Doing Business in Thailand

One of the largest nations in Southeast Asia, Thailand is part of the Indochinese Peninsula, and lies between Myanmar, Laos, Vietnam, Cambodia, and Malaysia. Although considered an emerging economy, Thailand is the second largest in Asia (behind Indonesia), with a GDP of around $670 billion. As a newly-industrialised country, Thailand is heavily export-focused: exported goods and services make up two-thirds of the country’s GDP, amount to $105 billion of revenue each year, and include electrical and computer components, cars and automotive parts, agricultural products, and textiles. With the manufacturing, tourism and energy industries growing in importance over the 20th century, Thailand’s economy is diversifying, and the country now boasts one of the lowest unemployment rates in Asia. Thailand is a member of ASEAN, the UN, and the WTO, and was ranked 26th in the World Bank’s Ease of Doing Business Survey 2018.

Why invest in Thailand?

Thailand’s economy offer numerous reasons for investment. These include:

  • Economic potential: In 2016, Thailand was ranked 14th on Deloitte’s Global Manufacturing Competitiveness Index, and 2nd on the World Bank’s survey of Emerging Economies in East Asia. From 2010 to 2016, Thailand experienced 21% growth in foreign direct investment.
  • Association of Southeast Asian Nations: Thailand is part of the ASEAN Economic Community (AEC), which gives its businesses access to markets across the region (around 616 million customers), and allows for the free flow of goods, labour and services between members. Thailand also has numerous FTAs with countries in every corner of the globe, including China, Japan, Canada, Australia and the EU.
  • Regional connectivity: The quality of Thailand’s roads has been ranked 12th in Asia by the World Economic Forum - this represents 465,000km of highway, connecting every province in the country. Thailand’s businesses also benefit from 4000 km of railway that connect the country internally, and to neighbouring markets. 
  • Financial incentives: Thailand’s corporate tax rate is a competitive 30%. The Thai government also recently introduced Special Economic Zones with added financial incentives for certain industries, such as a reduced corporate tax rate (or even tax exemptions), rights to foreign labour, free import duties and low interest rates. 
  • Workforce advantages: The workforce of Thailand is one of the most skilled and cost-effective in the region. Highly literate and educated, Thai employees also embody a friendly, flexible culture, and a desire to succeed.

Foreign Direct Investment in Thailand

The Government of Thailand welcomes inward investment from foreign investors to help develop the economy. Some incentives are available to encourage investors to support emerging industries within Thailand.

Registering a Company and Establishing an Entity in Thailand

The company is required to have a legal entity established in order to process a payroll.
The timescale for completion of this process is one - two months.
Typically foreign investors will do business in the form of a limited company, branch or representative office. There are different regulations and different tax issues for each form. The most common is the limited company.

Limited company

Formation of a limited company is regulated by the Civil and Commercial Code. There must be at least three persons to form a company; they must subscribe their names to a memorandum of association (MOA) and then register. Upon receiving the amount of shares, the director must register the company within three months from the date of company’s meeting to establish the company.
If more than 49% of the shares in the limited company are owned by non-Thai nationals then the company is subject to the Foreign Business Act and the restrictions that it imposes.

Branch Office

In Thai law the branch and its head office are a single legal entity. This means that the head office is liable for lawsuits brought against its branch in Thailand. The head office will be required to pay tax on transactions in Thailand, even when the Thai branch is not involved.

Representative Office

This form of company can only partake in limited business activities. This office is forbidden from rendering services for anyone other than its head office. It can only receive funds from its head office.

Treaty of Amity

The Treaty of Amity is a treaty between the US and Thailand, which creates favourable, trade conditions. The treaty allows citizens of the US to establish a business in Thailand with majority ownership, this is usually prohibited under the Foreign Business Act – usually the majority owner must be Thai national(s). A company can register under the Treaty of Amity if at least 51% of the company shares are owned by US citizens. Usually the directors of the company have to be US citizens. It should be noted that this exception for US citizens does not extend to all types of business activity.

Business Banking in Thailand

It is not mandatory to make payments to both employees and the authorities from an in-country bank account.
Working Days and Working Hours In Thailand
The working days in Thailand are Monday to Friday. Generally the working hours for commercial offices are from 0830 to 1730.

Basic Facts about Thailand

General Information

Thailand lies at the centre of Southeast Asia and is bordered by Myanmar to the northwest, Laos and Cambodia to the east, and Malaysia to the south. Thailand and its neighbours make up a large part of the Indochinese Peninsula, while its southern coast looks out onto the Gulf of Thailand - which provided historic maritime trade access and connections to the rest of the world. Formerly known as Siam, Thailand’s earliest civilisations date back to prehistory and show visible religious and cultural influences from across Asia. Once ruled by an imperial dynasty, Thailand is now a constitutional monarchy with a parliamentary government and separate legislative branch. Thailand’s tropical climate and scenic beauty is known across the world, and attracts millions of tourists each year: a variety of regional environments include thick forests, mountainous highlands and stretches of picturesque coastline - along with numerous island destinations. Temperatures and weather vary dramatically in Thailand - from hot, tourist friendly seasons, to warm, wet monsoons.

