Foreign business law has consistently been an issue in Thailand. The laws are continually being revised commiserate with the evolution and steady incremental increase in the overall presence of foreign run and foreign based companies .The Department of Business Development has recently announced the conclusion of its investigation on foreign business law malpractice .It is becoming more and more apparent that “Big Brother” is watching your foreign business endeavours therefore, I strongly recommend you consider this update seriously.
It is no surprise that Thailand like all other countries protects its domestic owned businesses from foreign competition using its right to enact pertinent laws and regulations. The Foreign Business Act limits a foreign owned company’s involvement in various business sectors. The exclusions and limitations of these business sectors are categorised into 3 sections.
Category of Business pertinent to Schedule 1
Off Limits and Excluded from foreign Competition
Category of Business pertinent to Schedule 2
Possible Only Upon Positive Acceptance of Licence Application
Category of Business pertinent to Schedule 3
Possible Only Upon Positive Acceptance of License Application
Prior to further detail it behoves the potential business man in Thailand to note the following;
There are severe penalties for Non-Compliance to Business Restrictions:
Three year prison term and or fine of 100,000 – 1,000,000 Baht
Foreigners cannot engage in the following business:
– Newspaper Publishing ,Radio or television broadcasting
– Rice farming , arable farming or orchard farming
– Rearing livestock
– Forestry and the processing of wood from forests
– Fishery, in relation to marine life in Thailand waters .
– Extraction of medicinal herbs
– Trading and auctioning of Thai antiques which are of historical value to the country
– Manufacturing of Buddha images and alms bowls
– Trade in real property
The Variety of Companies one may Start in Thailand :
A) Registered Ordinary or Limited Partnership
B) Representative Office , Regional Office or a Branch Office
C) Limited Company
*Registered Ordinary or Limited partnership:
One partner’s liability limited the other partner’s is unlimited.
Non-existent in Thai partnership and unlike Thai partnership limited partnership must be registered
*Representative Office has limited activities:
1-Reporting on business movements in Thailand
2-Providing advice related to products that are being sold to distributors or customers
3-Sourcing goods and services in Thailand
4-Inspecting and controlling the quality and quantity of goods purchased or ordered to be manufactured in Thailand
5-Introducing information regarding new products or services
The regional office will conduct its business in Thailand on behalf of its head office based outside of Thailand Kingdom.
Foreign company must have at least one active branch office or affiliate in Asia. Regional offices are restricted from earning income, purchasing, selling, and negotiating while based on Thai soil .
Not limited to the ’non-trading“ activities . They are allowed to earn income
– Private or closely held company that has only a limited number of members.
– Public company
Minimum of 15 promoters
Minimum of 5 members Board of Directors at least half of them Thai
Obtaining a work permit in Thailand requires a company to comply with capital, fiscal, salary and employment standards.
The Thai Alien Employment Act lays down the process, which can seem complicated but has the objective to protect the Thai labor force and include only skilled foreigners in the kingdom’s market.
The first step in obtaining a work permit is to have a Non-immigrant Visa (Business Visa). The second issue is the nature of the work: Foreigners must be aware that they are only allowed to perform work that does not violate the Alien Employment Act (there is a list of professions prohibited for foreigners).
In general, foreigners are not allowed to perform labor work and some skilled jobs that have an extensive Thai work force such as architects, doctors etc. Once we have verified that the position is allowed we have to comply with company financial requirement set out by Thai regulations:
Capital and fiscal requirements
1) Capital must be at least 2 million baht (fully paid) for each foreign employee hired
2) Alternatively the Company can hire one foreigner if its total corporate income tax payment had been at least 5 million Baht for the past three years.
3) if the Company is engaged in export, a revenue equal to 3 million Baht of sales outside Thailand can be used as an alternative to the capital requirements. An additional foreigner can be hired for every 3 million baht of sales, with a maximum of 3 foreigners.
Thai/ foreigner ratio
The employer has at least 5 Thai employees per each employee up to a maximum of 5 foreign employees.
