Doing Business in Thailand
The State of Thailand Today
Thailand boasts a population of over 65 million with an annual growth rate of about .91%. Approximately 75% of the population are of one of the major Thai ethnic groups. Ethnic Chinese are a large minority group at around 14%. The remaining population is a mix of minority groups such as Malays, the various ethnic minorities many of whom tend to reside in mountainous regions (“hill-tribes”) and a small number of groups from other SE countries.
The country’s official language is Thai which is split into 5 main dialects groups which may vary from city to city.
The government is based on a Constitutional Monarchy which is headed by King Bhumibol, the longest reining monarch to date.
The minimum daily wage varies between provinces with less developed/populated provinces tending to be considerably lower, but is approximately $6US in Bangkok, the capital. The local currency is the Baht (THB).
Thailand follows a code law system which has a constitution as its base, however, it is important to note that due to instability the constitution has been voided and rewritten as many as 18 times as recent as last year.
Thailand has many different types of courts all of which operate under H.M. the King.
The courts are split up into many different levels and there are specific sub-level courts (all of which are located in Bangkok) specialized in certain types of cases. The Thai court system has no juries.
Although the courts primarily follow code law, judges often acknowledge precedent in making judgments and therefore Thailand often emulates common law as well as code.
The four main courts:
- Administrative Courts
- Constitutional Tribunal
- Courts of Justice
- Thailand Military Courts
More information on the different types of courts and their functions are available in the following document here
In 1997, under pressure from the US and other important trade partners, the Intellectual Property and International Trade (IP&IT) Court was established as one of the many branches under the Courts of Justice. Aside from cases like trademark infringement, the court also handles trade contracts, letters of credit as well as carriage and shipping disbutes.
According to the document entitled “Thailand’s Implementation on Intellectual Property Rights (Nov 07 – Feb08), released by the Department of Intellectual Property, a division of the Ministry of Commerce, the situation is considered “among the issues of importance.” The document offers somewhat impressive statistics of confiscated pirated good and arrests in an attempt to reduce infringements in Thailand. However, as of this writing, it is still possible for one to walk into Central Kad Suan Kaew (the local mall) and purchase pirated DVDs and console game software. One can also walk into my university library and copy a book in its entirety at the copy shop within – it is not necessary to check out the book.
More information on Thai intellectual property laws and the current situation are available here.
Starting a Business in Thailand
Foreigners hoping to start a business in Thailand have a number of hurdles they need to be prepared to jump through in order to be successful. Laws place limitations on a number of issues involving non-Thais that can make the whole process a daunting task.
Important Legal Information
The primary law to be aware of whenever foreigners are attempting to do business in Thailand is the Foreign Business Act B.E. 2542 (A.D. 1999). This law sets the basic guidelines to what is and isn’t permitted. While this act limits many of the industries that foreigners can work and/or invest in, there are exceptions in certain cases. Additional information of this act can be found here.
The act does not affect any type of business that Thailand’s Board of Investment is currently promoting so it is possible to apply through other government branches such as the Industrial Estate Authority. Either way, one should consider the BOI and the above mentioned act as vital reading material when considering starting a business in Thailand.
Another option is exclusively available to US citizens. Thanks to the the Treaty of Amity and Economic Relations B.E. 2509 (A.D. 1966), Americans are exempt from many restrictions affecting foreigners under the Foreign Business Act. However, recently, the Thai government has expressed interest in ending this treaty which may reduce or eliminate benefits currently afforded Americans. This document has more details for further reading.
There are a number of options available for those wishing to start a business in Thailand.
Some of the more common types for foreigners include:
• Sole Proprietorship
• Regional Branch Office
• Joint Venture
• Limited Company
More detailed explanations of the above business types as well as additional options are available here
While the fees and steps involved in starting a business in Thailand can vary between different types , the basic process is as follows:
- Corporate Name Reservation – apply for permission to use a unique company name
- File Memorandom of Association – File the company name, location, capital registered, business objectives, and promoters (original shareholders), pay memorandum fee .05%
- Convene a Statutory Meeting – Determines division and type of shares (preferred/common), any contracts are ratified and directors are officially appointed and given reigns of the company, government fee of 5,000 per Baht 1 million of registered capital (up to 250k) is paid, Articles of Association are announced **The Civil and Commercial Code sets the guidelines for meetings with shareholders and directors.
- Register the Company – Filed within 90 days of Statutory Meeting, pay registration fee .05%, registration documents sent to the Revenue Department.
As the system is based somewhat on the procedures and laws of more developed nations you may see some similarities to the laws of your own country, however one should be aware that there are plenty of potential headaches that may arise doing business in a different country/culture and one should research accordingly before taking any serious actions towards starting or investing in a business.
Foreign Investment/Trade Agreements
A number of countries, such as Japan, China, the US and Australia count Thailand among their trade partners. Thailand is also a participating member of ASEAN Free Trade Area which is made up of SE Asian countries. Most trade treaties with Thailand are managed by the Ministry of Foreign Affairs, though other upper branches of the government can initiate negotiations for new treaties.
You can look up which items were exported/imported to/from which countries at The Customs Department website.
Finding a Location for your Business
Thai nationals can purchase land within the kingdom with some exceptions. Ownership can be sole or shared. Until recently, Thai citizens married to aliens were unable to purchase and own land, but recent law changes have made this possible albeit, difficult.
Foreigners on the other hand are barred from directly owning land. However, companies with at least 51% Thai ownership may own land. Within legal loopholes a foreigner can be the largest single shareholder within a company and therefore be able to purchase land through the company.
Another options for foreigners is leasing for long periods of time. Foreigners can lease (usually in renewable blocks of 30 years) land, but depending on the purpose, it may or may not be the best option. Foreigners are not restricted in buying buildings, so one may lease a plot of land and build a building atop it which they would own. Foreigners are able to purchase condominiums, but as with land the amount of rooms owned by foreigners in a particular building may not exceed 49%.
Exceptions are possible in certain situations. As with many legal business and investment situations, government bodies such as the Board of Investment (BOI) and the Industrial Estate Authority of Thailand (IEAT) can superscede these regulations and in certain circumstances, allow foreign owned companies to own land. The BOI for example, allows for a foreigner who has invested at least 40 million baht over at least a 5 year period may purchase 1 rai of land for residential purposes. Also, the following acts allow foreigners to own land:
Investment Promotion Act B.E. 2520 (A.D. 1977), Section 27
Commercial Banking Act B.E. 2505 (A.D. 1962)
Land Code Amendment Act B.E. 2542 (A.D. 1999), Section 96 bis
More legal details as well as the specifics of the above acts can be found here.
Process of Acquiring Land
Before purchasing any land, one must research the legal ownership of the land in question. First, you should contact the provincial Land Office, or the District Land Office in Bangkok. After confirming the seller is the actual owner do the following example which assume you will be starting a business.
- Contact a Lawyer – draw up/check existing contract
- Business Formation (See above) -company is formed and registration fees are paid/officiated
- Sign contract and Pay Deposit – Payment dates are generally based on this day
Important Government Bodies: