Most of the foreign companies doing business in Thailand successfully operate in the local market through the appointment of agents/distributors or the establishment of their own offices.
After pricing, technical support is the most important issue for potential Thai buyers. Local presence demonstrates that companies are serious about the market and are ready to provide local technical support to partners and customers.
Foreign companies can enter the Thai market in several ways. Specifically, you can start with a direct export, appointing an agent or distributor, partnering with franchise companies, creating a joint venture, or opening a local representative office, regional office, or regional headquarters.
Companies wishing to have a permanent presence in Thailand must establish a legal entity that complies with Thai legal and tax requirements. The Foreign Business Act (FBA) of 1999 imposes restrictions on 43 categories of businesses, classified according to three options:
- enterprises are open to 49% foreign ownership without a license;
- 49% of foreign ownership without a license is allowed and 60-75% of foreign ownership with the permission of the Cabinet of Ministers, provided that two-thirds of the directors are Thai;
- 49% foreign ownership is allowed without a license and up to 100% foreign ownership with a license from the Ministry of Commerce.
- In addition to the FBA, there are several industry-specific legislation governing banking and financial institutions; general and life insurance; insurance brokerage companies; securities, and telecommunications.
The Investment Board of Thailand (BOI) is authorized to issue foreign majority ownership of a Schedule 2 or Schedule 3 business if that business is eligible for promotion under the BOI rules.
Standards and technical regulations
The Thai Industrial Standards Institute (TISI) is responsible for developing the standards. Product labeling in Thailand is governed by the Consumer Protection Act
Labels on controlled goods must have the following characteristics:
- the name or trademark of the manufacturer or importer;
- place of production or place of conducting import business;
- statements indicating the nature of the goods;
- the name of the country of origin, for the imported goods;
- price, quantity, use, recommendations, caution, and shelf life.
Tax and customs aspects
In addition to technical regulations, before entering the Thai market, it is necessary to familiarize yourself with the taxation in the country. In Thailand, the following fees apply:
Value Added Tax (VAT). The current VAT rate is 7%. For imported goods, VAT is calculated using the formula: cost of goods including shipping and insurance + import duty + excise duty (if any) + other taxes and fees (if any).
For exported goods, the following algorithm is used: the cost of the goods, taking into account delivery to the place of dispatch, excluding transport costs + excise duty (if any) + other taxes and fees (if any).
Corporate income tax. Companies incorporated in Thailand are subject to corporate income tax on worldwide income, and profits. The standard corporate income rate is 20%. Certain industries are subject to a separate tax regime.
Income tax. Thailand’s Department of Income provides detailed information on personal income tax rates.
How to register a company in Thailand
Each year, Thailand becomes more attractive for foreign investment: new markets are opening up, protectionist measures are weakening, and programs for attracting foreign capital are launched.
The Thai government is gradually expanding the opportunities for foreigners to conduct commercial activities in the territory of the state, annually simplifying the procedure for registering a company.
Currently, foreign business is prohibited from carrying out more than one hundred and sixty types of activities. Some of them, such as the activities of travel agencies, are highly profitable and fast-growing industries. However, there are several opportunities for a foreign investor to register a company in Thailand, which will be considered a resident of the country and will be able to enjoy the full range of rights for Thai legal entities. Therefore, it is worth considering in detail how you can register a resident company in Thailand, which will receive permission for almost any type of activity except strategic and socially significant industries.
A company in Thailand can be established as a partnership, society, or regional representative office of an international company. For each of the listed organizational and legal forms, the boundaries of responsibility of the founders, the registration procedure, the number of initial capital contributions, and other requirements are legally determined. The choice of the organizational and legal form of a new business should be determined by taking into account the goals and scale, as well as based on the operational plan and long-term strategy of the company.