Doing Business in Thailand

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1 Doig Busiess i Thailad 2014

2 Mazars i Thailad Mazars i Thailad is a leadig audit, accoutig, tax, legal ad advisory practice, combiig the beefits of a itegrated global partership with the etrepreeurial drive of the Double Impact Group, which was fouded i Bagkok i Mazars curretly employs over 140 professioals i Bagkok, divided betwee two operatig etities, Mazars (Thailad) Ltd. ad Mazars Ltd. ad provides accoutig, audit, tax, legal ad busiess advisory services to iteratioal cliets ad locally registered ower maaged busiesses. A key feature of the practice is the multiatioal compositio of its advisors, with British, Frech, Thai, Dutch, Japaese ad Australia atioals amog its seior advisors. Mazars is a iteratioal, itegrated ad idepedet orgaisatio specialisig i audit, advisory, accoutig, tax ad legal services. As of 1st JANUARY 2013, the Group has a direct presece i 71 coutries ad draws o the expertise of more tha 13,500 professioals to assist compaies major iteratioal groups, SMEs ad etrepreeurs ad public bodies, at every stage i their developmet.

3 Skywalk with the Urba city, Bagkok, Thailad Table of Cotets Geeral iformatio 2 Regulatio of foreig ivestmet 5 Govermet icetives 7 Busiess orgaisatios available to foreigers 14 Settig up ad ruig busiess orgaisatios 17 Corporate taxes 23 Persoal taxatio 26 Double Taxatio Agreemets 31 Sales, VAT ad other taxes 34 Portfolio ivestmet for foreigers 37 Trusts 38 Practical iformatio 39 This guide has bee prepared for the assistace of those iterested i doig busiess i Thailad. It does ot cover exhaustively the subjects it treats, but it is iteded to aswer some of the importat broad questios that may arise. Whe specific issues arise i practice, it will ofte be ecessary to cosider the relevat laws ad regulatios ad to obtai appropriate professioal advice. For this reaso the publishers ad authors are ot resposible for the result of ay actios which are udertake o the basis of the iformatio which is cotaied withi this publicatio, or for ay error i, or omissio from this publicatio. Doig Busiess i Thailad

4 Geeral iformatio Opportuities ad possible obstacles for foreig ivestors The Thai Govermet has log maitaied a ope market-orieted ecoomy ad ecouraged foreig direct ivestmet. Followig the Asia fiacial crisis, the Govermet embarked o a Iteratioal Moetary Fud-sposored ecoomic reform programme, desiged i part to promote a more competitive ad trasparet climate for foreig ivestors. Although protracted, the reform process cotiues to move ahead ad Thailad remais committed to ecoomic reform ad a ope ivestmet regime. The Foreig Busiess Act of 1999 govers most ivestmet activities by o-thai atioals. It opeed additioal busiess sectors to foreig ivestmet ad icreased maximum owership stakes permitted i some sectors above the stadard 49% limitatio. It cotiues to restrict majority foreig participatio i certai types of busiess but this restrictio excludes the majority of maufacturig vetures. Area ad populatio Thailad is oe of the largest coutries i the regio of South East Asia. The borders are shared with Myamar to the west, Lao PDR to the orth ad ortheast, Cambodia to the east, ad Malaysia to the south. The populatio of Thailad is estimated at 67 millio. With a populatio of over 10 millio, the capital city of Bagkok is the most importat city, ecoomically ad politically. Govermet ad law Thailad is a costitutioal moarchy, with the Prime Miister as the head of govermet ad a hereditary moarch as the head of state. The judiciary is idepedet of the executive ad the legislative braches. Thailad is divided ito 77 provices (chagwat), which are gathered ito five groups of provices by locatio. There are also two special govered districts - the capital Bagkok (Krug Thep Maha Nakho) ad Pattaya. For admiistrative purposes, each provice is divided ito districts ad the districts are further divided ito sub-districts (tambos). Thailad s legal system combies priciples of traditioal Thai ad Wester laws. Its members are omiated by the Seate ad appoited by the Kig. The Courts of Justice have jurisdictio over crimial ad civil cases ad are orgaised i three tiers: Court of First Istace The Court of Appeal The Supreme Court of Justice Admiistrative courts have jurisdictio over suits betwee private parties ad the Govermet, ad cases i which oe govermet etity is suig aother. 2 Doig Busiess i Thailad 2014

5 Geeral iformatio Currecy The baht (B or iteratioal abbreviatio THB) is the currecy of Thailad. Oe baht is divided ito 100 satag. Issuig currecy is the resposibility of the Bak of Thailad. Ecoomy The ecoomy of Thailad is a emergig ecoomy which is heavily export-depedet, with exports accoutig for more tha two thirds of GDP. Thailad s mai exports are computer hardware, motor vehicles ad auto parts, jewellery ad electrical circuits. Crude oil, machiery ad parts, ad alloy steel ad steel products have bee the top three import products of Thailad durig the past five years. To ecourage export activities, a umber of tax icetives are available. The exportatio of goods is zero rated for purposes of Value Added Tax (VAT), whilst custom duties already paid will be refuded o materials imported for the productio of goods which are the exported. The Miistry of Commerce desigates classes of goods that are subject to import cotrols, which usually take the form of permissio ad licesig. Applicatio for the licece must be accompaied by a supplier s order, cofirmatio, ivoice ad other pertiet documets. Goods subject to import cotrols iclude medicie, mierals, explosives, fireworks, atiques ad cosmetics. Customs duty is also levied o some type of goods imported ito Thailad. Fiace Thailad has a substatial umber of fiacial istitutios, both private ad govermet owed. The fiacial istitutios i Thailad offer a full rage of fiacial services uder the supervisio of the Bak of Thailad. I geeral, the Thai baks are reluctat to led moey to start up compaies ad small iteratioal etities. Normally collateral is eeded to secure exteral fudig. The collateral ca be i the form of a title deed of lad, a bak guaratee from a paret compay or a guaratee via the Thai Credit Guaratee Corporatio. I additio, Thailad is a member of the World Bak ad the Asia Developmet Bak. Immigratio law Visas All persos, other tha people i trasit ad Thai atioals, are required to obtai a visa i order to eter Thailad. Foreig atioals who ited to remai i Thailad to work or coduct busiess must comply with visa requiremets, i additio to obtaiig a work permit. The categories of visa iclude: Tourist - Foreigers who obtai tourist visas are iitially grated a stay of 60 days. Reewals, at the discretio of the Immigratio Departmet, are ormally grated for periods of up to 30 days at a time. Doig Busiess i Thailad

