Thailand legislation guide
By Kowit Somwaiya and Naddaporn Suwanvajukkasikij
LawPlus Ltd
Tel: +662 636 066 Fax: +662 636 0663 Website: www.lawplusltd.com
The Central Partnerships and Companies Registration Office of the Ministry of Commerce issued a regulation dated January 4 2011 to set out new rules on filing and registration of companies. The regulation requires, inter alia, documents signed outside Thailand to be notarised by a notary public or legalised by the Thai Embassy.
Other major changes are the recent amendments to the Civil and Commercial Code that include:
- the reduction of the minimum number of promoters and shareholders of private limited companies from seven to three;
- the change that allows registration of a company at the same time as the registration of its Memorandum of Association, rather than waiting for seven days after the registration of the Memorandum of Association as in the past; and
- the requirement for a notice of a shareholders meeting to be published in a local newspaper and sent to all shareholders by registered mail before the meeting date – at least seven days for passing a normal resolution and at least 14 days for passing a special resolution.
Foreign ownership limits
Some businesses are prohibited or restricted by the Foreign Business Act B.E. 2542 from being majority-owned or wholly-owned by foreigners. But some restricted businesses can be majority-owned or wholly-owned by foreigners if the businesses have obtained a foreign business licence (FBL). Retailing, wholesale, advertising, hotel services, restaurant services and most other services are restricted, while manufacturing businesses in several industries that produce and sell their own products are not prohibited or restricted.
In practice, obtaining an FBL is not difficult if the basic requirements are met. The requirements are not very stringent while the Foreign Business Committee has discretion to grant an FBL.
A company majority-owned or wholly-owned by foreign shareholders can operate a restricted business without obtaining an FBL. But this is only if it is granted an investment promotion certificate from the Board of Investment or a permit to operate business in an industrial estate from the Industrial Estate Authority of Thailand.
Investment promotion
Thailand promotes investments by foreigners and local investors under the Investment Promotion Act B.E. 2520. Under the said Act, the Board of Investment (BOI) issues and amends regulations from time to time to set out rules for granting promotion certificates. The BOI has a policy to promote industries that support sustainable development. These include manufacturers that produce eco-friendly products, projects that produce alternative energy, and projects that use high technology for manufacturing products.
Manufacturing and service businesses majority-owned or wholly-owned by foreigners are eligible to obtain a BOI certificate. A promoted business is granted tax and non-tax privileges. The tax privileges include exemption and reduction of the corporate income tax and the import duty on machinery and raw materials. Non-tax privileges include permission to own land and to employ foreign technicians and experts to work for the promoted project. The privileges vary on the BOI zones in which the promoted project is located. Zone 3 is mainly the provinces far from Bangkok, or at the borders with neighbouring countries, and it receives the highest privileges.
Regional operating headquarters
The legislation on regional operating headquarters (ROH) was amended in November 2010 to encourage multinationals to establish their ROHs in Thailand. This was so they could provide supporting services, such as R&D, technical support, business planning and HR management services, to their subsidiaries and branches inside and outside Thailand. An ROH must be established as a company with the Ministry of Commerce and registered as an ROH with the Revenue Department (RD) by November 5 2015.
An ROH can enjoy both tax and non-tax benefits. For example, it is granted exemption of the 30% corporate income tax on income received from services provided to overseas affiliates and branches. It is also granted a reduction of the corporate income tax to 10% on income received from services provided to local affiliates and branches. Foreigners who are managers and experts working for the ROH are granted exemption of the personal income tax if they are sent to work overseas for the ROH. They are granted a reduction of the personal income tax from 37% to 15% if they work with the ROH in Thailand.