Thailand – New Government with its Executive and Legislative Policies to Promote Foreign Direct Investment

The new government, which has taken office following a nine-year ruled by General Prayuth Chan-o-cha, signifies Thailand’s return to democracy after the 2014 military coup. Under the leadership of the Pheu Thai Party, led by Prime Ministerial candidate Srettha Thavisin, the government has set forth a visionary agenda, with a primary focus on promoting foreign direct investment to invigorate the country’s GDP.

To achieve this overarching objective, the government has implemented a multifaceted strategy that encompasses both executive and legislative policies. This strategy revolves around three core principles: reducing expenses, increasing income, and expanding opportunities, all designed to enhance Thailand’s overall business environment and attractiveness to foreign investors within the ASEAN region.

One of the government’s primary measures is an extensive economic stimulus program. This program aims to reduce the cost of living and production costs in the country. Key components include significant reductions in electricity prices, petrol prices, personal consumption loan interest rates, and suspension of debt payments for farmers. These measures are strategically designed to enhance the appeal of Thailand as a destination for foreign investment by improving the overall cost structure for businesses operating within its borders.

Furthermore, the government is focusing on boosting the Electric Vehicle (EV) industry as a driver of foreign investment. To achieve this, it plans to reduce tax exemptions for imported EV cars, incentivizing domestic EV manufacturing. By nurturing this emerging sector, Thailand seeks to enhance its industrial and technological capabilities, making it a compelling option for foreign investors looking to capitalize on the growing EV market.

The government has also implemented visa policies to promote foreign investment and tourism. Passport holders from China, Kazakhstan, Taiwan, and India already benefit from a free-visa policy, with plans to extend this privilege to other nationalities in the near future. Such policies foster an environment conducive to foreign business travel and investment in various sectors.

Furthermore, the government is taking steps to upgrade the country’s infrastructure. The proposed land bridge project, connecting the Andaman Sea to the Gulf of Thailand, will significantly enhance international trade routes, positioning Thailand as a pivotal transportation hub in the Indo-Pacific region. This infrastructure investment opens up opportunities for foreign investments in logistics and related industries.

Lastly, the government plans to introduce legislation to fund the 10,000 THB digital wallet project. This initiative will provide digital currency to adults with monthly incomes below 70,000 THB and savings below 500,000 THB. Any unused funds will be channeled into the National Competitiveness Enhancement for Targeted Industries Fund, further enhancing economic competitiveness and making Thailand an attractive destination for foreign investment.

In conclusion, the government’s comprehensive approach to economic development, with a focus on improving the business environment, supporting key industries such as EV manufacturing, and encouraging foreign investment, positions Thailand for substantial growth and prosperity. If effectively implemented, these policies have the potential to transform Thailand into a regional economic powerhouse.

Author: Panisa Suwanmatajarn, Managing Partner.

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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.

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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.