13 Things You Need To Know Before Doing Business In Thailand 

Doing business in Thailand can be a great experience, but there are a few things you need to know before you get started. In this blog post, we will discuss 13 of the most important things you need to know before doing business in Thailand. We will cover topics such as culture, the economy, and the legal system. If you are thinking about doing business in Thailand, make sure to read this blog post!

Thailand has a rich and diverse culture, with many different people, religions, and beliefs making up the population. It is important to understand this before doing business in Thailand as cultural differences can have an impact on your operations. Understanding the local customs and norms could also help you form better relationships with your customers, colleagues, and business partners.

Key Takeaways

• Understand the culture and local customs of Thailand before doing business there.
• Learn about the economy, laws, and regulations in Thailand.
• Get familiar with the language, currency, and taxes of Thailand for successful business transactions.

Can foreigners do business in Thailand?

Thailand doesn’t have a specific distinction between a Thai and a foreign shareholder in the eyes of the law. As such, any foreigner can register a company without needing a Thai partner. Despite this, foreigners are limited to the business activities they can conduct in Thailand under the Foreign Business Act B.E. 2542 (1999) (FBA). This is particularly true for service-based businesses that are restricted per list 3 of the FBA. On a more positive note, the Board of Investment permits up to 100% foreign ownership for companies investing in key development projects for Thailand.

Additionally, Companies that receive promotion from the Thailand Board of Investment (BOI) are allowed to participate in business activities restricted under the Foreign Business Act, but they must first obtain a foreign business certificate.

But what is BOI?

The Board of Investment (BOI) is the government organization in Thailand that is responsible for encouraging foreign businesses to invest in the country. They provide services, information, and incentives for these companies.

These investment incentives range from corporate income tax exemptions to import duty exemptions on raw materials.

Why is Thailand attractive to foreign direct investment?

Many businesspeople choose to invest in Thailand because of the country’s booming economy. For instance, agricultural production plays a significant role in Thailand’s economy and contributes 40 percent of the world’s natural rubber as well as rice, sugarcane, and fruits.

The city’s industrial sector is booming, with multiple industries to explore including automotive, food processing electronics, and services. Another draw for businesses looking to relocate or start up operations in the city is the skilled yet inexpensive workforce.

Lastly, as Thailand is located in the center of Asia, it allows access to not only booming markets like Southeast Asia but also recently developed economies in areas such as the Greater Mekong Basin region. To sum it up, this country should be strongly considered by any investor looking to take advantage of its various benefits.

The factors above not only make Thailand a great option for direct foreign investment but also offer businesses the potential for stability. With all of these advantages, it’s no wonder that many international companies are now considering Thailand as their next venture!

Doing Business in Thailand: What You Need to Know

1. Economic Situation

The Thailand Economic Monitor paints a picture of GDP growth slowly gaining momentum since early 2021 when COVID-19 cases caused many businesses to close. However, even though the economy has started to rebound, activity in the first quarter of 2022 was still lower than it was before the pandemic began.

Although the economy’s growth predicted for this year is 2.9%, it has decelerated one percent from what was anticipated in December 2020, things are picking back up and the rebound will gain traction in future years.

Contrary to what one would expect, this year while poverty and unemployment have fallen, labor incomes have decreased and household debt has risen. In just the first quarter of next year, the official unemployment rate is projected to drop from 2.0% to 1.5%.

The economy is projected to slowly recover in the next few years, returning to its pre-pandemic state by 2021. This is largely due to government intervention and relief measures which help cushion against economic downturns.

2. Political Landscape

The business world in Thailand is still thriving and foreign investors are more than welcome. Lots of deregulation and trade liberalization have been going on lately, which is mostly due to the country’s involvement with the ASEAN Economic Community (AEC). In 2015, they adopted the AEC Blueprint 2025—this gave the AEC a defined economic goal and caused an increase in autonomy related to circulating goods, services, capital, and labor.

Several changes have taken place, for example:

• Considerable decreases in tariffs on items from ASEAN countries.
• Unification of security regulations.
• The Foreign Business Act BE 2542 (1999) permits foreign nationals to engage in certain restricted businesses.

3. Business culture

Business practices in Thailand are largely similar to those seen in other Asian countries. Thai culture places a great deal of importance on proper etiquette and respect, so it’s important not to lose your temper or raise your voice when doing business there.

To avoid conflict, gently discuss the situation. “The Thai way” is a phrase used to describe how Thais handle business and personal matters differently than others; it’s based on trustworthiness and longstanding relationships. Therefore, direct questions are not considered rude in Thailand.

