Small Businesses In Thailand

[rossigee]

1)Why does a foreigner who starts a company in Thailand have to leave the country to apply for a working visa?

2)Why is a foreigner who pays tax in Thailand expected to leave the country every 90 days?

3)Why does a foreigner running a small business in Thailand need to employ four Thai staff?

4)Why does a foreigner applying for a 1 year visa need to register their company for VAT?

5)Why is a foreigner expected to earn a certain salary based on their country of origin?

[naka]

TIT ... Don't look for logic, it can only end in tears of frustration

Naka.

[Sunbelt Asia]

1)Why does a foreigner who starts a company in Thailand have to leave the country to apply for a working visa?

If you have any type of visa even a tourist/ transit visa, you can get around this by changing the tourist/ transit visa inside Thailand. You can also obtain a extension of stay based on business from any other type of 90 day non immigrant visa ( except for a O-A)

2)Why is a foreigner who pays tax in Thailand expected to leave the country every 90 days?

Because either it’s not enough tax being paid on their nationality or they are not employing enough Thais.

By the way, this would not apply if the foreigner had an extension of stay based on support of a Thai national or if it was based on investment.

Example: You have four Thais employed with a minimum salary of 5,250 Baht per month and you are from Germany and get a salary of 50K Baht per month. If you are the only one with a work permit, you do not need to leave the country every 90 days. You then can apply for the extension of stay based on business.

3)Why does a foreigner running a small business in Thailand need to employ four Thai staff?

You do not need to hire any Thais to obtain a work permit unless you are applying for the extension of stay based on business. If your companies’ objective is consultant, than you only need one Thai employed to obtain the extension of stay based on business.

Example: You have an extension of stay based on investment, and a work permit for your company. You do not need to have any Thai employees and you do not need to leave the country every 90 days.

Example: You have a business that is a consultant in the IT industry. You have a valid work permit and get paid 60,000 Baht per month. You only have a Thai secretary working and can apply for the extension of stay based on business.

4)Why does a foreigner applying for a 1 year visa need to register their company for VAT?

I surmise you mean a one year based on business. In certain situations you do not need to register for Vat. ie: if your companies objective is retail of books, mags. In most other cases it is because if your company is paying a foreigner they should be doing turnover of at least 150,000 Baht per month. In this case, they would need to be in the Vat system even to obtain a work permit.

5)Why is a foreigner expected to earn a certain salary based on their country of origin?

Only if you apply for the extension of stay based on business is this the criteria. This criteria is not required for the work permit.

The reason for the different amount with Immigration is they feel that if they didn't enforce this, many foreigners would milk Thailand and not be paying as much tax as they should. This salary requirement was based on the database of the average salaries of their fellow countrymen working in Thailand and what they listed as the salary in 2002.

Even though it may not seem fair. All and all, Thailand’s laws are not as restrictive for foreigners to be employed as you may find in your own country.

www.sunbeltasiagroup.com

[billaaa777]

Question for Sunbelt Asia

Wow, what a great answer. Thank you.

I was just in the process of posting a few questions for your firm and you have answered many of them here. In addition, I was going to call and set up an appointment with your office in Pattaya to answer a few more questions and maybe set up a company.

If you could be so polite to answer the following questions I would appreciate it. In addition could you please PM with a person as knowledgeable as you are that works in the Pattaya office? I have been to see more than one attorney attempting to get my questions answered and I believe you provide more information in this one post than they all did.

1) What is and how much is the least expensive company to set up in order to obtain a work permit?

2) I am American; I want my monthly tax expense, social security expenses and accounting expense to be as low as possible. What is the best procedure to accomplish this goal, while maintaining a work permit and a visa?

3) Is it possible to set up a Thai company and later change it to an American firm utilizing the Amity Treaty?

4) Are there so many advantages to initially starting your company utilizing the Amity Treaty that it is well worth the additional expense?

Thank You,

Bill

[rossigee]

TIT ... Don't look for logic, it can only end in tears of frustration

Naka.

Indeed, there have been many tears of frustration ever since I first opened a company in Thailand several years ago. The tears ended when I finally closed it earlier this year. My problem now is that I have a nipper on the way, so I will probably have to start working and open a company again in order to live here securely and not risk my child becoming fatherless and my wife husbandless.

