Partnership
Three types of partnerships in Thailand differ principally in the liability attached to each.

An unregistered ordinary partnership has partners who are all jointly liable, without any limitation on the partnership' total obligations. A new partner in an unregistered ordinary partnership becomes liable for all obligations incurred by the partnership before or after his association with the partnership. This type of partnership is not a legal entity and is subject to taxation as if it were an individual.

A registered ordinary partnership is a juridical entity having a separate and distinct personality from each of the partners by virtue of its registration with the Commercial Registrar. A registered ordinary partnership is treated as a corporate entity for income tax purposes.

A limited partnership is one in which there are one or more partners whose individual liabilities are limited to their respective contributions, and one or more partners jointly liable without any limitation on all the oobligations of the partnership. A limited partnership is taxed as a corporate entity.

Private limited company
The Thai private limited company is similar to what is commonly referred to as a corporation. The company may be wholly owned by aliens. However, in those business activities reserved for Thai nationals, alien participation is generally allowed up to 49 per cent.

The liability of the shareholders is limited to the par value of the authorized capital. The liability of the directors, however, may be unlimited if so provided in the company's memorandum of association or the articles of incorporation. The limited company is managed by a board of director according to the company's charter and by laws.

Although there is no established minimum level of capitalization, the private. Limited company's capital must be sufficient to accomplish its objectives. All of the shares must be subscribed to, and at least 25 per cent of the subscribed shares must be paid up. Both common and preferred shares of stock may be issued, but all shares must have voting rights. Thai law prohibits the issuance of shares with no par value; it also stipulates that only shares with par value of five bath or above may be issued.

Thai corporate law has some features which may be unfamiliar to foreign business persons. Among these are the prohibition on treasury shares and a rule that a private limited company's shareholders must never be fewer than seven at all times. In addition, non-voting stock, whether common or preferred, is not permitted; the original authorized capital stock must be subscribed in full.

Public limited company
The procedure for setting up a limited public company is similar to that for a private limited company. The provisions of the Limited Public Company Act of 1992 allow a private company to be converted into a public company. The major difference between a public and a private company is that a private company is prohibited form offering shares to the public. Certain other differences are as follow:

Joint venture
A join venture may be described in accordance with general practice as a group of persons (natural and/ or juristic) entering into an agreement in order to carry on a business together. It has not yet been recognized as a legal entity under the Civil and Commercial Code.
However, income from a joint venture is subject to corporate taxation under the Revenue code, which classifies it as a single entity.

Branch of a foreign corporation
A company incorporated under foreign laws may establish a branch office to do business in Thailand. Branch offices are required to maintain only those accounts relating to the activities of the branch in Thailand. It is important, however, to clarify beforehand what constitutes income subject to Thai tax, as the Revenue Department may consider revenues directly earned by the foreign head office form sources within Thailand as subject to Thai tax.

As a condition for approval of an alien business License for a branch of a foreign corporation, Minimum capital amounting to three (3) million bath must be brought in to Thailand. This amount may be changed by subsequent Ministerial Regulations, A branch office may exist for an indefinite period up to its date of dissolution.

Representative office of a foreign corporation
A foreign entity may establish a representative office in Thailand to engage in limited non-revenue-earning activities. These activities are restricted to:

• searching for local sources of goods or services for its head office.
• Inspecting and controlling the quality and quantity of goods procured by its head office.
• Providing advice in various fields relating to products directly sold by its head office to local distributors or consumers.
• Disseminating information about new products and services of its head office.
• Reporting to its head office on local business developments and activities

  The minimum capital contributions in respect to branches also applies to representative offices.

Regional office of a multinational corporation
A multinational corporation may establish a regional office in Thailand to engage in limited non-revenue-earning activities are restricted to:

• Contacting, coordinating, and supervising
• Providing services to affiliated branches or subsidiaries such as: advisory and management services; training and personnel development; financial management; marketing control and sales promotion; and product research and development

All expenditures incurred by the regional office must be borne by the head office of the multinational corporation. The minimum capital requirements in respect to branches also apply to regional offices.