6 Geeral iformatio Visitor trasit - Foreigers who have obtaied a trasit visa from a Thai Embassy or cosulate will be grated a 30-day stay i Thailad. Extesios of stay are ormally grated for periods of 7 days. I additio, atioals of may coutries are able to eter Thailad without a visa ad may remai for 30 days per visit. Foreigers who eter Thailad uder the Tourist Visa Exemptio category may re-eter ad stay i Thailad for a cumulative duratio of stay ot exceedig 90 days withi ay 6-moth period, from the date of first etry. Immigrat - A perso wishig to immigrate to Thailad may apply for a Certificate of Residece. However, the coditios for qualifyig as a immigrat are quite restrictive ad covered by aual immigratio quotas ad other coditios fixed for each coutry by the Miistry of Iterior. No-quota immigrat - This category icludes former residets who have lost their residet status, but who have reapplied to resume their residecy ad who are able to demostrate a covicig reaso to support the gratig of this type of visa. No-immigrat - Foreigers seekig a prologed stay or for the purpose of work i Thailad should obtai o-immigrat visas for themselves ad all family members prior to eterig Thailad. The visa is geerally grated for a iitial stay of 90 days, but it may be exteded by up to oe year, ad is reewable each year. A foreiger holdig this type of visa is etitled to apply for a work permit. Holders of a trasit or tourist visa caot apply for a work permit. Work permits The Foreig Employmet Act stipulates umerous rules regardig work permits, summarised here: 1. With a few exceptios, the law requires all o-thai atioals who work i Thailad to have work permits issued by the Miistry of Labour. Employers i Thailad may apply for a work permit for prospective foreig employees who wish to work i Thailad before the employee starts workig. 2. The use of these work permits is restricted to the particular occupatio, particular employer ad particular locality for which they are applied. Ay chage i these restrictios will require a ew work permit. 3. Foreigers temporarily workig i Thailad uder the Immigratio Law to perform a essetial ad urget assigmet for the period ot exceedig 15 days do ot have to apply for a work permit. However, such foreiger may egage i work oly after a writte otificatio o a prescribed form has bee issued by the Director-Geeral of the Departmet of Employmet, or his assigee. 4. A foreiger seekig permissio to work i Thailad uder the Ivestmet Promotio Law must submit a applicatio for a work permit withi 30 days of otificatio by the Board of Ivestmet (BOI) that the positio has bee approved. Such foreiger may egage i authorised works while the applicatio is beig processed. 5. Foreigers workig i Thailad uder special covetios betwee Thailad ad other coutries, icludig iteratioal orgaisatios, such as the World Bak, are exempted from obtaiig work permits. 4 Doig Busiess i Thailad 2014

7 Regulatio of foreig ivestmet The Thai Govermet offers a rage of icetives to ivestors, admiistered by the Board of Ivestmet (BOI) ad the Idustrial Estate Authority of Thailad (IEAT) ad these icetives ofte come with permissio for full foreig owership. The BOI issued a ew policy (1 August 2000), which i priciple gives special cosideratio to ivestmet projects where the operatios are located i provicial areas (i preferece to Greater Bagkok). The IEAT carries out the govermet s idustrial developmet policy, which icludes allocatig lad for further expasio, improvig lad coditios ad providig accommodatios ad facilities to assist etrepreeurs. Foreig Busiess Act The Foreig Busiess Act regulates the activities i which compaies desigated as foreig may egage i. While some activities are completely prohibited, some may be egaged i with prior approval from a desigated govermet agecy ad some do ot require ay special approval. Defiitio of foreig compay Accordig to Thai law, a compay registered uder the followig laws shall be deemed a foreig compay: The laws of aother coutry (icludig all braches, represetative offices ad regioal offices of overseas compaies operatig i Thailad); Thai law, whereby 50% or more of its shares are held by o-thai s (idividuals or busiess etities). The Foreig Busiess Act has idetified three lists of activities i which foreig participatio may be prohibited or restricted. Activities stated i List 1 are desigated as busiesses ot permitted for foreigers to operate due to special reasos. Foreig compaies are completely restricted from egagig i the activities cotaied i List 1. Activities stated i List 2 are desigated as busiesses related to atioal safety or security, activities affectig arts ad culture, traditioal ad folk hadicraft or atural resources ad eviromet. Foreig compaies may oly egage i the activities stated i List 2 with prior Cabiet approval. Activities stated i List 3 are desigated as busiesses i which Thai atioals are ot yet ready to compete with foreigers. To egage i activities stated i List 3, the foreig compay must apply for ad obtai a Foreig Busiess Licese prior to commecig the activity. Compaies promoted by the BOI are permitted to egage i certai busiess activities restricted uder the Foreig Busiess Act by obtaiig the foreig busiess certificate prior to operate its busiess. Doig Busiess i Thailad

