Tag Archive: business

  1. Thailand’s Import Procedures

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    All goods that are imported into Thailand must be reported to the Thai Customs Department. The steps required to import products into Thailand legally are outlined below.

    Step 1 – E-Customs system registration

    As of January 1st, 2007, the procedures for importing goods into Thailand have been centralized into the online e-Customs system. In order to register for the e-Customs system, the importer must first obtain a „digital certificate“ prior to registration. A digital certificate is an electronic signature file used to confirm the identity of the sender of electronic documents and the authenticity of said documents.

    Once a digital certificate is obtained, the importer may then proceed to register for the e-Customs system. Companies can either register with the system directly (i.e. at their own office) or through an agent. If a company decides to register through an agent, the agent will handle all aspects of the registration process. If a company decides to register to use the e-Customs system directly, the following steps must be taken:
    e-Customs software must be installed on the company’s IT system, and digital certificates must be verified;

    • the importer must register with Thai Customs at one of the following places:
      • The Registration and Customs Privileges Sub-Division;
      • Customs Procedures and Valuation Standard Bureau;
      • or the General Administration Division at each Customs office;
    • the accuracy and readiness of message exchange with the e-Customs system must be tested;
      • once tests are completed successfully, the Communication and IT Bureau will issue an e-Customs registration ID, and the process is complete.

    Step 2 – Review of controlled goods

    Two separate checks must be made before goods are imported: first, products that require an import permit (if any) must be identified. A range of goods requires import permits issued by different agencies before the date of arrival. Second, it must be ascertained if products are considered ‚red line‘ goods (as opposed to green line). Red line goods are goods found to be at high risk or requiring additional certification and verification upon arrival. When importing red line goods, it is necessary to provide the following supporting documents:

    • Bill of Lading (B/L) or Air Waybill
    • Invoice
    • Packing List
    • Import License (if required)
    • Certificates of origin
    • Other relevant documents (e.g. list of ingredients, technical standards certificates, etc.)

    There is no definitive list of red line goods. However, the e-Customs system will inform the importer once the Import Declaration has been submitted (see Step 3) whether the goods are considered red line or green line. As such, it is crucial to ensure the correct paperwork is prepared for all imports in order to be prepared for a shipment being flagged as being red line.

    Step 3 – Submission and verification of the declaration

    Once all correct documentation is prepared, an Import Declaration can be submitted to the e-Customs system together with an arrival report with the information of the vessel carrying the shipment of goods. The e-Customs system will then check and verify the submission, identify any discrepancies, and specify whether the shipment is considered green line or red line.

    Step 4 – Payment of taxes and duties

    Thai Customs Tariff Decree B.E. 2530 (1987) stipulates that „goods imported or brought into, exported, or taken out of the Kingdom shall be chargeable with and liable to duty“. Some items are exempt from import duties.

    For goods that are subject to import duties, payment can be made at either the Customs Department of the port of entry or via the e-Customs system’s e-Payment section.

    Step 5 – Inspection and release

    The final step before the imported cargo is released is the inspection of the goods. For green line goods, this is a simple online screening and will take only a few minutes. For red line goods, all the supporting documents will have to be presented, and the cargo must be physically examined by customs officials.

    If you have any question regarding the Thailand’s Import Procedures, Feel free to contact us at [email protected] or +66 (02) 117 9131 – 2. 

  2. Seminar on BOI promotion with a full house of Bangkok business professionals

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    FRANK Legal & Tax hosted a seminar on BOI Promotion for Tech Startups, attended by a full house of businesspeople working in the tech and digital sectors in Bangkok.

    The event provided an opportunity to explore BOI promotion related to the tech industry in Thailand and gave insights into the various BOI categories that are relevant to IT, software development and tech business.

    The audience asked a number of questions based on their own experiences of planning or trying to pursue BOI promotion in Thailand.

