[Infographic] BOI Company Thailand
As you pull onto the university grounds at dusk, the tension is palpable; excitement is in the air. The sky is alight – and the smell of fresh Thai food fills the air. Tourists and Thais all appear in a great mood. A clean, anticipatory high sets the mood.
You walk down the path, buying fireworks and night lanterns along the way – and eventually, thousands gather in a large field in the middle of the grounds. Buddhist monks chant over a large auditory system and then a voice instructs you: please light your lanterns, then – he gives the go.
The night sky is illuminated as the crowds simultaneously release thousands of lanterns. This is the annual festival in Chiang Mai Thailand, and at Maejo University, throngs of Thais and tourists gather to celebrate by lighting fireworks, sky lanterns and praying with the Buddhist monks. The purpose: to let go of old grievances and start fresh.
Thailand is an amazing place for a vacation – but is it a strategic place to start a business?
If you like 0% tax – it might be…
Let’s examine a case study: South African running a software shop in Thailand.
This is for illustrative purposes only and should not be relied upon for any reason, or used to avoid taxes. Please consult with a tax lawyer from your relevant jurisdiction(s). Best efforts have been used in compiling this information but there is no guarantee it is timely or accurate.
Truly Tax Free is Paradise
Chiang Mai may seem like a sleepy city on the outside – and to the initiated, it remains that way. However – Chiang Mai has a tremendous opportunity as an outsourcing hub, software development shop, or almost any location independent business that can benefit from low costs, no tax, and great employees.
It is for these reasons that many tourists have flocked to work here illegally (which is NOT recommended and can carry stiff penalties under Thai law, including jail-time or becoming blacklisted from the country).
Chiang Mai is an excellent hub for business owners. If you want to take your business to the next level (look for investors, mitigate tax legally, hire staff to work in an office) you can use the low operational cost of living and running a business from Chiang Mai to your absolute business advantage.
What Benefits Are Afforded to Thai Companies and Foreign Investors
I’ve previously shown the benefits of a Thai Company, How to structure a Thai Company, Thai Visa laws, highlights of Bangkok City, and in this article – I will demonstrate how with a certain type of Thai Company (which is often misunderstood and unknown) you can achieve:
- 0% Corporate Tax – 8 year tax holiday (with the option to extend to 11 years)
- Thai Residency
- A Thai work Permit
- A 2-3 year Non-B Visa
- Diplomatic Entry to Suvarnabhumi airport
- up to 50% Personal tax reduction (off normal Thai personal tax)
- 100% foreign ownership
- 4:1 Foreign to Thai work Permit rule exceptions
- Permission to own a small piece of land
This may seem impossible (to the uninitiated or uneducated) but I’ve seen/experienced every one of the previous points and can verify they are completely possible and legitimate under a BOI license.
Have a question About A BOI Company? Use the Form here to contact us, or keep reading.
Here is a deeper look at how a BOI company can be used with other strategic flags in a real life case study.
- Flag 1: South African Passport
- Flag 2: BOI Company Thailand
- Flag 3: Hong Kong Holding Company
- Flag 4: Singapore Banking Flag
- Flag 5: New Zealand Productive Land
- Flag 6: Eastern Block Server / Web Hosting
Flag 1: South African Passport
South Africa passport is an average travel document – with visa free entry to 94 countries. Many South Africans I meet share little desire to acquire a 2nd passport. Their primary concern is establishing a new tax residency – as you will soon see, this is beneficial.
If you are not South African, recommend you skip to the next section. This will apply similarly if you are British, Australian, etc.
Thailand DTA South Africa
If you are exclusively a resident of another country which shares a DTA with South Africa, you are excluded from the definition of resident. Thailand has a dual tax agreement. You are a tax resident of Thailand if you live there for 183 days a year. In general, you are taxed on any income earned abroad that you bring into the country – as well as any monies earned in the country.
The following is useful to South Africans – not many others. There are many South Africans who live and work abroad. For these passport holders who were previously residents of South Africa, it is important to determine residency status, as South African residents are taxed on their worldwide tax income. The tests for residency are as follows the “ordinarily resident” test and “physical presence” test.
You are considered a tax resident of South Africa if you meet either of these tests:
1. Ordinarily Resident Test
There are a number of different factors that determine this test, however – it boils down to determine if a person’s ordinary home. if it happens that you normally return to South Africa, you may be regarded as being ordinarily resident in South Africa.
2. Physical presence test
This test is more clear cut – and if you are not considered ordinarily resident during the relevant year, you must be physically present in South Africa for a period or periods exceeding:
- 91 days in the aggregate during the year of assessment under consideration;
- 91 days in the aggregate during each of the five years of assessment preceding the year of assessment under consideration; and
- 915 days in the aggregate during the above five preceding years of assessment.