However, people are often roundabout in their dealings with others and avoid getting to the main point. Tasks could be completed more rapidly and effectively if people were more direct.

Nevertheless, a few people have started to oppose the existing customs of a paternalistic culture by pointing out problems and demanding more honesty, access to information, and responsibility.

4. Setting up in Market

You must seek expert legal and accounting advice before starting a business in Thailand. Usually, a foreign business can only own 49% of an enterprise in Thailand, with the rest owned by Thai citizens. Yet there are some instances where exceptions to this rule are made, often for industries that generate a lot of investment or Board-approved projects.

Looking to establish a business in Thailand? I got you! I provided detailed information on how to get started, visit an article I wrote here!

5. Banking and Finance

Thai banks are much more difficult to work with. There are only 14 local Thai commercial banks and 11 foreign banks, and you can generally open an account for your business at a Head Office branch of one of the local banks if you’re a foreigner.

The accounting principles commonly used in the United States are, for the most part, accepted in Thailand. The same goes for legal methods and conventions surrounding auditing practices. However, it’s important to note that authorized auditors are usually the only ones who practice these international standards.

6. Intellectual property protection

As part of a market entry strategy, companies should do an intellectual property (IP) audit and be acquainted with how best to protect their IP rights in Thailand.

7. Manufacturing in Thailand

On average, Thailand’s labor costs are 30% to 50% higher than its Southeast Asian competitors: Vietnam, the Philippines, and Indonesia. Even so, Thailand is considered a low-cost country for manufacturing with labor rates almost a third of China’s.

8. Important Industries

Thailand has developed rapidly in the past few decades, turning from an undeveloped country to a “middle-income” one, as labeled by the World Bank. Its economy falls into three primary sectors: agriculture, manufacturing, and services.

9. Manufacturing & Supply Chain 

The majority of inbound FDI is focused on the manufacturing and financial service sectors. In 2021, Thailand’s FDI level was US$11.4 billion which is a significant increase from five years earlier when it was only US$3.4 billion. This 23.5 percent growth happened while real GDP grew by 1.5 percent.

10. Shipping

Thailand has excellent shipping and logistics services that make it a great place for foreign companies to set up operations. As the largest port in Thailand, Laem Chabang is the main hub for imports and exports. It has a large number of container terminals and warehouses, as well as ship repair facilities.

11. Workforce

Thailand has an educated and skilled workforce which is relatively cost-effective. It has also created incentives for foreign qualified workers to stay and work in the country, such as streamlining visa applications and providing more flexible residency arrangements. Additionally, English language schools are available throughout Thailand for those wanting to learn English or improve their existing skills.

12. Economy

The agricultural industry contributed 8.4% to the GDP in 2012, while industries contributed 39.2%. The service sector, which accounted for 52.4% of GDP (slightly more than half), was the most important contributor to the economy according Though 2014 estimates show that Thailand has a labor force of approximately 39.41 million people, the unemployment rate was 0.9%, according to official figures from two years ago.

13. Tax Rules

All individuals, whether residents or not, are taxed on the employment income they make from working in Thailand- even if this money is paid to them outside of the country. 

How to incorporate a company in Thailand?

Step 1: Register the company name.

To set up a foreign company in Thailand, the first action you must take is to reserve your intended business name. The new name cannot be identical or too similar to an existing registered company in Thailand. Lastly, the company name has to end with “Limited”.

Please keep in mind that your company name will be registered in Thai, regardless of the original language. To avoid any complications down the road- such as misspellings when drafting a check- try to select a name that is concise and easy to pronounce for non-native speakers.

Although the registered name of your company and business may be different, you can still reserve your company’s name through the Department of Business Development (DBD) website.

In most cases, name reservations go through within 1-3 days. However, keep in mind that the company name is only valid for a month after you receive approval and there is no way to extend this period.

Step 2: Draft and file the Memorandum of Association

The company must pay for all shares after it registers its memorandum of association with the Ministry of Commerce (MOC).

Getting approval from the cabinet is necessary before engaging in any business dealings with foreign entities. The memorandum of association includes:

• The company name
• The registered office of the company in Thailand
• What the company wants to achieve
• That shareholder will only be held liable up to their investment into the shares
• How much money is being put into initial share capital and how it’s divided among shares
• Who the promoters are, where they live, what they do for a living, and how many shares each person intends on buying

Step 3: The Statutory Meeting

In addition to its by-laws and articles of incorporation, the company must also submit a statutory meeting draft. This is also when the board of directors and auditors are appointed.