8 Regulatio of foreig ivestmet Exchage cotrols Foreig currecy Foreig currecies ca be trasferred or brought ito Thailad without limit. With limited exceptios, ay perso receivig foreig currecies from abroad is required to covert such foreig currecy ito Thai baht (THB) or to deposit the same i a foreig currecy accout with a authorised fiacial istitutio. A Foreig Exchage Trasactio must be submitted to authorised commercial baks for each trasactio ivolvig the purchase, sale, deposit or withdrawal of such foreig currecy valued at $20,000 USD or more. Local Currecy There is o restrictio o the amout of Thai Baht (THB) that may be brought ito the coutry. A perso travellig to Thailad s borderig coutries icludig Vietam is allowed to take out up to THB 500,000 ad to other coutries up to THB 50,000 respectively, without authorisatio. All foreig exchage trasactios must be coducted through commercial baks ad through authorised o-baks that are grated foreig exchage liceses by the Miister of Fiace, amely authorised moey chagers, authorised moey trasfer agets ad authorised compaies. Ay trasactios ot coducted through the above-metioed licesees require approval from the Competet Officer, which will be assessed o a case-by-case basis. 6 Doig Busiess i Thailad 2014

9 Govermet icetives Research & Developmet (R&D) The R&D provisios of the icome tax legislatio allows a compay to claim deductios of 200% of eligible expediture icurred o paymet to govermet or certai private agecies for costs of R&D icurred for techology. I additio, assets used for R&D activities ca be depreciated at a accelerated rate. Ivestmet Promotio Act Through the Board of Ivestmet (BOI), the govermet offers a rage of tax icetives, support services ad import duty cocessios. These are available to a extesive list of busiesses that are regarded as priority or promoted activities. The structure, role ad policies of the BOI curretly follow the guidelies provided i the Ivestmet Promotio Act. Uder BOI, there are o foreig equity restrictios i the maufacturig sector, o local cotet requiremets ad o export requiremets. This is because Thailad s ivestmet regime complies fully with WTO regulatios. The BOI also coordiates the activity of the Oe-Stop Service Ceter for Visas ad Work Permits, which eables foreig staff of BOI-promoted compaies to obtai work permits ad log-term visas. Foreig equity participatio The BOI uses the followig criteria whe cosiderig the extet of foreig equity participatio allowed i a promoted ivestmet project: Criteria Maximum foreig equity participatio 1. Projects i agriculture, aimal husbadry, 49% fishery, mieral exploratio ad miig ad service busiess uder Schedule Oe of the Foreig Busiess Act Maufacturig projects, i all zoes 100% 3. The Board may specifically fix the shareholdig of foreig ivestors o some promoted projects whe it is deemed appropriate. Doig Busiess i Thailad

10 Govermet icetives Ivestmet Promotio Zoes To comply with the atioal objectives of decetralisig ad spreadig the beefits of developmet to the coutry s provices, the BOI has divided all provices of Thailad ito three ivestmet zoes. Ivestors who set up their operatios i provices outside the cetral regio of Thailad are etitled to a wider rage of tax icetives. A ivestor is able to establish factories i all ivestmet zoes, except for certai activities for which a specific zoe is stipulated. The BOI offers two kids of icetives to promoted projects, regardless of locatio - tax icetives ad o-tax icetives. Tax-based icetives Exemptio or reductio of tariffs o imported machiery ad equipmet, as well as raw materials for the promoted activity, ad Exemptio from icome tax o et profits ad divideds. The extet of these icetives varies accordig to the locatio of the promoted compay. No-tax icetives iclude: Permissio for full or majority foreig owership of the compay To brig i foreig workers To ow lad ad To take or remit foreig currecy abroad. Actio required after the project is approved for promotio The BOI will iform the applicat i writig withi seve workig days of the approval date, detailig the coditios, privileges ad beefits grated. A applicatio form for the promotio certificate will be attached, together with the otificatio of approval. Upo receipt of the BOI letter approvig the project, the applicat must reply by completig the form of promotio acceptace ad sedig it back to the BOI withi oe moth. If ay chages or special coditios ad privileges are sought, they should be requested at that time. If the applicat is uable to reply withi the stated time limit, a extesio letter should be set to the BOI, which will cosider extedig the deadlie by o more tha oe moth at a time, up to a maximum of three times. I order to receive the ivestmet promotio certificate, the applicat must set up the compay withi six moths of acceptig the approval, ad submit all of the required documets to the BOI. If the applicat is uable to submit the documets withi the required time frame, a explaatory letter must be set to the BOI, which will cosider extedig the deadlie by four moths at a time, up to a maximum of three times. The BOI will issue the ivestmet promotio certificate after receipt of all specified documets, ad the promoted compay must follow the coditios stipulated i the Certificate. 8 Doig Busiess i Thailad 2014

11 Govermet icetives Regioal Operatig Headquarters (ROH) The Reveue Departmet has a umber of tax privileges that are provided to the busiess sector, oe of which is the Regioal Operatig Headquarters (ROH) icetive. A ROH is a suitable corporate structure for a etity that provides maagerial, admiistrative ad techical support services for other affiliated compaies operatig i the regio ad watig to set up i Thailad. Both tax privileges ad o-tax privileges are grated to the ROH. The Reveue Departmet itroduced ROH Scheme I i 2002 ad approved the ROH Scheme II i November The taxpayer is etitled to apply for either scheme. Outlied below are the tax icetives ad coditios for both schemes. Tax privileges ad coditios of ROH ROH Scheme I (Royal Decree No.405) Tax icetive 10% corporate icome tax o service icome, iterest icome ad royalty icome derived from all related compaies ad braches of the ROH (both i Thailad ad overseas). Exemptio from corporate icome tax o divided icome received from all related compaies ad braches of the ROH. Exemptio from withholdig tax o divided icome paid to ay related compaies or braches outside Thailad. 15% flat rate of tax o salaries paid to expatriate employees for hire of labour i Thailad for a period of four years ad exemptio from tax o salaries paid to expatriate employees for hire of labour outside of Thailad. Accelerated depreciatio write-off o the purchase or acquisitio of buildigs used i carryig out the operatio of the ROH - a deductio of 25% of the asset value is allowed as a iitial allowace ad the remaiig balace ca be deducted over 20 years. Coditios The ROH shall be a compay icorporated uder the laws of Thailad with paid up capital of at least THB 10 millio. The ROH shall provide its services to at least three related compaies ad braches of the ROH outside Thailad. The ROH shall ear at least oe-third of its total icome from related compaies ad braches of the ROH outside Thailad for the first three years, ad thereafter, ot less tha 50% of its total icome from related compaies ad braches outside Thailad. The ROH shall otify the Reveue Departmet of its status as a ROH uder Sectio 10 ad its itetio to apply the tax privileges uder such Scheme. All coditios eed to be satisfied i order to be etitled for tax icetives uder the ROH Scheme I. Doig Busiess i Thailad

