Starting New Company

[Mystic Mick]

My wife and I (both British) are thinking of starting our our company in Thailand. Everyone tells us something different, or doesnt know, the answers to our questions. Can anyone help with clear answers to the following?

1. We want to be legal and have a Non Imm Visa and work permit each. What is the minimum capitalisation to assure these documents? Does the capital have to remain in the bank or can we spend it?

2. For 2 visas and 2 work permits, how many Thai staff must we employ upon commencing operations?

3.We will own 49% of the company. Is it correct that we need another 7 Thai shareholders?

4. Can the company buy land?

I know you guys can help us out good and proper!

[Indo-Siam]

Answers:

1. For two foreign work permits, meeting the stated requirements entails total capitalization of 4 million baht - with all of it paid in. Reality - you generally do need the 4 million registered - but they generally do not check on pay-in. If you do pay-in capital, and get it documented, you are then "biulletproof" on this aspect - and you are free to spend the money - for salaries, rent, equipment - whatever.

2. To support two work permits, you will generally need to have eight Thai employees.

3. You need a total of seven shareholders. If you and your wife are shareholders, you will need five additional shareholders.

4. The company can buy land.

In general, requirements to initially obtain work permits are not checked closely - they tacitly expect that you may skirt capitalization and employment rules by "faking it" - in the very early stages. Getting work permit and entry permit renewals is much harder - by the time you've been in business a while, they expect you to meet all requirements.

While they do not monitor bank balances, they do look at your formal financial filings - particularly your balance sheet. If your balance sheet reflects assets below your outstanding liabilities - or if your total cumulative loss approaches your capitalziation level - they may withhold work permit renewals unless you increase your registered capitalization, or increase your "cash" position (and thus increase your assets).

By third operating year, you must be showing a profit - and paying some corporate income tax on that profit, or they will not renew your work permits.

Finally - if a husband (or wife) gets a work permit and is employed, and obtains an extended entry permit, that person's spouse can automatically get a matching entry permit extension - although not a work permit. So - if all your efforts are just about getting in and staying in, then do not have both parties officially working - both can still be shareholders. That reduces both capitalization and Thai employee requirements by half.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

Bangkok

www.thaistartup.com

[Sunbelt Asia]

Sorry but I have several answers that are different than Steve and must respectfully disagree on several small points.

1. A limited company or partnership has no minimum capital requirement at this time for work permits. Old rules before May 2002 stated 2 million per work permit.

If you are looking to work, under the current Ministry of Labor work permit regulations you would be able to apply for and receive a work permit as long as the job is not prohibited to foreigners and you pay at least 18,000 baht in personal income tax a year. The Ministry of Labor however will look to see if you can pay yourselves together 80,000 baht a month salary. In this case, the discretion of the officer comes in play; some would like to see 500,000 Baht in the bank.. Some officers would be looking for 1 million Baht or more in the bank.

However, the Ministry of Labor is currently reworking the regulations for the application and renewal of work permits, which might easily include re-instating the requirement of minimum 2 million baht of paid-up capital per working foreigner. I can guarantee you today however our firm can get you two work permits with as low as 2 million Baht paid up capital. NOT 4 million is required now.. Our lawyers don’t get you a work permit, no fee would be charged.. By the way we’ve even done 10 work permits for a Thai company that just had 2 million in registered capital., They were a good company but still had minimum capital.

Any money you do pay in towards capital can be used for the business.

2. Eight Thai employees are required getting the minimum wage if you both have one year visas. If you however have just MULTI- ENTRY one year non immigrant visas...NO Thai employees are required to be working for you to obtain work permits. You only need to leave Thailand for 5 minutes every 90 days. If you plan on traveling and are NOT looking to hire 8 people at first, this is an option.

3. I agree with Steve on this point, its five more for a total of seven. Only one in your case however has to be Thai. The other 4 can be any Nationality.

4. If more than 39% of the shares are owned by foreign shareholders and if land is purchased…. The Land Bureau will investigate, to see if you had set up a company to only acquire land. If you have a business as well with monthly trading then 49% ownership seems to be ok with the government..

Happy New Year to you both. Feel free to e-mail me for any other questions you may have.

