Thailand Subsidiary Entity Set Up

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Thailand Entity Set Up

Launching a subsidiary overseas can be costly and time consuming – and the venture has no guarantee of success.

The southeast Asian nation developed into a social and economic success story in the early 21st Century, growing from a low-income to an upper-middle income economy in recent decades. The World Bank ranked Thailand 21st out of 190 nations in its most recent ‘ease of doing business’ report.

Thailand’s Gross Domestic Product (GDP) was expected to have reached 546 billion US dollars by the end of 2021, 26th in the world, with predicted growth of between 3.0% – 3.5% to around 550 billion US dollars by the end of 2022. Instead of taking a big risk, the sensible alternative is to use a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs to locate the finest local talent and administer your payroll in Thailand – speedily and risk free. Your company will be up-and-running in days rather than weeks or even months.

How to set up a Thailand Subsidiary

Setting up a subsidiary in Thailand? International companies planning to hire staff and run payroll have the option of opening a legal entity as a foreign-owned limited liability company.

A limited liability company as a subsidiary is incorporated under the Foreign Business Act after obtaining a Foreign Business License. The company must also comply with Section 1096 of the Civil and Commercial Code. US companies, however, do not need the license and are free of most of the restrictions under the Act due to signing the Treaty of Amity with Thailand in 1966.

General procedures and requirements include:

  • Reserve the company name prior to application and all documents being lodged with the Department of Business Development (DBD)
  • At least three initial shareholders, founders or promoters must sign application documents
  •  Open a head office in Thailand, confirmed by letter of consent from the landlord or owner, and obtain registration number (Tabien Ban)
  • Memorandum of Association of the parent company
  • Articles of Association detailing company by-laws as established in a statutory meeting, where directors and auditors are appointed
  • Bank letter certifying sufficient funds in Thai shareholders’ personal bank accounts
  • Legally, the three initial minimum shareholders must each have shares worth THB 5, giving total share capital of THB 15 (€0.40, US$0.45)
  • However, companies are expected to have registered capital to cover business expenses for the first three years, as follows:
  • Non-restricted companies with registered capital of THB 2,000,000 (€52,975, US$60,650), which can include US companies covered by the Treaty of Amity
  • Restricted companies with THB 3,000,000 (€79,470, US$90,980)
  • Once registered with the DBD and issued with a Business Registration Certificate, the company can open a corporate bank account to deposit capital
  • Obtain bank certificate confirming sufficient funds have been deposited

To operate other procedures, include:

  • Applying to the Revenue Department for a Tax Identification Number (TIN) to register any foreign employees and those Thai employees who are not exempt through being registered for a national Personal Identification Number (PIN)
  • Registration must be completed within 60 days of employees receiving first pay
  • Withholding and remitting tax to the Revenue Department on form PND1
  • Register for Value Added Tax at the relevant area Revenue Office
  • Registering Thai and foreign employees with the Social Security Office (SSO) by submitting their Social Security Fund application within 30 days of starting work
  • Withholding and remitting contributions to the SSO for social welfare funds, including the Provident Fund and the Workers’ Compensation Fund
  • Taxes must be remitted by the 7th (manually) or 15th (online) following the salary month
  • Employees must receive pay slips, hard copies or online, for each pay period
  • Filing employees’ annual tax returns by March 31 of the year following the tax year, which runs from January 1 to December 31
  • Payroll records must be kept for seven years

Benefits of setting up a Subsidiary in Thailand

Specific advantages for a foreign company opening a private limited liability company in Thailand include that the entity has a separate legal identity from the parent company. The subsidiary operates under Thailand’s Civil and Commercial Code. Shareholders’ liability is limited to the value of their shares. However, the directors who manage the company can have unlimited liability if this is stipulated by the Memorandum and Articles of Association. Generally, the subsidiary is responsible for its own debts and liabilities, while the parent company has no responsibility.

Through its subsidiary, the parent company has the advantage of maximizing business opportunities throughout Thailand and further afield.

At the crossroads of Asia, Thailand is a founder member of the Association of Southeast Asian Nations (ASEAN) formed in 1967. Apart from it immediate neighbours, Thailand is in prime position for international trade with Singapore, Indonesia, China, and India among a host of other Asian nations and into the Pacific Rim.

Other benefits for a subsidiary: 

  • Easier to obtain potential benefits and incentives from the Thai Board of Investment and enter contracts with other Thai companies 
  • More impact with clients and suppliers, as subsidiaries imply more permanency than branches 
  • Employees feel there is more stability and job security than from being with a branch 

In the wider commercial sense, opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets, in this case the opportunities offered by Asian and Pacific Rim economies.