12 Govermet icetives ROH Scheme II (Royall Decree No.508) Tax icetives Exemptio from corporate icome tax o service icome from related compaies ad braches of the ROH outside Thailad for a period of 10+5* years: l 10% corporate icome tax o service icome from related compaies ad braches of the ROH i Thailad for a period of 10+5* years l 10% corporate icome tax o iterest icome ad royalty icome from all related compaies ad braches of the ROH (both i Thailad ad overseas) for a period of 10+5* years Exemptio from corporate icome tax o divided icome received from all related compaies ad braches of the ROH for a period of 10+5* years. Exemptio from withholdig tax o divideds paid to ay related compaies or braches outside Thailad. 15% flat rate of tax o salaries paid to expatriate employees for hire of labour i Thailad for a period of eight years ad tax exemptio o salaries paid to expatriate employees for hire of labour outside of Thailad. Coditios The ROH shall be a compay icorporated uder the laws of Thailad with paid up capital of at least THB 10 millio. The ROH shall provide its services to at least three related compaies ad braches of the ROH outside of Thailad withi the followig time frame: l At least oe outside Thailad i the first ad secod years; l At least two outside Thailad i the third ad fourth years; l At least three outside Thailad i the fifth ad subsequet years. The affiliated compaies or braches outside of Thailad shall be fully established with geuie operatios, icludig the set up of maagemet ad employees. The ROH shall ear ot less tha 50% of its total icome from related compaies ad braches outside of Thailad. The ROH shall icur expeditures i Thailad of at least the followig: l Operatig expediture (ot icludig depreciatio or paymets made to recipiets outside Thailad) of THB 15 millio per year or l Capital ivestmet expediture (ot icludig ivestmet i shares o the stock exchage) of THB 30 millio per year. * 10+5 years meas the tax privileges are grated for 10 years, ad subject to the ROH havig complied with all the coditios for that 10 year period ad havig expeded a total of THB 150 millio over that 10 year period o operatig expeses (ot icludig depreciatio ad operatig expeses paid to recipiets outside of Thailad, raw materials, goodwill, copyrights, or ay other rights, compoet parts, ad packig charges). If these coditios are satisfied, the ROH shall be etitled to apply to the Reveue Departmet for a extesio of the tax privileges for five more years. 10 Doig Busiess i Thailad 2014

13 Govermet icetives The ROH shall have employees: l l l With the miimum skills ad kowledge as prescribed by the Reveue Departmet, I ad from the fourth year owards, 75% of the total umber of ROH employees shall have those miimum skills ad kowledge, I ad from the fourth year owards, at least five of those employees shall ear a salary of at least THB 2.5 millio each per aum. The ROH shall otify the Reveue Departmet of its status as a ROH uder Sectio 11/6 ad its itetio to apply the tax privileges uder such Scheme, ad such otificatio shall be made withi five years of the law goverig its etry ito force (for example, by 5 November 2015). The ROH shall, i additio, comply with the tax compliace procedural rules. All coditios eed to be satisfied i order to be etitled for tax icetives uder the ROH Scheme II. Types of services that qualify for ROH Both Scheme I ad Scheme II have the same service qualificatios: Maagemet services Techical services Supportig services, icludig: l l l l l l l l l Geeral admiistratio, busiess plaig ad coordiatio Procuremet of raw materials ad compoets Product R&D Techical assistace Marketig ad sales promotio Persoel maagemet ad regioal traiig Fiacial advisory Ecoomic ad ivestmet feasibility ad aalysis Credit cotrol ad maagemet Idustrial Estate Authority of Thailad Act As a state eterprise uder the Miistry of Idustry, the Idustrial Estate Authority of Thailad (IEAT) is resposible for the developmet ad establishmet of idustrial estates, where factories for various idustries are orderly ad systematically clustered together. With idustrial estates as a implemetatio tool, IEAT also serves as a govermetal mechaism to decetralise idustrial developmet to provicial areas throughout the coutry. Idustrial estates are divided ito two zoes: Geeral Idustrial Zoe (GIZ) ad IEAT Free Zoe/Export Processig Zoe (EPZ). Doig Busiess i Thailad

