Thailand is the second best developed country in Southeastern Asia with an export-oriented economy. It is a popular tourist destination even though the manufacturing industry and agriculture seriously contribute to the economic development of Thailand.
Key characteristics of Thailand
International policies of Thailand are aimed at promoting development of the country’s economy and preserving the good reputation that Thailand enjoys in the international arena. The pace of the market reforms is not very fast, the country faces lack of human resources and corruption in the state agencies but it is overcoming these problems slowly but surely. In particular, the authorities of Thailand are doing their best to improve the business climate in the country. They are putting in order such areas as company registration, contract fulfillment, and payment of taxes.
The Government of the Kingdom of Thailand has created 10 Free Economic Zones in the country to attract more foreign direct investments. Their main goal is to stimulate cross-border trade by offering beneficial fiscal conditions to companies registered in the Free Zones. Resident companies are exempted from some taxes but not all of them.
To help taxpayers, Thailand has made a large number of double taxation avoidance agreements. On the other hand, Thailand has not signed the agreement on Common Reporting Standards. Local authorities do not share the information about bank account holders in Thailand with the fiscal authorities of their home countries. Plainly speaking, the information about your bank account in Thailand is going to be unavailable to your home country’s authorities.
Main elements of the tax system in Thailand
The Revenue Code has been in force since 1995 in Thailand. In accordance with the Code, 3 main taxes are charged in the country: on corporate income, on added value, and on personal income.
The corporate income tax. A company registered in Thailand and making an income in Thailand or registered in another jurisdiction while making an income in Thailand has to pay taxes in the country. The tax rate is between 15% and 20% depending on the size of the company and the amount of income that it makes. Small businesses with an income below US$ 5,000 per year are not taxed in Thailand. The corporate tax is payable once a year. Company registration in Thailand entails paying taxes in the country even if it makes profits in other jurisdictions (on the condition that the company also has a bank account in Thailand).
VAT. The VAT is payable by companies and private individuals engaged in commercial activities and deriving profits from added value of their goods. The VAT rate is 7% of which 0.7% goes to the municipal budget. Sole proprietors and small business owners with a turnover of less than 1.8 million baht per year are exempted from the VAT. In addition, the following products are exempted from this tax in Thailand: unprocessed agricultural products, fertilizers, animal food and pesticides, foreign printed materials as well as healthcare, education, and transportation services.
The personal income tax. The tax is payable on a progressive scale in Thailand and the rates are between 0% and 35%. Residents of the country have to pay their taxes within 6 months after filing the tax return. Non-residents of Thailand (those who spend less than 180 days per year in the country) pay taxes only on the income made in Thailand.
The following personal income tax rates are applied:
- Up to 150,000 baht per year: 0%;
- 150,000-300,000 baht: 5%;
- 300,000-500,000 baht: 10%;
- 500,000-750,000 baht: 15%;
- 750,000-1,000,000 baht: 20%;
- 1,000,000-2,000,000 baht: 25%;
- 2,000,000-5,000,000 baht: 30%;
- Above 5,000,000 baht: 35%.
Property tax. Two types of property tax are charged in Thailand:
- Tax on buildings: owned – 12.5%, rented – 7%;
- Tax on land: from 0.25% to 0.95%, depending on the size of the land plot.
Withholding tax. The tax is levied on the following types of income:
- Dividends – 10%;
- Interests – 1%;
- Royalties – 3%;
- Bonuses – 5%;
The stamp duty is charged when various kinds of documents are issued. Its amount depends on the type of document and it can be between 1 and 200 baht.
Specifics of company registration in Thailand
The country’s legislation is designed to support local business people. A foreigner can be a 100% owner of a Thai-based company only if he/ she acquires a business license. Business licenses are issued to those foreign entrepreneurs who make significant investments in the Thai economy, who share strategic technologies with the country, and those who create a large number of new jobs.
Not more than 49% of a regular company can be owned by a foreigner in Thailand. There are exceptions: if the company is engaged in export operations exclusively, it can be fully owned by a foreigner. Besides, the foreign owner can be the only company director – this is allowed in Thailand. Thus, the foreign company co-owner can retain control over it.
Non-residents most often set up Limited Companies in Thailand. The minimum amount of registered capital is 15 baht while the recommended amount is 200,000 baht (approximately US$ 3,000). The capital has to be registered but it does not have to be deposited.
A limited company has to have at least 1 director and 3 shareholders. If you need to stay in Thailand for business purposes for a long time, long-term visas are available. Under certain conditions, you can get a 1-year, a 5-year, or a 20-year visa. If you are over 50, you can apply for a pensioner visa, which is also a long-term visa. Thailand is open to foreigners.
When the company is registered in Thailand, a company registration fee is due. Its amount depends on the amount of registered capital.
Company registration timeframe – from 2 business days from the date of submitting the documents.
After the company is registered, it has to obtain a Tax ID in the Tax Department. If the foreign company founder needs a work permit or if the company’s turnover exceeds 1.8 million baht per year, the company has to register for VAT.
A bank account in Thailand
Thailand is an attractive jurisdiction for opening a bank account. It boasts the following main advantages:
- It is possible to both register a company and open a bank account in Thailand;
- Opening a corporate bank account takes 2 weeks or a bit more, which is fast by today’s standards;
- Local banks are happy to work with US dollars, euros, and Asian currencies;
- Local banks do not mind if the account holder is a foreign national and the country of his/ her origin does not matter;
- Local banks do not apply the maxim “no economic substance in the country, no bank account” thus far;
- Thai banks enjoy a good reputation in the international banking world: no dark stories behind them.
You have to pay a personal visit to Thailand to set up a bank account there. The country is worth a visit, however: tourists from all over the world love it!
