Business Incorporation and Relevant Registrations in Thailand
Setting up a company in Thailand requires at least 3 or more individuals to subscribe their shares at the incorporation stage. Then, such subscribers shall conduct a statutory meeting for a company establishment to appoint the director(s) of the company and hand over the business to the director(s). The director(s) shall call for shares subscription either in kind or in cash and register for incorporation within 3 months from the statutory meeting.
The company’s director(s) can be both Thai and foreigner. This does not affect the ownership of shares in the company or types of the company whether it is a Thai company or a foreign company under Thai law. However, in the event that the director(s) is a foreigner and receive salary from the company, this shall be considered as an employee who is required to apply for a work permit in order to work in Thailand legally.
Once the company has already been established and if the company has an employee, social security registration is required. In addition, if the company has its income more than 1,800,000 baht per year, the company is required to register for value added tax (VAT) number.
Last but not least, other registrations or procedures may be required for any other specific types of business. For example, specific licenses are required for operating the restaurant business, securities business, tourism business, etc. The business owners need to seek consultation and check the relevant laws whether the business requires any other specific registrations or procedures.
Key Issues You Need to Know When Doing a Business in Thailand
On the scenario that a foreigner is exploring the business opportunity and would like to establish a company for operating its business in Thailand, if more than 49% of shares are held by foreigner(s) (either individual(s) or entity(ies)), the company is considered as a foreign company under the Foreign Business Act B.E. 2542 (“FBA”). In this case, certain restrictions in doing businesses will be applied and the company cannot hold ownership over the land subject to international agreements/treaties that the country of nationality of such foreigner(s) has entered into with Thailand and/or privilege policies granted by the government of Thailand.
For some restricted business under the FBA, if the foreign company would like to do so, a specific foreign business license is required. However, some types of business are exempted from the provisions of FBA such as the businesses related to the securities exchange and financial institutes. but, those exempted businesses from the provisions of FBA may be, on the other hand, regulated, supervised or monitored by other specific laws and regulations of relevant authorities such as the Bank of Thailand.
It is noteworthy that the numbers of foreign individual working or representing the company, even as a director or authorized director, will not impact the ownership of shares in the company.
The requirements on visa and work permit for foreign employee(s)/director(s) play a significant role on the elements of business operation. The specific ratio of Thai employees to each foreign employee will be applied when considering the matters of visa and work permit. The size of investment is also a matter attribute to the requirements for granting visa and work permit to the foreign employee(s)/director(s).
Last but not least, the issues of tax and dividend are among major questions and concerns how the laws and practices work here in Thailand. The corporate income tax is currently imposed in the range of 15% – 20% of the net profit subject to certain exemptions. Also, the dividend distribution is subject to tax implications, but may be deducted or credited under the applicable double taxation agreement that Thailand have entered into, and regulatory corporate provisions before its distribution.
In the nutshell, the business and investment opportunities in Thailand is wide open for foreign investors. You are totally welcome here in Thailand, but it is for your best advantage to be fully aware of restrictions with good strategies and structure planning.
On 14 September 2021, the Cabinet has approved the draft Ministerial Regulation Prescribing the Advertisements of Goods or Services Being Unfair to Consumers or May Cause Negative Effects to the Society as a Whole B.E. …. (“Draft Ministerial Regulation 1”) and the draft Ministerial Regulation to Repeal the Ministerial Regulation on the Advertisements of Alcoholic Beverage and Caffeine-Containing Drink in Cinemas and Billboards B.E. 2547 B.E. …. (“Draft Ministerial Regulation 2”) as proposed by the Office of the Consumer Protection Board (OCPB) and considered by the Council of State.
The main points of the amendment of ministerial regulations are as follows:
The Draft Ministerial Regulation 1
The advertisement of goods or services containing these following messages are considered as the messages that are unfair to consumers or that may cause negative effects on the society.
Business operators will provide a giveaway or a prize by gambling arrangement or give free gifts or give rights or benefits for free.
The sale of condominium units that have not been registered as condominium according to the law without specifying the details according to the conditions prescribed by law.
The sale of lands by dividing the sale into sub-plots, whether selling only the land or sell the land with the building, without specifying the details according to the conditions prescribed by law.
Messages using or referring to facts about the King, Queen, heir-appointed, or regent which has been used without permission, unless it is a message as prescribed by law.
The Draft Ministerial Regulations 2
Since there are currently laws containing consumer protection provisions that specifically regulate the advertising of alcoholic beverages and caffeine-containing beverages such as Alcoholic Beverage Control Act B.E. 2551 and Food Act B.E. 2522, this said ministerial regulations shall be repealed in order to have laws as necessary and not hinder one’s careers.
Currently, there are 2 draft acts to amend Alcohol Control Act B.E. 2551 (2008) (“Act”). One is presented by Mr. Charoen Charoenchai and his proponents (“Draft Act Proposed by Mr. Charoen”) and another is proposed by the Office of the Alcohol Control Committee (“Draft Act Proposed by the Committee”).
