Private company limited by shares
Thailand is the second largest economy of the Association of Southeast Asian Nations (ASEAN) and the gateway of one of the most growing and promising markets worldwide. Thailand has a dynamic diversified economy, with leading industries such as automotive and electronics.
In addition, Thailand has concluded free trade agreements with China, India, Japan, South Korea, Australia, and New Zealand, among others.
Incorporating and doing business in Thailand gives access to a growing domestic consumer market, cost-effective skilled labor, a strengthened banking system, and a relatively high commercial freedom.
Thailand has world-class infrastructure, including a developed highway system, 7 international airports, modern city-wide mass transit, 6 deep sea ports, and 2 international river ports.
Furthermore, business costs in Bangkok such as office rentals, electricity and water are considerably lower than other trade hubs of the region such as Singapore, Kuala Lumpur, Shanghai or Hong Kong.
Usually, foreign-ownership of a Thai company is limited to 49% capital shares, but this restriction may be waived if a Foreign Business License is granted if the business is unique or does not compete with Thai businesses. Conditions, such as minimum capital (THB 3 million), transfer of technology and reporting requirements, may apply.
However, a 49% foreign-owned Thai company may be formed with a preference share legal structure and other protection mechanisms to ensure that the foreign minority shareholder obtains full control rights, voting majority in the shareholder meeting and undivided profits.
In addition, under the US-Thailand Treaty of Amity, Americans may hold a majority of the shares or the whole company, subject to certain conditions and restrictions on certain economic activities.
Furthermore, Thailand has concluded double tax agreements with more than 40 jurisdictions.
Thailand has not implemented the OECD's Automatic Exchange of Information for Tax Purposes (AEoI) yet.
In summary, Thailand is an emerging market and the regional hub of Southeast Asia and an interesting jurisdiction to incorporate a company for manufacturing, outsourcing, and regional headquarters.
Country code – TH
Legal basis – Mixed (Civil and Common law)
Legal framework – Civil and Commercial Code, Foreign Business Act
Company form – Private company limited by shares (Co., Ltd.)
Liability - The liability of a shareholder to the company is limited to the remaining unpaid amount, if any, of the par value of their shares.
Share capital – At the time of incorporation, all shares must be subscribed and at least 25% of the total shares must be paid by the shareholders.
For a foreigner to obtain a work permit, the company requires a minimum fully paid-up registered share capital of THB 2,000,000.
Both common and preferred shares of stock may be issued, but all shares must have voting rights. Thai law prohibits the issuance of shares with a par value of less THB 5. Treasury shares are prohibited.
Shareholders – Company promoters are responsible for registering the company with the Ministry of Commerce (MOC). The promoters must be individuals (not juristic persons). There must be a minimum of three promoters for a private limited company.
A minimum of three shareholders is required always. Shareholders’ details are available to the public.
Under certain conditions, a private limited company may be wholly owned by foreigners. However, in those activities reserved for Thai nationals under the Foreign Business Act, foreigner participation is generally allowed up to a maximum of 49% capital shares.
The 49% capital shares limited in certain reserved businesses can be exceeded or exempted if a Foreign Business License is granted. If the desired business is unique, does not compete with Thai businesses, or involves dealings among members of an affiliated company, the chance of approval is more probable. Conditions, such as minimum capital, transfer of technology and reporting requirements, may be attached to Foreign Business Licenses. If the business is required to obtain a Foreign Business License under FBA, the minimum capital requirement must be THB 3 million for each business activity.
Under the US-Thailand Treaty of Amity, Americans may hold the majority of the shares or the whole company, subject to certain conditions and restrictions on certain economic activities.
Directors – At least one director is required, who must be a natural person and may be resident or non-resident. Details of the directors are disclosed on a public file.
Secretary – The appointment of a locally qualified secretary is optional.
Registered Address – Companies must be registered at a physical address.
General Meeting – Annual general meeting is mandatory and must be held in Thailand. The director is responsible for arranging the annual meeting of shareholders to approve the company’s audited financial statement within 4 months of the end of the fiscal year.
Electronic Signature – Permitted.
Re-domiciliation – Not permitted.
Compliance – Companies must keep books and follow accounting procedures as specified in 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.
