Foreign business ownership/employment
It was never easy, but the goal posts keep moving further away with Foreign
Business Act changes...
mainly on information and advice from experience for ordinary foreign long term residents or those semi- or
in Asia. But in today's changing world, most
ex-pats need extra income, so many who come want to run their own business in Thailand,
with or without Thai partners. This is still possible, but there are a lot of
requirements which we will go into below. We strongly recommend you
understand the implications of a foreigner running a business in Thailand
before pursuing your 'tropical paradise dream'. It could end up as an
expensive nightmare! So-called ''professional' companies selling
businesses and law offices may tell you otherwise, but they are only
interested in their commissions and fees, which are substantial.
avoid most of the problems associated with starting a business in Thailand
(or any foreign country) visit our
easy alternative page.
As you will read below, the authorities
seem to be going out of their way to discourage foreigner-owned small businesses. There
were no changes made after the 2006 military coup, but the recently elected
new government will proceed with new legislation. This includes
to the Thai Foreign Business Act. Company control will be based on voting
rights rather than shareholding. With a maximum of 49% foreign shareholding
allowed, the owner may be outvoted by the 51% majority Thai shareholders in
a control-related issue.
categories of foreign business or investment, the Board of Investment
of Thailand (BoI) offers
a government-sponsored scheme which includes tax and other incentives. Preferential treatment
is also given to US citizens going into business. Visit the
website for further information.
Many foreigners over the age of 50 take
advantage of the
retirement visa (non immigrant visa for retirees). The financial requirements are
relatively easy to comply with, including a basic medical certificate, annual evidence of funds,
a pension or regular
income. There's more detail on our Visa Page. However,
the retirement visa does not allow any form of employment or work, even as a consultant
– paid or not. Foreigners may receive profits from a business, so
they can invest
in Thai businesses, but cannot be involved in any way with the
day-to-day running without a work permit specific to that business
and its location. Few options are available to those who need to
earn income in Thailand without transgressing the immigration and
foreign labour laws. Internet-based business is possible but foreigners with
business web sites are now
supposed to declare this to the authorities.
Non-Thai website hosting is advisable. Read more about
internet businesses which can be managed from any physical
location in Thailand, Asia or virtually anywhere else, with
proceeds available as cash wherever you are.
Partnership with a Thai
To own and run a local small business, typically a restaurant, bar, guesthouse or retail shop, the usual method is to have a Thai
partner (perhaps a wife, lover
or friend) who will 'front' it. It is unwise to have your
Thai lawyer as a partner, by the way. Inconspicuous Thai-owned small
businesses have less to comply with regarding Thai bureaucracy. Provided the
foreigner stays in the background or acts like a paying customer, fewer problems
like licensing, VAT, accounting and
auditing, to name some, are likely to be encountered. Most foreign-owned
bars, restaurants and
guest houses in Thailand and also the
Philippines are operated this way.
Whether there is a profit at the end of
it more or less depends on the relationship with
the partner – business or personal. Of the many ex-pats who try it,
few are successful. Many end up losing all their money
one way or another – especially where there's a Thai wife, lover
or other partner is
word of warning to those who have never had a successful business in their own country: don't
try it in Thailand! Stories of failure and loss are legendary.
Owner/operators (including Thai nationals) of bars and clubs which provide
more personal hospitality or
customer entertainment, apart from complying with local licensing and regulations,
need to maintain good relationships with police or the local mafia
regular contributions to their 'welfare funds'. Depending on what type of
entertainment or 'personal services' are on
offer, these donations can be a considerable portion of gross income (not
profit). However, more conventional
businesses do not usually encounter these problems. Read an article on the 'joys' of
owning a bar in
|click on eBook|
ICON Group International: Franchising in Thailand: |
A Strategic Reference, 2007
Registering a Thai Company and Employing
its Foreign Owner
For a foreigner to stay in Thailand and run (work in) even a perfectly
legitimate business, there is really only one legal option and the requirements are quite
extensive. The main requirement is
the issue of a Work Permit. There is a list of business
activities restricted to Thais only.
Business applications need to be handled by a lawyer experienced in these
reputable Thai lawyer (considered by some as a contradiction in
terms!) is best
found by recommendation from a foreigner already resident or in business in
Embassy lists are not reliable. Charges vary and will include application
the various government and licensing authorities. It is essential to get a
quote or invoice beforehand, detailing as much as possible. Some lawyers
will expect 50% of their fee on application and the remainder when completion is
imminent. Due the nature of Thai law and regulations which often change without
warning, this can be a frustrating and time-consuming exercise for all concerned, with inexplicable delays.
However, there's much more to come after you have complied with all the
requirements and are
actually trying to run your new business! Read on...
