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|Doing business in Thailand|

Doing business in Thailand Pages in this section Content of this page: (Updated July 2008. Contact us for the latest updates) Company Setting Up
Thailand offers a lot of opportunities to local and foreign investors. Compared with other countries in the region, its stability in social and economic situation, politics, and government support, good work ethics and attitude of the people are its key advantages. The Royal Thai Government (RTG) has long maintained an open, market-oriented economy and encouraged foreign direct investment as a means of promoting economic development, employment, and technology transfer.

Forming a company in Thailand involves creating a new business; or registering an existing overseas company for foreigners. It is an important part of the entrepreneurial process. One can handle the registration process but it is time-consuming and seeking professional services will make you go through smoothly in shorter time. Opportunity for incorporation is also available here in the country. Incorporation happens when there is an union or merger of existing corporations to form new or another corporation. The decision to incorporate you or your business is the first step in providing effective protection from personal liability, excessive taxation, and provides the investor with an effective and powerful tool to assist in managing and growing their business ventures.

Some reasons for incorporating is that you are forming a separate, distinct legal entity that can be utilized to safeguard your personal property and assets by separating you, personally, from business liability, lawsuits, creditors and excessive taxation. By incorporation, you are forming a separate "person or identity", a legal entity that can own property, pay taxes, enter contracts and create income that is separate from yours. A corporation can sue and be sued on its own, thereby safeguarding the personal assets of the shareholders. This separation and safeguarding of personal assets and property is known as “limited liability.” Other advantages include continuity of the business, as the business is not affected by the changing of the shareholders due to death, transfer of shares, sales, acquisitions, etc.

When you have a desire to set up and run your own business, then you have come to the right place. But, before you engage in a business or an investment, you must plan deeply and focus on the risks and challenges that you and your business will encounter before and after you have started. At Panwa Group, we can make these things easier for you. Our team provides assistance to our clients in terms of setting up their business or investment here in Thailand. We provide advices and guidance to our clients to make them comfortable in investing their money, time and effort into company setup, leasing and forming an office, rent, and staff recruitment. We also help them in finding a good office location, their own employees, and other matters. We make sure that we perform our responsibilities in accordance with the government regulations and policies specifically the Board of Investment.

Planning your business
A business plan should be made to serve as a guide in forming your business. It contains a set of business goals and objectives, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team aiming to reach those goals. You must plan carefully all the details about your business specifically in terms of: 1. Creating your business structure
Forming a business and creating its structure or type can be a complicated process. Our services can simplify that process by providing comprehensive descriptions of the various types of businesses, and even allowing you to compare them side by side. In this way you can be sure to choose the type which can be most suitable for you in achieving your goals. This includes forming a business organization according to its structure such as: sole proprietorship, partnership, corporation or joint venture. As in most countries, there are three kinds of business organizations in Thailand: Sole proprietorships, partnerships, and limited companies. The most popular form of business organization among foreign investors is the private limited company.

Private limited companies require a minimum of seven promoters and must file a memorandum of association, convene a statutory meeting, register the company, and obtain a company income tax identity card. They must also follow accounting procedures specified in the Civil and Commercial code, the Revenue Code and the Accounts Act. A balance sheet must be prepared once a year and filed with the Department of Revenue and Commercial Registration. In addition, companies are required to withhold income tax from the salary of all regular employees.

2. Getting business license
It is important for the person(s) forming companies or business to provide acceptable proposed name in advance of submission of documents for registration to the Ministry of Commerce. We then check if the name proposed is not similar to one already registered. Business registration is essential in order to be legal in a certain location. We will assist you not only in business registration but also in getting your business license or permit. This will authorize or permit your business to operate or perform its activities and services and be recognized as an entity in a certain location.

3. Hiring employees
At Panwa Group, we provide secretarial services for you to assist your business in hiring personnel for your operation. We can assist you in professional recruitment of highly qualified employees for your company.