Companies must be registered with the Revenue Department and obtain a tax number and corporate tax identity card.
All juristic companies are required to prepare financial statements for each accounting period. The financial statement must be audited by and subjected to the opinion of a certified auditor.
Companies must file the audited statement and supporting documents, including a list of shareholders on the date of the meeting, to the Revenue Department and to the Commercial Registrar no later than 1 month after the date of the shareholder meeting.
Thai companies are required to file their tax returns (Form CIT 50) within 150 days from the closing date of their accounting periods. Tax payment must be submitted together with the tax returns.
In addition, it is also required to make tax prepayment (Form CIT 51). A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within two months after the end of the first six months of its accounting period. The prepaid tax is creditable against its annual tax liability.
Depending on its business activities, a Limited Company may have to register for the Value Added Tax or Specific Business Tax.
The registration fee for the MOA and establishing the company is THB 5,500 per THB 1 million of registered capital.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Mixed (Civil and Common) Legal basis
- 3 Minimum shareholders
- 1 Minimum directors
- THB 1 Minimum issued capital
- - Minimum paid up capital
- THB Capital currency
- Local Location of annual general meeting
Tax residency – A company is tax resident in Thailand if it is incorporated under the law of Thailand and registered in the Ministry of Commerce.
Basis – Resident companies are subject to tax on their worldwide income. Nonresident companies pay taxes on their income derived from Thailand.
Tax rate – Corporate income tax standard rate is 20%.
SMEs with paid-in capital equal or lower than THB 5,000,000 and trading income not higher than THB 30,000,000 are subject to reduced rates of 0% for net profits lower than THB 300,000, 15% from THB 300,000 to THB 3,000,000 and 20% over THB 3,000,000.
Petroleum operations performed by companies under a concession are taxed at 50% rate.
Capital gains – Capital gains are treated as ordinary income and taxed at the standard rate.
Dividends – Dividends received are included in the corporate tax base.
Dividends received from a Thai listed company are exempt from tax. Those received from a local unlisted company may be exempted, provided that the beneficiary holds at least 25% of voting shares for a period of at least 3 months.
Dividends received may be 50% tax exempt, provided that the beneficiary has been held the shares for at least three months before and three months after the dividends were received.
Dividends received from foreign companies are taxable but may be exempted if beneficiary holds at least 25% of shares with voting rights of the payer for a period not less than 6 months and profits were subject to at least 15% tax on the source.
Interests – Interests are subject to corporate income tax.
Royalties – Royalties are taxable at ordinary rates.
Foreign-source income – Foreign-source income is taxed when is accrued. Foreign tax paid may be creditable against the tax chargeable in Thailand
Withholding taxes – Dividends paid to resident and non-residents are subject to a 10% withholding tax.
Royalties and interests paid to non-residents are subject to a 15% withholding tax. Interests paid on loans from a financial or insurance institution may be subject to a reduced 10% withholding tax if the lender is resident in a country where Thailand has concluded a tax treaty with.
Withholding tax rates may be reduced under a tax treaty.
Losses – Losses arising from taxable income may be carried forward for 5 years. Carryback of losses is not allowed.
Inventory - Inventory may be valued at the lower of acquisition/production costs or market value. To determine costs are allowed First in first out (FIFO), Last in first out (LIFO), Highest in first out (HIFO) methods, but a change in the method may require the approval of the Revenue Department.
Anti-avoidance rules – Related-party transactions must be made on an arm’s length basis, and transfer pricing disclosure is mandatory at the time of tax filing.
Thin capitalization and controlled foreign company regulations do not apply in Thailand.
Labor taxes – Employers and employees are required to make contributions to the social security fund at 5% of the monthly salary, capped at THB 750 per month for each one.
Tax credits and incentives – Foreign tax paid on foreign-source income taxable may be creditable up to the amount of tax payable in Thailand.
The Investment Promotion Act and the Competitive Enhancement Act provides tax holidays to companies approved by the Board of Investment (BOI). Companies conducting activities in the agricultural, mining, ceramic, metals, light industry, machinery, transportation equipment, electronic industry, electrical appliances, chemical, paper, plastics, services and public utilities, targeted core technologies and enabling services and strategic based activities may benefit from several tax exemptions and incentives.