14 Govermet icetives Ivestmet i a Geeral Idustrial Zoe (GIZ) Ivestors i a GIZ are eligible for the followig opportuities, optios ad privileges: 1. Permissio to operate service busiesses i the GIZ IEAT offers idustrial operators i a GIZ with comprehesive services essetial for idustrial operatios such as trasportatio, warehouses, traiig cetres ad cliics. 2. No-Tax privileges for operators i a GIZ l The right to ow lad i a idustrial estate l The right to brig i foreig skilled workers, plus their spouses or depedets l The right to remit moey abroad Ivestmet i Export Processig Zoe (EPZ) Uder the most recet Idustrial Estate Authority of Thailad Act, ivestors i a EPZ are etitled to additioal tax ad other privileges, icludig: 1. Operators i a EPZ are afforded the privilege of exportig products without ay restrictios ad with the added coveiece of beig able to brig merchadise or raw materials ito a EPZ. 2. Supplies take ito a EPZ are etitled to improved tax ad duty privileges, such as: l Tax burde relief for products take out of a EPZ for domestic use or cosumptio. Cotrary to the previous Act, cotet or raw material compoets, if produced domestically, ca be grated tax ad duty exemptios. l Operators i a EPZ remai etitled to claim privileges specified i the previous Idustrial Estate Authority of Thailad Act. These iclude: - Tax privileges, icludig import/export tax ad duty exemptios, as well as exemptios o Value Added Tax (VAT) ad excise tax o machiery, equipmet, compoets, raw materials ad supplies used for the productio of goods ad other merchadise. - Geeral privileges, comprisig the right to ow lad, ability to brig i techical experts (ad family members ad depedets), as well as the ability to remit foreig currecy to their home coutries. 12 Doig Busiess i Thailad 2014

15 Govermet icetives Petroleum laws To develop Thailad s atural resources, the Petroleum Act ad the Petroleum Icome Tax Act of Thailad offers special icetives i relatio to petroleum surveyig, exploratio ad productio. Petroleum related ivestmet icetives iclude: Import duty - imported machiery, spare parts ad materials required for busiess or for the use of drillig ad oil field service cotractors are exempt from tariffs. Lad owership - the busiess is permitted to ow lad used for its operatio. Immigratio - relaxed work permits ad visa rules exist for foreig experts, techical staff ad their depedets, icludig cotractors. Other icetives - the govermet shall ot restrict the export of petroleum except i very exceptioal circumstaces ad will also provide a guaratee that it will ot atioalise ay private idustrial activity. Doig Busiess i Thailad

16 Busiess orgaisatios available to foreigers Thailad recogises three types of legal busiess etities: Parterships Limited compaies Joit vetures Parterships There are three types of parterships i Thailad, differig pricipally by the liability attached to each. Uregistered ordiary parterships have parters that are joitly ad wholly liable for all obligatios of the partership. This form of partership is ot a legal etity ad therefore, for tax purposes, is treated as a idividual. Registered ordiary parterships that are registered with the Commercial Registrar are legal etities, separate ad distict from the idividual parters, ad are taxed as a corporate etity. Limited parterships comprise oe or more parters, whose idividual liability is restricted to the amout of capital cotributed to the partership, ad oe or more of the parters will be joitly liable, without ay limitatio for all obligatios of the partership. A limited partership must be registered ad is taxed as a corporate etity. Limited compaies There are two types of limited compaies - private or closely held compaies ad public compaies. The first is govered by the Civil ad Commercial Code, the secod by the Public Limited Compay Act. Private limited compay A Thai private limited compay has basic characteristics that are similar to Wester corporatios. A private limited compay is formed through a process that leads to the registratio of a memoradum of Associatio (Articles of Icorporatio) ad Articles of Associatio (By-laws). These are the compay s registered costitutive documets Public limited compay The procedures for settig up a public limited compay are similar to those for a private limited compay. A Thai public limited compay may, subject to compliace with the prospectus, Securities ad Exchage Commissio (SEC) approval ad other requiremets, offer shares, debetures ad warrats to the public ad may apply to have their securities listed o the Stock Exchage of Thailad (SET). 14 Doig Busiess i Thailad 2014

17 Busiess orgaisatios available to foreigers The table below illustrates the differet procedures ivolved i establishig a private limited compay ad a public limited compay. Private limited Public limited compay compay Miimum umber of atural persos as promoters Miimum umber of shareholders required at all times Public subscriptio of shares by prospectus Public subscriptio of debetures by prospectus Registratio fee per Baht (THB) millio of capital 3 3 Not allowed Allowed* THB 5, Allowed* Allowed* THB 2,000 * Subject to SEC approval. Appoitig directors Every compay must appoit at least oe director to act as a aget of the compay. The umber of directors of a private compay is ot fixed uder Thai laws, but set by the shareholders geeral meetig. A director is appoited or removed oly by geeral meetig. For public compaies, there must be at least five directors of which three must be Thai atioals. The directors are joitly resposible for esurig that the paymet for shares by the shareholders have actually bee made, as well as the proper distributio of ay divided or iterest as prescribed by Thai law. I additio, the directors have a statutory obligatio to keep the books ad documets prescribed by Thai law ad to eforce the resolutio of the geeral meetigs. Joit vetures A joit veture may be described, i accordace with geeral practice, as a group of persos (residet ad/or o-residet) eterig ito a agreemet i order to coduct a busiess activity together. It is ot yet recogised as a legal etity uder the Thai Civil ad Commercial Code. However, icome from a joit veture is subject to corporate taxatio uder the Thai Reveue Code, which classifies it as a sigle etity. Doig Busiess i Thailad

18 Busiess orgaisatios available to foreigers Other forms of corporate etities Brach of a foreig corporatio Foreig compaies may carry out certai busiess activities i Thailad through a brach office. Brach offices are required to maitai accouts oly relatig to the brach that is established i Thailad. It is importat to clarify before establishig a brach what costitutes icome subject to Thai tax. This is because the Reveue Departmet may cosider reveues directly eared by the foreig head office from sources withi Thailad as beig subject to Thai taxes. A coditio for approval of a Foreig Busiess Licese for a brach of a foreig corporatio is that miimum capital, amoutig to ot less tha THB 3 millio, must be brought ito Thailad. This amout may be subject to chages by subsequet Miisterial Regulatios. Represetative office of a foreig corporatio Foreig corporatios may establish represetative offices i Thailad to egage i limited o-reveue geeratig activities. These activities are restricted to: Sourcig of goods or services i Thailad for the head office or ispectig ad cotrollig the quality of goods that the head office purchases i Thailad Providig advice i various fields relatig to products directly sold by its head office to local distributors or cosumers Dissemiatig iformatio about ew products ad services of the head office Reportig to its head office o local busiess developmets ad activities The miimum capital cotributio of THB 3 millio for braches also applies to represetative offices. Regioal Operatig Headquarters (ROH) A ROH is a juristic compay orgaised uder Thai law that provides services to its domestic or overseas affiliated compaies/or braches. Such services relate to admiistrative, techical, maagemet ad other supportig roles, icludig R&D ad traiig. The govermet provides tax breaks ad icetives to attract foreig compaies to set up a ROH i Thailad. There are two schemes of a ROH model which the ivestors ca choose (for details see sectio 3.3). 16 Doig Busiess i Thailad 2014

