Operating as a Foreign Business in Thailand: Pros and Cons

When doing business in Thailand, one has the option of operating in a joint-venture with majority Thai ownership or as majority or solely foreign-owned firm. Although Thai law is restrictive of how foreigners are able to operate the business, it nevertheless does allow majority foreign ownership of the business and foreign entrepreneurs to engage in business in certain cases. In the case where a foreigner is able to do business without having to rely on a Thai partner, such as where a foreigner engages in a business that is not restricted by the Foreign Business Act, or where the foreigner is granted permission to operate the business. Here are a few advantages and disadvantages of doing business in Thailand as a foreign company.

Capital Investment

Pro: Foreign companies, depending on the specific type, are normally required to remit their capital investment as foreign currency from overseas, which is then usually converted into Thai baht in order to conduct business. This requirement can be regarded as advantage in that since the cost of doing business in Thailand is normally more cost-effective than as compared to in developed nations and since the foreign currency is likely to be stronger than the Thai baht, being required to remit the funding from overseas may be seen as a benefit.

Con: The minimum investment by foreign companies is regulated by law and must be at least 2 million baht unless government regulations prescribe a higher amount depending on the situation. In the case where a foreign company engages in a business that would require a Foreign Business License, then the capital investment is required to be at least 3 million baht per each business.

Scope of Business

Pro: Although the scope of business permitted to foreigners is restricted, once granted permission to operate the business, the foreign company will be qualified to receive tax and non-tax benefits, such as those offered under the Board of Investment.

Con: If the foreign company seeks to expand its business activities, then the process of being granted permission for each additional business activity may be quite cumbersome, depending on how often the company expands its business scope.

Thailand offers great potential to foreign investors. It is worth considering whether it is still advantageous to do business as a foreign company depending on the particular situation. However, Thai law is very bureaucratic and foreign business activities are restricted. Therefore, foreign investors are advised to seek competent Thai Lawyers before engaging in business.

 

Category: Business in Thailand, Civil and Commercial Law