Corporate registration procedures
Limited Company:
Before forming a limited company, the chosen corporate name must first be registered and approved by the Commercial Registrar. A Memorandum of Association is then filed which contains: the approved name of the company, its business address, its objectives, personal details about the promoters and the shares subscribed by each, and data on the authorized capital of the company.

The next step is to hold a statutory meeting of shareholders during which the articles of incorporation and by-laws are approved, the board of directors is elected, the transactions and expenditures of the founders are ratified, and the authorized auditor is appointed. The directors may then register the company with the Commercial Registrar.

Branch, representative and regional office:
Foreign corporations wishing to do business in Thailand through a branch, representative or regional office must submit the required document, which documents issued by the Head Office must be notarized by a notary public or certified by the local Thai consulate or embassy.

Documents required register to a branch, representative or regional office in Thailand
Foreign corporations wishing to do business in Thailand through a branch, representative or regional office must submit the following documents

• An affidavit from the manager or corporate officer, stating the following:
  

- name of the corporation, registration member, and date of registration;
- address of the registered office;
- jurisdiction under which the corporation is registered;
- name, address, nationality, age and race of each director, number of shares held by each, and identification of the director (s) with the power to bind the corporation;
- authorized capital of the corporation, number of shares and par value of each, and amount of paid-up capital stock, and
- total number of shareholders, their nationalities, and number of shares owned or held by each national group.

• A power of attorney for the manager in Thailand giving him or her, in addition to the normal powers, the power to register the branch office with the pertinent Thai government authorities, and to act as the manager thereof.
• Brief description of the objectives or details of the business and steps of work.
  

  - Office address in Thailand and map thereof.
  - Brochure or profile and annual report of head office.
  - Details of technology transfer to Thai staff.
  - Number and name of staff together with their salaries.
  (Items 1-2 must be notarized by a notary public or certified by the Thai consulate or embassy abroad). These documents must not be more than six months old at the time of submission to the Commercial Registrar.

• Well known projects/ clients/ products. (case by case)
• Forecast plan and amount of expenses for the next three years.
  
• Type, value and number of machinery/office equipment used in the business.

Tax registrations
An individual person who is subject to personal income tax must obtain a tax identification card from the Revenue Department within 60 days from the date of having income.

A business, which is subject to corporate income tax, must obtain a tax identification card from the Revenue Department within 60 days after its incorporation or registration.

All persons whose annual turnover exceeds Bath 1.5 million must register for value added tax within 30 days after the annual turnover has exceeded that amount, unless specifically exempted.

The application for VAT registration before the date of commencing business is also allowed under the conditions specified by the Director General of the Revenue Department.

Licensing a factory
Under the Factory Act 1992, factories are separated into three groups according to the gravity of impact of the factory operations on the public or the environment, as follows:

• Group 1 - Factories that can operate immediately without prior government permission.
• Group 2 - Factories that require prior notification of the pertinent government authority before the business starts operations.
• Group 3 - Factories that require the application for a factory license before the establishment of the factory.

Before the establishment of a factory classified under Group 3, the operator must obtain a factory license from the Department of Industrial Works, Ministry of industry. Application for a license entails completing an official form, submitting drawings and particulars of the factory , machinery, and acceptable effluent treatment system, and attaching a set of documents stipulated on the form. These additional documents include statements of the amount of investment in factory establishment and operation, number and grades of factory employees, details of production, construction period for the factory, and the blueprints of the structures and the machinery that will be installed. The factory must be established in accordance with the approved plan and specifications.

The operator of a Group 3 factory must notify the competent authority at least 15 days before a factory test-run commences, and again 15 days before actual manufacturing operations start.

The factory license is valid up to the last day of the fifth calendar year from the year of commencement and is renewable. An application for renewal of the factory license must be filed to the authority prior to the expiration of that license. While the factory license is valid, the licensee must pay an annual fee for the said license as scheduled by the authority.

Licensees must also obtain prior permission from the Ministry of Industry for any factory expansion, transfer of machinery to other sites, or transfer of factory site. Permission is likewise required in order to transfer, lease, assign, or sell a factory operation.