19 Settig up ad ruig busiess orgaisatios Corporate registratio procedures Limited compay Before formig a limited compay, the chose corporate ame must first be registered ad approved by the Thai Commercial Registrar. A memoradum of Associatio must be filed, which cotais the approved ame of the compay, its busiess address, its objectives, the persoal details about the promoters ad the shares subscribed by each, ad data o the authorised capital of the compay. The ext step is to hold a statutory meetig of shareholders, durig which: l the articles of icorporatio ad by-laws are approved, l the board of directors is elected, l the trasactios ad expeditures of the fouders are ratified ad l the authorised auditor is appoited. The directors may the register the compay with the Commercial Registrar. Brach, represetative office ad RO Foreig corporatios wishig to do busiess i Thailad through a brach, represetative office or RO must submit the required documets. Documets issued by the Head Office must be otarised by a Public Notary or certified by the local Thai cosulate or embassy. Public securities I order to offer ewly issued securities for sale to the public, compaies must apply for approval from the Securities ad Exchage Commissio (SEC), complyig with the rules ad regulatios issued by the SEC Board accordig to the Securities ad Exchage Act B.E However, the offerig of existig securities by holders ca be doe without the SEC s approval, o the coditio that the compay discloses iformatio to the SEC prior to offerig securities for sale. Before offerig securities to the public, the compay or existig shareholders will geerally eed to file a registratio statemet ad a draft prospectus to the SEC. This is i order to provide iformatio to potetial ivestors. Doig Busiess i Thailad

20 Settig up ad ruig busiess orgaisatios Tax registratio A idividual perso who is subject to Thai persoal icome tax must obtai a tax idetificatio umber from the Thai Reveue Departmet. This must be doe withi 60 days from the date of earig the icome. A busiess which is subject to corporate icome tax must obtai a tax idetificatio umber from the Thai Reveue Departmet withi 60 days after its icorporatio or registratio. All persos whose aual turover exceeds THB 1.8 millio must register for VAT withi 30 days after the aual turover has exceeded that amout, uless specifically exempt. The applicatio for VAT registratio before the date of commecig busiess is allowed uder the coditios specified by the Director Geeral of the Thai Reveue Departmet. Licesig a factory The Factory Act B.E (1992) divides factories ito three groups: Group 1 factories that ca fuctio immediately without licesig. Group 2 factories that oly require otificatio to officials i advace of the start of operatios. Operators may commece operatios upo acquirig a receipt from the Miistry statig their report has bee received. Group 3 factories that require applicatio for a factory licece before the establishmet of the factory. Before the establishmet of a factory classified uder Group 3, the operator must obtai a factory licece from the Departmet of Idustrial Works, Miistry of Idustry. The operator of a Group 3 factory must otify the competet authority at least 15 days before a factory test-ru commeces, ad agai 15 days before actual maufacturig operatios start. A factory licece is valid up to the last day of the fifth caledar year from the year of issue, ad is reewable. A applicatio for the reewal of a factory licece must be filed to the authority prior to the expiratio of the curret licece. While the factory licece is valid, the licesee must pay a aual fee for the said licece, as determied by the authority. Prior permissio from the Miistry of Idustry must be obtaied for ay factory expasio, trasfer of machiery to other sites or trasfer of a factory site. To trasfer, lease, assig or sell a factory operatio, the same permissio must also be obtaied. 18 Doig Busiess i Thailad 2014

21 Settig up ad ruig busiess orgaisatios Audit ad accoutig requiremets Audited fiacial statemets of a juristic etity, icludig a limited compay, registered partership, brach office ad joit veture, must be audited by a Thai certified public accoutat ad submitted to the Reveue Departmet ad the Departmet of Busiess Developmet for each accoutig year. The audited fiacial statemets must be prepared i compliace with Thai Accoutig Stadards ad approved by the shareholders i a geeral meetig withi four moths after the ed of the accoutig period. Compaies listed o the Stock Exchage of Thailad or the Market for Alterative Ivestmet i Thailad must also prepare fiacial statemets, which are reviewed by Thai auditors o a quarterly basis Shareholdigs by o-residets Shareholders i a Thai compay ca be residet of ay coutry. However, some specific busiess activities do limit the percetage of foreig owership, as detailed i the Foreig Busiess Act Labour law Thailad s codified employmet laws, admiistered by the Departmet of Labor, Protectio ad Welfare, stipulate workig coditios, such as maximum work hours, holidays, sick leave, miimum wage ad severace pay. The laws, which may sigificatly affect a firm s decisio to do busiess i Thailad, also give employers some flexibility with regard to maagig labour, such as staff recruitmet processes, retrechmet policies ad employee trasfers. The maximum umber of work hours is eight per day or 48 per week. The exceptio is whe work is deemed by law to be hazardous, i which case workig hours are limited to seve hours per day ad 42 hours per week. Overtime compesatio must be paid at a rate of betwee 1.5 to three times the ormal hourly rates to qualifyig employees. Employees are etitled to a miimum of 13 atioal holidays per year, plus a miimum of six vacatio days after oe year of cosecutive work. Thirty aual paid sick days is stadard. A employer may require a doctor s certificate for sick leave that is three cosecutive days or more. Female employees are etitled to 90 days of materity leave, icludig 45 days of paid leave. The govermet has recetly itroduced a miimum wage of 300 Baht. Salaries for full-time office ad maagemet staff rage from approximately THB 15,000 per moth ($500 USD) for a fresh graduate to over THB 200,000 per moth ($6,667 USD) for maagemet level. Doig Busiess i Thailad