At least Sunbelt Asia's answers to my questions show that there is some small hope for running a small (IT consulting) company in Thailand *and* keeping my sanity (and customers), if I can just find a decent lawyer/accountant this time around. I enquired with Sunbelt Asia before, but unfortunately they don't cover the area we live in (Prachuab Kirikhan).

Thanks for the excellent response, Sunbelt Asia. One more thing, can I open a company in an area that you do cover, but work from home?

[Sunbelt Asia]

Thank you for the kind words.

These are good questions but not easy to answer because the answers can differ depending on a persons situation. Each answer has advantage and disadvantage over another answer and depends on your case. I'm then going on the basis that you have enough funds to set up a sole proprietorship which will be cost effective in the long run. Also its a small business.

1) What is and how much is the least expensive company to set up in order to obtain a work permit?

As you are an American and can file under the Amity Treaty, sole proprietorship but you cannot get an extension of stay based on business with this formation. The disadvantage is its unlimited liability. If the business you are involved with will be small, then it could be the perfect way to be legal here.

2) I am American; I want my monthly tax expense, social security expenses and accounting expense to be as low as possible. What is the best procedure to accomplish this goal, while maintaining a work permit and a visa?

Work permit would be sole proprietorship. However if you wanted a visa and if you had a work permit with this formation, it would have to be either based on support of a Thai national, investment visa or a multi-entry one year visa (going on 90 day visa runs) The reason the sole proprietorship is the correct answer in my opinion, is you can decide between declaring actual expense or 65-85% depending on the types of income. Legally, you only need to keep track of gross receipts under the sole proprietorship and not expenses, if you want to just use their standard guidelines and then pay personal tax on that difference. You also do not need to be in the Vat system to apply for the work permit.

Example: You are married and have a consulting business that generates one million in gross receipts for 2005. The expenses were 300,000 Baht. The government gives you a choice to declare the standard expense of 80% or in this case 800,000 rather than the actual expense of 300,000 Baht. You then would only pay 7,000 Baht tax on the 200,000 personal income being married. If you had a Thai limited company you would need to pay 105,000 Baht on a 700,000 Baht profit as you are a SME with a 15% tax bracket

3) Is it possible to set up a Thai company and later change it to an American firm utilizing the Amity Treaty?

Yes but would strongly advocate doing the Amity now! Forming a Thai Limited company, if the business is restricted under the FBA, is not easy unless you apply for the Foreign Business License or have Thai investors who will own 51% of your company. When it all said and done, it will be more expensive than setting up the company under Amity in the first place.

4) Are there so many advantages to initially starting your company utilizing the Amity Treaty that it is well worth the additional expense?

Yes. The window is open till September 5th. They may or may not keep the application window for Amity open for an additional 90 days. Do the sole proprietorship today!

This application for Amity can only be done in Bangkok. I would apply for it here, get the work permit in Bangkok (no need to pay the Pattaya Administration surcharge and have a 4 week delay) and then transfer the work permit down to Pattaya.

www.sunbeltasiagroup.com

[jdinasia]

and what would the total outlay for startup be under treaty of Amity?

[Sunbelt Asia]

Thanks for the excellent response, Sunbelt Asia. One more thing, can I open a company in an area that you do cover, but work from home?

You are welcome. A number of clients have formed the company in Bangkok (paperwork being sent by EMS back and forth) obtained the work permit here and then transferred the company and work permit to their location. Some also have made Bangkok the Headquarters and their location the branch. All have found the time process for a work permit to be much faster than dealing with upcountry as everything needs to be submitted in triplicate there.

www.sunbeltasia.com

[rossigee]

Thanks for the excellent response, Sunbelt Asia. One more thing, can I open a company in an area that you do cover, but work from home?

You are welcome. A number of clients have formed the company in Bangkok (paperwork being sent by EMS back and forth) obtained the work permit here and then transferred the company and work permit to their location. Some also have made Bangkok the Headquarters and their location the branch. All have found the time process for a work permit to be much faster than dealing with upcountry as everything needs to be submitted in triplicate there.

www.sunbeltasia.com

Fantastic. That sounds like the way forward. I'll be in touch in due course.

[Sunbelt Asia]

and what would the total outlay for startup be under treaty of Amity?

Sole proprietorship 2,500

Tax ID 3000

Name reservation for sole proprietorship at district office ( ie: Lucky Eleven) 1,500

Amity for sole proprietorship 19,500 ( The limited company Amity is 34,000 Baht)

Government fees for Amity and sole proprietorship is 25,450 Baht

Traveling fees 1,800 Baht

www.sunbeltasiagroup.com

[lingyai]

and what would the total outlay for startup be under treaty of Amity?

