Setting up a Business
Friday, 30 April 2010| What You Need to Know About Setting up a Business in Thailand |
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The following is an overview of establishing a business in Thailand.
As in most countries, there are three kinds of business organizations in Thailand: Sole proprietorships, partnerships, and limited companies. The most popular form of business organization among foreign investors is the private limited company.
Private limited companies require a minimum of seven promoters and must file a memorandum of association, convene a statutory meeting, register the company, and obtain a company income tax identity card. They must also follow accounting procedures specified in the Civil and Commercial code,the Revenue Code and the Accounts Act. A balance sheet must be prepared once a year and filed with the Department of Revenue and Commercial Registration. In addition, companies are required to withhold income tax from the salary of all regular employees.
The Ministry of Industry administers The Factory Act, which governs factory construction and operation, as well as safety and pollution-control requirements. In some cases, factories do not require licenses, in other instances the requirement is simply to notify officials in advance of start-up, and in some cases licenses are required prior to commencing operations. Licenses are valid for five years, and are renewable.
Thailand recognizes three kinds of intellectual property rights: patents, trademarks, and copyrights.
The Patent Act protects both inventions and product designs and pharmaceuticals.The Copyright Act protects literary, artistic works, and performance rights, by making it unlawful to reproduce or publish such works without the owner's permission. The Trademark Act governs registration of, and provides protection for, trademarks.
The Alien Occupation Law requires all foreigners working in Thailand to obtain a Work Permit prior to starting work in the Kingdom, except when they are applying under the Investment Promotion Law, in which case they have 30 days to apply.
Non-Immigrant visas provide the holder with eligibility to apply for a work permit, and allow the holder to work while the work permit application is being considered.
Through the links below, you can learn more about topics such as industrial licensing, taxation, patents and trademarks , and the cost of doing business in Thailand. You can also find out about the status of Thai infrastructure, including facilities such as airports, deep sea ports, and highways, and the availability of power, water and telecommunications.
In addition, there is a link to a page of statistics, which displays tables of utility, communications and labor costs, tax rates, information about air, sea, rail and road freight pricing, and information about availability and cost of land within industrial estates. Other charts and tables provide costs of establishing and running an office in Bangkok, and the results of a survey of expatriate living costs in Bangkok.
This page also contains information about industrial production of selected products in Thailand, tables breaking down Thai imports and exports by product and a table displaying interest rate movements for the past 5 years.
By the time you have finished visiting all these pages, you will have a complete picture about the business climate in Thailand.
Own a Thailand Business
Starting A Business in Thailand.
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In order to set up a limited company in Thailand, the following procedures should be followed:
1. Reservation of your Corporate Name
The name to be reserved must not be the same or similar to the name of any other companies. There are names that are not allowed and the name reservation guidelines of the Commercial Registration Department in the Ministry of Commerce need to be observed. The approved corporate name is valid for 30 days. No extension is allowed.
2. File a Memorandum of Association
A Memorandum of Association must be filed with the Commercial Registration Department. This has to include the name of the company that has been successfully reserved, its business objectives, the capital to be registered, the province where the company will be located, and the names of the seven promoters. The capital information must include the number of shares and the value per share. At the time of formation, the authorized capital, although partly paid, must all be issued. Although there are no minimum capital requirements, the amount of the capital should be of a respectable amount, and adequate for the business operation to function healthily. The Memorandum registration fee is 50 baht for every 100,000 baht of registered capital. The minimum fee is 500 baht, and the maximum is 25,000 baht.
3. Convene a Statutory Meeting
Once the share structure has been decided, a statutory meeting needs to be called, during which the bylaws and articles of incorporation are approved, the Board of Directors are nominated and an auditor selected. A minimum of 25% of the value of each subscribed share must be paid.
4. Registration
Within three months of the date of the Statutory Meeting, the directors must submit their application to establish the company.
5. Tax Registration
Within 60 days of incorporation, or within 60 days of the start of operations, businesses liable for income tax must obtain a tax identity card and a number for the company from the Revenue Department. Business operators earning more than 1,800,000 baht per annum must register for VAT within 30 days of the date they reach that figure in sales.