However, the person will cease to be tax resident on the day of departure if he/she is outside the Republic for 330 consecutive days thereafter.
To reiterate natural person who is not ordinarily resident in South Africa only becomes a South African resident for tax purposes as from the first day of the sixth year of assessment if he/she is physically present in South Africa (utilizing the test above).
When you lose your South African tax residency, for instance, you go work abroad and your circumstances dictate that you become non-resident, there is a deemed disposal of certain of your assets for capital gains tax purposes and this may cause some cash flow problems.
Flag 2: BOI Company Thailand
This is the most important flag of this particular set up, as it forms the basis for both residency and company.
Normally it can be quite painful to start and run a company in Thailand.
However, a company with BOI promotion comes special rules to promote industries which have a high benefit to the Kingdom of Thailand – and makes Thailand more competitive against other countries in SE Asia.
Singapore and Hong Kong have very low effective tax rates – and for Thailand to compete regionally against these financial and business hubs – they need to offer strong incentives to certain types of companies.
Many “offshore companies” are merely paper companies that don’t give you the right to operate in said jurisdiction.
- EXAMPLE: (for a BVI offshore company – you can’t ever do business in BVI)
- EXAMPLE: For an HK company to exempt from tax from IRB – you can’t do business in HK or with HK persons)
- EXAMPLE: For a Singapore company to be exempt from tax from IRAS – you can’t do business in Singapore have any connections, you have to have a few years of good filing records, and you must apply for an exemption.
With a Thailand BOI approval, you can have a physical office and operations on the ground, (not possible with most “offshore companies” and official tax residency. This is powerful, particularly if you have an established business with a turnover.
A Thai company with 100% foreign ownership gives you many more acquisition opportunities and paths to exit.
Benefits of a BOI Company
- 100% foreign ownership permitted
- 0% tax for up to the first 8 years possible (depending on category and location)
- Work permits to bring in foreign technicians
- Exemption for VAT for import of machinery
- 3 Additional years of tax exemption if can support research and development institution (full details provided upon inquiry)
|Normal Thai Company||Approved By Government|
|Foreign to Thai Ratio of Employees||4:1||Negotiable based on Requirements^|
|Effective Corporate Tax Rate||15-20%||0%*|
|Max. Foreign Ownership||49% Restriction||100%|
|Import of Machinery||VAT Tax||No Tax|
|Ongoing Requirements||On-site inspections from Immigration||BOI update form submissions|
^Some companies have a lower ratio. We can apply for the ratio you require.
*Possible. The software is one such industry.
Most industries under the BOI promotion allow for 100% foreign ownership.
Special Visa under BOI
This visa allows you to remain in the country to begin work on the project.
Normally it is required that the foreigner obtain a B-Visa outside the country at one of the neighboring embassies or consulates. Furthermore, a NON-B visa is required for a work permit. (The following information not found elsewhere on the internet at time of publication)
Steps for a visa to conduct feasibility study :
- Incorporate the company and receive BOI approval
- Write a cover letter in a specific way which includes specific information about the application, current visa status.
- It would be important to show the presentation detail that the company is already incorporated and why you want this type of visa.
- After you submit to the right person (there only one person who can do this) – you need to get a letter from this person – then go to immigration.
- Most immigration officers will not even know of this visa. We have previously had to pull out the law and show them.
- This requires at least 1 full day for someone (not necessarily visa applicant) to successfully obtain.
It is 30,000 baht for this visa if you get a B-visa from outside the country (at a nearby consulate or Embassy – Penang, KL, Singapore as is usually customary, issue letter for 12,000).
There is also an option under the BOI to receive a multiple year visa, and another which grants a diplomatic entry at Suvarnabhumi airport. (Did someone say baller status?).
The application paperwork itself is about 8 pages long. It requires your basic information, financial projections and anticipation of the # of hires, among other information. Care should be taken that the application is backed up by evidence and it is applied for in a specific fashion. While the application paperwork itself is not challenging, it can be difficult for someone unacquainted with the process to get the approval all the way through. Although the BOI step individually can be very quick – the entire process realistically takes 3-6 months.
Interview at BOI HQ
After the paperwork is submitted there will be an important interview with the BOI in Bangkok of which the founders need to be present. We will prepare you thoroughly for this interview. We know 95% of what the BOI will ask – there will be another 5% you will need to think on your feet and answer truthfully about your company. The BOI is smart and they have seen many applications – do not try and fool them with false or misleading representations. A normal business plan and anticipated turnover is expected.
Thai company formation law has some intricacies uncommon for other countries, for instance, the use of promoters.
- At least 3 promoters (individuals age 20 or older)
- Must be registered and available to sign documents during the registration process for a private limited company – and 12 promoters for a public limited company.
