To set up a limited company in Thailand, follow the procedures below:
1. File a Memorandum of Association
A memorandum should be prepared and submitted to the company registrar in the Ministry of Commerce. The memorandum should include the name and address of the company, its business objectives, and total capitalization. Capitalization information should include the number of shares outstanding and the value per share. In addition, provide personal details of the promoters (minimum of seven), along with the number of shares each holds. There are no minimum capital requirements, although capital value should reflect the nature of the business.
The memorandum registration fee is 50 baht per 100,000 baht of registered capital. The minimum fee is 500 baht; the maximum is 25,000 baht.
2. Convene a Statutory Meeting
Once the share structure has been defined, a statutory meeting is called. A minimum of 25% of the par value of each subscribed share must be paid.
3. Registration
Within three (3) months of the date of the statutory meeting, the directors must submit applications to establish the company. Company registration fees are 500 baht per 100,000 baht of registered capital. The minimum fee is 5,000 baht; the maximum is 250,000 baht.
4. Tax Registration
Businesses liable for income tax must obtain a company income tax identity card and number from the Revenue Department within 60 days of incorporation or the start of operations. Business operators earning more than 600,000 baht per annum must register for VAT within 30 days of the date they reach 600,000 baht in sales.
Firms must keep books and follow accounting procedures specified by the civil and commercial code, the revenue code and the Accounts Act. Documents may be prepared in any language, provided that a Thai translation is attached.
1. Imposition of Taxes
Companies are required to withhold income tax from the salary of all its regular employees. A value added tax of 10% is levied on the value added at each stage of the production process, and is applicable to most firms. The VAT must be paid on a monthly basis.
A specific business tax is levied on firms engaged in several categories of businesses not subject to VAT, based on gross receipts at a variable rate ranging from 0.1%-3.0%.
Corporate income tax is 30 percent of net profits and is due twice each fiscal year. A mid-year profit forecast entails advance payment of corporate taxes.
2. Annual Accounts
A balance sheet must be prepared annually. The performance record is to be certified by the company auditor, approved by shareholders, and filed with the Department of Revenue and Commercial Registration.
Thailand, like many other countries, recognizes three types of business organization:
1. Sole proprietorship. This is a firm, owned by a single individual, that is not incorporated.
2. Partnership. Thai and Western concepts of partnership are broadly imilar. Thailand provides for three general types of partnerships as follows:
Unregistered ordinary partnerships, in which all partners are jointly and wholly liable for all obligations of the partnership.
Registered ordinary partnerships. If registered, the partnership becomes a legal entity, separate and distinct from the individual partners.
Limited partnerships. Individual partner liability is restricted to the amount of capital contributed to the partnership. Limited partnerships must be registered.
3. Limited Companies
There are three kinds of limited companies, as follows:
Public limited companies, which must have a minimum of 15 promoters. Permission for inviting the public to subscribe for shares must be applied for as prescribed by the Securities Exchange Act B.E. 2535.
Private limited companies, which must have a minimum of seven promoters and seven shareholders. A representative office may also be established to engage in limited "non-trading" activities, such as sourcing goods or services in Thailand for its head office or inspecting and controlling the quality and quantity of goods which its head office purchases in Thailand.
A regional office of a multinational corporation may be established to coordinate and direct the operation of branches operating in the region on behalf of its head office, and must not receive income or have the authority to negotiate business with persons or legal entities in Thailand. Application for establishment of a representative office or a regional office must be submitted to the Department of Commercial Registration.
Limited partnerships. In this kind of partnership, there are two types of partners, (1) a partner(s) whose liability is limited to the amount that he/she may respectively undertake to contribute to the partnership and (2) a partner(s) who is jointly and unlimitedly liable for all obligations of the partnership. Limited partnerships must be registered.
Employment legislation has a direct bearing on labor practices for each type of business. Investors should seek appropriate advice to determine which legislation applies to their line of business.
Labor Protection
Work hours and holidays are stipulated, depending on the nature of the work. Employees are also entitled to medical leave (not more than 30 working days per year) and maternity leave (90 days leave, with pay of 45 days). In addition, there are restrictions on the kind of work women and children can perform. Guidelines are set for wages and overtime, and labor-management disputes are handled through formal administrative channels. Employers must pay workers compensation if an employee suffers injury, sickness or death in the course of work.
Thai law also requires employers to provide welfare facilities, including medical and sanitary facilities. Firms with more than 10 employees must establish written work rules governing working conditions.
Minimum wages regulations apply to all businesses and rates depend largely on the location of the workplace. Regular employees are also entitled to severance pay. Conditions for termination of employment are also laid out, and a code governs unfair practices and unfair dismissals. Employee associations and labor unions must be registered at the Labor Department, and require a license for operation. Finally, there is a labor court formed specifically to settle employment disputes.
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