Sole proprietorship 2,500

Tax ID 3000

Name reservation for sole proprietorship at district office ( ie: Lucky Eleven) 1,500

Amity for sole proprietorship 19,500 ( The limited company Amity is 34,000 Baht)

Government fees for Amity and sole proprietorship is 25,450 Baht

Traveling fees 1,800 Baht

www.sunbeltasiagroup.com

If an 100% American owned company covered by the Amnity treaty was sold to another American after Sept 5th, say sometime in 2007, is the busienss still covered?

[Sunbelt Asia]

If an 100% American owned company covered by the Amnity treaty was sold to another American after Sept 5th, say sometime in 2007, is the busienss still covered?

Up to now it has been allowed.

Some people have speculated that if the Amity Treaty would end, Amity companies will lose the privilege. The fact remains over 20 billion US dollars are invested in Thailand under the Amity treaty and the giant sucking sound you would hear would be that money being pulled out of Thailand. Over $20 billion dollars leaving would kill most countries, the likelihood of the existing Amity companies being grandfathered in, maintaining the same rights is extremely high.

www.sunbeltasiagroup.com

[lingyai]

and what would the total outlay for startup be under treaty of Amity?

Sole proprietorship 2,500

Tax ID 3000

Name reservation for sole proprietorship at district office ( ie: Lucky Eleven) 1,500

Amity for sole proprietorship 19,500 ( The limited company Amity is 34,000 Baht)

Government fees for Amity and sole proprietorship is 25,450 Baht

Traveling fees 1,800 Baht

www.sunbeltasiagroup.com

So to set up a limited compnay under the Amnity treaty would cost:

34,000

+Tax ID

+goverment fee

+traveling fee

+company registration fee

and

then you need to keep 25% of 2 million baht minimum capital, so 500,000baht in the bank right?

One more question. Is there talk of renewing the Amnity Treaty in the future?

[Sunbelt Asia]

So to set up a limited compnay under the Amnity treaty would cost:

34,000

+Tax ID

+goverment fee

+traveling fee

+company registration fee

and

then you need to keep 25% of 2 million baht minimum capital, so 500,000baht in the bank right?

One more question. Is there talk of renewing the Amnity Treaty in the future?

The 500,000 Baht can be used for operational expense or even a director’s loan, it does not need to sit in the bank. However you are able to use assets instead of cash as well for paid up capital. If you use a car, you must state the license plate number, make, model and year. A computer would be serial number, brand. It must be done in the statutory meeting before the company is set up. This asset can be depreciated on your annual tax.

It looks like it will be extended for another 90 days on applications but it is not guaranteed. Last week, they said it would. Several days ago they called and said it still not confirmed.

www.sunbeltasiagroup.com

[rossigee]

1)Why does a foreigner who starts a company in Thailand have to leave the country to apply for a working visa?

If you have any type of visa even a tourist/ transit visa, you can get around this by changing the tourist/ transit visa inside Thailand. You can also obtain a extension of stay based on business from any other type of 90 day non immigrant visa ( except for a O-A)

If, when we go back to Thailand next year, I set up another company, how would I go about changing my tourist visa to a non-imm visa without leaving the country? Or, knowing that I will be setting up a company, can I apply for a non-imm visa in advance (in London) on the premise that I will be travelling to Thailand to start another company?

As I read it in the rules on the MFA website, you can only obtain a non-immigrant visa in a Thai consulate outside of Thailand (and in some cases only in your home country), so if you start the company whilst in Thailand, you are still required to leave the country for at least a few days to get permission to work for it.

However, certain parts of the BOI website suggest they have ways around this, although they seem to require that I have a company that has large amounts of registered capital. As I'm just a techie, not a businessmen, I don't quite understand this side of things very well and they don't exactly explain it in laymans terms

2)Why is a foreigner who pays tax in Thailand expected to leave the country every 90 days?

Because either it’s not enough tax being paid on their nationality or they are not employing enough Thais.

By the way, this would not apply if the foreigner had an extension of stay based on support of a Thai national or if it was based on investment.

Example: You have four Thais employed with a minimum salary of 5,250 Baht per month and you are from Germany and get a salary of 50K Baht per month. If you are the only one with a work permit, you do not need to leave the country every 90 days. You then can apply for the extension of stay based on business.

