Why Singapore Companies Should Consider Setting Up a Company in Thailand

With increasing competition and rising costs, some Singapore companies are exploring new markets to diversify their business and boost growth. One country that has attracted the attention of many Singapore companies is Thailand, a rapidly developing economy with a population of over 71 million and a growing middle class. Thailand offers an attractive destination for Singapore companies looking to establish a company or subsidiary. Explore the benefits of setting up a company in Thailand, the key considerations, and how our team in Thailand can assist with company registration and other essential services.

Benefits of Establishing a Company, Office, or Subsidiary in Thailand

Thailand presents itself as a potential market for foreign investors for seven significant reasons.

Large and Growing Consumer Market

Thailand has a population of roughly 72 million people (population growth rate of 0.15%), making it the second largest economy both in Southeast Asia and ASEAN after Indonesia. The middle class is rapidly growing, and their purchasing power is increasing, which creates a strong demand for goods and services. The Ministry of Finance forecasted up to 3.8% economic growth in 2023, brought about by an improved tourism sector and domestic demand.

Location and Access to Other Southeast Asian Markets

Thailand’s location at the centre of Southeast Asia provides access to neighbouring markets, sharing borders with Cambodia, Laos, Myanmar, and Malaysia. This makes Thailand an ideal gateway to the region. It has also signed free trade agreements with many countries, including China, Japan, South Korea, and India, benefitting Singapore companies with access to a vast market (to be discussed further below).

Favourable Tax Incentives and Investment Policies

The Board of Investment in Thailand encourages foreign investment by offering tax incentives and investment policies, such as corporate income tax exemptions, import duty exemptions on machinery and raw materials, and other benefits (e.g. permission to own land, work permits, and visas for foreign workers. These incentives can attract companies in the manufacturing, technology, and service sectors.

Other Government-Provided Grants and Assistance

The Thai government also offers grants and assistance programs, including research and development grants, financing for small and medium-sized enterprises (SMEs), and support for industry-specific initiatives. You can take advantage of these programs to reduce costs and increase your competitiveness in the Thai market.

Access to Free Trade Agreements (FTAs)

Thailand has signed FTAs with other countries and economic blocs like the Association of Southeast Asian Nations (ASEAN) and the European Union (EU). You can take advantage of the benefits of these agreements, such as reduced tariffs, more simplified customs procedures, and wider market access.

Low Operating Costs & High Potential Profits

The cost of labour, land, and utilities in Thailand is relatively low compared to other countries in the region. Its business-friendly policies and strategic location make it possible for your business to maximise profits.

Thailand’s Business Environment vs Other SEA Countries

Thailand fares favourably compared to other Southeast Asian countries because of its well-developed infrastructure, strong legal framework, and stable political environments. The city-state ranks highly in terms of Ease of Doing Business, ranking 21st out of 190 economies in the World Bank’s Doing Business 2020 report (the most recent report on DB). In comparison, Singapore ranks second, while Brunei (66), Vietnam (70), and Indonesia (73) rank 66th, 70th, and 73rd, respectively.

Overview of the Company Setup Process in Thailand

Setting up a company in Thailand could be a viable option if you are looking to expand your reach in the region. To prepare for company incorporation, here is an overview of the company setup process in Thailand.

1. Reserve your company name (at least 2-3 names in case one or two are already taken).
2. Identify the promoters, shareholders, and directors and their details.
3. File Memorandum of Association with the Department of Business Development.
4. Convene a statutory meeting after the share structure has been defined.
5. Register the company within three (3) months of the meeting’s date.
6. Register the company for corporate income tax purposes.
7. Open a corporate bank account.

Available Business Structures Explained

There are three kinds of common business structures in Thailand: Partnership, Limited Companies, and Joint Venture.

Partnership

• A type of entity formed by the agreement between two (2) or more individuals to run the business as co-owners.
• There are two types of partnerships in Thailand

1. 1. Ordinary partnerships – all partners are jointly and indefinitely liable for all the obligations of the partnership
   2. Limited partnerships – creates two types of partners, one whose liability is limited and another whose liability is unlimited/indefinite.

Limited Company

There are two types of limited companies:

1. Private limited company – governed by the Civil and Commercial Code; requires at least three shareholders, and they enjoy limited liability.
2. Public limited company – governed by the Public Company Act; a minimum of 15 promoters is required.

