Often, the most challenging part of international growth is figuring out how to establish a subsidiary. Companies must consider all of Thailand’s subsidiary laws, decide which business structure is best, and allocate time and money for the incorporation process. As an alternative to establishing a subsidiary, G-P helps companies begin operations in Thailand without the need to undergo the complicated subsidiary process.
How to establish a Thailand subsidiary
Establishing a Thailand subsidiary can be a difficult process. First, companies need to understand several business factors specific to Thailand. The Foreign Business Act places restrictions on global employees and defines several industries that require special permissions. Employers should understand the minimum capital and conditions as well as free trade and economic partnership agreements between Thailand and the U.S., Thailand and Australia, and Thailand and Japan.
Since Thailand has many provinces, companies should consider their location carefully. Different provinces often have separate laws, cost structures, and approval criteria. If employers are not familiar with the various areas, they should work with an advisor or talk to other business owners to figure out which province is best for their industry.
Thailand offers 6 business forms for companies looking to incorporate:
- Partnerships
- Limited companies
- Joint ventures
- Representative offices
- Branch offices
- International headquarters
Each one has unique advantages and disadvantages, but most companies choose to incorporate as a limited company.
The Thailand subsidiary setup process is as follows:
- Choose at least 3 promoters to sign together to prepare and register the Memorandum of Association and Articles of Association.
- Obtain the certificate of incorporation.
- Designate a registered address.
- Transition the business from the promoters to the directors.
- Collect share capital from the promoters and subscribers.
- Prepare a request to register the company’s establishment.
- Submit the form to the registrar.
Thailand subsidiary laws
Thailand has lengthy subsidiary laws for private limited liability companies. This business structure must be managed by a board of directors, and the number of directors should be determined at the shareholders’ meeting. Some directors are allowed to be global employees, but at least 2/5 need to be nationals of Thailand.
A limited liability company does not have any minimum or maximum share capital requirements. However, if the business activities are restricted to nationals of Thailand under the Foreign Business Act, only 49% of the share capital can come from international participation. This percentage of international ownership can change if the company receives a Foreign Business License.
Every year within 4 months from the end of the fiscal year, the directors of the company will need to arrange a general meeting to obtain shareholder approval of the company’s audited financial statements. Directors must file the final audited financial report and shareholder list within 1 month after holding this meeting.
Benefits of establishing a Thailand subsidiary
After companies establish their Thailand subsidiary, they’ll be ready to begin the recruitment process in the country. Incorporating as a limited liability company, specifically, offers several additional benefits. The subsidiary will be able to create its own culture based on Thailand’s, separate from the parent company’s laws. Plus, the parent company will not have to worry about any litigation or losses the subsidiary incurs since these risks will fall on the subsidiary’s shoulders.
Other important considerations
If companies decide to establish their own subsidiary, they’ll need to prepare a budget for business growth that includes travel, expenses of incorporation, and other related expenses. If they don’t understand all of Thailand’s subsidiary laws, companies will either need to appoint an employee to learn them or work with an advisor who can help them grow. Employers must also set aside a significant amount of time for business growth since the process can be lengthy.
The taxation of international subsidiaries in Thailand is according to the business instrument. Companies operating in Thailand are subject to Thai Corporate Income Tax, Value Added Tax, and other commonly applicable taxes. Thailand has double taxation treaties with 61 countries, which offer preferential remittances over other nations.
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