Public offerings
A company, which wishes to issue shares or debt securities to the public, must comply with the regulations of the Securities Exchange Commission and the Securities Exchange of Thailand. A description of the activities of these bodies is outlined below.

Securities Exchange Commission
The Securities Exchange Commission (SEC) has regulatory control of he securities industry. The objectives of the SEC are as follow:

• To provide a single legal framework for the development of Thailand's capital markets. The SEC is responsible for overseeing the issuance by private companies of debt securities to the public and the review and approval of prospectuses.
• To improve the level of investor protection. The SEC is responsible for the investigation of any breach of the laws relating to stringent information disclosure requirements, insider trading and takeover, and
• To develop Thailand's capital markets. For example, the SEC has sanctioned the establishment of foreign-backed mutual funds

Securities Exchange of Thailand
Under the Securities and Exchange Act 1992 the Securities Exchange of Thailand (SET) operates under the SEC. A board elected from the SEC and the member brokers operates the new SET. In short, the SET is responsible for the operating side of the exchange while the SEC is responsible for enforcement.

The SET is responsible for determining which companies will be allowed to list on the stock exchange. The SET has complete power to approver a company's listing.

Investment incentives
Incentives under the investment promotion act

Government role
The Board of Investment (BOI) is the government agency responsible for administering incentives to encourage private sector investment in priority areas. The structure, role, and policies of the BOI today basically follow the guidelines contained in the Investment Promotion Act of 1977, as amended in 1991. The BOI is chaired by the Prime Minister and includes as members and advisors, key ministers and private sector representatives. The office of the BOI functions as the administrative arm of the Board. BOI has six regional offices in Songkhla, Nakhon Ratchasima, Chiang Mai, Chonburi, Surat Thani and Ubon Ratchathani and four overseas offices in New York, Frankfurt, Tokyo and Paris.

Foreign equity participation rules
The BOI uses the following criteria in considering the extent of foreign equity participation allowed in a promoted investment project:

The BOI has a policy of giving special consideration to investment projects which:

• Locate operations in provincial areas.
• Establish or develop industries, which form the base for further stages of industrial development.
• Develop public utilities and basic infrastructure.
• Conserve natural resources and reduce environmental problems.
• Conserve energy or replace imported energy supplies.
• Contribute to technological development.
• Strengthen significantly the balance of payments.

Promoted company
The types of entities that may be promoted by the BOI and granted investment incentives are: a limited company, a foundation, or a cooperative. Application for promotion may be submitted in accordance with the rules, procedures, and forms prescribed by the BOI prior to the formation of the qualified promoted company.

Non - tax incentives for promoted companies
The following non-tax incentives may be granted to promoted companies:

• Guarantees
  - Against nationalization.
  - Against competition of new state enterprises.
  - Against state monopolies..
  - Against price controls.
  - Against tax - free imports by the public
• Permission
  - To own land.
  - To bring in foreign nationals to undertake investment feasibility studies.
  - To bring in foreign technicians and experts to work on the promoted project.
• Protection measures
  - Imposition of a surcharge on competing imported products of up to 50 per cent of CIF value for a period of one year at a time.
  - Import ban on competing products.
  - Implementation of other tax relief measures as appropriate.
• Investment promotion zones
  In line with the national goals of decentralizing and spreading the benefits of development to the country's provinces, the BOI has divided all provinces of Thailand into three investment zones. Investors who set up their operations in provinces outside the central region of Thailand are entitled to a wider range of tax incentives. The three investment zones are as follows:
  • Zone I: Six provinces, namely: Bangkok, Samut Prakan, Nakhon Pathom, Nontaburi, Pathum Thani, and Samut Sakhon.
  • Zone II: Twelve provinces, namely: Suphan Buri, Ayutthaya, Nakhon Nayok, Chachoengsao, Chonburi, Ratchburi, Samut Songkram, Saraburi, Kanchanaburi, Ang Thong, Rayong and Phuket.
  • Zone III: All the remaining fifty eight (58) provinces, and Industrial Estate in Rayong Province under conditions prescribed by BOI.