REPORTING REQUIREMENTS
Companies must keep accurate books and follow the accounting procedures which are specified in the Accounts Act, the Civil and Commercial Code and the Revenue Code. Documents may be prepared in any language, provided that a Thai translation is attached. All accounting entries should be typewritten, printed or written in ink. Specifically, Section 1206 of the Civil and Commercial Code provides rules on the accounts that should be maintained as follows: "The directors must cause true accounts to be kept: Of the sums received and expended by the company and of the matters in respect of which each receipt or expenditure takes place. Of the assets and liabilities of the company."
1. Imposition of Taxes
Companies are required to withhold income tax from the salary of all regular employees. Value Added Tax of seven per cent is levied on the value added at each stage of the production process, and is applicable to most firms. This VAT must be paid every month. A specific business tax is levied on companies that engage in several categories of businesses that are not subject to VAT. This tax is based on gross receipts, at a variable rate ranging from 0.1 % to 3.0 %. Corporate income tax is 30 % of net profits and is due twice each economic year. A mid-year profit forecast entails advance payment of these corporate taxes.
2. Annual Accounts
A newly-established company or partnership should close accounts within 12 months of the date of registration. Thereafter, these accounts should be closed every 12 months. The performance record has to be certified by the company auditor, approved by the shareholders, and filed with the Commercial Registration Department, at the Ministry of Commerce, within five months of the end of the financial year, and with the Revenue Department, at the Ministry of Finance, within 150 days of the end of the financial year. If a company wishes to change its accounting period, it must obtain written approval from the Director General of the Revenue Department.
3. Accounting Principles
Broadly speaking, accounting principles practised in the United States are acceptable in Thailand , as are accounting methods and conventions as sanctioned by law. The Institute of Certified Accountants and Auditors of Thailand is the authoritative group promoting the application of generally accepted accounting principles. Any accounting method that a firm chooses to adopt must be used consistently, and may be changed only with approval of the Revenue Department.
Certain accounting practices of note include:
Depreciation
The Revenue Code permits the use of varying depreciation rates according to the nature of the classes of assets which have the effect of depreciating the assets over periods that may be shorter than their estimated useful lives. These maximum depreciation rates are not mandatory; a company may use lower rates that approximate the estimated useful lives of the assets. But if a lower rate is used in the books of the accounts, the same rate must be used in the income tax return.
Accounting for Pension Plans
Contributions to a pension or provident fund are not deductible for tax purposes unless these are actually paid out to the employees, or the fund is approved as a qualified fund by the Revenue Department and is managed by a licensed fund manager.
Consolidation
Local companies with either foreign or local subsidiaries are not required to consolidate their financial statements for tax and other government reporting purposes, except for listed companies which must submit consolidated financial statements to the Securities and Exchange Commission of Thailand.
Statutory Reserve
A statutory reserve of at least five percent of the annual net profits arising from the business must be appropriated by the company at each distribution of dividends until the reserve reaches at least 10 % of the company's authorized capital.
Stock Dividends
Stock dividends are taxable as ordinary dividends and may be declared only if there is an approved increase in authorized capital. The law requires the authorized capital to be subscribed in full by the shareholders.
4/ Auditing Requirements and Standards
Audited financial statements of juristic entities (that is, a limited company, a registered partnership, a branch, or representative office, or a regional office of a foreign corporation, or a joint venture) must be certified by an authorised auditor, and submitted to the Revenue Department and (except for joint ventures) to the Commercial Registrar for each accounting year.
In Thai shrimp industry, child labor and rights abuses persist
Saturday, 2 January 2010But this is no scene from the end of a school day.
Nampeung is from Myanmar and an ethnic Mon girl who has been working in a seafood factory in central Thailand for nearly three years.
The desks are the metal tables where she spends six days a week shelling shrimp, and her work is measured by the kilogram.
Of the 200 people working in a barnlike factory during an unannounced visit by Reuters, nearly half appeared to be in their early teens or younger - clear evidence of child labor in an industry worth $2 billion a year in exports.
