How Can a Foreigner Own Majority or 100% Shares in a Thai Company ?
As IDGIP already mentioned about HOW TO SET UP A COMPANY IN THAILAND, and now we realize that owning majority shares in Thai companies is also beneficial for foreigners who are interested in investment in Thai firms.
There are two ways to achieve 100% ownership:
- Obtain a Foreign Business License
A Foreign Business License (hereinafter referred to as “FBL”) can be loosely understood as a Work Permit for companies. Just as foreigners in Thailand can only engage in certain occupations and are required to have a Work Permit to be able to work, foreign companies can also operate merely in the selected categories and need an FBL.
FBL only allows you to operate the permitted business type in Thailand. There are other requirements like registered capital.
The Business Lists under the Foreign Business Act B.E.2542 (1999)
- Business List 1: covers Business which foreigners are not allowed to operate.
- Business List 2: foreigners can operate business if permitted by the Minister of the Ministry of Commerce with the approval of the Cabinet.
Foreign companies that wish to engage in business activities under list 2 can apply for the FBL by meeting the following criteria:
- Minimum capital of THB 3 million
- Not less than 2/5 of the total number of directors must be Thai nationals.
- A minimum of 40% of Thai shareholding. The Minister together with the Council of Ministers’ approval may reduce the requirement, but to not less than 25% for certain cases.
Once the requirements are met, the foreign company can apply for the FBL through the DBD by submitting the application and supporting documents.
The Minister shall consider whether to approve within 60 days from filing the application. Once the Minister has approved the application, the license shall be issued within 15 days from the approval date. However, the full process may take up to four months.
If the Minister refuses to give permission to the foreign company, the Minister shall notify the foreign company and state the reason of refusal in writing and within 30 days.
In the case that the foreign company has received approval to engage in activities under List 2 from the BOI or a foreign trade agreement, the foreign company will only need to apply for the foreign business certificate.
Application Fee for Business List 2: 10 Baht for each registered capital of 1,000 Baht with the minimum of 40,000 Baht and the maximum of 500,000 Baht.
- Business List 3: foreigners can operate business if permitted by the Director – General of the Department of Business Development with the approval of the Committee
The criteria to be met for foreign companies seeking to engage a List 3 business are:
- A minimum capital of THB 3 million
- At least one authorized director or member residing in Thailand
- The foreign company must submit the application and necessary documents to the Director-General of the DBD.
The Director-General shall approve within 60 days of filing the application, and the Director-General shall issue the license within 15 days after the approval date.
If the Director-General does not approve the foreign company operating activities in List 3, the Director-General shall notify the foreigner and state the reason for such refusal in writing and within 15 days.
Similarly, to List 1 and 2, a foreign company that received approval to operate under List 3 by the BOI or under a foreign trade agreement only needs to apply for a foreign business certificate.
Application fee for Business List 3: 5 Baht for each registered capital of 1,000 Baht with the minimum of 20,000 Baht and the maximum of 250,000 Baht.
We would strongly advise you to discuss with our attorney to provide you with comments and evaluate which type of company is best suited for your business operation in Thailand.
- Board of Investment (BOI) Promotion
The Thailand Board of Investment (hereinafter referred to as “BOI”) is a division of Thai government that promotes business start-ups and projects in areas that are deemed desirable for the economic outlook of Thailand.
Nowadays Thailand Board of Investment offers promotional privileges in 8 key sectors:
- Agriculture and agricultural products
- Minerals, ceramics, and basic metals
- Light industry
- Metal products, machinery, and transport equipment
- Electronic Industry and the electrical appliances
- Chemicals, paper, and plastics
- Services and public utilities
- Technology and Innovation Development
Tax incentives given to promoted entities by Thailand BOI can be separated into two different categories:
- Activity-based incentives that depend on the type of activity
- Additional merit-based incentives that are provided to projects benefitting the country.
Some of the most important Tax and Non-Tax Incentives under BOI include:
- Corporate Income Tax exemptions for a minimum of 3 years to a maximum of 8 years.
