Choice of legal entity structure in Thailand
Private limited company
By far the most prevalent form of entity that is used in Thailand is the private limited company. A private limited company is simply a company that has at least 3 shareholders (all of which can be US nationals and/or corporations once the Treaty privileges are invoked) and at least 1 director who is resident (domiciled) in Thailand (who may also be a US national).
The liability of the shareholders is limited to the amount of the private limited company’s share capital. The shareholders appoint director(s), who act according to a registered set of articles and memorandum of association, both of which remain under the control of the shareholders.
The business activities of a Thai private limited company are set out in its memorandum.
The activities are usually drafted in very wide terms and provided the memorandum does not allow any of the 6 restricted business activities under the Treaty, a private limited company would usually be able to undertake virtually any kind of activity that a US corporation would require of it to undertake in Thailand. But whilst a private limited company is the most widely known and most common form of doing business in Thailand, it may not be the most advantageous structure for tax.
As the activities of a private limited company are revenue-generating activities, it is therefore liable to all the corporate and transaction taxes payable by taxable entities in Thailand, the two main ones being corporate income tax, which is payable at the rate of 30% of the net income earned by the entity plus profits remittance tax at the rate of 10% of net profits remitted out of Thailand (equating to 37% income tax on net income), and VAT at the current rate of 7% on all sales of goods or provision of services by the Thai private limited company.
Representative office
In terms of its legal attributes, a representative office entity is the same as a branch office, i.e. an arm of the US corporation that forms it. But whereas a branch office conducts activities for commercial gain (i.e. for revenue-generating purposes), a representative office conducts its activities for its head office only – not for any consumer, i.e. a representative office conducts non revenue-earning activities. And as the activities are non revenue-earning, the Thai Revenue Department has prescribed that provided a representative office complies with the rules and conditions for representative offices, it shall not be subject to either income tax in Thailand or VAT in Thailand.
A representative office entity in Thailand is the right tax-effective and cost-effective choice for a US corporation carrying out any non revenue- earning activities in Thailand, such as:
Sourcing goods and services in Thailand for the US corporation.Checking and controlling goods purchased or goods manufactured in Thailand for the US corporation.Providing information and advice in relation to goods sold or services provided by the US corporation to consumers in Thailand.Propagation of information concerning new goods or services of the head office; and/or Reporting on matters in Thailand to the US corporation. The above activities are those listed in the Thai Commerce Ministry guidance for representative offices, and in the case of a US corporation’s activities in Thailand not exactly fitting into the guidance, but are nevertheless, non revenue- generating activities (such as, for example, a US corporation is required to research/gather information in Thailand and report back to the US head office only), it would be a worthwhile exercise to seriously consider a representative office entity for the activity in Thailand.
Branch office
Similarly to a private limited company entity, a Thai branch office of a US corporation would usually be able to undertake virtually any kind of activity that a US corporation would require it to undertake in Thailand (except for, of course, the six restricted business activities under the Treaty).
But unlike a private limited company, a branch office is the exact same legal entity as the US corporation that forms it, and therefore, a US corporation forming a branch office assumes all liability for the operations of the branch office in Thailand.
That being said, however, if it is the case that the business activities in Thailand requires the US corporation’s guarantee of performance of the activities in Thailand and/or the activities in Thailand will be conducted for a finite period oftime after which time the activities in Thailand would cease (for example, business activities involving a particular project to be carried out for a period of time in Thailand) then a branch office entity could be a bit more favorable.
A branch office in Thailand pays the same 30% rate of corporate income tax as a private limited company plus the same 10% profits remittance tax (making the total income tax payable equal to 37%) and the same rate of VAT (current rate of 7%) on all sales of goods and provision of services by the branch office.
But whilst there are no major Thai tax payable differences between a branch office and a Thai private limited company, an exit from a branch office entity in Thailand is far less cumbersome, far less time consuming and therefore far less than an exit from a Thai private limited company entity, which is required to comply with all the legal dissolution and liquidation procedures prescribed in the Thailand Civil and Commercial Code.
Regional office
Unlike for a branch office and the similarly for a representative office, the Thailand Revenue Department has prescribed that regional office entities in Thailand are not subject to corporate income tax or VAT in Thailand.