The Draft Act Proposed by Mr. Charoen remains in the public hearing process. The public hearing will need to be taken place for no less than 15 days from 23 June 2021. Until now, it is still waiting for comments from all related governmental agencies and private entities (i.e. Excise Department, Office of the Alcohol Control Committee, Ministry of Public Health, Office of the Higher Education Commission, Royal Thai Police, Department of Religious Affair, business operators, alcohol beverage consumer, and general population). The Draft Act Proposed by Mr. Charoen will have to be amended according to the comments as received from the hearing proceeding and it will then be presented to the Cabinet and Parliament for their consideration.
The Draft Act Proposed by the Committee has finished its public hearing process since 9 July 2021. It is in the process of amending and finalizing according to the comments as received from the hearing proceeding. The draft Act Proposed by the Committee will be proposed to the Cabinet and Parliament for their approval.
The Parliament will consider both drafts together as their contents are interrelated.
Key Summaries of both Draft Act Proposed by Mr. Charoen and Draft Act Proposed by the Committee presented for their public hearings are as follows:
Draft Act Proposed by Mr. Charoen
Draft Act Proposed by the Committee
Narrowing down the scope of definitions resulting in more relaxed restriction whereby the sell of alcoholic beverages will only mean exchange of alcoholic beverages with money and advertisement will exclude market communication (activities with an aim to sell goods, services or image. It also covers public relations, sales promotion, product expositions, organization or support of special events and direct marketing).
Expanding the scope of alcoholic drinks to cover any consumables having alcohol higher than 0.5 degree as part of its component.
Reducing restriction imposed on the advertisement of the alcoholic drinks.
Expanding the scope of restricted advertisement whereby the Alcohol Control Committee has the power to issue regulations on advertisement; Prohibiting any persons to endorse or act in anyways to promote, whether directly or indirectly, the alcoholic beverage including for the promotion of the brand image and any other purposes to be prescribed by the Alcohol Control Committee.
National Alcoholic Beverage Policy Committee
Including representatives from the alcoholic operators and experts.
Expanding the scope of power in issuing policies and work plan for controlling of alcoholic beverages through taxes and other measures as well as treatment and rehabilitation of alcoholics without the approval of the cabinet.
Alcohol Control Committee
Reducing the numbers of representative from the private entities whose goal is to protect consumers, consumer protection, and protection of the right of women and children; and Reducing the scope of power of the Alcohol Control Committee ranging from their power to regulate the label, limited time and area to sell the alcoholic drinks.
Increasing the numbers of the representative from the private entities whose goal is to promote public health.
Power of the competent official
Expanding the power of competent official in collecting evidence and checking of ID or related documents during investigation.
Other Sale Policies
Prohibiting the sale of alcoholic beverages on specific days is still possible, but the government will need to provide measures to reduce the adverse impact on the businesses and the tourism sector; and Revoking the prohibitions of use of promotion to boost sales and use of electronic vending machine to sell alcoholic drinks.
On 25 May 2021, the Cabinet has approved a draft Ministerial Regulation Concerning an Electronically Private Hire Car with Driver Not Exceeding 7 Passengers No. .. B.E. …. (“Draft Ministerial Regulation”) as proposed by the Ministry of Transport. The Draft Ministerial Regulation will be referred to the Council of State for further consideration.
Once enacted, the Draft Ministerial Regulation allows an individual passenger car carrying not exceeding 7 passengers booked through an electronic platform to be a legally private hire car with a driver. It will accommodate modern livelihoods which will allow more choices for consumers, more economic fostering, and more competition for an existing private hire car with driver form (i.e. taxi). It will also extend authorities’ power to control its services.
Main Points of the Draft Ministerial Regulation
The Definition Provisions:
“A private hire car through electronic platforms” means a private hire car resulting from registering a passenger car as a private hire car. Its hiring is done through an electronic platform.
“A private hire car” is a passenger car on a hire carrying not exceeding 7 passengers through an electronic platform.
Types of Cars
There are 3 types of private hire car allowed for registration considering their sizes, i.e. small, medium, and large. Each individual person can register 1 car. The criteria for the cars’ sizes will be in this Draft Ministerial Regulation once finalized.
Any passenger car to be registered as a private hire car has to be a 4 doors sedan, a panel van, an SUV car, a van, or other types of cars to be specified by a notification of the Department of Land Transport.
The private hire car will have and be booked through an electronic platform approved by the Department of Land Transport. In addition, the car must:
Display a sign showing the private hire car through electronic platforms status;
Have a color that matches the car’s registration; and
Not be in use for longer than 9 years from the registration date.
The car registered as a private hire car will keep the same plate, but the registrar will change the type of registration on its registration handbook.