    The event was a success, drawing attention to the importance of the rule of law in doing business in Thailand, and raising awareness of the ways in which business people in Bangkok can take advantage of BOI promotion.

    FRANK Legal & Tax looks forward to continuing events related to important legal issues and we welcome any questions you may have about doing business in Thailand by contacting us at [email protected]

  3. Exemptions from the Foreign Business Act

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    With the ministerial regulation by the Ministry of Commerce of June 25th, 2019, the following services provided by foreign-owned companies, to affiliated companies, are excluded from the obligation to obtain a Foreign Business License according to Schedule Three (21) of the Foreign Business Act.

    • Lending money to affiliated companies in Thailand;
    • Renting out office space
    • Providing consultation and recommendations in the following sectors:
      • Management;
      • Marketing;
      • Human resources;
      • Information technology.

    It needs to be mentioned that it is possible to provide consultation and recommendations to affiliated companies that are located outside of Thailand.

    Before the new regulation came into effect, foreign companies providing these services had to obtain a Foreign Business License to act in accordance with the law. This required them to fulfill additional conditions which were hard to meet for small companies or Start-Ups. This new regulation is a further step, that is underlining Thailand’s effort to open its market for foreign business carefully.

    If you have any questions regarding the trademark registration, feel free to contact us at [email protected]

  4. Thailand’s International Business Center Incentives

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    Under the Foreign Business Act (“FBA”), foreigners are legally restricted in doing certain businesses in Thailand as prescribed in the lists Annexed to the FBA.

    Fortunately, there are various possibilities to obtain official permissions. And there are also government schemes available which provide for tax exemptions and tax reductions. Until now the Thai government authorities offered investment promotions for international headquarters (IHQ) and international trading centers (ITC). These have been replaced by the international business center (IBC). The differences between IHQ/ITC and IBC are as follows:

    • BOI Promotion for International Business Center

    On 11th December 2018, the BOI has published BOI Announcement No. Ngor. 1/2561 to suspend the investment promotion for 7.5 International Headquarters: IHQ and 7.6 International Trading Center: ITC. This suspension is active since the date of the announcement.

    At the same time, the BOI published Announcement No. Sor. 6/2561 to facilitate 7.34 International Business Center: IBC as a newly promoted activity. Any company wishing to apply for the new BOI promotion for IBC must comply with the conditions as follows:

    1. The company must have a business plan to provide at least one of the services enlisted in 1.1.- 1.11, to associated enterprises:
      1. Organizational administration and management and business planning
      2. Procurement of raw materials and parts
      3. Research and development
      4. Technical support
      5. Marketing and sales promotion
      6. Human resources and training and development
      7. Financial management advisory service
      8. Credit management and control
      9. Treasury center
      10. International trade
      11. Other services as approved by the Board
    2. The companies paid-up registered capital must not be less than 10 million THB.
    3. The Applicant must employ at least 10 full-time employees who have knowledge and skill which are necessary for an IBC. Exception: If the IBC hast the scope of a treasury center, only 5 full-time employees are required.

    In comparison: There is no minimum amount of employees required for IHQ/ITC.

    1. For international trade: The applicant must have at least one scope of business from no. 1.1 – 1.10 included.
    2. The company may not be eligible for the exemption of import duties on raw or essential materials used in production for export.
    3. The corporation may not be eligible for merit-based incentives.

    The IBC shall receive B1 incentives which include all Non-Tax Incentives and exemption of import duties on machinery. The new promoted activity is valid since 11th December 2018.

    Thailand International Business Center Incentives

    1. Revenue Department Promotion for IBC

    Regardless of whether a company operates the IBC business with BOI promotion or conducts a business exempted from FBA requirements, the company may also be eligible to apply for certain IBC tax privileges directly at the Thai Revenue Department.

    An IBC is a company incorporated under Thai law and approved by the Thailand Revenue Department to provide administrative and technical support service, treasury service and/or international trading service.