Half of Thailand's exported shrimp goes to the United States, where it ends up on the shelves of retail giants like Wal-Mart Stores and Costco, according to Poj Aramwattananont, president of the Thai Frozen Foods Association. Japan and Europe each account for 20 percent.
Even though she can only dream of going to school, Nampeung is one of the lucky ones. She makes as much as 300 baht, or $9, a day - more than the province's minimum wage - and sees nothing wrong with children her age working.
"The old people are so slow," she said with a broad smile, sitting demurely on the floor of the concrete hut next to the factory, which she shares with her mother, father and three siblings.
Other factories in the coastal province of Samut Sakhon, 50 kilometers, or 30 miles, west of Bangkok, where 40 percent of all shrimp are processed, do not have such a contented work force.
A police raid on a factory called Ranya Paew in September revealed conditions that were little short of medieval.
Around 800 men, women and children from Myanmar were imprisoned behind walls 5 meters, or 16 feet, high and topped with razor wire in a compound patrolled by armed guards.
The rescued workers told human rights monitors that they had to work 18 hours or more a day and were paid 400 baht a month, out of which they had to buy food - mainly rancid pork - from the factory's owner.
Those who asked for a break had a metal rod shoved up their nostrils. Three women who asked to leave were paraded in front of the other workers, stripped naked and had their heads shaved.
The Labor Rights Promotion Network, a nongovernmental organization that estimates there are 200,000 Burmese migrant workers in Samut Sakhon - of whom only 70,000 are legally registered - says that the Ranya Paew case is the worst it has seen.
But this, the group says, is just the tip of a human trafficking iceberg of factories fed by people-smuggling rings and labor brokers that have the complicity, if not active involvement, of government officials and the provincial police.
"For many migrants, work in Samut Sakhon is the chance for a better life, but for too many it leads to abuse," said Sompong Srakaew, president of the nongovernment organization.
"Unscrupulous employers and brokers conspire to ensure migrant workers remain vulnerable to exploitation. This is only possible with the complicity of elements within the law enforcement authorities."
Wal-Mart and Costco said that none of their shrimp had ever come from Ranya Paew and that strict ethical guidelines for suppliers, as well as audits of processing units in Thailand, ensured that they complied with food standards and labor regulations.
One shipment from Ranya Paew a few years ago, however, did end up in the United States, according to a Western diplomat who has followed the case closely.
Poj, the president of the Thai Frozen Foods Association, denied that children or trafficked people worked in the industry, saying factories were monitored carefully.
"There are no more illegal workers in the Thai food industry, because the government registers all the workers properly," he said. "We never use child labor."
But even Thailand's biggest agro-industrial company, Charoen Pokphand Foods, which produces its own shrimp from pond to package, is not untouched by allegations of trafficked labor.
The company sells a range of shrimp products to the United States and Europe, including the "Thai Torpedo" and "Bangkok Firecracker."
According to the Labor Rights Promotion Network, when the police and immigration officials raided a Charoen Pokphand factory in Samut Sakhon on April 5 and fired shots into the air, more than 100 Burmese migrants in the compound tried to escape by swimming a canal.
Six workers who could not swim are thought to have drowned, the Labor Rights Promotion Network said, and the police rounded up and deported 90 others to Myanmar for being illegal migrants.
Narong Kruakrai, the general manager of the plant, described the raid as a "regular visit" by the immigration police and said the factory never hired illegal workers.
The labor rights group said the workers appeared to have been employed by a third-party broker.
With smaller shrimp companies, overseas buyers have an even harder time conducting their own background checks, as much of the processing is outsourced to small operators.
As a result, foreign companies rely more on the Thai Labor Ministry, which is responsible for ensuring that factories do not use illegal or child workers. But the ministry is short on staff, the Western diplomat said.
"The Thai Ministry of Labor lacks the proper resources to conduct rigorous inspections of these factories," he said.
Despite the discovery of abuses at Ranya Paew, the police in Samut Sakhon have allowed the plant to remain open. In the meantime, about 200 Burmese men were deported as illegal immigrants, and more than 60 women and children are in a Bangkok center for victims of trafficking.