- Each of the promoters must be an initial shareholder immediately after company registration and hold a minimum of one share.
- They are generally free to transfer those shares to existing shareholders or third parties, thereafter.
The use of promoters is required, and a ripple in Thai company law that isn’t normally required in other jurisdictions.
The name should be applied for. Three names must be given and the registrar has a good deal of leeway to reject any or all of the names if they do not comply, are taken, or essentially at their discretion.
Memorandum of Association MOA must include
- the name of the company
- the province where the company will be located
- the scope of the company’s business
- the capital to be registered
- the names of the promoters.
- The capital information must include the number of shares and their par value.
- At the formation step, the authorized capital, although partly paid, must all be issued.
Registration of the company should occur after the registration of the memorandum of association and after the BOI approval. 25% of the registered capital must be paid along with the appropriate government fees. If the company is to employ foreigners or the activities are not listed in the FBA, then other registered capital requirements may apply.
Care should be taken to provide that all registered shares have been subscribed for, the promoters have handed over the business to the directors and payment of at least 25% of the total shares has been paid by the shareholders at a statutory meeting is held to transact the business with the presence of all promoters and subscribers.
If the company falls under the definition of “foreign” (as defined in the Foreign Business Act [FBA]), it will normally be required to obtain Cabinet approval or a Foreign Business License prior to commencing operations. This is another step which is time and effort intensive – and most likely as a Foreigner with a BOI certificate – you would need to obtain a Foreign Business License.
VAT & Tax Registration
Furthermore – you would also need to apply for and obtain the company tax ID card and VAT certificate within 60 days of incorporation or the start of operations. Companies that have a turnover in excess of 1.2 million baht must also register for VAT with the Revenue Department within 30 days of the date the annual turnover exceeded that threshold.
Restricted Foreign Ownership?
Can my business qualify? Fill out the form at the bottom of this page and we will let you know.
There are very few activities where the business cannot be fully owned by a foreign investor
- Agriculture – Plant propagation and development
- Mining – Mineral ore prospecting
- Mining – Mining or ore dressing (although Australians can under the treaty)
- Mining – Marble or granite mining
- Manufacturing – Manufacture of 4-stroke motorcycles
- Service and Public Utilities – International Trading Companies
It is important to note that the BOI reserves the right to set the number of shares eligible to be held by foreign investors on any promoted projects. From my experience, they seem very reasonable on this point – and overall the BOI is a great institution to work with.
Do I need a lawyer to Set Up A Company?
You are not required to have a lawyer assist – we bring a lawyer for the company formation aspect, therefore, we will provide a lawyer for all customers who work with us. With regards to the BOI approval, we have the correct connections to confidently navigate the necessary process.
Thailand BOI Company Set up
You can do all of the previous steps – or you can hire us to establish your BOI company. We handle all of the steps from incorporation to exit.
We charge flat fee’s – and we are transparent with our pricing.
Ready To Get Started?
Many law firms charge over 500,000 Baht.
These are our fees:
- We will process your application for 150,000 Baht
- If you are successful, there is another 100,000 Baht fee.
Again – you get a full tax free company, you don’t have to deal with any of the headaches of setting it up (which is difficult, and you need to prepare an enormous amount of paperwork in a foreign language to get approval).
Contact us for a consultation
Apply today by heading over to our dedicated site: http://siamstartup.com/boi-company-thailand/
These flags help further explain the infographic above. If you’d like to download a whitepaper to learn more about what the six flags of Flag Theory are, you can click here.
Flag 3: Hong Kong Holding Company
For the purposes of attracting investors – some entrepreneurs chose to make their BOI company 100% owned and held by an offshore holding company. This allowed for a much easier capital raise, as investors generally feel more comfortable deploying capital into Hong Kong (or Singapore, or BVI) than in Thailand.
Flag 4: Singapore Assets + Banking
Singapore is the best place in South East Asia to have a bank account. It’s worthwhile to plant a banking flag in this country. Decent for investments as well. Recommend DBS, UOB or OCBC for business banking.
Flag 5: Productive Land New Zealand
Without getting into a discussion on the benefits of productive land and the process – check out this article if you are interested. (note around 2.5 Million is needed minimum for this type of investment and relocation).
Flag 6: Eastern European Servers
For the paranoid or the prepared: pay with bitcoin, and set up a server in Ukraine or Estonia. Non-euro, eastern block countries tend to be the best security in the world, and have advanced IT professionals attending to your needs.
This article was written in 2014 and is for illustrative purposes only and should not be relied upon for any reason, or used to avoid taxes. Please consult with a tax lawyer from your relevant jurisdiction(s). Best efforts have been used in compiling this information but laws and rules change so there is no guarantee it is timely or accurate.