    To obtain the tax privileges from Royal Decree (No 674) for IBC, a company has to fulfill much stricter requirements than under the ITC/IHQ schemes. Applicants must have paid up a minimum capital of 10 million THB, which is similar to the IHQ and ITC, but annual expenses for operation in Thailand must be at least 60 million THB, while it was 15 million THB in the former schemes. Further, the applicant is required to employ a minimum of 10 employees (if the applicant will only provide treasury services; only 5 employees). Such a rule does not exist in the IHQ/ ITC.

    There is also a possibility to switch from an old IHQ/ITC scheme to the new IBC scheme. Applicants switching from an old plan are only required to have at least 15 million THB of annual local spending.

    Because of the Royal Decree No. 674, from December the 28th 2018, there are several tax incentives for the IBC, these privileges are guaranteed for 15 years. These privileges are shown and compared to the old ITC/IHQ schemes as follows:

    1. Corporate Income tax
      1. The net income from support services, treasury services and royalty income from affiliates  is reduced by:
        • 8% for companies with an annual operating expenditure between 60 – 300 million THB,
        • 5% for companies with an annual operating expenditure between 300 – 600 million THB,
        • 3% for companies with an annual operating expenditure of over 600 million THB.
      2. There is an exemption from co-operating income tax on behalf of dividend income (local and overseas). In IHQ and ITC, there is only an exemption from dividend income derived from affiliates in Thailand.
      3. Capital gains and trading income are not mentioned in the IBC, but there is an explicit exemption in IHQ and ITC.
    2. There is an exemption from withholding tax for dividend distribution to overseas and interest payment to overseas, no difference to ITC and IHQ.
    3. There is no specific business tax for financial management service income derived from affiliated companies.

    Personal income tax for expatriate employees for the IBC is based on a 15% flat tax rate.

  5. Residential Property Leasing as a Contract-Controlled Business

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    Overcharging tenants for electricity and water was a common practice among landlords in Thailand. Weak regulations laid the foundation for the collection of exaggerated deposits and punitive methods of landlords if tenants did not pay their rent.

    The Contract Committee of the Consumer Protection Board aims to end such practices with “the Regulation of Residential Property Leasing as a Contract-Controlled Business B.E. 2561” (the “Regulation”). Since May 2018 residential property leasing is considered as a contract-controlled business.

    According to the Regulation the residential property leasing business is considered as a business which involves the lease or sublease of five or more units to individuals. The term ‘property’ has a broad meaning; it includes all kinds of residential accommodations, such as apartments, condos, flats and houses.

    Residential Property Leasing

    Such lease agreements must comply with the following requirements:

    • The agreement must be composed in Thai language (in addition to other languages, as the case may be) and include information on the business operator, the lessee and the property itself, the property’s condition and equipment. The lease agreement must contain the start and end date of the lease, rental and utility fees, due dates and other reasonable costs such as service fees and security deposit.
    • All invoices must be sent seven days before the due date. The business operator is obligated to provide a duplicate of the lease agreement and attach the tenant’s acknowledgement of the property’s condition and equipment.
    • The business operator has to repay the security deposit within seven days after the termination of the lease agreement and the inspection of the property’s condition.
    • The tenant has the right to terminate the lease agreement any time by giving written notice to the business operator 30 days in advance.
    • Clauses which give the business operator the right to terminate the lease agreement prior to the originally agreed period of time must be written in bold, italic or red letters.
    • If the tenant is in breach of the contract, then the business operator is required to give the tenant 30 days to eliminate the breach before termination.
    • It is forbidden to incorporate clauses which waive or limit the liability of the business operator who is in breach with the lease agreement or acts wrongfully, allow the business operator to request an advance rental fee of more than one month’s rent or to alter the rental rates or any fees during the duration of the lease agreement. The security deposit must not exceed the amount of more than one month’s rent, and terms which allow the business operator to seize the security deposit or advance rent are void.
    • Before inspecting the property, the business operator has to notify the tenant within a reasonable time.
    • Terms which allow a higher billing for electricity and water than the rates prescribed by the authorities are prohibited as well as stipulations which enable the business operator to bar the tenant from entering the accommodation or confiscating the tenant’s possessions.
    • Fees for prolongation of the rental agreement and terms which allow the business operator to terminate the lease agreement earlier without cause, such as material breach of the contract, are forbidden.
    • Normal wear and tear of the property or its interior and defects that result out of wear and tear shall be borne by the business operator only.
    • The tenant is not liable for property damages caused without the tenant’s contribution.

