Monday, August 9, 2010

Starting a business in Thailand: the basics

Thailand has always been an attractive proposition for foreign business. Large businesses and small have been drawn here by the perceived low costs, cheap labour, great access to Asia-Pacific markets, strong infrastructure and what often looks like a market just waiting for your particular product or service.

For some companies though, what may at first seem like a paradise for business can soon turn in to a nightmare. Restrictions and regulations on foreign-national shareholding, work permit provisions and visa requirements can cause many small businesses to change tact and abandon plans before they have even started. Combine this with the obvious language barrier, and it can often seem impossible for some to achieve what they want.

This article will address some of the main areas of concern for businesses wishing to enter Thailand:

·         Special allowances
·         Company Registration and shareholding
·         Visas and work permits
·         Business basics
·         Ongoing management

Special allowances
Depending on your type of business and your nationality, you may be qualified in the eyes of the Board of Investment and/or Ministry of Commerce to obtain certain benefits with regards shareholding and potential tax breaks. For example, a US-National may hold a majority shareholding in a company in Thailand.

Company Registration and shareholding
The Company Registration process entails far more than it may seem at first, because it requires submissions at various government departments in a specific order to secure the company shareholding, affidavit, VAT registration, Tax ID, social security fund registration and others. Additionally, there are different requirements for each of these submissions. For example, to obtain your Tax ID, you will need a registered office and the Landlords ID and ownership papers.

Shareholding poses the greatest problem for small businesses, especially if you do not already have a trusted Thai partner. Most companies require a Thai-majority shareholding, with the foreign-national elements registered as 49% or less. However in some cases we would recommend a lower shareholding for the foreign-national owner, depending on the situation. Additionally, there must be a minimum of 3 shareholders. The use of nominee shareholders is illegal, so the Thai majority shareholder must be a genuine shareholder.

Visas and work permits
All foreign-nationals living in Thailand require a visa. All foreign-nationals working in Thailand require a work permit, and this includes voluntary work. Whilst your visa requirement will vary depending on your situation, and whether you are married to a Thai-National, the process will generally require paperwork from Thailand to be submitted at a Royal Thai embassy overseas.

Your work permit requirements will also vary, depending on your situation. General rules are that your company requires registered capital of Baht 2,000,000 for every work permit you require, and that you must employee 4 Thai-national employees for every work permit. There are situations where this is flexible though (registered capital of just Baht 1,000,000 is required for a work permit for a foreign-national married to a Thai-national) and regulations may vary slightly from region to region.

Business basics
Other important points to consider are your needs for office space. To register your company, and obtain Tax ID etc, you will require a registered office, serviced or otherwise. You will also require ID and documents from your landlord.

You will need to recruit staff, especially if you require a work permit (see above). This can be done easily utilising online recruitment websites that are specific to Thailand, of which there are several good ones.

Ongoing management
With a registered company, visa, work permit, office and team in place, you will be ready to start operating and generating revenue. It is important to ensure your office is managed in a structured manner, with strong HR policies and documents, including company handbook and employee contracts. Thailand may provide you with various management challenges at first, because business operates in a different way here compared to western countries. It is important that you vary your management style accordingly, if required.

Importantly, you must manage your accounting activities in the correct manner. This can be done in-house or by utilising a professional accounting firm. When you are trading, monthly submissions must be made to the government authorities, and an annual audit is also required. Even if you are not trading, but have registered for VAT, you must make monthly submissions.

Don’t forget also that your visa and work permit require constant attention, as you will need to report to Immigration every 90 days and renew your documents annually.

Starting a business in Thailand is a challenging but rewarding endeavour. It is better to get everything right first time, every time, so seek expert assistance if this makes you more comfortable.

Disclaimer: Please note that regulations in Thailand change from time to time. The information above was correct at the time of publication, but we recommend that you always consult with an expert for the latest regulations.

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