Full Name: Kingdom of Thailand
Population: 68.1 million (UN, 2010)
Capital: Bangkok
Primary Language: Thai
Main Religion: Buddhism
Monetary unit: 1 baht = 1 santangs
Main Exports: Rice, Seafood, Live animals, office equipment, rubber.
GNI per Capita: US $3,760 (World Bank, 2010)
Internet Domain: .th
International Dialing Code: +66

Hello: สวัสดี / sà-wàt-dee

Good morning: ดีตอนเช้า / sà-wàt-dee kráp (male), sà-wàt-dee kâ (female)

Good evening: สวัสดี / sà-wàt-dee kráp (male), sà-wàt-dee kâ (female)

Do you speak English?: คุณพูดภาษาอังกฤษได้ไหม / pôot ang-grìt dâai măi

Good bye:  ลาก่อน / sà-wàt-dee kráp (male), sà-wàt-dee kâ (female)

Thank you: ขอขอบคุณคุณ / kòp kun mâak

See you later:  ไว้พบกันใหม่ / láir-o jer gun ná

Dates are usually written in the day, month and year sequence.  For example: 1st of July 2018 or 1/7/18.

Numbers are written with a comma to denote thousands and a full stop to denote fractions, for example, 2,000.50 BHT (2000 baht and 50 satang).

 

Income Tax & Social Security In Thailand

Tax year runs from 1 January to 31 December in Thailand.

There are two mandatory statutory contributions in Thailand:

Social Security Fund (SSF) - Both the employee and employer have to contribute on a monthly basis. The contribution rate is usually 5% with basic salary capped at THB15,000.00. With the minimum wage being increased recently, it has been decided to extend the reduction in Social Security contribution rate.
This is due for payment on the 15th of the next month. For late payments a surcharge will be charged at 2% per month of the amount due.

Workmen Compensation (WCF) -  Only the employer is required to contribute on an annual basis. The contribution rate is based on the total annual salary paid to employees. The contribution rate will depend on the type of company business.
Provident Fund/Welfare Fund- The payment for the provident fund must be submitted three days after payday and may vary depending on PF trustee.

Social Security In Thailand

Monthly social security payments must be submitted by the 15th of the following month and must be submitted to the Social Security Department (www.sso.go.th). For instance, contributions for October must be paid by November 15th, after which they will be charged an extra 2 percent of the overdue amount each month until the payment is made.
The penalty for late Social Security payment is 2% on the due amount calculated monthly.

Reporting Tax In Thailand

Monthly

Employers are responsible for submitting Monthly Withholding Tax (WHT) on a monthly basis.
The deadline is by 7th (Manual Submission) or 15th ( for online submission) of the following month. The amount can be calculated using the tax table supplied by the government.

Provident Fund (monthly)

The format of this is determined by the vendor

SS (monthly)

SS report to Social Security Department

Yearly

WHT (year-end)

A ‘PDN1 K report’ must be completed at the end of every year. It must be submitted to the Revenue Department (www.rd.go.th)
Information required in each form varies however the employee name and salary is always required.
Filing of all reports can be done by any party but statutory forms need to be approved by the company’s authorized signatory.

New Employees And New Starts In Thailand

It is required for all new starts to be registered with the following departments within the first month of employment:

  • Provident Fund registration is required with the appointed Provident Fund vendor.
  • SS registration required with the Social Security Fund.
  • Revenue Department (It is not required if the new starter is citizen of Thailand. If the new starter is an expat and never had TAXID then the company should apply TAXID for expat employee.)

Registration is usually submitted together with monthly PF and SS forms.

To set up a new start the following information is required:

  • PF – New hire form containing all the personal & employment information
  • SS – Standardized termination form

The Following Documents are also required when setting up a new start:

  • Passport
  • Signed contract
  • Work permit
  • Working visa

Leavers In Thailand

All leavers must notify the local authorities if they are leaving their job by completing the following:

  • PF – Termination form containing all the personal & employment information
  • SS – Standardized termination form

Payroll in Thailand

Employers in Thailand have withholding obligations to their employees, and must make income tax and social security contributions on their behalf:

  • Income tax rates in Thailand range from 0% for the lowest-earning employees, to 35% for those earning over 4,000,001 Baht. Tax must be reported to the Thailand Revenue Department.
  • Social security contributions for employer and employee amount to 5% of salaries - up to a maximum of 750 Baht per month.

Employees in Thailand must be issued with payslips for each pay period (payslips may be issued online), and payroll records must be kept for at least 7 years. Thai payroll may be handled in-house by a dedicated payroll officer or payroll team, or outsourced to a third party to take advantage of regional expertise. It may be advisable for foreign businesses setting up in Thailand to take advantage of global service providers in order to acquire valuable compliance expertise - and ensure their international employee populations are paid accurately and efficiently.

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