Setting up a company

[Paillote]

The solitude nature of my work allows me to work from anywhere in the world. Now my cunning plan is to settle down in Bangkok and commute every other month to sort out the things that needs physical presence. Tax-wise it would be better to start up a company in Thailand and let the mother-company buy my services through that. But having read through the legal pages regarding setting up a company in Thailand, I find this very difficult. For once you must have 6 Thai partners

(Where can I get that?) and I can only own 49%(!!!) of my own company. In addition some financial requirements for certain company-forms are impossible to meet for me.

I will do my work in the comfort of a Bangkokian home, and get my payment in return from snow-country. I will not do any work for the Thai market, nor will I get any payments from Thailand. Is there a way I can settle this in a practical and preferably legal way? I know there are many foreigners running small-scale businesses in Thailand, so it must be possible. If not, I will have to settle for South-America. I know several countries there that not only let you start businesses; they don?t even tax income originating from abroad. That is what I call a good deal? Can I achieve something like this in Thailand through a representing company?

One alternative I can think of is registering a company in a tax-heaven (like Bermuda), but then I do not know if I can get a work/residence permit in Thailand. What requirements exists for opening a Thai bank account?

Btw, the taxes in Thailand looked ridiculously high (30% for income over THB 1 mill). I can reluctantly pay 30% tax, but then I expect something back (education, health care etc.). What does the taxes buy you in Thailand?

Thanks for your time guys.

All the best,

Paillote

[Nervous_Dog]

People close to me use a Tax Haven company to own a company 100% in Bangkok.

It was done through the BOI (Board of Investment) I did the paper work, no worries, you just had to be in a high tech industry.

I suggest you look at BOI web site. The company now has 8 years tax free status! And can own land.

Very effective way around the 49% drama and taxes

[Guest]

[ July 07, 2001: Message edited by: RogerRabbit ]

[Guest]

A few comments:

1. The law restricting foreign ownership of companies is called the Alien Business Operations Act (ABOA), and it only applies to companies engaged in certain business activities. Not all business activities are restricted under the ABOA. And most of the ABOA does not apply to Americans.

2. Thai law requires seven shareholders for a private limited company. This requirement applies to all private limited companies (it is not limited to companies subject to the ABOA), including companies receiving promotional privileges under the BOI.

3. You can fill out the BOI application yourself, but setting up a private limited company is something else altogether. The BOI provides promotional privileges, which can include, among others, waiver of restrictions under the ABOA, the right to own land, work permit waivers, tax waivers, etc., but the BOI does not form companies. Companies are formed through the Commercial Registration Department of the Ministry of Commerce. I have a hard time picturing a Farang establishing and registering a company on his own. Everything is in Thai, and not just any Thai, but Thai legalese.

4. Not to alarm Mr. Blonde, but there have been more than few Farangs that have applied to the BOI, got preliminary BOI approvals, but either because they did not understand the process, got bad advice or were simply not diligent, never actually set up their company, got the work permit, VAT registration and or dealt with the other “details” of legitimately doing business here. Every Farang that I know who found himself in this predicament worked through one of these “agencies” that specialize in setting up companies in foreign jurisdictions such as Thailand. Because the Farangs are not legitimately set up, they are highly vulnerable. I know of two cases where the Farangs involved were arrested and deported. Not fun.

5. On work permits, absent some BOI waiver, you need a company with registered and paid up capital of at least 2 million baht for one work permit, and you need to employ at least four Thais. There are other requirements, but those are the two big commercial issues you need to consider. The “paid up” capital requirement is a source of confusion because in Thailand you generally only need to pay in 25% of the capital. but for a work permit, the 2 million must be fully paid in. (My wife, who is Thai and has a MBA constantly gets confused on this issue, so its not just Farangs that trip up on this issue.)

6. The Revenue Department will expect to see some revenue here.

7. I assume you meant a representative company or branch. Under the ABOA regulations, what was formerly called a branch office of a foreign company is now considered a service business, and therefore subject to the ABOA’s restrictions on foreign ownership. The BOI does promote regional headquarter operations in Thailand, and I saw a mistranslated brochure from an accounting firm recently that referred to such operations as “representing companies” (perhaps the source of your comment?), but I don’ think that is what you had in mind.

8. If you cannot get BOI promotion and your business is ABOA restricted, you can still use a preference share arrangement to control the company even though you own 49%. See point no. 9.

9. Don’t despair; you can probably do what you want, but you just need to make sure you do it right. You are not going to full and complete advice on how to do so on a sanuking board – surprise!! Hire a competent and reliable lawyer. I suggest you interview several firms before picking one. I also suggest you deal with an office where there is a resident farang who has been here for some time to make sure that you get what you want, to avoid communication problems and for other reasons. The international firms are all reliable and good, but not cheap. Talk to a number of firms and get a range on fees. Probably most important, be very clear on what you want to do by making an outline of your objectives and other pertinent information. Be honest. If it is not clear in your own mind what you intend to accomplish, even the best professional help will not do you any good.

Good luck!

[Nervous_Dog]

I agree with most of what the cartoon character has to say.

When I say I did the paper work, I meant the BOI application, form 5.8 I think from memory.

We used a local layer recommended by Software Park, where we abide, for the rest of the paper work.

Once we got BOI approval, they gave us forms for "Changing" the ownership of the company.

It is now 100% foreign.

The 7 sharehlders is a funny thing, and a bit tricky to get around. My parent company didn't want any partners, even if they only owned 1/100 000 000 of the company!

Minium invest ment was 1 million baht by the way, not 2 million.

[Guest]

A quick response from the cartoon character.

You mentioned changing the ownership of the company. My guess is the law firm had already set up a "shelf company" and then transferred the shares to you. If the company is set up right up for your purposes and meets the requirements of your BOI promotional certificate, this a very efficient means of handling matters.

Since your company was BOI promoted, the "normal" rules for work permits I mentioned may not apply. That is the nice thing about BOI promotion: they can tweak and waive some of the requirements. You still, of course, need to apply for the work permit, set up the company (well, in this case, transfer the shares since the company was already established), etc., but it's much easier to do all of this once you get the BOI promotion.

Incidentally, on work permits, if you are married to a Thai (my situation), the capitalization requirements are halved even when you do not have BOI promotion. One of the problems with BOI promotion is that it only applies to certain businesses - ones the Thai government is actively trying to promote.

[Nervous_Dog]

hehehe actually its quite funny, we needed to start work training our Thai staff, so I needed to be able to pay them "Legally" as the Layer/accountant told us, so while waiting for head office to get its act together, we went ahead and established a shelf company of the same name as head office. Ownership was me and my head engineer (Thai). For the first time in his life, he was MD with 51% shares (Along with most of his family to get the 6 shareholders, me being the 7th).

In addition between us we controlled the Thai subsidery of a $50 million company, the parent company at that stage had no shares, should of seen the look on my Presidents face when I told him!

But we needed to do this so we could start work and employ people, 6 weeks later the BOI came through and we transfered shares.

The lady who's company I used was great, very thorough, and professional, and a fraction of what major firms charge. I would be happy to recommend her if any one contacts me off list