Employing Thai staff is just not an option in my case. I simply do not have any work for them. If there were even Thais capable of doing what I do, they almost certainly wouldn't want to work for me anyway - there's probably more interesting and better paid work to be found at larger companies in Bangkok or by working for my clients for themselves!

3)Why does a foreigner running a small business in Thailand need to employ four Thai staff?

You do not need to hire any Thais to obtain a work permit unless you are applying for the extension of stay based on business. If your companies’ objective is consultant, than you only need one Thai employed to obtain the extension of stay based on business.

Example: You have an extension of stay based on investment, and a work permit for your company. You do not need to have any Thai employees and you do not need to leave the country every 90 days.

Example: You have a business that is a consultant in the IT industry. You have a valid work permit and get paid 60,000 Baht per month. You only have a Thai secretary working and can apply for the extension of stay based on business.

For the first example (extension based on investment), what is the minimum amount I would need to invest in order to qualify for an investment visa? Could I just bring a large lump sum (i.e. 1m baht?) and deposit it in a Thai bank, or do I need to find some 'real' investment to invest in?

I already fell into the category as described in your second example, albeit only earning the basic 50,000 a month as required for UK citizens at the time, but immigration wouldn't accept my 1yr visa extension application at all until it also had at least *four* staff *and* VAT registration. Where does it say I can get away with just having one Thai secretary? Presumably, I would still be required to register for VAT?!

I am all for helping make more jobs for Thais etc, but I have no need of a secretary and wouldn't have any work to give them if I had one. I don't see why I should have to pay for staff I don't need or use.

4)Why does a foreigner applying for a 1 year visa need to register their company for VAT?

I surmise you mean a one year based on business. In certain situations you do not need to register for Vat. ie: if your companies objective is retail of books, mags. In most other cases it is because if your company is paying a foreigner they should be doing turnover of at least 150,000 Baht per month. In this case, they would need to be in the Vat system even to obtain a work permit.

I'm sorry, I don't understand what you mean by 'if your company is paying a foreigner they should be doing turnover of at least 150,000 Baht per month'. Are you saying that, unless my business can make a turnover of 150,000 baht a month, it's not worth setting up if the purpose is simply to provide a legal framework for getting a visa/work permit for one person (me) to pay taxes and live and work legally in Thailand. Also, please forgive my poor understanding of what entering the 'Vat system' entails

As it stands now, I could potentially bring in maybe around 80-100,000 a month, working on projects for my current UK clients if I were based in Thailand. That's about 1500 UK pounds a month, which is pretty reasonable even for someone living in the UK (with associated mortgage and living costs), and certainly more than enough to raise a family in upcountry Thailand. If that's still not considered enough, and I need to find another 50,000 or so a month, then I'm definitely on the wrong track.

5)Why is a foreigner expected to earn a certain salary based on their country of origin?

Only if you apply for the extension of stay based on business is this the criteria. This criteria is not required for the work permit.

The reason for the different amount with Immigration is they feel that if they didn't enforce this, many foreigners would milk Thailand and not be paying as much tax as they should. This salary requirement was based on the database of the average salaries of their fellow countrymen working in Thailand and what they listed as the salary in 2002.

Even though it may not seem fair. All and all, Thailand’s laws are not as restrictive for foreigners to be employed as you may find in your own country.

When I see that someone with the same skills and opportunities as me but from a slightly 'cheaper' part of the world is able to live and work in Thailand for less money than me, that puts me at a competetive disadvantage as I am forced to charge my clients more for the same services simply because of my nationality. I always thought you were paid according to the value of your skills, not according to where you were born.

Anyway, thanks again for taking the time to explain things.

[autonomous_unit]

Being in the VAT system mostly just means more paperwork on business to business transactions, e.g. if your business obtains goods or services from another, you are supposed to pay them part of the VAT on those services and pay the rest directly to the government. There is more accounting to track this, and they can then cross-check that both parties are reporting the same transactions and it adds up to the total VAT due.

If your clients are overseas, your services may be exempt from VAT. A competent accountant should be able to explain the rule, but it comes down to whether your services or products are "re-entering" the Thai economy or not. I do IT consulting w/ foreign customers and haven't had to collect any VAT on my services so far.

Having your company be legal in the VAT system doesn't necessarily increase the amount due to the government. It just means more accounting paperwork. Your qualification for extension of stay will be based on your personal income and income tax documents, and the fact that your company is documented and legal.