How to Register a Thai Limited Company and Set Up a Land Holding Company?

Registering a Thai limited company lets a foreigner hold land indirectly, since foreigners cannot own land outright in Thailand. The company must be at least 51% Thai-owned with two or more shareholders, and is incorporated in 12 steps from reserving the name to registering for tax. A land-holding company is a common, legal route to a house or villa, but carries director duties and annual costs.

What are the Advantages of Setting Up a Local Limited Company in Thailand?

The three main advantages of registering a business in Thailand are:

1. Strategic Location: Thailand is strategically situated in the center of Southeast Asia, at the crossroads of major sea routes and its proximity to the eastern economic corridor makes it the largest growing market and fosters domestic manufacturing and commerce within the ASEAN jurisdiction.
2. Manufacturing Hub: Thailand is an innovative technology hub with abundant raw materials and generous incentives for exports and foreign investments. Further, the industrial clusters in the country make collaboration easier and material processing faster.
3. Educated and affordable workforce: According to World Bank data, adult males in Thailand have a literacy rate of 95.5%, and adult females have a literacy rate of 92.8%, respectively, providing a qualified and affordable workforce for Thailand-based businesses.

The Thai Law on Registering Local Company Limited

The Thai law on incorporating a local company in Thailand is governed under Chapter 4, part 1 of the Civil and Commercial Code (CCC). Section 97 of the CCC permits ownership of a private business structure partly foreign-owned by Thai companies, limited to 49% foreign ownership and 51% ownership by Thai citizens. This company structure is the main route around the restriction on foreigners owning land.

The company must have at least two shareholders and shares with a minimum par value of 5 baht each. While no specific minimum capital is required, it should be sufficient for business needs.

12 Steps to Incorporate a Business in Thailand

To form and register a new company in Thailand, the Thai entity must be registered with the Department of Business Development (DBD), for which the promoters shall need to undertake the following 12 steps:

Step 1: Reserve Your Company Name

The name of the new company is reserved by the DBD, and the name must be in Thai. The incorporator can either submit a name reservation form in person or fill it out and submit it online through the DBD’s website at www.dbd.go.th.

The name must be unique and in accordance with section 1098 of the Thai Civil and Commercial Code. The name must include or end with “Company Limited” or “Limited”. A subsidiary of a foreign company can use the parent company’s name followed by the word “Thailand” to reflect the subsidiary’s geographical location in Thailand.

The incorporator must submit a minimum of three names, as the reserved name of the company can be rejected due to the following three reasons:

1. The officials may think that it is too similar to another company’s name, OR
2. It is already in use OR
3. It is not in accordance with the central partnership and company registration regulations.

The incorporator will need to re-submit the forms with three new names if the given names are rejected. The company name is normally approved within 1-3 days.

Step 2: Signing MOA and Preparing the Articles of Association

Once you have reserved a name, within 30 days, you will need to prepare and register the Memorandum of Association (MOA). An MOA is a declaration letter from the promoters. The memorandum expresses the promoter’s intention of establishing a Thai company. An MOA must be filed with the DBD under the Ministry of Commerce. The MOA is also known as Bor Aor Jor. 2 form.

The memorandum of association includes:

1. The name of the proposed company
2. The proposed registered office of the company in Thailand
3. The company objectives
4. A declaration that the liability of the shareholders will be limited
5. The amount of share capital with which the company purposes to be registered and the divisions thereof into shares;
6. The names, addresses, occupations, and signatures of the promoters and the number of shares subscribed to by each of the promoters

The official fee for registration of the MOA for private limited companies is 50 baht per 100,000 baht of capital (min. 500 baht, max. 25,000 baht).

The Articles of Association are the second most important document after the MOA and is like a user manual for the company. AOAs outline the fundamentals regarding the regulation and operation of a company, including share transfers, share certificates, director tenures, remuneration, and more.

Companies in Thailand are required to draft their AOA at the Statutory Meeting when establishing the company to outline its operations and aims.

Can I Alter the Articles of Association?

Yes, articles of association can be altered to protect minority shareholders by a special resolution passed at a shareholder’s meeting, as per section 1145 of the CCC. It is always advised to have these documents drafted by experienced legal counsel.

Step 3: Subscribe Shares to Incorporators

Incorporators initiate share subscriptions by share subscribers, who become initial shareholders. As per Section 1104 of the CCC, all the shares the company proposes to register must be subscribed or allocated before registration.

Each incorporator must hold at least one share, thus becoming a shareholder. The company is mandated to maintain a shareholders register documenting shareholders’ details along with their share certificates.

