Many of Joe Lizzerd’s clients who move to Pattaya, including those who originally intended to retire, often find themselves edventually wanting to either be self-employed, or start a small business to keep busy or enjoy the challenge of accomplishing something successful.
It is considered that the process for starting a business in Thailand for an expat is fairly complicated. All documentation must be in Thai. There is also the Foreign Business Act which restricts the type of business that can be started by an expat and may also restrict the amount of shares which can be owned by an expat in any business.
As in other countries there are different types of businesses that can be started. These are limited companies, sole proprietorships and partnerships. It is considered that many foreigners wanting to start their own business will opt for a limited company. There are two types of limited companies in Thailand – private and public. A public company is overseen by the Public Companies Act while the private limited companies are overseen by the Civil and Commercial Code.
There is no limit applied to the capital investment on a private limited company and an expat is able to own 100% of the shares, but this depends on the type of business. The Foreign Business Act states that there are certain businesses where foreigners are not able to own a majority share.
An expat is able to apply for a permit to have majority ownership but there is no guarantee that this will be granted. The details on the type of work that is not permitted for foreigners can be obtained from the Ministry of Commerce and are different for manufacturing and services businesses. There are also plans to make changes to this list so it is a good idea to keep checking with their website for the latest information.
In order to set up a limited company in Thailand there are a number of steps should be taken. The first of these is the corporate name reservation. There is a commercial registration department based at the Ministry of Commerce. The ministry will take a couple of days to approve the name.
Business owners will then need to file a memorandum of association with the same department. This will show the name, location, business objectives, how the business is divided and feature the signatures of three promoters. A meeting of all shareholders is compulsory and the company can be registered within 90 days. The government imposes a fee of 0.5% of the registered capital of the company.
This needs to be followed by registration of corporate income tax and this should be done within 2 months. A company will also need to register for VAT if they believe they will have a gross income of more than 300,000 THB each month. Arrangements will also need to be made to withhold income tax and social security from the wages of employees.
Public companies require that at least half of the promoters are legally resident in Thailand and there needs to be 15 promoters for the memorandum of association. For these reasons many expats choosing to begin a limited company will opt for the private option rather than public.
A person starting a sole proprietorship business will find that they are responsible for every aspect of the business, including any debts. However, unless a person is permitted under the US-Thailand treaty on economic cooperation, an expat is not allowed to run a sole proprietorship. Those who are permitted will be taxed at the standard income tax rates.3
There are three types of partnerships that can be established in Thailand. These include unregistered partnerships, where profits are taxed at standard income tax rates and all partners are equally liable, a registered partnership which is a legal entity and profits are taxed at company tax rates, and limited partnerships where liability is based on the amount of capital in the business. A limited partnership must be registered.
Organisations such as the American and British Chamber of Commerce are able to advise on all matters relating to starting a business in Thailand. The British Chamber of Commerce is not restricted to British members and all those who are not Thai are able to join. They run regular workshops and social networking events throughout Thailand.