4. Visa and Working Permit
Any entity wishing to do business in Thailand must register with the Department of Business Development at the Ministry of Commerce. Firms engaging in production activities need to register with the Ministries of Industry and Labor and Social Welfare. Our specialized team provides the assistance in obtaining a necessary visa and working permit for our foreign clients. This authorizes a foreign individual to stay, work, and render business activities and services here in Thailand.

5. Tax Registration
Businesses liable for income tax must obtain a tax I.D. card and number for the company from the Revenue Department within 60 days of incorporation or the start of operations.

Reporting Requirements
Firms must keep books and follow accounting procedures specified in the Civil and Commercial Code, the Revenue Code and the Accounts Act. Documents may be prepared in any language, provided that a Thai translation is attached. All accounting entries should be written in ink, typewritten, or printed.

Specifically, Section 1206 of the Civil and Commercial Code provides rules on the accounts that should be maintained as follows: "The directors must cause true accounts to be kept: of the sums received and expended by the company and of the matters in respect of which each receipt or expenditure takes place; of the assets and liabilities of the company."

A. Imposition of Taxes
Companies are required to withhold income tax from the salary of all regular employees.

A value-added tax of seven percent is levied on the value added at each stage of the production process, and is applicable to most firms. The VAT must be paid on a monthly basis.

A specific business tax is levied on firms engaged in several categories of businesses not subject to VAT, based on gross receipts, at a variable rate ranging from 0.1 – 3.0 percent.

Corporate income tax is due twice each fiscal year. A mid-year profit forecast entails advance payment of corporate taxes.

B. Annual Accounts
A newly-established company or partnership should close accounts within 12 months from the date of its registration. Thereafter, the accounts should be closed every 12 months. The performance record is to be certified by the company auditor, approved by shareholders, and filed with the Business Development Office, Ministry of Commerce, within five months of the end of the fiscal year, and with the Revenue Department, Ministry of Finance, within 150 days of the end of the fiscal year.

If a company wishes to change its accounting period, it must obtain written approval from the Director General of the Revenue Department.

C. Accounting Principles
In general, the basic accounting principles practiced in the United States are accepted in Thailand, as are accounting methods and conventions as sanctioned by law. The Institute of Certified Accountants and Auditors of Thailand is the authoritative group promoting the application of generally accepted accounting principles.

Any accounting method adopted by a company must be used consistently and may be changed only with approval of the Revenue Department.

Certain accounting practices of note include: D. Auditing Requirements and Standards
Audited financial statements of juristic entities (that is, a limited company, a registered partnership, a branch, or representative office, or a regional office of a foreign corporation, or a joint venture) must be certified by an authorized auditor and submitted to the Revenue Department and (except for joint ventures) to the Commercial Registrar for each accounting year.

Auditing standards conforming to international auditing standards are, to the greater extent, recognized and practiced by authorized auditors in Thailand.

Types of Business Organizations
Thailand recognizes three types of business organizations:

1. Partnership

Thai and Western concepts of partnership are broadly similar. Thailand provides for three general types of partnerships: 2. Limited Companies

There are two types of limited companies, i.e., private or closely held companies, which is governed by the Civil and Commercial Code; and public companies, which is governed by the Public Company Act. Private Limited Companies in Thailand have basic characteristics similar to those of Western corporations. A private limited company is formed through a process which leads to the registration of a Memorandum of Association (Articles of Incorporation) and Articles of Association (By-laws), as its constitutive documents.

Shareholders enjoy limited liability, i.e., limited to the remaining unpaid amount, if any, of the par values of their shares. The liability of the directors, however, may be unlimited if so provided in the company's memorandum of association or the articles of incorporation. The limited company is managed by a board of directors according to the company's charter and by-laws.

All shares must be subscribed to, and at least 25 percent of the subscribed shares must be paid up. Both common and preferred shares of stock may be issued, but all shares must have voting rights. Thai law prohibits the issuance of shares with no par value. It also stipulates that only shares with par value of five baht or above may be issued. Treasury shares are prohibited.