Greg Lange

Managing Director

Sunbelt Asia

[email protected]

www.sunbeltasia.com

[Indo-Siam]

I am vitually positive that a Thai Private Co. Ltd. with no Thai employees will not be able to renew even one work permit. Period. You can possibly get a work permit initially, but you cannot renew it. For renewal, you will need to show social fund pay-in receipts for four Thai employees per work permit - and they will only count employees for whom payments have been made for each of the three most recent months. You can argue at the edges of this - but you cannot simply blow of the entire requirement ... "and live happily ever after."

If you have low registered capital, but very strong earnings - and your balance sheet shows very healthy current assets, you can get and renew whatever work permits you Thai headcount justifies. If you are a small start-up company with two million baht registered capital, and struggling with a weak record of earning income - and current assets are below your registered capital - you can forget about the idea of getting "10 work permits." As far as I am concerned, you will have great difficulty even getting renewal of a second work permit.

What is absolutely true is that a company that registered with two million baht in registered capital six years ago - and that now has 20 million baht in retained earnings - and is paying 1,000,000+ in corporate taxes each year - can hire on the basis of assets and taxes paid, and they do not care at all about ancient capitalization.

I fully agree that two work permits can be obtained with "2 million baht in paid up capital" - we can get it with less. But that is paid up capital. They still want to see four million baht in registered capital - albeit this may be negotiable, for a new company. They do not even actually check if any of it has been paid up. But you then better have a strong balance sheet by renewal time.

Greg is saying:

1) A limited company can get a work permit (or even multiple work permits?) regardless of registered capital amount - even at the 1,000,000 baht minimum registered capital that is required to even form a Thai private company limited. I disagree - at least for routine processing.

2) You can register 2,000,000 in capitalization, and then go get 10 work permits. I again disagree.

3) You can get all your work permits without any record of any Thai employees, and proceed ahead uneventfully - as long as you are willing to live without an extended entry permit. I again disagree.

But - if any of the above three situations apply to you, then I certainly think that you should go have Sunbelt Asia process your transactions - because I won't - and then come back and tell us that all turned out OK - and I will stand around and wipe the egg off my face.

Man - I would LOVE to be able to secure several work permits for a company with only 1,000,000 baht in registered capital, none of it paid in, and no Thai employees - which is what I think Sunbelt is claiming to be able to do - if you combine the claims. If Sunbelt can do this in 2004, then I will almost certainly be closing up shop.

But - in the meantime - I will go by the following guide Ministry of Foreign Affairs Business Handbook

Quoting from Section 5.1, Private Limited Companies:

"All of the shares must be subscribed to, and at least 25 percent of

the subscribed shares must be paid up. It should also be noted that private limited companies are required to have capitalisation of two million baht, fully paid up, per each work permit the company desires"

Also: "A minimum of seven shareholders is required at all times. A private limited company may be wholly-owned by aliens. However, in those activities reserved for Thai nationals, aliens' participation is generally allowed up to 49 percent."

I will agree that over just the past couple of weeks, Immigration is starting to look very closely at Thai employee head counts versus renewals of entry permits - at a level of scrutiny that I have never seen before. This very afternoon, we obtained a one year entry permit renewal for the General Manager of a Thai Rep Office for a quite large multinational company - which falls under a different set of rules concerning Thai headcount versus foreign employees - and we were told that the next renewal would not be granted unless Thai headcount was raised to at least equal the foreign headcount (which was 10 foreign individuals) - and this Rep Office has been around for quite a few years - and personal income tax withholding payments exceed 250,000 baht per month.

Happy New Year!!!

Steve

Indo-Siam

[Sunbelt Asia]

Steve,

Part of the confusion...

is if a business is Foreign owned, meaning more than 49% of the shares. In that case, under the Alien Business Operation Act B.E.2542 (1999), whether individual or juristic person, a foreigner must have minimum capital to commence a business of not less than two Million Baht per business. For restricted businesses, the required minimum capital is not less than three Million Baht per business.

1. The minimum capital a foreigner must have is based on 25% of the annual average of three years’ estimated incurred expenses per business. This must not be less than three million Baht.