Canada, Japan, United States 60,000 THB
Europe (incl. UK) Australia 50,000 THB
Hong Kong, Malaysia, Korea, Singapore, Taiwan 45,000 THB
China, India, Indonesia, Middle East, Philippines 35,000 THB
Africa, Cambodia, Laos, Myanmar, Vietnam 25,000 THB
Persons working for newspapers in Thailand 20,000 TH
The work permit application can be summarized in the following documentation:
work permit form by issued by Thai’s labor department
Invitation letter from the employer duly signed by the Director with company stamp.
Full set of Company documents (affidavit, shareholder list, certificate of incorporation)
Financial report of the previous 3 years of activity. If we are applying for a NewCo, we must notify the labor department with a formal letter, duly signed by the authorized Director.
Evidence of the employee’s personal income tax payments or Withholding tax form.
Cleary show the work place and address(map and photo).
Employee’s valid Passport copy, signed on every page, including the visa page.
A recent medical certificate.
Degree copy of the employee and related qualification. The documents must be in English or else have to be translated and certified by the referenced embassy.
How can we overcome the burder of land ownership in thailand for foreigners?
Thanks to the liberal interpretation of condominium law, foreigners could legally acquire land in Thailand.
In general, aliens are not allowed to own the outright ownership in a land plot in Thailand.
legally speaking foreign buyers have few options to acquire a property in Thailand with full rights of ownership, meaning the property is registered under the owner’s name, and the owner has the right to use or sell the property at his/her own discretion.
One popular option is the 30 year leasehold where a foreign buyer is allowed to hold a leasehold title for 30
years with the possibility of extending for another 30 years.
Another option is to purchase a freehold condominium
unit, provided that foreign individuals and companies own up to 49% of the total areas of each condominium.
Condominium ownership in fact has been primarily used as a vehicle for foreigners to purchase a freehold
property in Thailand.
The term “condominium” is defined by Thai law as a commercial building which is divided into multi units; each unit is individually owned and all unit owners share the ownership of the common areas.
Typically when we think of a condo, we refer to one room in a high rise building that has a nice lobby and full facilities, such as elevator(s), 24 hour security guard, or a fully equipped gym with a swimming pool. But, there is a catch here. The land where the building is built on is not owned by the unit owners, but belongs to the common property. So does the exterior of the building. The unit ownership is limited
from the (middle of) wall to (middle of) wall, from the floor to the ceiling. So, another way of looking at it is, when a foreign buyer purchases a condo unit, what he gets is merely an air spacein one high rise building, along with the right to use common facilities.
As the foreigner seems to agree with that explanation, his lawyer continues defining what a townhouse is. Put simply, a townhouse is a particular design of a house that is built attached to adjacent house. Typically it is built in rows and has 2 or 3 stories. The main difference between a townhouse and a condo is that the ownership of the townhouse comes with the ownership of the land where it’s built on. The exterior of a townhouse also belongs to the owner, but there are also common
areas shared among townhouse owners. Since the townhouse comes with land,
most people commonly perceive that it is only available to Thai citizen, not foreigners. It holds somewhat true until the Council of State issues its legal opinion to clarify this matter.
According to the Condominium Act B.E. 2522 (1979), a
“condominium”means a building that person may separate the ownership into proportions; each of which consists of the personal ownership of the personal property and the common ownership in the common property. Let’s examine this a little more closely. The definition emphasizes on separate ownership of
property, but does not however stipulate the formatof the building. So, the Council of State is ofthe opinion that so long as a building can be separated into the private propertyand the common property
, regardless of the format of the building, it can be considered a condominium. This is where some developers get creative by offering a townhouse style building with a condominium ownership. They build townhouses or row houses where the areas can be distinctly divided into personal property and common property, and to make more attractive, a piece of land outside the building is included as part of the personal property. Hence, according to the Council of State’s interpretation, this can be registered as a condominium because it has separate personal and common property. Effectively such registration may cause buyers, including foreigners, to obtain the ownership in both building and land.
In practice, it will depend on the land official who takes the registration at the local land office. In case the land official allows the registration of such townhouse with condominium ownership, it will pave the way for foreign buyers to get around the law restricting foreign land ownership in Thailand.
he Council of State’s liberal interpretation of condominium law makes it possible for foreigners to
have the right over the building and the land, but the land officials would have the final say on the success of the condominium application.