Other business conducted at the statutory meeting includes:

1. The company’s regulations, if any;
2. The approval of the promoter’s contracts and expenses in promoting the company;
3. The payment to promoters, if any;
4. How many preference shares are authorized;
5. How many ordinary or preference shares are Issued as paid-up (in part or whole); Appointing the first directors and auditors and their respective powers.

Step 4: Register the Company

The company registration must be lodged on the same day as the Memorandum of Association is registered at the Ministry of Company Registrar, only if the Statutory Meeting has already occurred. The application for registration cannot be submitted more than 90 days after the statutory meeting date.

You pay company registration fees during this stage of the process.

Step 5: Registering for VAT and Income Tax

Within 60 days of registering your company or beginning operations, you will need to apply for and receive a corporate tax ID card from the Revenue Department.

VAT has been present in Thailand since ’92. It’s an indirect tax put on the value-added at each stage of production and distribution.

Thai companies that habitually give goods or services in Thailand and make more than 1.8 million baht yearly must sign up for VAT in Thailand. Also, if you want to get a work permit, you will need to straightaway register your company for VAT.

Although registering a company in Thailand can be complex, the country is still a fantastic place to invest. When making decisions about what kind of company to establish, it is best to consult with a Thai corporate lawyer. 

Doing business in Thailand FAQs

What are the laws, rules, and regulations for doing business in Thailand?

Before launching a business in Thailand, take note of the various laws, rules, and regulations. To start, establish the company with a minimum registered capital. If you’re planning to hire foreign employees, secure work permits next. Furthermore, the number of foreign workers you’re allowed to hire depends on the sort of services or operations your business provides.

Likewise, you should research which regulations and licenses may apply to your business. In Thailand, all financial transactions are subject to Thai compliance law and companies must pay a 20% corporate income tax on profits.

Lastly, to hire salaried employees, employers need to register their company with the Social Fund and take care of secretarial duties like bookkeeping and taxes.

Before you launch your business, there are many things you need to take into consideration. It is helpful to have somebody who can guide and support you through the process so that everything goes smoothly. By taking the time to understand all of the requirements before starting your business, you will be setting yourself up for success!

Are there any measures protecting minority investors doing business in Thailand?

Thai law protects shareholders’ right to take legal action against any director who, through action or inaction, fails to uphold duties with responsibility, due care, and loyalty for the best interest of the company.

This includes if such behavior causes damage to the company or creates benefits for oneself or others. In this case, shareholders are entitled on behalf of the company to claim damages or return of benefits received by that director as a result of his/her misconduct.

Can foreign companies trade across borders in Thailand?

Businesses that import or export goods are not restricted by the Foreign Business Act. If a company has already been established in Thailand, it can begin importing and exporting products.

Which business structures are available to foreigners doing business in Thailand?

No matter what type of business you want to form in Thailand, there is an option available for you. You can choose from a sole proprietorship, partnership, regional office, or joint venture depending on your needs and preferences. Each type of business has its benefits and drawbacks, so be sure to do your research before deciding which one is right for you.

For those looking to get their business up and running quickly, a sole proprietorship is the simplest option. However, forming a partnership or opening a representative office gives entrepreneurs access to more resources. Regional and branch offices provide opportunities for expansion and localization, while limited companies and joint ventures are an ideal route for businesses seeking to establish long-term roots in Thailand.

No matter what type of business you’re looking to form, there’s sure to be an ideal structure that will set your venture up for success!

And if you’re new in Thailand, you make likely need these essential apps that you need while you’re in the country!

What is a foreign business license?

A Foreign Business License (FBL) in Thailand can be given to a company that is majority owned by non-Thais, or to foreign investors who want to operate a business type restricted to foreigners under Thai law. If a foreign company wants an FBL, they must see if their desired business type is allowed by checking the “Foreign Business Act.”

A business license from a foreign country offers many advantages, one of which is that foreigners can hold up to 100% of the company’s shares. The US-Thailand Treaty of Amity and Economic Relations (AER) provides opportunities for US citizens and businesses to engage in business on the same basis as Thai companies.

Conclusion

So there you have it – 13 things you need to know before doing business in Thailand. Of course, this list is not exhaustive but should give you a good foundation on which to start your research. If you want more information about doing business or living in Thailand, subscribe to our newsletter for all the best tips and tricks straight to your inbox. And if you have any questions, feel free to reach out – we’re always happy to help!