2. A company which is registered in Thailand, must have a registered capital of at least 25% of the annual average of three years’ estimated expenditure per business. If not, the capital must be increased. In the case where a foreigner is not registered in Thailand, the said 25% average of three years must be remitted into Thailand.

3. A foreigner must bring or transfer the said minimum capital as follows:

-At least 25% of the minimum capital must be brought in within the first three months.

-The total of 50% of the minimum capital must be transferred or brought in within one year.

-The remaining amount of the minimum capital must be transferred or brought in during the two following years in the amount of at least 25% per year

http://www.thairegistration.com/eng/MR_capital.htm

HOWEVER, in this case, we are not talking Foreign owned as they are holding only 49% of the shares. In this case, a Thai limited company can be formed with even less than one million registered capital. The perception is a minimum exist, but the Thai law does not have a minimum for a private limited company. If you are applying under BOI, then the million baht minimum requirement would come into play. Certainly you do not have to register for 4 million to get 2 work permits. This is NOT a requirement at this time.

The law states all the above , but let’s say a firm registered a company for 500,000 Baht, with paid in capital of 125,000 and applied for a work permit. Would they get one? The officer has to be convinced that the firm has enough funds to pay the salary and will be able to pay 18,000 Baht tax. for that year. That is the requirement.

With Thai employees, no requirement of having 8 Thais for 2 Foreigners exist, IF they have a multi-entry Non immigrant visa. Notice the IF.

If they have a one year visa, then that requirement would come into play. They would indeed need to show social fund pay in receipts. They are very strict on this. But please remember if the Limited company, that has the work permit for the foreigner, has a one year visa. Then you MUST have 4 Thais working for every foreigner and the social funds.

Multi entry won’t have this requirement of having 4 Thai employees. They will need to show any social fund pay in receipts but it does not have to show 4 Thai employees IN THIS CASE.

In 2003, our lawyers have done 4 work permits for one firm, they only had three employees and only registered for 2 million. it was paid up. This was a start up. Nothing to brag about but it’s just a case to use, that is how the law reads now. As you know, I'm very strict on following the letter of the law. We do everything on the up and up. We refuse to pay “tea” money. We will however tell our clients, the way the law is, in every scenario.

http://www.thailabour.org/news/02053101.html Notice it says “ MUST do ONE of the following in the eighth sentence in that link

On the company that has 10 work permits, they were established 2 years and losing money but lots of trading and they were paying 400,000 VAT a month. They have 18 Thai employees.

We have many clients as well, that the minimum would not even come into play even under the old rules. Last week, one client had paid up capital of 95 million and only needed one work permit.. But to answer this poster, who seems to have funds anyway, these are still the facts. It is up to them, how much registered capital they want. I would agree, more is better but not a requirement NOW.

The way I read into this, the Thai government is trying to get those firms to file for a work permit, if that firm was not doing it before for a foreigner because they did not have enough Thai employees to obtain one. This new way the Thai government gets at least 18,000 Baht in tax versus nothing at all. This is all subject to change and can. But this is how the law reads now.

However don't be surprised to read new rules soon because "The changes are aimed at making it more difficult for foreigners to work in Thailand unless they are really qualified and are useful for the country and for the Thai people "

But until that day, this is the rules we play by because who knows, those new changes may never happen.

Happy New Year Steve. All the best.

Regards,

[Mystic Mick]

Guys! Guys! Calm down! No need to start a fight! Remember I started this thread off asking for clear advice?

Your answers are appreciated and - mostly - helpful. However you inevitably generate some more questions. See how you do without another scrap breaking out!

1. What is the difference between a 1 year visa and a multi-entry non-immigrant visa?

2. Each work permit holding foreigner must pay 18,000B minimum a year in income tax. Right?

3. What's the difference between registered and paid up capital? What do these mean to us?

4. What exactly are retained earnings?

5. Some areas of company activity are prohibited. If our company is 49% farang (my wife and I) and 51% Thai owned, can we open a massage/health business? What government licences are required and how much?

We may offer short 1-3 day courses in massage & reflexology although we are not a school. We hope to issue a little certificate saying that "So and So attended a short training session in refelexology at our company" Can do or not?