Joint Venture

• A setup that is commonly used by foreign investors, defined as a profit-seeking business carried on jointly by:

1. 1. Two companies
   2. A company and a juristic partnership
   3. Two juristic partnerships
   4. A company and/or a juristic partnership with an individual, an ordinary partnership, a juristic person or a group of people

Other entities or forms of corporate presence may also be formed based on the regulations in the Civil and Commercial Code of Thailand, including:

• Branch of a foreign company
• Regional office
• Representative office in Thailand
• Regional Trade and Investment Support Offices
• Foundations

Legal Requirements and Regulations for Foreign-Owned Companies in Thailand

Here are the key considerations that Singapore company owners like you should be aware of when establishing a corporate presence in Thailand:

1. Determine which category your business falls under the Foreign Business Act so you can comply properly with the law. The categories are a) businesses prohibited to foreigners, b) businesses that need a Foreign Business License, and c) businesses exempt from the Foreign Business Act.
2. The minimum registered capital requirement for a limited company is 2 million THB. Certain businesses may be subject to higher minimum capital requirements based on the type of their business activity.
3. The company must have at least four (4) Thai employees for each foreign employee (4:1). Foreigners who plan to work in Thailand must secure a work permit. The Ministry of Labor issues this and requires a non-immigrant visa.
4. Companies operating in Thailand are subject to various taxes (corporate income tax, value-added tax, and specific business tax). Strive to understand the tax implications of establishing a company in Thailand to ensure compliance with all tax regulations.
5. All limited companies must prepare and file yearly financial statements with the Department of Business Development.
6. Foreigners can hold up to 49 percent of the shares in a Thai limited company. But there are legal ways to achieve a majority or even 100 percent foreign ownership of a company in Thailand: a) obtaining a Foreign Business License and b) Board of Investment promotion.
7. Foreigners are prohibited from owning land in Thailand but may own buildings and condominium units. Until recently, the Thai cabinet approved a draft ministerial regulation that permits foreigners to buy land in Thailand as individuals. The draft has yet to be implemented officially.

These requirements and regulations can be complex and may vary (depending on the business activities and industry). As such, it is best to consult with a local legal or accounting professional for expert guidance, ensuring total compliance.

Challenges and Pitfalls to Avoid when Registering a Company in Thailand

Discussing the challenges and potential pitfalls in establishing a company in Thailand is essential, especially for business owners like you who are unfamiliar with the country’s legal and regulatory system.

1. Understanding Thai laws and regulations
2. Meeting capital requirements
3. Dealing with bureaucracy
4. Language barrier
5. Cultural differences
6. Compliance with labour laws
7. Tax compliance
8. Intellectual property protection

All of the abovementioned stumbling blocks can be avoided and solved by working with a trusted company registration firm that has experience in setting up companies Thailand and support from Singapore, so you can easily navigate the legal and regulatory framework of the country.

Frequently Asked Questions

How long does it take to establish a company in Thailand?

The company registration process in Thailand depends on the chosen business structure. It can take three to five business days for a Thai Limited Liability Company to a maximum of 90 days for a more complex BOI Company.

What are the tax implications for Singapore companies setting up a company in Thailand?

Companies established in Thailand are taxed on worldwide income (its profits arising from the operated business in Thailand). The corporate income tax rate is 20 percent. If your company is not carrying on business in Thailand, it is subject to a final withholding tax on particular assessable income types, such as interest, dividends, rentals, royalties, and service fees, paid in or from Thailand. The tax rate is generally 15 percent, except for dividends (10 percent), while the remaining rates may apply under the provisions of a double tax treaty.

How can a Singapore company hire employees in Thailand for their company?

There are two ways to hire employees in Thailand. Firstly, the most obvious way – setting up a local entity. It could be a limited company, representative office, or other available business entities in the country. But as a foreign company owner, you must be aware of the Foreign Business Act (see ‘Legal requirements and regulations for foreign-owned companies in Thailand’ above). The second option is to engage the services of a professional employer organisation (PEO), a third-party company equipped to hire, manage, and pay employees on your behalf.

How can a Singapore company ensure success for their company in Thailand?

Follow these tips to help you navigate the local business landscape and build a strong foundation for your business in Thailand:

1. Conduct thorough research on the Thai market, trends, and challenges. This will help you gain insights into consumer preferences, business practices, and regulatory requirements.
2. Build strong partnerships with local companies and suppliers. This will help you gain access to local networks, resources, and expertise.
3. Adapt to the local culture and language to help you establish credibility in the market.

Conclusion

Building a successful company takes time, effort, and willingness to expand and adapt to local market conditions. It is always the first step that is crucial – company incorporation. Set up your company for long-term success in Thailand by engaging the services of a company registration firm in Singapore, like Corporate Services. With our offices in Singapore and Thailand, Corporate Services is well-positioned to support your business needs in both countries.