The Kingdom of Thailand was ranked first on the list of the Best Countries for Starting a Business in 2020 by the US News & World Report. This global perception-based survey took the following attributes into account: Bureaucracy, affordability, global connection, low manufacturing costs, and access to capital.
The survey acknowledged various factors that contribute to Thailand being the best country for starting a business, one of which is that Thailand is one of the most visited countries worldwide. Furthermore, Thailand has a highly consistent agricultural sector, and its manufacturing industry is thriving and remains competitive. The country is also a leader in the electronics, tin, and textile industries and stands as one of the largest rice exporters in the world.
The survey was supported by data provided by Trading Economics. The World Bank ranked The Kingdom of Thailand 21 among the 190 listed countries in the Ease of Doing Business. This index ranks various countries based on how business operators benefit from the country's regulatory environment. Thailand is a convenient business hub, as it is considered the second-largest economy in the Southeast Asian region.
The Thai business sector is continuously expanding and attracting more foreigners who want to invest and set up their enterprises. Not only do foreigners invest in the country's existing businesses, but they also establish their own and expand their enterprises into various branches of the economy.
The Thai government consistently introduces new incentives to assist the growth of the economy, including permissions to own real estate if all requirements are met. The government also promotes joint ventures, giving businesses more opportunities to grow their profits.
Doing Business in Thailand
All Thai businesses are either classified as companies or partnerships. Apart from these classifications, businesses can also be considered representative offices, branch offices, or regional operating headquarters.
Deciding on the most suitable Thai business to establish, prospects require the expertise, knowledge, and experience of a dedicated lawyer. Thailand lawyers are knowledgeable about the fundamental Thai laws relating to business practices. A lawyer can also be a beneficial asset when registering a business in Thailand, which is the first step to establishing a new business. They will help execute the appropriate preparation and filing of all the required documents with the government agencies of concern.
It is essential to comprehend that a foreign-owned business operating in Thailand is subject to a different set of rules under the Foreign Business Act. A business with a foreign ownership of over 49% is defined as a foreign business in Thailand. If the business type and operations align with particular categories outlined in the Foreign Business Act, the business owners will either need to apply for a Foreign Business License or be restricted from operating.
Before any business can commence operations, obtain industry-specific licenses from the Ministry of Commerce, or obtain a business promotion from the Board of Investments, the business owners must apply for a Foreign Business License. If the person investing in the business is of US nationality, they may consider registering the company under the US-Thai Treaty of Amity to own over 49% of the business shares.
Thailand Company Limited
A limited company is the most commonly used structure for starting a business in Thailand. A company limited is established by dividing the capital into equal shares. The shareholders' liability is limited based on the number of shares they hold, respectively.
Majority-owned Company Limited in Thailand
A majority-owned company in Thailand requires that at least 51% of the company shares belong to Thai nationals. A Foreign Business License is not required in this instance, as the company is primarily owned by Thai nationals. Generally, a Thai majority-owned company isn't subjected to restrictions.
Foreign Majority-owned Company Limited in Thailand
If over 49% of a company is foreign-owned, the company is defined as a foreign majority-owned company. The Foreign Business Act governs all business activities and operations involving foreign nationals and foreign entities. Foreign majority-owned limited companies in Thailand are required to obtain a Foreign Business License before operations can commence.
Foreign Business Act in Thailand
Any company deemed "foreign" is regulated by Thailand's Foreign Business Act (FBA). According to Thai law, a foreign company is a company registered under the following laws:
- Another country's laws. This includes representative offices, branches, and regional offices of any foreign company operating in Thailand.
- Thai law, provided more than 49% of the company shares are owned by foreign nationals.
According to the Foreign Business Act, foreign nationals are restricted or prohibited from participating in the following three lists of company activities:
- Company activities outlined in List 1 are deemed to be business in Thailand that foreigners are prohibited from conducting due to special reasons. All foreign companies are restricted from conducting all the business activities in List 1.
- Company activities outlined in List 2 are deemed to be businesses related to national security or safety, activities involving folk and traditional handcraft, activities involving arts and culture, and activities involving the environment and the country's natural resources. Foreign-owned companies are only permitted to engage in such activities following Cabinet approval.
- Company activities outlined in List 3 are deemed to be foreign businesses that Thai nationals are not ready to compete with. For foreign companies to participate in such business, they must first obtain a Foreign Business License before operations can commence.
If the Thailand Board of Investment promotes a company, the company is permitted to participate in the activities the Foreign Business Act restricts, provided they obtained a Foreign Business Certificate in Thailand.
Thailand Board of Investment
Thailand's Board of Investment (BOI) offers investment incentives for local and foreign entrepreneurs interested in investing in BOI-promoted activities and conducting business in Thailand. The Board of Investment has set specific criteria for projects that wish to apply for privileges and incentives. A Thai business must meet these criteria to be eligible for a Board of Investment promotion.
What is the US-Thai Treaty of Amity?
The US-Thai Treaty of Amity strives to offer US individual and corporate investors conducting business in Thailand significant advantages. This treaty provides US investors with the following trade advantages:
- US nationals are permitted to own either all or most of the shares of a Thai limited company or establish a representative or branch office in Thailand without obtaining a Foreign Business License under Section 17.
- US nationals are permitted to participate in business activities on the same basis as all nationals in Thailand. They are also exempt from most foreign investment restrictions the Foreign Business Act of 1999 imposes.
Regional and Representative Offices in Thailand
Regional and representative offices are company structures that differ from a company limited and branch offices. Both regional and representative offices are restricted from earning income and engaging in trading activities. They are also regulated to perform particular functions as outlined by their head offices abroad.
Branch Offices in Thailand
Branch offices are another company structure for conducting business in Thailand. A branch office is similar to a company limited but does not have a respective legal entity from the company's head office abroad. Instead, it serves as an extension of the head office. A branch office is required to obtain a Foreign Business License, as it is effectively a foreign-owned business.
