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 several business forms for companies looking to incorporate or establish a presence, including private limited companies, branch offices, representative offices, regional offices, and partnerships. BOI promotion may support qualifying Thai entities, but it is not a separate legal form.

  1. Partnerships
  2. Limited companies
  3. Joint ventures
  4. Representative offices
  5. Branch offices
  6. 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 2 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 may be foreign nationals. Thai private limited companies do not generally need at least 2/5 of directors to be Thai nationals, unless a specific law, license, concession, or industry regulation requires it.

A limited liability company generally does not have a statutory minimum registered share capital requirement to incorporate. However, each share must have a par value of at least THB 5, and specific activities, foreign ownership, licensing, or immigration needs may impose capital requirements. However, if the business activities are restricted to Thai nationals under the Foreign Business Act, foreign ownership must generally stay below 50% unless the company has a Foreign Business License or another exemption. This is commonly treated as a maximum of 49% foreign shareholding, with Thai nationals holding the majority. This percentage of international ownership can change if the company receives a Foreign Business License.

Every year, within 4 months after the end of the fiscal year, the directors must arrange a general meeting to obtain shareholder approval of the company’s audited financial statements. After approval, the company generally must file them with the Department of Business Development within 1 month after the AGM. Directors must file the final audited financial report within 1 month after AGM approval. They must also file the updated shareholder list within 14 days after the 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 agreements with around 61 countries. The exact count can vary depending on whether recently signed but not-yet-effective treaties, amendments, or succession arrangements are included.

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