And similarly as for representative offices, the Thailand Ministry of Commerce has prescribed that regional office entities shall not undertake activities in Thailand for commercial gain, but shall undertake non revenue-earning activities for the head office company only.
The prescribed non revenue-earning activities for regional office entities are as follows:
Coordination or supervision of operations;Consultation or management services;Personnel training or development;Financial management;Marketing & sales promotion management;Product development; andResearch and development services. Regional operating headquarters
Finally, for a US corporation that is carrying out the types of business activities listed above for regional offices, but those activities are being conducted for commercial gain, i.e. a charge is made by the regional office to the branches or affiliated companies in SE Asia for the services rendered to them by the regional office, the US corporation would be wise to consider a type of legal entity in Thailand known as a Regional Operating Headquarters (ROH).
An ROH entity in Thailand has the same legal attributes as a private limited company, but it is additionally registered as an ROH entity under the Thai Revenue Code, which provides ROH entities the following exceptional tax privileges: 0% income tax on income generated from branches/affiliates outside Thailand; and10% income tax on income generated from branches/affiliates in Thailand.should note that whilst the Treaty of Amity may override the Thai FBA in relation to ownership, it does not however override the Thai FBA in relation to the minimum capital requirements of foreign entities in Thailand.
Thus, for any of the legal entities of company, branch office, representative office or regional office, a minimum amount of Bt 3 million (or about $100,000) is required for establishment of the entity in Thailand. This minimum amount of Bt 3 million forms the “capital” of the entity (similar, if you like, to share capital), it shall be actually remitted into a Thai Baht bank account (you cannot hold this sum in a USD account in Thailand) and it is required to stay in Thailand under the termination of the entity in Thailand, but of course, it can be used for the purposes of the entity.
For an ROH in Thailand, the minimum amount of capital is increased to Bt 10 million (or about $330,000).
Minimum capital requirements for each non-Thai (foreign national) employee in Thailand
You need to note however, that in addition to the minimum capital requirements under the Thai FBA, Thailand’s Foreign Employment Act prescribes that for work permit and immigration purposes, the employer entity in Thailand shall have paid-up capital of at least Bt 2 million (or around $67,000) per foreign national employee (including US national employee) in Thailand.
Thus, in addition to meeting the required capital amount of a minimum of Bt 3 million stipulated under Thailand’s Foreign Business Act, if a US corporation will be seconding foreign nationals (including US nationals) to work as employees of the entity in Thailand, the entity in Thailand will be additionally required to meet the Foreign Employment Act requirement and have at least Bt 2 million of paid-up “capital” in Thailand for each foreign national employee.
About the Author
RSM Thailand
For more helpful information, visit us at:http://financial-and-legal-thailand.com/category/legal-articles/
Best Diesel Drag 9 sec 1 4 Mile From Thailand
|
|
Stone (Granite) Mortar and Pestle Made in Thailand of carved granite, this durable high quality product is an important tool for Thai cooking as well as around the world. Won’t chip or crack. Each mortar is cut from a solid granite rock and carefully carved by hand. Hefty 15 lb weight, this product has remarkable visual appeal and is the finest mortar and pestle on the market, mentioned as the best mortar and pestle in America by … |
|
|
Anolon Advanced Hard Anodized Nonstick 12-Inch Covered Ultimate Pan $39.99 Designed for cooks who appreciate the best in materials and aesthetics, our Ultimate Pan has sloped sides that allow for fast rotating or stirring of ingredients. The shape is similar to a salad bowl to allow for easy tossing of food. Restaurant tested by professional chefs, DuPont’s Autograph 2 surpasses all other standard nonstick formulas by delivering enduring nonstick performance inside and o… |
|
|