Tax incentives for promoted companies
BOI grants two major types of tax incentives to promoted companies: exemption or reduction of tariffs on imported machinery and equipment, as well as raw materials for the promoted activity, and exemption from income tax on net profits and dividends. The extent of these incentives varies according to the location of the promoted company.

Customs duty exemption
The general rules for granting import duty exemptions on the import of machinery and raw materials by promoted companies are outlined in the table below:

Conditions:

• Machinery is subject to import duty of 10% or more
• For a period of one year, for raw & essential materials used in the manufacturing of export products.
• For a period of five years.

Income tax exemption
In general, the duration of income tax exemption granted to promoted companies depends on the project's location. The period of tax exemption generally starts from the date of the first sale.

Conditions:

1. For project with capital investment of 10 million bath or more (excluding cost of land and similar international standard certification within two years from the start-up date. Otherwise the income tax exemption will be reduced by one year.
2. Located in an industrial estate or promoted industrial zone.

Additional fiscal incentives for projects located in zone III
Promoted activities located in Investment Zone III may also be eligible for the following additional incentives:

1. A project located in one of the following forty (40) provinces: Krabi, Kamphaeng Phet, Khon Chumphon, Chiang Rai, Chiang Mai, Trang Trat, Tak, Nakhon Ratchasima, Nakhon Si Thammarat, Nakhon Swan, Prachuab Khiri Khan, Prachin Curi, Phangnga, Phattalung, Pijit, Phitsanulo, Phetchaburi, Phetchabun, Mukdahan, Mae Hong Son, Ranong, Lop Buri, Lamphang, Lamphun, Loei, Songkhla, Sakaew, Sing Buri, Sukhothai, Surat Thani, Nong Khai, Udon Thani, Uttaradit, Uthai Thani, and Ubon Ratchathani shall be granted further privileges, as follows:
   1. A project located within industrial estates or promoted industrial zones in entitled to the following privileges:
      - 50 per cent reduction of corporate income tax for five years after the exemption period;
      - double deduction from taxable income of transportation, electricity and water costs for 10 years from the date of first revenue derived from promoted activity;
   2. For a project located outside industrial estates or promoted industrial zones, a deduction can be made from net profit of 25 per cent of the project's infrastructure installation or construction cost for 10 years from the date of first sales, and net profit for one or more years of any year can be chosen for such deduction. The deduction is additional to normal depreciation.

2. A project located in one of the following eighteen (18) provinces: Kalasin, Nakhon Phanom, Narathiwat, Nan, Buri Ram, Pattani, Phayao, Phrae, Maha Sarakham, Yasothon, Yala, Roi Et, Si Sa Ket, Sakhon Nakhon, Sathun, Surin, Nong Bualamphu, and Amnat Charoen shall be granted further privileges as follows:
   1. 50 per cent reduction of corporate income tax for five years after the exemption period;
   2. double deduction from taxable income of transportation, electricity and water costs for 10 years from the date of first revenue derived from promoted activities;
   3. Deduction can be made from net profit of 25 per cent of thee project's infrastructure installation or construction cost for 10 years from the date of first sales, and net profit for one or more years of any year can be chosen for such deduction. The deduction is additional to normal depreciation.

Priority activities
BOI places priority on promoting the following types of projects: agriculture and agricultural products, direct involvement in technological and human resource development, public utilities and infrastructure, environmental protection and conservation, and targeted industries.

BOI shall announce the list of priority activities or industries. Such projects will be entitled to the following privileges: exemption of import duty on machinery regardless of location; corporate income tax exemption for eight years, regardless of location; other privileges entitled for each zone.

Source: American Chamber of Commerce in Thailand

Related Documents
Starting a business in Thailand by by Ministry of Foreign Affair
Costs of Doing Business in Thailand

Related Links
Ministry of Commerce
Thailand Board of Investment
Department of Export promotion
Thailand Business Registration (Ministry of Commerce)
Thailand Industrial Estates Authority Business