Step 4: Holding the Company Statutory Meeting

As per section 1107 of the CCC, after all shares that must be paid in money have been subscribed in money, the promoters are required to hold a general meeting, which is called a Statutory Meeting. The statutory meeting is held by the incorporators to accomplish the following six purposes:

1. Ratifying contracts and expenses incurred by the promoters in promoting the company.
2. Appointing the initial Board of Directors (“BOD”) and auditors of the company.
3. Adopting articles of association.
4. Certifying the list of share subscribers.
5. Ascertaining the number of ordinary/preference shares to be allotted as fully or partly paid up.
6. Deciding preference shares issuance and rights

The resolution on all the above agenda must be approved by the majority of shareholders. Subsequent to this meeting, incorporators must transfer their duties and all business to the initial BOD.

Step 5: Calling for Share Payment

Thai law provides that the shareholders must pay up at least 25% of the registered share capital. BOD has been empowered to make a call for the payment of the issued shares from the party-paid shares subscribers at any time in the future.

According to section 1124 of the Thailand limited companies law code, the director will declare the shares forfeited if the shareholders do not pay for the unpaid shares.

How do You Account for Unpaid Share Capital?

To account for unpaid share capital, which represents the amount of capital that shareholders have committed to contribute to the company but have not yet paid for share subscriptions, the accountants may record that a shareholder or director borrowed funds from the company to compensate for any cash deficits in the company’s bank account.

In Siam, certain business owners tend to form a limited company with inflated registered and paid-up capital without making cash payments for share subscriptions. This practice renders registered and paid-up capital data highly unreliable. Public trust in registered records is compromised since there’s a chance that no cash payment for share subscriptions has been made to the company’s bank account.

So, to keep a proper account of the Share Capital of the company whose registered capital exceeds 5M Baht, the DBD now requires the applicant/accountant of the company getting incorporated to submit to DBD a bank letter confirming payment received by one authorized director on the registration date.

Additionally, after incorporation, the company must open a bank account to receive share subscriptions from the director. Following this, another bank letter is issued stating the amount received for the share subscription, which must be submitted within 15 days of registration to DBD.

Failure to submit the bank letter can result in revocation of the registration of the company by the Department of Business Development.

Step 6: Signing Up for DBD Application

Following pre-registration procedures, an application for company registration is submitted to DBD, including the shareholders list (Bor Or Jor. 5 forms) and AOA. This application must be filed within 90 days of the statutory meeting, accompanied by payment of registration fees.

Step 7: Register the Incorporation of Your Company

The signed company registration application is submitted to the Registrar of DBD for company incorporation or, if the head office is outside Bangkok, to the provincial Business Development Office. Registration concludes upon issuance of the company certification document or affidavit by the registrar.

Incorporators have to proceed with the company registration by collecting the following documents:

1. Memorandum of Association
2. Articles of Association
3. Company Affidavit
4. Shareholder’s and/or Directors’ Identification Card and Passport.
5. Company Name Reservation
6. Proof of Registered Address.
7. List of Shareholders and/or Directors
8. Shareholder Meeting Minutes
9. Bank Letter certifying the financial status of Thai shareholders (if applicable).

The Company’s registration fee for the private limited Company is 500 baht per 100,000 baht of capital (minimum 500 baht, maximum 250,000 baht).

Step 8: Open a Limited Company Thai Bank Account

Opening a limited company bank account is crucial for business transactions in Thailand. The following documents must be submitted when opening a bank account:

1. Minutes of board meetings in which the resolution of opening a bank account is passed
2. Business registration documents(Form BOJ 3 Or BOJ 4)
3. Identification documents of directors, authorized signatories, shareholders owning 20% of the share, or anyone who has the authority to open and close a bank account.
4. Company tax identification card
5. A minimum deposit of 500 baht

Step 9: Register for Corporate Income Tax at the Revenue Department

Businesses liable for Income Tax, after their company registration and within 60 days of incorporation or the commencement of operations need to apply for a corporate tax ID card from the Revenue Department.

Step 10: Open Employer Account for Social Security Fund

If a company hires even one employee, it must register a social security account with the Social Security Fund office within 30 days of hiring the first employee. This usually takes one day.

Step 11: Register for Value Add Tax at the Revenue Department

Whenever a business exceeds a revenue threshold of over 1,800,000 THB per financial year, it must register for VAT within 30 days of exceeding this threshold to register for VAT. However, businesses also have the option to register for VAT voluntarily before reaching this threshold. To register for VAT, the business must complete form Por.Por.01 and submit it at the Revenue Department office covering the business’s head office location. The following documents are required for the registration process:

1. Property rental contract of the business registered premises, including the name and address of the property owner, or a consent letter for the property’s business use.
2. ID card or passport of owners.
3. Company registration documents or partnership/fund/juristic documents if applicable.
4. Business licenses if applicable.
5. Location map of the business, along with photos of the building.
6. Power of attorney form with stamp duty attached if the business owner is not applying in person.

VAT registration is one of the prerequisites for hiring foreign employees in Thailand.

