Security to employees.

By 2020, every one of your employees who make at least 15,000 Baht will be required to contribute 750 Baht per month to Social Security. Additionally, your business contributes 750 baht to each worker to Social Security.

A new employee must be registered with Social Security each time they are hired. Additionally, you must notify Social Security if they quit your business. Therefore, accountants often handle all Social Security-related matters.

Company Audits

You must engage a certified auditor each year to review your financial accounts so you may submit them to the appropriate government agencies.

If you prepare the statements, finding an auditor will be challenging. Note that, if you aren’t an accountant certified by the Revenue Department, they won’t review or audit the financial statements you prepare.

In Thailand, accountants and auditors frequently collaborate. Your accountant prepares and sends an auditor your company’s annual financial statements for check and inspection. There is nothing that needs attention from your end.

The services of some accountants include auditing and accounting. However, auditing costs are typically additional for accountants. Over 100 licensed auditors are available to assist with company audits, according to the Securities and Exchange Commission of Thailand.

Business Licenses

Irrespective of the type of business you plan to do in Thailand, you must have the relevant license to do that. That is the token of approval that the Royal Thai Government has legalized your business in Thailand. Therefore, your accountant must have knowledge about the issuance, upgrade, renewal, and surrender of such licenses. The license becomes more crucial if your business is of any of the following types:

• restaurants
• bars
• hotels
• construction companies
• food manufacturers
• recruitment agencies
• travel agencies
• importers and/or exporters
• banks and/or lenders

Knowledge of Visas and Work Permits

Although it may seem weird, accountants can also help you obtain Thai work licenses and visas. They might not be as knowledgeable as immigration lawyers in Thailand, but they could help you and your staff obtain business visas and work permits.

Personal Tax Consulting

Your accountant might also serve as a personal tax advisor for you. They might be ready to handle your personal taxes for an additional fee if they handle your company’s taxes and are aware of your income.

How to check the price of the best Accountants in Thailand?

The following are the three primary factors determining the rates for accountants in Thailand:

• Average monthly accounting transactions
• The complexity of your business 
• Accounting services that you require

The average monthly cost for basic accounting services for startups with few transactions ranges from 4,000 to 5,000 baht.

According to the complexity of your company, accountants charge more. If you established a BOI-promoted company in Thailand, this would be the situation. This is because companies in Thailand receiving BOI promotions, go through more formalities than other business categories.

Finding an Accounting Firm in Bangkok

If you have read through this article and reached this section, you have already found the leading accounting firm in Thailand. We at Konrad Legal Company Limited hold a team of the most efficient and seasoned accountants in Thailand to deliver you the best of services. Our wide array of services includes, but is not limited to the following:

1. Company Registration Documentation
2. Tax Registration
3. Tax Audit and Filing
4. Immigration
5. Payroll Management

Apart from the mentioned ones, we often provide special assistance to our clients in finding a Thai partner, tax schedules, advice to save taxes, and anything and most possible from our end. Feel free to reach out to us by emailing your requirements in detail at officer@konradlegal.com.

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.