22 Settig up ad ruig busiess orgaisatios Staff recruitmet ad trasfers Employers ofte recruit staff through advertisemets i either Thai or Eglish laguage ewspapers, ad there are several domestic ad iteratioal persoel recruitmet services. Employers may specify criteria, such as prefereces for a applicat s age ad geder. Employers have the right to trasfer staff to other locatios, providig the trasfer is ot ordered with the itet to create persoal hardship. A employee s refusal to trasfer is legal cause for dismissal. Social security cotributios The Social Security Act requires all employers to withhold social security cotributios of 5% from the mothly salary of all employees, up to a maximum of THB 750 ($25 USD) per perso per moth. Employees with social security registratio may file compesatio claims for ijury, illess, disability or death if it is ot a cosequece of work performace, childbirth, child welfare, retiremet ad uemploymet. Severace pay Severace pay is madated accordig to employmet duratio. If busiess coditios ecessitate cutbacks, firms have freedom i determiig retrechmet policies. There is o first i, last out requiremet i Thailad. Workme s compesatio The Workme s Compesatio Act requires a employer to provide beefits at rates prescribed by law for employees who suffer ijury, illess or death while performig their work. I geeral, the compesatio amout is paid mothly at a rate of 60% of mothly wages, betwee a miimum of THB 2,000 ($67 USD) ad a maximum of THB 9,000 ($300 USD) per moth. Actual ad ecessary medical expeses must be paid up to THB 35,000 ($1,167 USD) for ormal cases ad THB 50,000 ($1,667 USD) for a serious ijury. Protectio of Itellectual Property Copyright The Copyright Act protects works i the categories of literary work, icludig computer programmes; dramatic, artistic ad musical work; audiovisual material, ciematic film or recorded material; dissemiated pictures or dissemiated soud; or ay other works i the fields of literature, sciece or fie arts. Copyright belogs to the creator of a work, subject to the followig coditios: For upublished work, the creator must be of Thai atioality or reside i Thailad or be a atioal of or reside i a coutry which is a member of the Covetio o the Protectio of Copyright, of which Thailad is a member, providig that the residece, at all times or most of the time, is spet o the creatio of the work. 20 Doig Busiess i Thailad 2014

23 Settig up ad ruig busiess orgaisatios For published work, the first publicatio must be made i Thailad or i a coutry that is a member of the Covetio o the Protectio of Copyright. If the first publicatio was made outside of Thailad or i a coutry which is ot a member of the Covetio, the work created must have bee published i Thailad or i a coutry which is a member of the Covetio withi 30 days from the first publicatio. Alteratively, the creator must have the qualificatio, as prescribed above, whe the work was first published. Copyright is valid for the period of the creator s life, plus a additioal 50 years thereafter. Where the creator is a juristic perso, the protectio period is 50 years from the date of creatio or 25 years whe the copyright applicatio is for art. The followig are ot deemed eligible for copyright protectio uder the Act: Daily ews ad facts that are, by ature, merely ews items The Costitutio ad laws Aoucemets, orders ad regulatios of miistries, bureaus, departmets or ay other agecy of the state or local jurisdictio Court judgmets, orders, ruligs ad official reports Traslatios ad collectios of items specified above, which are prepared by govermet agecies or local admiistratios Thailad is a member of the Bere Covetio for the Protectio of Literary ad Artistic Works. This allows certai copyrights registered i other Bere Covetio coutries to be eforced i Thailad. Trademarks The Trademark Act of Thailad govers registratio of ad provides protectio for trademarks. The Act defies a trademark as a symbol used i coectio with goods, for the purpose of idicatig that they are the goods that belog to the ower of the trademark. The trademark must be distictive ad ot idetical or similar to those registered by others. Registratio of a trademark may be completed by the trademark proprietor or through a aget. Applicatio for registratio must be made o official forms duly siged either by the proprietor or the aget ad filed with the Trademark Office. If a applicatio is approved, the registratio will be published i the Official Joural. Oce published ad ot opposed, the proprietor has the exclusive right to use the registered mark o all of the products for which registratio has bee grated. Trademark registratio is valid for 10 years from the date of applicatio. It is reewable for a ulimited umber of periods, of 10 years each. Reewal of the registered trademark must be made withi 90 days prior to the date of expiratio. The Trademark Act allows the protectio of Service Marks, Service Names, Collective Marks, Certificatio Marks ad Trade Names. Doig Busiess i Thailad

24 Settig up ad ruig busiess orgaisatios Patets The Patet Act protects both ivetios ad product desigs ad pharmaceuticals. Thailad has umerous bilateral agreemets eablig citizes of other coutries to file patet applicatios i Thailad. However, Thailad is either a sigatory to the Paris Covetio for the Protectio of Idustrial Property, or a sigatory of ay other iteratioal covetio for reciprocal protectio of patets. Uder the Patet Act, patets for ivetios are valid for 20 years, ad patets for desigs valid for 10 years. The ivetio must be patetable uder the followig requiremets: Havig ovelty Ivolvig a ivetive step Capable of beig made or used for some kid of productio activity Ay patet that is widely published ad/or pateted or registered i a differet place prior to the filig date of the Thai applicatio is ot patetable i Thailad. Also, the followig are ot patetable i Thailad: Microbes ad ay compoets thereof which exist aturally, for example aimal, plat ad extracted substaces from aimals or plats Scietific or mathematical rules or theories Computer programmes Methods of diagosis, treatmet ad care of huma ad aimal diseases Ivetios that are cotrary to public order or morality, public health or welfare 22 Doig Busiess i Thailad 2014