- Exemption of Import duties on machinery
- Exemption of import duties on raw materials used in R&D
- Permission to bring to Thailand skilled workers and
- Permit to own land
- Permit to take out or remit money abroad in foreign currency
To receive the BOI investment promotion certificate, the applicant must establish a Thai company within six months of acceptance approval. The following documents must be submitted to the OBOI offices in due course:
- Application form for BOI promotion certificate
- Memorandum of association
- Certificate of company registration
- Certificate stating the registered capital, authorized directors indicating signing authority and the registered address
- Shareholder list
- Evidence of the transfer of funds from overseas, or an investment certificate issued by the Bank of Thailand
- A Joint venture agreement, licensing or franchise agreement, technical assistance contract and/or technology transfer contract.
If the applicant is unable to submit the documents within the required time frame, an explanatory letter must be sent to the BOI, which will consider extending the deadline by 4 months at a time, up to a maximum of three times. The BOI will issue the investment promotion certificate after receipt of all specified documents, and the promoted company must follow the conditions laid out in the BOI investment promotion certificate.
Foreigners who want to own 100% of their business should consult with our BOI attorney on how to maximize your chance of success and get the most out of these incentives.
The Pros and Cons of Setting Up a Company in Thailand
There are certain advantages and disadvantages to setting up a company in Thailand, and it’s important to know what they are and whether the pros outweigh the cons for your situation.
Pros
- Juristic Person. As your company will be Thai-owned by majority (at least 51%) it will command the same rights as a Thai person and can enter into contracts, own property and purchase land in Thailand (though. more Thai shareholders may be needed for this).
- Protection of Liability. By keeping your personal funds separate from those of the company, and by dividing the company’s capital into shares, you can protect yourself from private liability.
- Visas and Work Permits. The company can sponsor visas (Non-Immigrant B) and work permits for foreigners, and with both you can stay and work legally in Thailand. In order to sponsor the work permit, however, there are some extra rules. The company must register 2,000,000THB of capital per foreigner (half if married to a Thai) and must employ 4 Thai staff per foreign employee. This is normally required by the Department of Labour, and may also have to be proven for visa extensions, depending on the type of extension the foreigner applies for.
- Reduced Taxes. Private limited companies are able to claim tax deductions in many categories. If you move some of your personal expenses to company expenses, they may tax-deduction. For example: training, research and development, entertainment expenses, donations, wear and tear, etc.
- Trust. Doing business inside and outside of Thailand can be made easy by registering your company here, where associates can see your official status as a sign that your business deals are trustworthy and backed by company liability.
Cons
- Costs of Paperwork, registration, accounting services – all of these costs must be taken into account when planning to start a company. Costs can be significant, so make sure it’s going to be worth it for you, i.e., the company will generate more than enough income to offset these costs.
- A reasonable estimation of the cost of setting up a company with 2 million baht of registered capital and 1 foreigner working with a work permit could be about 100,000THB for the first year. This would include fees to set up the company, applying for the foreigner’s work permit, doing accounting for the year, and paying social security contributions for employees. This is simply an estimate, and companies set up in different ways and with more or fewer employees could be looking at somewhat lower or higher costs.
- If you’re thinking about a major investment, it may be useful to you to verify your intentions with the BOI (Board of Investment). They can grant many benefits to foreigners wanting to invest large sums in the Land of Smiles, including special permission to start a company that is majority-owned by you.
- Time. It takes time to incorporate and then time to run and operate a company no matter where it is. It also takes time to get a work permit, sometimes up to a couple of months. If you don’t have the time and interest in running your business, it will likely fail so be sure you can make a substantial commitment to it or try a different idea. There are many rules to learn and it will take you time to adjust and adapt yourself to Thai business practices. If you make a mistake, it might cost you additional time or fees.
For these reasons, IDG strongly suggests that you or your company consults with our Law Firm before you apply for such a license. Our FREE first consultation will show you what exactly is involved before you embark on such a process. Plus, we may be able to offer alternative suggestions which can be a better fit for you or your company.
Hopefully, this information would be beneficial for your business planning in Thailand.
If there are any questions and suggestions, IDGIP willingly provides advice and helps planning your business.
Contact:
Phone: +662-011-7161 – 6
E-mail: [email protected]
Line : @idgthailand
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