Corelle Livingware Winter Frost 16-Piece Dinnerware Set, Service for 4 $29.63 Fashion the perfect setting for any occasion. Durable guaranteed against breakage, chipping, and staining. Storage stacks in less space than stoneware. Versatile refrigerator, microwave, oven, and dishwasher compatible. 1 year warranty covers normal household use, food preparation, serving or commercial/industrial use of Corelle products promise to replace any Corelle dinnerware that should crack,… |
|
|
Survivor: The Official Soundtrack to the Hit CBS TV Series $8.73 All products are BRAND NEW and factory sealed. Fast shipping and 100% Satisfaction Guaranteed…. |
|
|
Bossa n’ Stones, Vols. 1-2 $8.68 All products are BRAND NEW and factory sealed. Fast shipping and 100% Satisfaction Guaranteed…. |
|
|
National Anthems of the World $7.95 No Description Available.Genre: Classical MusicMedia Format: Compact DiskRating: Release Date: 27-JUL-2004… |
|
|
Model Yoga Season 1 Volume One (Strengthening & Toning, Lengthening) $1.99 … |
|
|
Model Yoga Season 1 Volume One (Strengthening & Toning, Lengthening) $9.99 … |
|
|
2 Police Magnum OC17 Keychain Red Pepper Spray w/ UV Dye – 1/2oz Soft Cases $3.99 Police Magnum OC-17 Pepper Spray offers the most powerful concentration of pepper spray allowed by law. This is the same spray used by police officers. Each unit also includes UV dye for later identification of the perpetrator by law enforcement. The handy unit allows for one hand operation and can be used to provide multiple blasts up to 12 feet away. A suspect will be immediately affected with b… |
|
|
Mace Brand Triple Action Pepper Defense Spray- Pocket Model $5.99 Mace Brand Triple Action Pepper Defense Spray- Pocket Model Pocket Model. Easy aim finger-grip feature makes this model ideal for emergency use. Compact design fits comfortably in woman’s hand. Features flip-top safety cap, finger-grip dispenser and keychain. 11 gram stream unit sprays 6-12 feet. Contains 5, one second bursts… |
|
|
Cotton ‘Emerald Thai’ Shoulder Bag (Thailand) $29.49 Mighty and regal elephants march around this shoulder bag. This beautifully handcrafted handbag is made for a cotton blend with rain tree wood and coconut accents. |
|
|
Agate and Carnelian ‘Summer Flower’ Necklace (Thailand) $35.49 This lavish necklace by Nareerat features a summery floral motif. The necklace features beautiful agate and carnelian gemstones. |
|
|
Sterling Silver ‘Pirouette’ Drop Earrings (Thailand) $28.99 Gleaming ribbons perform graceful pirouettes in earrings from Aoy in Thailand. Meticulously crafted of sterling silver, these earrings are delightfully modern. |
|
|
Women’s Cotton ‘Cool Night’ Blouse (Thailand) $29.49 Jariya Kakaew creates fashion with Thai flair in this beautiful women’s blouse. With a jewel neckline, embroidered with flowering patterns, this handmade top is crafted of cotton. |
|
|
Garnet and Carnelian ‘Tropical Orchard’ Cluster Earrings (Thailand) $19.99 These earrings by Nareerat feature a cluster of gemstones influenced by ripe fruit in a tropical orchard. The earrings feature garnet, carnelian, serpentine and magnesite gemstones. |
|
|
Pearl ‘River of Snow’ Necklace (3-8 mm) (Thailand) $28.99 Add a stunning accent to your ensemble with this ‘River of Snow’ gemstone necklace. This elegant necklace features natural and dyed pearls creating the illusion of a flowing river. |
|
|
Brass Cute Turquoise Teardrop Swirl Earrings (Thailand) $19.99 A pleasant addition to any outfit, there earrings are embellished with reconstructed turquoise gemstones. These brass earring were handmade in Thailand by artisan, Siam. |
|
|
Set of 2 ‘Bold Orange Fortunes’ Beaded Wristband Bracelets (Thailand) $21.49 These beautiful bracelets, designed by Tiraphan Hasub, are decorated with glass beads and brass bells. Let these colorful pieces of jewelry highlight your look with its nylon construction. |
|
|
Wooden Hand-carved Walnut Oil Twist Stool (Thailand) $184.99 The splendor of this twisting side stool lies in its simplicity. Bold, yet gentle, rustic, yet refined, this stool is handcrafted from eco-friendly sustainable wood and can also be used as an end table, display stand or stool. |
|
|
Set of 3 Wood 18-inch Tree Life Wall Panels (Thailand) $219.49 This tri-panel set shows the body of the tree with branches, tree trunks and a slice with rings to count. These wall panels are hand-carved using the drill and finger saw method to layout and then chiseled for a 3D look. |