    If a lease agreement includes above-mentioned clauses, such clauses will from now on be deemed invalid. A business operator who fails to follow the Regulations could face criminal prosecution.

  6. Starting a business in Thailand: upcoming Bangkok event

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    FRANK Legal & Tax will be holding another of our regular free events, designed to support the business community in Bangkok.

    The upcoming event will provide an opportunity to explore the topic of starting a business in Thailand. Starting a new business can be both exciting and challenging, particularly in a foreign country. By attending our workshop, you will acquaint yourself with the legal procedures for opening a business in Thailand and be more familiar with the programs and opportunities available throughout the Kingdom. Please register using the form on this page.

    In addition, Partner Fabian Doppler will briefly discuss the legal process for start-ups in Thailand.

    [contact-form-7 id=“3006″ title=“Register for our next event_Nov7 18″]

  7. New Fees for Business Registration

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    The former process of business registration was considered as complex and unclear. The new regulation enhances the system and brings benefits to the applicant. It helps to save costs and strengthen the competitiveness. The additional possibility of e-Registration provides savings up to 30%, it saves time and is an easy method to register the new business.

    While the former rates were not specified, and a moving scale was used as a guideline the new rates stipulate a fixed sum for Incorporation, Alteration, Dissolution and Liquidation. So, if you want to start a business the following flat rates will apply:

    • Incorporation of Partnership: THB 1000, e-Registration: THB 700
    • Incorporation of Limited Company within the same day: THB 5500, e-Registration: THB 3850
    • Alteration of Partnership, Limited Company, Increase Partnership capital made up of contributions,
      Increase limited company’s capital: THB 500 / time, e-Registration: THB 350
    • Dissolution and Liquidation: THB 500, e-Registration: THB 350
    • other registrations: THB 500 / time, e-Registration: THB 350

    Note that special Development Areas can request a reduction by half from the new rates. But, another reduction within the e-Registration is not provided. The new fee system simplifies the registration process and ensures transparency. It is a welcomed change and encourages starting a business in Thailand.

  8. How Many Thai Staff are Required for my Business

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    1. Requirements for Business Visa

    Business visas (“non-immigrant-B-visas”) are issued by Thai embassies and consulates abroad. They can be issued for a 90 days period or for one year.

     

    a) Non-B visa 90 days (from Thai embassy abroad)

    For a 90 days non-B-visa, some embassies/consulates (particularly in the neighboring countries may require the presentation of an approval letter (WT3 form) which is issued by the Labor Department in Thailand. As a requirement for this approval letter, the Thai employer who is supporting the visa application must employ four Thai employees for each foreigner, however in our experience it is possible to negotiate and the number may be reduced to 1-2 Thai employees. Such employees must be registered at the Social Security Office in Thailand.

    In our experience, not all embassies/consulates require this approval letter and it is worth contacting the embassy/consulate in advance to inquire about their policy (particularly in western countries).

     

    b) Non-B visa 1 year (from Thai embassy abroad)

    Business visas can also be issued by the Thai embassy/consulate for one year.

    It should, however, be noted that even for the 1 year visa, the permission to stay is only for 90 days. This visa is suitable for foreigners who travel and leave Thailand frequently. In other cases, foreigners holding this type of visa do so called “visa-runs”.

    A new application at the Thai embassy/consulate abroad required after the expiration of the visa (after 1 year).

