Frequently Asked Questions by Foreign Investors in Thailand

This article addresses common questions from foreign investors considering or already doing business in Thailand. It explains crucial issues about investing in Thailand.

1. What Types of Juristic Persons Can Foreigners Start in Thailand?

Foreign investors have a few choices for setting up a business in Thailand, and each has its own rules:

• Limited Company: This is the most popular. It can be a private limited company or a public limited company. A private company is suitable for smaller businesses, while a public limited company is typically used for larger firms seeking to raise capital from the public, or it is a condition under the law to be a public limited company to perform certain types of activities (e.g., insurance, banking, etc.).
• Branch Office: A foreign company can open a branch to do business in Thailand. The branch is considered part of the foreign company and must comply with Thai laws.
• Representative Office: This office is mainly for activities like market research, checking quality, and finding suppliers. It cannot generate income in Thailand, but still needs to file a financial statement to the authorities annually.
• Partnership: This can be a registered ordinary partnership or a limited partnership. Investors don’t use this type of juristic person as much because of liability issues.
• Joint Venture: This is when a foreign investor works with a partner(s). A joint venture can be in the form of an unincorporated joint venture, whereby the parties are only contracted to work together and share the profits thereof. While the incorporated joint venture, both parties set up a company and outlined ownership and management issues in the company’s Articles of Association.

2. What is the Foreign Business Act (FBA) and How Does it Affect Foreign Investment?

The Foreign Business Act (FBA) from 1999 controls foreign investment in Thailand. It limits foreign ownership in some businesses that are important or reserved for Thai people. The FBA has three lists of restricted businesses:

• List 1: Businesses that foreigners cannot perform (like newspapers, ranch, or land sales).
• List 2: Businesses needing government approval because of security or culture (like ammunition or antique item sales).
• List 3: Businesses where Thai people are not ready to compete yet (like grain milling, fisheries, and public auction). Foreigners can engage in the businesses specified in List 3 after obtaining a Foreign Business License (FBL).

Investors should verify if their business is listed on these lists. If it is, they can plan whether to prepare the license application, perform business with a Thai partner (holding at least 50% ownership in the business), considering applying for incentives from the BOI (discussed in item 7 below), or apply for incentives under an international treaty like the Thai-American AMITY Treaty.

3. How Can a Foreign Investor Get a Foreign Business License (FBL)?

To obtain an FBL, the foreign investor must apply the FBL license application to the Department of Business Development (DBD). The application requires detailed information about the foreign investor, the business they intend to conduct, technology transfer to Thais, details of the company’s structure and employment, and their financial plans. The DBD will review the application based on factors such as how it will benefit the Thai economy, the company’s financial stability, and whether it complies with Thai laws. It can take a considerable amount of time, so you need to prepare carefully.

4. What Should Foreign Investors Know About Buying Land in Thailand?

Typically, foreign individuals and companies are not permitted to own land directly in Thailand. But there are some exceptions:

• Leasehold: Foreigners can lease land for up to 30 years, with a chance to renew.
• Condominium Ownership: Foreigners can own condos, but there are limits (foreigners can’t own more than 49% of the condo units in a building).
• BOI Promotion: The Board of Investment (BOI) can allow foreigners to own land if it’s used for BOI-approved activities.
• Set Up a Thai Company: A foreign investor can start a Thai company (majority owned by Thais) to buy land. However, this needs to be done carefully to comply with the Land Code and avoid using “nominees,” which is illegal.

5. What Labor Laws Should Foreign Investors Know About?

Thailand has labor laws to protect workers. Foreign investors need to know:

• Minimum Wage: Employers must pay at least the minimum wage, which rates are different in each province.
• Working Hours: Normal hours are 8 hours a day and 48 hours a week. Overtime pay is needed for extra hours.
• Social Security: Employers and employees must equally pay into the Social Security Fund about USD 25/month, which helps with healthcare, unemployment, and retirement.
• Severance Pay: Employees fired without a legitimate cause shall get severance pay, which depends on his/her year of service.
• Work Permits and Visas: Foreign workers need work permits and visas to work legally in Thailand.

6. What Taxes Do Foreign Investors Need to Pay in Thailand?

Thailand taxes income earned within Thailand. Important taxes include:

• Corporate Income Tax (CIT): The normal CIT rate is 20% of profits.
• Value Added Tax (VAT): VAT is added to most goods and services at 7%.
• Withholding Tax (WHT): WHT is taken from some payments to a person/juristic person, like dividends, interest, and royalties.
• Personal Income Tax (PIT): Foreign employees working in Thailand pay PIT on their income at progressive rates, which range between 5% and 35% of their income each year.

Thailand also has agreements with many countries to avoid double taxation.

7. What Does the Board of Investment (BOI) Do and How Can it Help Foreign Investors?

The Board of Investment (BOI) promotes investment in Thailand by offering incentives to select projects. These can include:

• Tax Holidays: Exempt from the corporate income tax for certain periods (like 3, 5, or 8 years).
• Import Duty Exemptions: Exempt from import duties on machines and raw materials.
• Land Ownership: Allowing foreign companies to own land for the BOI-promoted projects.
• Visa and Work Permit: Simplified visa and work permit application processes, which allow the applications to be filed at the one-stop service center.

To receive BOI incentives, projects must benefit the Thai economy, utilize advanced technology (in most cases), and create employment opportunities.

8. What Problems Do Foreign Investors Often Face in Thailand, and How Can They Solve Them?

Some common problems include:

• Too Much Paperwork: Even though the Thai government is trying to reduce paperwork for their application and routine filing processes, Thai authorities still require extensive paperwork, and missing just a single document can create significant challenges.
• Language Problems: At the operational level, there are not many Thai authorities who are fluent in English.
• Following the Rules: As Thai authorities are changing their regulations quite often, keeping up with new laws can be difficult.
• Staying Updated: Keeping up with changes in laws and regulations.

Conclusion:

Investing in Thailand can be a great opportunity, but it requires careful planning and an understanding of laws at both the national and local levels. By answering these questions and seeking expert help, foreign investors can feel more assured and mitigate potential legal challenges.

Top of Form