Business Laws Business Blog

Thai company formation 2013

Thai company formation

More documentation required when foreign shareholders are involved

New 2013 business registration rules will require all new companies with foreign shareholdings involved to declare the sources of funds used to finance the company shares. The new rules, which will take effect January 2013, are aimed at preventing the use of Thai nominee shareholders by foreigners.

Thai Law Nominees and Foreign Shareholders

Twenty-two Thai companies found breaking foreign ownership rules

Source: bangkokpost Februari 5 2013

As many as 329 firms have been alleged to use nominees for their foreign shareholders, with 22 firms illegally found to have foreign ownership, according the Commerce Ministry reports. Many of these companies have representatives of foreigners on their boards or as shareholders who usually come from accounting, consultancy or law companies, according to an investigation by the ministry's Business Development Department.

Illegal foreign operated Thai companies

DSI plans foreigner proxy firm crackdown

BangkokPost: published Januari 7 2012

The Department of Special Investigation will crack down on foreigners, some of whom are gangsters, who illegally exploit loopholes to operate businesses which are normally off-limits to them. DSI chief Tharit Pengdit unveiled his plans after the cabinet had given the agency the authority to investigate nine more categories of special cases including human trafficking, computer crime and foreign business. Mr Tharit said executives were deciding how to to crack down on criminals this year. 

The DSI will target transnational criminals who have exploited loopholes in the legal system to use Thai nominees to run businesses not open to foreigners, as their influence was expanding.

Thai business: opening foreign representative office

A Representative Office in Thailand

Source: Thai government (Department of Business Development)

Note a representative office of a foreign business in Thailand is not allowed to operate a profit making business and is not allowed to earn income in Thailand.

Activities of representative office are service business under List (21) of the Foreign Business Act B.E. 2542 (1999). In the past, the definition of the representative office, in accordance with the Regulations of the Office of the Prime Minister governing application for Establishment of Representative Office of foreign juristic persons respecting international trading business B.E. 2529 (1986). Subsequent the mentioned regulations together wit Announcement No 281 of the National Executive Council were abolished. In the present, definition of representative office, in accordance with the regulations of the Office of the Prime Minister in Establishment of Work permit and Visa Center (No.3) B.E. 2544 (2001).

Thai corporate income tax

Thai Company Income Tax rates

Thai corporate income tax is a tax levied on the profits made by companies or associations. The general corporate income tax rate in Thailand is 30% for companies with a paid up share capital of more than 5 Million Thai Baht. The government has reduced corporate tax rates to promote specific business sectors and small and medium enterprises. The tax rate for companies with a paid up share capital not more than 5 Million Thai Baht at the end of its tax year shall be taxed at rate of:

Thai Preference Share Structure

Thai company shares

The structure of preference shares opposite ordinary shares in a Thai company is typically used to give control to a group of shareholders (foreigners) above another group of shareholders (Thai) in the company.

For now, Thailand has not changed the preference structure allowing foreigners as a minority shareholder to control a Thai limited company, however there is a discussion if preference shares and foreign voting rights in a Thai company should be used as a criterion in defining a Thai company foreign. In new regulations the government is currently discouraging foreigners to invest in Thai businesses by using Thai nominee shareholding structures, however has not issued restrictions on the use of preference shares and majority voting rights by foreign shareholders in a Thai company.

Business Registration rules

The Business Registration Rules are aimed at preventing the misuse of Thai nationals as nominee shareholders

Order of the Business Registration Office, Department of Business Development. Order No. 102/2549. Pursuant to the Order of the Business Registration Office No. 1/2538 Regulations for the Partnership and Company Registration B.E.2538, dated on March 13, 1995 (BE 2538), stipulates that the person, who desires to register a partnership and company limited, is subjected to submit the application form and the supplementary document complying to the appendix of the aforementioned Order;

Foreign Business Act Amendment Fact Sheets

The 2007 Foreign Business Act Amendment

Update August 2008:

The NLA (National Legislative Assembly) suggested even stricter amendments than proposed by the government and expanded the definition of 'foreigner' in the draft, following the government withdrew its draft bill.

Source: department of business

IMPORTANT NOTE: This fact sheet explains features that appear in the draft bill that was submitted by the Ministry of Commerce to the cabinet and approved on 9 January 2007 only. Subsequent changes of the draft bill by the Council of State and the NLA, if any, will be addressed later.

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