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Company Formation
In order to set up a limited company in Thailand, the following procedures should be followed:
1/Reservation of your Company 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 company 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 shall 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 three 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 THB for every 100,000 THB of registered capital. The minimum
fee is 500 THB and the maximum is 25,000 THB.
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 is 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. The Company registration fees are 500 THB per 100,000 THB of
registered capital. The minimum fee is Thai 5,000 THB, and the maximum
is 250,000 THB.
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 1,200,000 THB
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.
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
practiced 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. Auditing standards conforming to international auditing standards
are, to the greater extent, recognised and practised by authorised
auditors in Thailand .
For more information on how we can help with your company formation
requirements please email us or call to arrange a no-obligation free
consultation.
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