It is worth noting that
Thai Immigration, which is a
department of the Royal Thai Police uses the word 'alien'
in English translations
to describe anyone who is not a registered Thai citizen. This includes the
many groups of hill tribe people who have lived in the north of the country
for generations. Regulations become more stringent each year. Currently they require foreign 'aliens' to be employed by a limited company
(Co., Ltd.), in a position that a Thai would not qualify for including
certain businesses or professions. This legislation also covers work that
most Thais feel is beneath them, like manual labour, which is why Lao and Burmese
labourers are allowed into the country to work usually for a pittance.
Foreigners in Thailand are naive if
they think that their
knowledge, business skills, willingness to employ people or generate income and
taxes for the overall benefit of Thailand and Thai people, is wanted, much
by the Thais.
One-way investment including
upmarket tourism is
far more preferable and this is encouraged. There are former government-sponsored
schemes to attract money from the rich and famous. Low budget tourists or
retirees with relatively low resources are tolerated rather than welcomed,
in spite of the overall financial benefits they bring.
A foreigner can form or buy
a Thai company, and even be the sole director of it, but Thai citizens must jointly own at least 51% of its shares
– meaning a majority is technically under Thai control. Currently it is possible to allocate shares
to several unrelated people, who could have no combined effect on the company's business,
and this can be arranged by the lawyer, but along with most things connected
with business in Thailand, there are
considerable risks involved.
Amendments to the Foreign Business Act
this year will change things for a foreign business owner in Thailand.
Company control will be based on voting rights rather than
shareholding. As only a 49% foreign shareholding is allowed, it would be
technically possible for the owner to be outvoted by the Thai majority
There is also a minimum amount of paid up capital
required before a foreigner can be employed. Previously this was a
figure on paper only. Now, evidence in the form of bank accounts or
company assets need to shown. See further
Work Permit and
If the business application involves a foreigner being employed, then a
Work Permit application can be started simultaneously.
After the company has been set up or taken over and all the fees
etc. paid, the Work Permit needs to be approved too. Any foreigner who wants to
be employed by the company (with or without
reimbursement), even a sole director, needs a Work
Permit which is issued by the Employment Office of
the municipality or city where the business will be located. This is not an easy
process now, although it is believed that Phuket may be an exception
to the general rule. The list of requirements (may also be available in English)
producing original documents regarding education (no matter how long ago
they were issued), other qualifications and more, including identification
and house papers for the minimum number of
local staff that must be employed before a foreigner is allowed to be on the
Once you have your work permit, which can be issued for one
or more years, you take it to
Immigration and apply to have your visa changed to a non-immigrant
(business) visa, paying the annual fee.
you have been staying in Thailand on extension stamps during your
application, you should briefly leave and re-enter
before applying for the change of visa type, as the expiry date for your
new business visa will be one year after your most recent entry into Thailand.
work, but strictly in the designated occupation at a single place of business for
a certain period of time, after which the permit must be extended or
renewed. Periodic inspections may be carried out and penalties for non-compliance
include fines and or prison terms.
Here is more on the different classes of business
visa for Thailand.
Annual Re-application (renewal)
The non-immigrant business visa requires annual re-application with
all the same personal paperwork being re-submitted, plus audited
annual accounts (see below) for the business. Three sets of copies
of each document (there may be a hundred or more) need to be signed by the
director(s) over the company stamp.
Regulations for applications for extension of a Non Immigrant "B"
visa have been further reinforced and now must be supported by the following
Certified photocopies of the company's Affidavit and Shareholders' List
certified as a true copy of the original by the Ministry of Commerce; the
most recent Annual Financial Statements certified as a true copy of the
original by the auditor who audited it; copies of the company's most
recent Personal Income Tax Return (PND1) with the Revenue Department's
receipt plus photocopy of the applicant's most recent Annual Personal Income
Tax Return (PND91), certified as a true copy of the original by the Revenue
Department; photocopy of the employing company's most recent Social Security
Fund monthly return certified as a true copy of the original by the Social
Security Fund Office.
In addition to the above, photographic evidence is now required when making
the initial application to extend a Non Immigrant "B" visa. When making the
first application for an extension the applicant must also supply
photographs of every employee at their place of work. This came into effect
in May 2007. It is so that Immigration has photographic records they can use
to verify employees when making surprise checks on the premises.
visits are to be carried out so as to check the supplied information is
correct. Any discrepancies may result in cancellation of the visa
application and reporting to the police of the company and the unregistered
There is no automatic
renewal. Each year is treated as a new application which may be submitted to
a local Immigration Office, but the paperwork goes to Bangkok for
approval. This usually takes several weeks, during which time short
temporary visa extensions are granted, meaning more visits to both
Immigration and the Labour Office, where additional fees will be payable.
A further point to note is that although the Work Permit and Business Visa are
interdependent (they both need to be kept valid), their renewal dates will not coincide as they are issued by different
authorities. Again, more visits and additional fees payable during
the overlapping periods.
Providing all the above goes well, and you're 'in business', there will
be ongoing requirements for companies – especially those owned by foreigners.
