Limited Companies are the basic Thai corporate structure. They are governed by the Thai Civil and Commercial Code. Private Limited Companies are not eligible for public stock offerings. Every Private Limited Company must register their Memorandum of Association (similar to Articles of Incorporation) and Articles of Association (similar to by-laws).
Thai law requires at least 3 shareholders at all times. Shareholder liability is limited to the unpaid amount of their shares’ par value. All shares must be subscribed to at the time of incorporation, but only 25% of shares must be paid up. The minimum share price is 5 THB. Some shares may have preferential voting power, but every share must have at least one vote. If foreigners own more than 49% of the shares, the company is subject to the restrictions of the Alien Business Act.
Limited companies must follow strict financial requirements. Annual financial statements must be certified by an auditor, approved by the shareholders, and filed with the Commercial Registration Department and the Revenue Department. Small limited companies may be exempt from this requirement.
Establishing a Private Limited Company
A company must have three promoters before it can be registered. Each promoter must have at least one share in the company and be at least twenty years of age. Promoters do not have to be Thai citizens.
Step 1: Reserving the Company Name
The first step is to register the company name. One of the promoters must complete a Name Reservation Form and submit it to the Department of Business Development. If your name reservation is approved, you have thirty days to file a Memorandum of Association with the reserved name.
Step 2: Filing the Memorandum of Association
The second step is filing the Memorandum of Association, which is similar to “Articles of Incorporation.” This document must state the intended place of business, the company’s purpose, and the capital to be registered. The promoters must also be named in this document as noted. The Memorandum of Association is filed with the Department of Business Development.
Step 3: Convening the Required Meeting
Once the Memorandum of Association is filed, it is time to convene the first meeting. At this meeting, the bylaws are adopted and the directors and auditor are appointed. Decisions are made as to number of preferential shares and the extent to which shares are considered paid-up. Management is transferred from the promoters to the newly appointed directors.
Step 4: Applying for Business Registration
A company has three months from the time of the first meeting to submit an application for registration as a Private Limited Company to the Department of Business Development. There is a fee of 5,000 BHT per 100,000 BHT of registered capital. The maximum fee is 250,000 BHT.
Step 5: Registering for Tax Purposes
The final step in business registration is registration with the tax authorities. The business will need to apply for a tax ID card from the Revenue Department, and a Value Added Tax Certificate if the annual turnover exceeds 1.2 Million THB.
Public Limited Companies
Private Limited Companies who want to issues stocks to the public may convert to Public Limited Companies. Public Limited Companies are governed by the Public Limited Company Act and the Securities and Exchange Act. They are subject to greater regulation to protect shareholders.
Thai Branch Office
Multinational businesses can easily expand into Thailand by opening a branch office. A Thai branch office is not a separate business entity, so the parent company will be liable for the branch’s debts and tort liabilities. No special registration is required, but the Thai branch will have to comply with the usual regulatory requirements by registering for the VAT, applying for corporate tax ID, and getting a foreign business license.
Thai Representative Office
Establishing a Thai “Representative Office”enables a company to engage in an “international trading business” without incurring Thai Tax Liability. These offices are allowed to source goods for the parent company, check on the quality of the sourced goods, and report to the parent company on market trends. Representative offices are prohibited from generating revenue. They are required to apply for a tax ID card and file income returns whether or not they generate taxable income. There is a 2,000 THB application fee for Representative Office registration with an additional 20,000 – 250,000 THB (0.5% of registered capital) fee if the application is approved.
Thai Regional Office
A Thai Regional Office is a special corporate entity used to provide “supporting services” to the associated parent company. “Supporting services” includes administration, sourcing, technical support, R&D, marketing, training, and credit management. Thai Regional Offices enjoy a reduced 10% corporate tax rate on supporting service income and royalties on Thai R&D accomplishments. Dividends paid by the Thai branch office to foreign entities not directly incorporated within Thailand are exempt from Thai taxation.
