In Thailand, you have the option to register a company as a Thai limited company or a 100% foreign business ownership. It is well known that foreign businesses in Thailand are strictly regulated by the government in terms of business activities. On the other hand, Thai companies will be presented will bigger advantages in business engagements, lower setup costs, and more.
For foreigners looking to come to Thailand and establish a business, there are legal ways that you can follow to be able to achieve 100% foreign ownership of the company. You will most certainly have to factor in that this process is time-consuming and the result can be unpredictable. The government will likely ask questions here and there to see whether or not your potential business brings value to the country. There are 3 legal methods by that foreigners can establish ownership and those are:
- Foreign Business License
- Board of Investment (BOI)
- US-Thai Treaty of Amity
Businesses in Thailand will have to respect the ratio of 51% Thai ownership meaning that foreigners will be limited to ownership of 49%. The moment a company's foreign ownership exceeds 50%, then they are no longer considered a Thai company but a foreign majority-owned company.
Foreign Business License
The biggest difference between a Thai company and a foreign business is that business operations are strictly limited under the Foreign Business Act (FBA). As many business activities are prohibited to foreigners, those that aren't restricted will be allowed for 100% foreign business to operate under the condition that they acquire a Foreign Business License (FBL). To understand clearly, you will first have to research the list in which the FBA divides the business categories and see where you lie on.
Applying for the FBL can be a time-consuming process and is commonly known as rejection unless you have connections with the government. If you are looking for a higher chance of acceptance, your business will need to be unique, strong in value for the country, and not compete with Thai businesses. Without the FBL, you will not be able to conduct any business and if done so, you can be fined heavily and may even go to jail for up to 3 years which is not ideal for you.
Board of Investment Promotion
Another method that you can be doing is by receiving a promotion from the Board of Investment (BOI) to achieve 100% foreign business. The way the BOI operates is that they promote businesses that are considered start-ups if they have a value that can be brought into Thailand in the future. As foreign businesses are commonly restricted to a lot of business activities, the BOI can help you operate in more specific sectors while providing certain benefits that Thai companies provide.
Here is the list of business activities that are eligible for a promotion from the BOI:
- Agriculture and agricultural products
- Mineral, ceramics, and basic metals
- Light industry
- Metal products, machinery, and transport equipment
- Electronics and electrical appliances industry
- Chemicals, paper, and plastics
- Services and public utilities
In fact, when you compare companies that are promoted by the BOI to Thai limited companies, there are certain benefits that go over Thai companies. For example, the effective corporate tax rate for regular Thai companies is 20% while BOI companies are 0%. Import machinery will require a VAT tax from the companies for Thai business but for BOI companies will have no tax.
US-Thai Treaty of Amity
This is a more common method that is only applicable to US citizens. The US-Thai Treaty of Amity and Economic Relations is an agreement between the USA and Thailand that allows American companies to have full ownership of the company in Thailand without going through the hassle of certain procedures. It's important to note that you are still required to obtain the FBL in order to conduct business activities in Thailand.