Additionally there are paid-up capital issues, licensing,
taxes on personal income as well as
company profits; social services (medical treatment for staff
including yourself – a small perk!), workmen’s compensation contributions,
VAT and probably other issues to comply with. Submissions and most payments are made monthly
including withholding taxes on salaries and staff wages (minimum wages
apply). As all accounts must be submitted in the correct format and in
Thai language, the company will need the services of an
accountant and the services of an independent auditor (a 'nice little
earner' for those concerned) for the annual audit. Apart from the expense, this is time-consuming and often frustrating.
At the end of it, your business will need to be quite profitable to cover all the overheads as well as
allow drawings to cover normal living expenses, if this is the
The required number of local staff per foreigner varies for the type of
business. There must a minimum number of Thai
proper ID cards and house papers. Other aliens such as
hill tribe, Burmese or Lao who carry ID cards issued by the local municipality
can be taken on as extra staff. These people often make
better, more diligent and reliable employees than local Thais, especially in
the service industry. Physical checks by Immigration at your place of business
will be made before Work Permit/visa approval; also 'spot checks' if
they believe they have reason (perhaps from an informant). There is the risk of
heavy fines, imprisonment or deportation for foreign employers or staff for non-compliance with the law, and warning
signs are displayed in English outside relevant government offices.
Ignorance is no excuse.
Rent is paid in advance either annually or for the full term of the lease.
Monthly rental is less common, but may be agreed in advance.
If you are leasing a property such as a shop-house, standard forms may be
available in Thai. Get an English translation and make sure all
contingencies are covered and that the English version is the legally
registered one. Also if there is removable equipment or furniture involved,
include an inventory as an addendum to the lease, also noting
anything that is already damaged, broken or in disrepair. A refundable deposit
will be required as part of the lease and Thai landlords are notorious for
retaining part or all of this for 'damage' or missing items on termination
or expiry. Depending on the condition of the premises before you move in it
may be possible to negotiate a waiver of the equivalent of one month's rent
for painting, decorating and
electrical wiring and switches, and plumbing and waste water drainage, water
pumps, tanks etc. beforehand. Do not sign or pay in full until promises of
replacement or repair have been
kept. Get signed receipts for everything.
Property tax must be
paid on Thai properties leased for business purposes. Landlords are
entitled to charge the tenant for it as part of the lease, and a
clause is usually included. The tax may vary between areas but 12.5% is common.
The landlord may present you with the bill from the municipality and will
expect you to pay cash. You should see the receipt once the tax has been
paid and keep the original (give the landlord a copy) for your own accounts.
Social Services, Income and Other Taxes
There are legislated minima for
issues including a minimum number of Thai staff per working foreigner,
their wages, foreigner salaries, social and medical benefits contributions. For 'aliens' it depends on which 'planet'
you come from, but it's around USD1000 per month, and income tax is about
10%. The company will pay tax on your salary too, so if it's your company, you
are effectively paying tax twice. Fees for licences and taxes may not seem large amounts compared to running
a business in Western or other countries, but they can all add up to a
significant portion of your profits.
After a period of grace for new businesses, the accounts will need to show a
profit on which Corporation tax will be
payable. Thailand has caught up quickly with American and European bureaucracy.
On the other hand, 'all-Thai' owned businesses are less conspicuous than foreign ones which can
be closely monitored by the authorities.
Been there, done
From the above, you may have guessed that the writer has 'jumped through all the
hoops' above. Repeatedly, for a small but successful restaurant for more
than 5 years.
Each year the 'red tape' and cost became longer and higher than the
previous, until enthusiasm waned and a new owner took over three years ago.
He confirms this to be the case in spite of having his Thai wife as a
Unless you really know what you are doing and also
enjoying it, there's
not much to gain (and potentially a lot to lose) by trying to set up and run a small business in Thailand,
especially if you need to depend on it for a living. However, if you are prepared to risk it, it's
a way for you to keep relatives and friends of your newly-discovered
'extended family' in gainful employment or doing something
more useful than producing babies, sitting around doing little but watching
mindless TV programs, drinking or playing cards, or
even to keep you from being bored! But as far as making money
is concerned, there are easier and
safer ways. One option is to leave your funds in the bank or invest
elsewhere – maybe outside
If by now you're totally put off starting a conventional business in the
"Land of Guile", but still want to live in Thailand and earn a living,
there's still hope as there
are other ways of earning income while living or retired in
foreign countries. Here's
an easier alternative we found.
In spite of all this, Thailand can still
be considered as a suitable destination for foreign retirees with
modest resources or income.
See also our
Business Ownership in Asia page for further reference.
AOFT attempted to lobby the Thai government about unfair legislation
imposed on foreign residents or investors in Thailand, compared to what is
available to Thais and other foreign nationals in many other countries. It
appears this organisation became defunct in 2008 as the link we had to
http://aoft.org now leads to a video game site. Research brings up no
reference to the AOFT in Thailand after 2008. Draw your own conclusions