    The same applies here regarding the requirement of a WT3 form and the requirement of 1-2 Thai employees.

     

    c) Non-B visa extension for 1 year (from Immigration Office in Thailand)

    The Immigration Office in Thailand issues visa extensions for one year without the need of visa-runs (‘Visa Extension”).

    For this kind of permission to stay, the employer must strictly comply with a ratio between foreign and Thai staff of one foreign national per four (4) permanent Thai staff. Based on our experience, there is no room to negotiate with the Immigration Office regarding the number of Thai employees.

    The employment of Thai staff must be evidenced by presenting detailed documentation, including

    • Evidence of social security payments;
    • Documentation related to withholding of personal income tax
    • Photographs of each Thai staff, working place, together with the foreigner;
    • Financial statements of the employer (the company) of the preceding year
    • Corporate income tax return of eth employer of preceding year

    The Thai staff must have been employed since at least since 3 calendar months before the date of application. It is notable that bank statements are not required to be presented.

     

     

    2. Requirements for Work Permit

    Also, the work permit in Thailand requires the employer to employ Thai staff.

     

    a) Regular work permit

    The employing company must employ four (4) Thai employees for each work permit. Also here, in the first year of business after the registration of a new company, the Labor Department may allow a ratio of only 1-2 Thai employees per work permit, i.e. per foreigner working in the company.

    Such employees must be registered at the Social Security Office in Thailand. There is no requirement of other documentation (such as for the Immigration Office).

    It should be noted that the Labour Department, if it accepts the initial application with employment of only two Thai staff, it will follow up in the following year at the time of the work permit renewal, and then strictly require that the employer employs 4 Thai staff.

     

    b) If married to Thai spouse

    If a foreign employee is married to a Thai citizen, he/she is then entitled to apply for a work permit under privileged conditions from the Department of Employment. For such work permit, only two (2) Thai staff need to be employed for this foreigner.

    There is no requirement for a non-immigrant-B-visa in connection with such work permit, the non-immigrant-O-visa is sufficient.

     

    3. Conclusion

    Many of our clients who seek to reduce the number of staff on the payroll to the lowest amount possible, in particular newly set up companies. In this case, we recommend the following:

     

    a) Applying for a 1 year non-b visa at a Thai embassy/consulate abroad. For this type of visa, depending on the policy of the embassy/consulate, Thai staff may not be required;

    b) For the work permit application, at least in the first year of business it may be possible to negotiate a reduction of the required Thai staff from 4 to only 1-2 employees.

     

    Once the business operation is well established, the amount of 4 Thai staff are then often feasible from an operational perspective and the issue becomes less pressing.

  9. Visa and Work Permit for a Business Trip to Thailand

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    For business trips to or short term employment of foreigners in Thailand, this article summarizes the available options regarding the necessary visa and work permits:

     

    1. Business Visa

    Foreigners who wish to work, conduct business or undertake investment activities in Thailand must apply for a Non-Immigrant Visa at the Royal Thai Embassies or Royal Thai Consulates-General.

    Various categories of the Non-Immigrant Visa are currently provided to meet the needs and qualifications of individual business persons. These include business visa Category “B” and business-approved Visa Category „B-A“:

     

    A) Non-Immigrant-B-visa

    The Non-Immigrant Visa Category “B” (Business Visa) is issued to applicants who wish to enter the Kingdom to work or to conduct business.

    The holder of this type of visa is entitled to stay in Thailand for a maximum period of 90 days.  He or she may apply for an extension of stay at the Office of the Immigration Bureau and may be granted such extension for a period of one year from the date of visa expiration.