The private hire car will have its checkup under the procedures and prescriptions to be stipulated by this Draft Ministerial Regulation once finalized. The private hire car and its driver must be clean and hygienic. Nothing in the private hire car can cause the consumers any inconvenience or safety concerns.
For small and medium size private hire car:
The charge for the first 2 kilometers must not exceed 50 THB and not exceeding 12 THB for each additional kilometer;
In case that the car cannot move/commute in normal circumstances, the chargeable rate cannot exceed 3 THB for each minute; and
The platform cannot additionally charge more than 50 THB, and the maximum of other added charges by the platform must not exceed 200 THB.
For Large private hire car,
The charge for the first 2 kilometers must not exceed 200 THB and not exceeding 50 THB for each additional kilometer;
In case that the car cannot move/commute in normal circumstances, the chargeable rate cannot exceed 10 THB for each minute; and
The platform cannot charge more than 100 THB additionally, and the maximum of other added charges must not exceed 200 THB.
Details of the fare rate will be as stipulated by further orders of the Minister of Transport.
On 11 May 2021, the Cabinet has approved a draft Act for Amendment to the Thai Public Limited Companies Act B.E. 2535 (1992) (“PCA”) No. .. B.E. …. (“Act”) as proposed by the Ministry of Commerce endorsed by the Council of State. The Act will be considered by the House of Representatives thereafter. The Act has 6 main issues as follows:
To allow public limited companies to announce company’s matters, information and news through electronic means other than Thai newspapers. Currently, the PCA demands public limited companies to advertise its matters, information and news through Thai daily newspapers only.
To provide options for document submission and delivery by allowing public limited companies or their board of directors to submit and deliver documents to their directors, shareholders or the companies’ creditors electronically.
To amend and provide options for the board of directors and shareholders’ meetings by allowing them to be held electronically according to the law related to meetings through electronic means. The location of the meeting will be at the company’s headquarters or any nearby province unless the Articles of Association of the company specified otherwise. In any event, the location will need to be in Thailand.
To allow more flexible methods for calling the board of directors’ meetings such as in case of no chairman, the vice-chairman can call for the meetings and in the event that there is no chairman and vice-chairman, 2 members of the board or more are empowered to call for the meetings.
To allow shareholders to call for shareholders’ meetings electronically in the same manner that the board of directors can do.
To allow proxy appointments for attending the meetings be done electronically. Overall, the aim of this amendment is to update procedural matters of the management of Thai public limited companies to allow comfortabilities for all parties involved and to be in alignment with the technology of a modern time.
The Cabinet approved a Draft Credit Information Business Operation Act (No. ..) B.E. …. (the “Draft Act”) as proposed by the Ministry of Finance (the “MOF”) on 22 December 2020 in order to revise the Credit Information Business Operation Act B.E. 2524.
Summary of the Draft Act are as follows:
The main purpose of this Draft Act is to allow entrepreneurs who operate as intermediate entity in providing credit facility in forms of new transactions or financial innovations (Final Technology) which are rapidly expanding in Thailand (the “Entrepreneurs”) to be members of a credit information company in which such Entrepreneurs are able to send credit information of their SMEs and start-up businesses to the credit information company enabling the said Entrepreneurs to have their financial history information in its system. This will allow such Entrepreneurs having more opportunities to access to legal sources of fund, gain financial support or loans from other registered financial institutions in the future. This will also, in the meantime, reduce numbers of illegal loan debt.
The Draft Act will revise procedures for disclosing information of credit information or credit score (“Information”). In regard to the said revised procedures, the credit information company will need to notify in writing to its customers (owners of the Information) within 30 days from the date of disclosing or providing such Information, except for collective Information of financial institutions or Entrepreneurs that the credit information company has admitted as its members.
The credit information company, information controllers, information processors, members, customers, persons who know Information from working or performing a duty at the credit information company or persons who know Information from the above-mentioned entities/persons shall be basically prohibited to disclose the Information.
A service user shall not disclosure or disseminate the Information to the others who do not have the right to be informed and that it shall use the Information for specified purposes only, such as using the Information for the purposes of credit analysis and credit card issuance.
Entrepreneurs will be able to disclose or provide Information to its members for the purpose of credit analysis on behalf of the credit facility provider only.
Entrepreneurs will be able to use its customers’ Information obtained from the credit information company in order to create a credit model. If such Entrepreneurs use the Information other than for the purpose of credit analysis on behalf of the credit facility provider and other than for the purpose of risk management for the credit facility provider, such Entrepreneurs will be penalized by the provision under this Draft Act.
Entrepreneurs will be required to explain the reasons for refusal of the services or for increasing of service charges, including sources of customers’ Information to such customers in writing.
Financial institutions, members or service users, who do not explain the reasons for refusal of the services or for increasing of service charges, including sources of customers’ Information to such customers in writing, will be penalized by the provision under this Draft Act.
This Draft Act will be submitted to the Parliament for its consideration and approval before publishing in the Royal Gazette and then become enforced.
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