Incentives available include the exemption from import duties, exemption from corporate income tax for up to 15 years, exclusion of dividends received from promoted enterprises up to 15 years and participation on the THB 10 billion subsidies under the Competitiveness Enhancement fund.
The Investment and Promotion Act also provides tax incentives to R&D contractors, including a corporate income tax exemption up to 8 years, exemption from import duties on certain machinery and raw materials, and exclusion of dividends derived during the period.
Compliance – On average, a company in Thailand may require 21 payments and 266 hours per year to prepare, file and pay corporate income tax, value added tax, and labor taxes, including payroll taxes and social contributions.
Exchange control – Remittance of profits may not be made in THB, but may be made in any other currency. The Bank of Thailand must approve the remittance of funds exceeding the ceiling set by the bank.
Personal income tax – To be a tax-resident in Thailand an individual must spend at least 180 days in a calendar year in the country.
Tax residents are subject to personal income tax on their income derived from Thailand and their foreign-source income remitted to Thailand in the year in which it is accrued. Income earned outside Thailand remitted after 1 year is tax-exempt.
Non-residents are subject to income tax on their Thai-source income.
Personal income tax is progressive at rates up to 35% for annual income exceeding THB 5,000,000.
Dividends and interest are subject to a final withholding tax of 10% and 15%, respectively.
Capital gains are treated as ordinary income. However, those obtained from the sale of securities listed on the Stock Exchange of Thailand or any other ASEAN stock exchange are tax exempt, certain exceptions may apply.
Other taxes – A 12.5% real property tax is levied annually on the rental value of the property. Inheritances over THB 100,000,000 are taxed at a 10% rate, reductions may apply under certain circumstances. A gift tax applies on donations of assets exceeding THB 20,000,000 (10 million in the case that recipient is not descendant, ascendant or spouse).
There are no wealth taxes in Thailand.
V.A.T. standard rate is 10% (reduced to 7% until Sept 2017).
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 20% Offshore Income Tax Rate
- 20% Corporate Tax Rate
- 20% Capital Gains Tax Rate
- 10% Dividends Received
- 10% Dividends Withholding Tax Rate
- 15% Interests Withholding Tax Rate
- 15% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- 5 Losses carryforward (years)
- FIFOLIFO Inventory methods permitted
- 262 Tax time (hours)
- 21 Tax payments per year
- 5% Social Security Employee
- 5% Social Security Employer
- 35% Personal Income Tax Rate
- 7% VAT Rate
- 45 Tax Treaties
The Kingdom of Thailand, formerly known as the Kingdom of Siam, is a Southeast Asian country and a member of ASEAN. It is located to the north of the Southeast Asia subregion, bordering east with Laos, through the Mekong River, southeast with Cambodia and Gulf of Thailand, south with Malaysia and west with the Andaman Sea and Myanmar (Burma).
It is inhabited by 68 million people, of which more than a half live in rural areas. Its capital and the most populated city is Bangkok (also known as Krung Thep Mahanakon), with over 8 million inhabitants, and 14.5 million including the whole metropolitan area.
Its official language is Thai, although there are several regional languages and dialects. Its official currency is the Thai Baht (THB).
Thailand is the second-largest economy in Southeast Asia, after Indonesia, and the fourth in terms of per capita income, after Singapore, Brunei, and Malaysia. The country has a diversified economy, driven by its industry and services, and heavily dependent on exports. Thailand has deposits of natural resources such as gypsum, lead, natural gas, rubber, tin, and tungsten.
The services sector plays an important role on its economy, accounting half of its GDP, and mainly comprised by retail, financial and banking services, and tourism, which with over 32 million visitors in 2016, accounted for 17.7 percent of its GDP.
Its industrial sector, focused on exports, is mainly comprised of the automotive, electronics, electrical appliances, and garment industries.
Regarding the primary sector, although it accounts for about 10 percent of its GDP, it is still employing more than a third part of its labor force. Its main crop is rice, being the second largest rice exporter worldwide. Other agricultural products that are produced in significant quantities are tapioca, rubber, cereals, sugar and some tropical fruits such as pineapple. Thailand is also one of the top seafood exporters worldwide.<
Tax treaties Map
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