6. (Deep breath) What do you charge for your services?

[Guest IT Manager]

Bet you guys use dictation to make your posts. I do. Love MS Word, but I can't see how on a Sunday afternoon, you can between you, write a book on how to put a company together.

Quite refreshing.

IT M

[stopper]

Not to put anyone down, this is just my observation from reading many posts here. It seems to be that the two main business ideas that farangs come up with is to either open a bar or a massage business. From what I can see here in Thailand, I think those business sectors are already struggling with the established companies. And if you point this out to the farang who is thinking about it, his/her response would be, "Yes, but my business idea is different than the others." In the end, it really isn't anything new.

[Sunbelt Asia]

Guys! Guys! Calm down! No need to start a fight! Remember I started this thread off asking for clear advice?

Your answers are appreciated and - mostly - helpful. However you inevitably generate some more questions. See how you do without another scrap breaking out!

LOl.. we are not fighting I assure you! Steve and I are in fact friends. A Forum is to share ideas. Several months ago, Steve pointed out something on Amity, that we were given wrong info. It was much appreciated.

I pointed out some situations that we have been involved with and were different than Steve’s answers. Thailand changes from day to day or their interpretation of the laws. Other countries do the same. Just pointing out interpretation that Steve may not be aware of and are clients have been involved in..

1. What is the difference between a 1 year visa and a multi-entry non-immigrant visa?

One year visa.. you don’t have to leave the country. Multi entry. every 90 days

2. Each work permit holding foreigner must pay 18,000B minimum a year in income tax. Right?

No. Depends on the applicants nationality. If you use that condition rather than having 2 million registered capital than the answer is yes.

3. What's the difference between registered and paid up capital? What do these mean to us?

You register a company for how much it will be liable for. Paid up capital is how much you applied towards that registered amount.

4. What exactly are retained earnings?

Earnings not paid out as dividends but instead reinvested in the core business or used to pay off debt. also called earned surplus or accumulated earnings or unappropriated profit.

5. Some areas of company activity are prohibited. If our company is 49% farang (my wife and I) and 51% Thai owned, can we open a massage/health business?

Yes

What government licences are required and how much?

None for a health massage

We may offer short 1-3 day courses in massage & reflexology although we are not a school. We hope to issue a little certificate saying that "So and So attended a short training session in refelexology at our company" Can do or not?

yes

6. (Deep breath) What do you charge for your services?

Government fees are

Duty stamp 210 Baht

Step 1 Government registration 1,000 Baht

Duty stamp for cap registration 800 Baht

Capital registration 10,000 Baht

Tax ID and Corp ID is 100 Baht

Vat 1,000 Baht

Work Permit for one year 3,000 Baht

"B' or "O" visa is 1690 Baht

Total Government Fees is 16,110

Our Legal fees our Lawyer charges is

Company registration 7,500 Baht

Tax Id and Corp ID is 3,000 Baht

VAT 3,000 Baht

Work Permit 9,500

"O" or "B" Visa 7,200 Baht

Stamp is Free

Power of Attorney is Free

Total Legal Fees is 30,200

Total cost with Government Fees is 46,310 Baht

This is for a two million company. Government fees are more or less depending on that amount. Legal fees are always the same no matter if it’s a 100 million Baht company.

Greg Lange

Sunbelt Asia

02-642-0213

[email protected]

[DPlover]

Hi

I am new to this site. i got this question to ask the experts here ..... i am going to set a sole proprietor company using my gal name and where is the place or government department she is going to register ??? If she manage to register, can she open a bank account with the comapny name ??

thanks in advance

[Sunbelt Asia]

She only needs to obtain a Business Registration Certificate from the Department of Business Development of the Ministry of Commerce.

To open a Sole Proprietor acct at a bank...

Original certificate of registration

Application for registration of a business certified by Registry of Business (ROB)

Sole-proprietor’s identity card

Keep in mind, your rights to any repayment of the assets ( unless you have a loan agreement in writing but still good luck) or profits of this "company" is zero.

[DPlover]

Thanks again . still feel that sunbelt is still the best .....