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Thailand

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 a 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 majority of the shares or the whole company, subject to certain conditions and restrictions on certain economic activities.

Thailand may be an option to consider for incorporating a company as a Regional Operating Headquarters (ROH), providing administrative, technical assistance or supporting services to domestic or foreign subsidiaries or branches in at least three countries. This companies may benefit from a reduced 10% income tax rate, corporate and domestic withholding tax exemptions, and a 15% personal income tax rate on their foreign employees.

To be considered a ROH a Thai company must have a minimum paid up capital of THB 10,000,000, provide qualified services to its subsidiaries (at least 25% ownership) in at least 3 countries and income from services or royalties from foreign subsidiaries must be at least 50% of their total income.

Companies may also qualify for the International Headquarters regime (IHQ), benefitting from tax exemptions and incentives as the ROH.

Under the International Trade Center regime (ITC) companies conducting trade overseas with a paid-up capital of at least THB 10,000,000 and operating expenses of at least THB 15,000,000, may be exempt from corporation tax on income from buying and selling goods and services abroad without importing such goods into Thailand, a withholding tax exemption on dividends, and a personal income tax reduced rate of 15% for their expatriate employees.

Furthermore, Thailand has concluded double tax agreements with more than 40 jurisdictions.

Thailand has not signed yet OECD's Automatic Exchange of Information for Tax Purposes (AEoI).

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.

Taxes

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 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 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 filling.

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 subsidy 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.

Companies incorporating in Thailand as their Regional Operating Headquarters (ROH) providing administrative, technical assistance or supporting services to their domestic or foreign subsidiaries or branches in at least three countries may benefit from a reduced 10% income tax rate, corporate and domestic withholding tax exemptions, and a 15% personal income tax rate on their foreign employees.

To be considered a ROH a Thai company must have a minimum paid up capital of THB 10,000,000, provide qualified services to its subsidiaries (at least 25% ownership) in at least 3 countries and income from services or royalties from foreign subsidiaries must be at least 50% of their total income.

Under the International Headquarters regime (IHQ), companies may benefit from tax exemptions and incentives as the ROH, and in addition to the paid-up capital requirement, operating expenses related to the IHQ services must be at least THB 15,000,000 per year.

Under the International Trade Center regime (ITC) companies conducting trade overseas with a paid-up capital of at least THB 10,000,000 and operating expenses of at least THB 15,000,000, may be exempt from corporation tax on income from buying and selling goods and services abroad without importing such goods into Thailand, a withholding tax exemption on dividends, and a personal income tax reduced rate of 15% for their expatriate employees.

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. Expatriates working on companies under certain tax incentives regimes (Regional Operating Headquarters, ROH, International Headquarters, IHQ, and International Trade Centers, ITC) may be entitled to be taxed at a 15% flat rate.

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

Country details

Thailand
THB
Bangkok
Asia
t h , e n
67089500

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 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 per cent of its GDP.

Its industrial sector, focused on exports, is mainly comprised by the automotive, electronics, electrical appliances and garment industries.

Regarding the primary sector, although it accounts about 10 per cent 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

Country Type Date Signed
Czech Republic DTC  1994-02-12
South Africa DTC  1996-02-12
Belgium DTC  1978-10-16
Poland DTC  1978-12-08
Canada DTC  1984-04-11
Philippines DTC  2013-06-21
Mauritius DTC  1997-10-01
Ireland DTC  2013-11-05
Chile DTC  2006-09-08
Israel DTC  1996-01-22
Russian Federation DTC  1999-09-23
Austria DTC  1985-05-08
Slovenia DTC  2003-07-11
Italy DTC  1977-12-22
United Arab Emirates DTC  2000-03-01
United Kingdom DTC  1981-02-18
Denmark DTC  1998-02-23
Switzerland DTC  1996-02-12
France DTC  1974-12-27
Pakistan DTC  1980-08-14
Estonia DTC  2012-10-25
China DTC  1986-10-27
Japan DTC  1990-04-07
Turkey DTC  2002-04-11
Luxembourg DTC  1996-05-06
Malaysia DTC  1982-03-29
Ukraine DTC  2004-03-10
Hong Kong, China DTC  2005-09-07
Netherlands DTC  1975-11-09
Seychelles DTC  2001-04-26
Indonesia DTC  2001-06-15
Finland DTC  1985-04-25
Sweden DTC  1988-10-19
United States DTC  1996-11-26
Spain DTC  1997-10-14
Hungary DTC  1989-05-18
Cyprus DTC  1998-10-27
New Zealand DTC  1998-10-22
Singapore DTC  1975-09-15
Australia DTC  1989-08-31
Norway DTC  2003-07-30
Korea, Republic of DTC  2006-11-16
Romania DTC  1996-06-26
Germany DTC  1967-07-10
India DTC  1985-03-22

Procedures

We can help you incorporate a Private company limited by shares in Thailand.
Please, contact us to request a free, no obligation consultation.

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