3. Joint Venture

A joint venture may be described in accordance with general practice as a group of persons (natural and/or juristic) entering into an agreement in order to carry on a business together. It has not yet been recognized as a legal entity under the Civil and Commercial Code. However, income from the joint venture is subject to corporate taxation under the Revenue Code, which classifies it as a single entity.

4. Other Forms of Corporate Presence

Branches of foreign companies. There is no special requirement for foreign companies to register their branches in order to do business in Thailand. However, most business activities fall within the scope of one or more laws or regulations which require special registration, either before or after the commencement of activities. Foreign business establishments must, therefore, follow generally accepted procedures. It is important to clarify beforehand what constitutes income subject to Thai tax because the Revenue Department may consider revenues directly earned by the foreign head office from sources within Thailand as subject to Thai taxes.

As a condition for approval of an Alien Business License to a branch of a foreign corporation, working capital amounting to a total of five million baht in foreign exchange must be brought into Thailand within certain intervals over a four-year period.

The branch may be allowed to operate for a period of five years, unless a shorter period is indicated in the application as a result of a contract to be performed in Thailand. Extension of the original duration of the license to operate may be granted, provided the working capital required to be brought into Thailand is met.

A representative office of foreign corporations may also be established to engage in limited “non-trading” activities, such as sourcing of goods or services in Thailand for its head office or inspecting and controlling quality of goods which its head office purchases in Thailand. Other activities can cover disseminating information about new products and services of its head office, and reporting to its head office on local business development and activities.

For further information regarding this technical and legal matters, log on to the Board of Investment, Thailand website at www.boi.go.th

Choosing the Location of Your Business Office
Finding and choosing a location for your business office can be risky. Somehow, the key potentials for company’s growth and success depend on its location.

Factors that can be harmful or may affect the growth performance of the business must also be considered in choosing a location. Some of these harmful factors are: dust, smoke, unpleasant odors and noises, closeness to hospitals, drinking places and similar establishments, poor sidewalks, old buildings, poor security and the likes.

Some guidelines for finding a good office location:

1. Know the population of the area 2. Know the market competition 3. Know the accessibility of the location 4. Know the office type and needs for business

Office Solution Size and capacity of the office
Opening of Bank Account in Thailand
Thai banks provide a wide range of services throughout the country. Most foreign banks are represented; however, at this stage they offer limited services to the individual consumer. Banking hours are generally from 08:30-15:30, Monday through Friday, except on public and bank holidays. It is best to confirm the business hours of your chosen bank at the time of opening an account.

All banks require several forms of identification (i.e. passport, ID card, work permit, current credit cards, etc.) and most will request a letter of introduction from your employer along with details of your current visa status. It depends also on the requirements of the bank that you preferred to open an account.

There are many banks in Thailand to choose from. Most banks offer services to foreigners not only for exchange currency but also for anything more complicated matters. Once a bank account has been opened, you will be able to use ATM cards, debit and credit cards, do internet banking. However, the first step is to open a bank account. But requirements to open an account depend on banks, between branches of banks, as well as the banking policy that exists. Aside copies of passport, often a work permit is also required for every foreigner who wished to open their bank account.

Relevant Documents for Opening Saving Bank Account.
Banking in Thailand is a relatively stress free practice. There are a few documents you will need to submit in order to establish an account in an international bank. Requirements for opening an account: * The first deposit for the International Bank Account must be transferred from oversea only.

Requirements and procedures in opening bank accounts may seem to be complicated process, but it will be quite simple if taken step by step. Anybody can open a saving account (without check book, but ATM debit card for a fee).

Automatic Teller Machines (ATMs)
ATMs can be easily found all over Bangkok for the withdrawal of Thai Baht. At some machines it is also possible to take cash advances from Visa, MasterCard or American Express provided you have a registered pin number. The ATMs that can handle these transactions are clearly designated with the credit card logo. You can apply for ATM card at the same time you open an account. The fees vary to the type of ATM card that one would like to have (e.g. normal card, premier card, visa electron).

Links to some banking organizations in Thailand:

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