     

    B) Non-immigrant-B-A-visa

    This type of visa may be applied for at the Embassies or Consulates abroad, but first of all the approval shall be given by the Office of the Immigration Bureau in Bangkok before the visa is issued to the qualified applicant. The applicant’s associated company in which he or she will invest in or conduct business with may apply for this type of visa on behalf of the applicant at the Office of the Immigration Bureau. Once the application is approved, the Immigration Bureau will advise the concerned Royal Thai Embassy or Royal Consulate-General via the Ministry of Foreign Affairs to issue the visa to the applicant.

    The holder of this category “B-A” visa will be permitted to stay for a period of one year from the date of first entry into the Kingdom.

    However, it should be noted that this type of visa is rather uncommon and the practices are lacking clear and specific rules set forth in the law. The process is therefore rather tedious.

     

    2. Work Permit

    A foreigner shall apply for a work permit as soon as he engages in work by “exerting energy or using knowledge whether or not in consideration of wages or other benefits“. Working in Thailand is subject to the Working of Alien Act (B.E. 2551).

    The work must be eligible and the foreigner must be employed by an eligible employer. It is provided that such eligible employer must be a Thai national, or is legally permitted to conduct business activity in Thailand.

     

    A) Exemptions and Special Cases

    However, the Working of Alien Act stipulates certain exemptions. The following occupations explicitly do not require a Work Permit:

    1. Representatives of member countries and officials of the United Nations and its specialized agencies, as well as their family and personal servants;
    2. Members of the diplomatic corps or consular missions, as well as their family and personal servants;
    3. Persons who perform duties on missions in the Kingdom under an agreement between the government of Thailand and a foreign government or international organization;
    4. Persons who enter the Kingdom for the performance of any duty or mission for the benefit of education, culture, arts, or sports; and
    5. Persons who have received special permission from the Thai government.

    Furthermore, it should be note that attending meetings, seminars, lectures, appearing in court, or even buying things for the purpose of export are not considered as “working”.

     

    B) Temporary Work Permit

    For engaging in necessary and urgent work for a period of not exceeding 15 days from the date of issuance work permit, according to Section 7 of Alien Working Act B.E. 2521 (1978) and Regulation of Department of Employment B.E. 2546 (2003), the foreign worker may apply for a Temporary Work Permit.

    Work related to administration, academic matters and an unlimited period is not considered as „necessary and urgent work“, except in a case where damage may be incurred if the work is not performed in time.

    The temporary work permit does not require the company, as usually, to have a registered capital of at least 2 Million THB and employment of 4 Thai staff per one foreign staff. But the company must prove that it is an urgent and necessary work and needs a foreigner to perform on time, and otherwise there would be damages to the company. This kind of work permit can be allowed once but under no circumstances be renewed.

    One significant advantage of the temporary work permit is the fast process: if the applicant applies for a temporary work permit, the process should take only one working day (if the application is correct and complete), while for a normal WP the process usually takes, at least, five working days to proceed. The Registrar of Labour Department may impose any condition in the work permit to be complied with by the foreigner.

    Before applying for the temporary work permit, the foreign staff must have entered the Kingdom of Thailand with a non-immigrant “B” visa.

     

    C) Work Permit through General Process

    If the period of temporary work permit is too short, another option is to apply for a work permit through the general process. This, however, requires a Thai employer with a registered capital of at least 2 Million THB/one foreigner. The foreigner may apply for a work permit for a minimum period of 3 months.

    A non-immigrant–B-visa is required for this process.

     

    3. Expedited Process under the BOI Scheme

    Furthermore, if the Thai employer is promoted by the Thai Board of Investment (BOI), the BOI may issue a visa and temporary work permit for one month without specific requirements (regarding registered capital or employment of 4 Thai staff).

     

    Feel free to contact us if you have any questions regarding the above.

     

  10. FRANK Legal & Tax joins International Business Association Phuket (IBAP)

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    We are proud to announce that FRANK Legal & Tax Ltd. is now a member of the International Business Association Phuket (IBAP).

    Our lawyers have been working with IBAP and attending their monthly events for many years, and we are happy to now be member again with the new outfit FRANK Legal & Tax.