25 Corporate taxes The pricipal taxatio law of Thailad is the Reveue Code I Thailad, taxes are collected i two ways. There are direct taxes (persoal ad corporate icome taxes ad petroleum icome tax) ad idirect taxes (Value Added Tax, excise tax, customs duties, stamp duties ad specific busiess tax). Geerally, icome tax i Thailad is by self-assessmet whereby tax declaratios ad paymets are assumed to be correct. However, the Reveue Departmet has the power to audit taxes ad taxpayers fiacial records. Value Added Tax (VAT) is collected upo cosumptio of goods ad services ad is also levied o imports. Corporate Icome Tax Corporate Icome Tax (CIT) is a direct tax levied o juristic persos (compaies) established uder Thailad or foreig law ad coductig busiess i Thailad, or which derives certai types of icome from Thailad. The term juristic perso (compay) meas a juristic compay or partership operatig i Thailad. Compaies icorporated i Thailad are subject to corporate icome tax o all profits derived from both domestic ad foreig sources. The term also icludes ay joit veture ad ay tradig or profit-seekig activity coducted by a foreig govermet or its agecy, or by ay other juristic body icorporated uder a foreig law. Taxable etities Corporate icome tax is levied o both Thailad ad foreig compaies. A Thailad compay meas a compay icorporated i Thailad. A Thailad compay is subject to tax i Thailad o its worldwide et profit at the ed of each accoutig period (12 moths). A foreig compay meas a compay icorporated uder foreig law. Geerally, a foreig compay is treated as coductig busiess i Thailad if it has a office, a brach or ay other place of busiess i Thailad, or if it has a employee, aget or represetative that is coductig busiess i Thailad. A foreig compay coductig busiess i Thailad is subject to CIT oly for et profit arisig from, or i cosequece of, busiess coducted i Thailad at the ed of each accoutig period. A separate profit remittace tax of 10% of the amout remitted is imposed o foreig compaies that remit their Thailad based profits offshore. Profit meas ay sum set aside out of profits, as well as ay sum which may be regarded as profit. Doig Busiess i Thailad

26 Corporate taxes A foreig compay, ot coductig busiess i Thailad, but derivig certai types of icome from Thailad, such as service fees, iterests, divideds, rets or professioal fees, may be subject to CIT o the gross amout received. It is collected i the form of withholdig tax, by which the payer of icome shall deduct the tax from the icome at the rate show i sectio 8 (Withholdig tax rates paymets to o-residet coutries). A foreig compay egaged i iteratioal trasport is also oly subject to tax o its gross receipts. Fiscal year The ordiary fiscal year for tax submissio is for the 12 moth period edig 31 December. However, with coset from the Director-Geeral, corporate taxpayers may choose a alterative accoutig period for the purpose of determiig taxable icome. Determiig compay taxable icome The CIT of a compay coductig busiess i Thailad is calculated from the compay s et profit o a accrual basis. A compay must take ito accout all reveue arisig from, or i cosequece of, the busiess coducted i a accoutig period ad may deduct all expeses i accordace with the coditios prescribed by the Reveue Code. For the accoutig period commecig o or after 1 Jauary 2012 year, the corporate icome tax rate i Thailad is 23% o the et profits. Startig from 1 Jauary 2013 the rate is reduced to 20 % for the ext 2 accoutig periods. However, the rates vary depedig o the type of taxpayer. Additioal deductios o certai types of expediture may also be allowed. Foreig tax relief For icome derived from coutries that do ot have a Double Taxatio Agreemet (DTA) with Thailad, foreig tax credits are allowed. These foreig tax credits are subject to certai criteria ad coditios, up to the amout of Thailad tax that would have bee payable had the icome bee derived i Thailad. The same rules apply with regard to foreig tax relief for DTA coutries. Losses ad cosolidatio Each compay is taxed as a separate legal etity. Losses icurred by oe affiliate may ot be offset agaist profits made by aother affiliate. Losses ca oly be carried forward for a maximum of five years. 24 Doig Busiess i Thailad 2014

27 Corporate taxes Divideds Divideds received by a compay listed o the Stock Exchage of Thailad are exempt from tax. Exemptios also apply to divideds received by ay other compay icorporated i Thailad that holds at least 25% of the votig shares i aother Thai compay, without ay cross shareholdig, either directly or idirectly, providig that the related ivestmets have bee held for a period of at least three moths before ad three moths after the receipt of the divideds. Where a Thai compay does ot qualify for the shareholdig period specified, it will evertheless oly eed to iclude i its assessable icome a amout of 50% of a divided received from aother compay icorporated i Thailad. Divided paid by a foreig compay to a Thai compay after November 2005 will be exempt from Thai CIT if: The payig compay has a miimum corporate tax rate of 15% ad The Thai compay has a 25% or more equity iterest i the foreig etity ad The Thai compay maitais its shareholdig i that compay for a 6 moth period. Repatriatio of Profits ad Trasfer Pricig I additio to payig divideds, profits may be repatriated through other various meas, icludig paymet of royalties ad/or service fees. Although there is o separate trasfer pricig legislatio i Thailad, guidelies have bee issued to couteract aggressive iter-compay pricig practices ad to esure such paymets reflect the true market value. These guidelies are iteded to prevet the maipulatio of profits ad losses withi a group of related compaies ad esure that goods ad services traded betwee the related compaies are priced at a arm s legth value. The Reveue Departmet also has the power to assess icome resultig from trasfers which it deems is below market value. Doig Busiess i Thailad