Step 12: Secure Visa and Work Permit for Foreigners

Applicants seeking a Thai work permit must first obtain a Thai non-immigrant visa before entering the country. Upon entry, they have 90 days to apply for the work permit. Now, Thailand offers four different types of work visas:

1. 1. Non-immigrant visa B: The Employer issues this Thailand work permit for those who wish to work or pursue business in Thailand.
   2. Non-immigrant visa IB: This is specifically designed for foreign investors under the Board of Investment of Thailand (BOI) privileges. Foreign nationals planning to invest in Thailand or undertake business-related activities must apply for this visa type.
   3. Non-immigrant visa B-A: This is also called a business-approved visa. The company of the applicant must apply for the Non-Immigrant B-A Visa on behalf of the applicant. The visa is granted to foreigners who wish to register a company in Thailand or invest in existing Thai companies
   4. Smart Visa: It is another specialized visa category targeting foreign professionals with specific skills and experience, investors, startup entrepreneurs, executives, and family members of Smart Visa holders. It’s designed for those working in targeted industries like biotechnology, smart electronics, and biochemicals.

How Foreigners Buy Landed Real Estate Through a Land Holding Company?

Foreigners can acquire landed real estate through three simple ways as discussed below :

1. Investing through the Board of Investment (BOI) – This method facilitates purchasing residential land for employee housing under Section 96 bis of the Land Code Amendment Act, 1999, which permits foreign property ownership in Thailand, subject to the following conditions:

• Minimum 40 million Baht investment in BOI-approved Thai government bonds and assets
• Investment for a minimum term of 5 years in Thailand
• Land acquisition not exceeding 1 rai
• Approval by the Minister of Interior

1. As per Section 44 of the Industrial Estate Authority of Thailand Act B.E. 2522 (A.D. 1979) (IEAT): Industrial operators and those trading for export may hold land ownership in industrial estates or export industrial zones, as determined by the Board, even if it exceeds limits set by other laws.
2. Section 97 of the Thai Land Code permits ownership through a partly foreign-owned Thai company, with foreign shareholding capped at 49% and majority Thai shareholders.

What Limitations Land Holding Company has?

The limitation for Land Holding Companies is that foreigners are permitted to hold a maximum of 49% of the shares, with the remaining shares held by Thais. This means that foreigners can be minority shareholders in a Thai land holding company.

Furthermore, there are several important limitations to take into consideration, as outlined in the following four points:

1. Vested Interest in Thai shares

Foreigners are not allowed to use “Nominee Thai Shareholders” to create a majority Thai-owned company for land ownership. Under section 96 of the Land Code Act, any land that appears to be acquired in place of a juristic or alien(also called nominee shareholders) to circumvent the Foreign Business Act (“FBA”) is illegal and creates unlawful foreign ownership.

2. Commercial use of Land Holding Company

• Limited companies in Thailand must demonstrate a genuine business purpose and activity, filing yearly financial statements with the Revenue Department.
• Establishing a company solely for foreign land ownership circumvents laws, rendering it void under Sections 150 and 172 of the CCC.
• Such actions violate land laws and incur penalties under Section 113 of the Thai Code Act.

3. Obligation to Fulfill Director Duties

• Directors must act with responsibility and due care, meeting standards expected in similar businesses.
• The CCC imposes statutory duties on directors.
• Foreign shareholding surpassing the threshold or using Thai nominee shareholders to evade regulations is a criminal offense under the FBA, holding directors liable.
• Foreign directors lacking work permits under the Alien Employment Act risk imprisonment, fines, or both. Directors may face criminal prosecution for employing foreigners without work permits.

4. Annual Expenses

Expenses of a Thai limited company include but are not limited to:

• Preparations and filing of audited accounts.
• Thai residents and non-residents are taxed on income derived from employment or business in Thailand, with rates ranging from 0% to 35%.
• Corporate Income tax and VAT are applicable.
• Transfer fees for immovable property can be up to 2%, with additional taxes like withholding tax (1%), special business tax (3.3%), and stamp duty (0.5%). The same fee applies to the transfer of title deed in the Thai land department.
• Rental properties owe annual land and building tax, charged on the government appraised value rather than on rental income — 0.02% for residential use let monthly or longer, 0.30% for nightly or hotel use. The 12.5% House and Land Tax was repealed by the Land and Building Tax Act B.E. 2562 and has not applied since 2020.

Is a Foreigner Married to a Thai Citizen Allowed to Purchase Land?

Yes, foreign nationals can purchase land in Thailand if they are married to a Thai citizen. However, the land title deed must be in the name of the Thai spouse, as land ownership is restricted to Thai nationals. The property is considered the asset of the Thai spouse.

Also, the foreign spouse can inherit the land of their Thai spouse after his/her death but cannot register ownership of that land and is legally obligated to sell the land within one year of acquiring it.

What are the Alternatives to Buying Land for Foreigners?

The 2 main alternatives to buying land for foreigners in Thailand are:

1. Leasehold Property Ownership: Buying a leasehold property entails a basic 30-year lease, extendable twice for 90 years. While it does not have full ownership like freehold property, it offers exclusive rights over the property.

1. Usufructural rights: As per section 1417 of the CCC, usufruct grants temporary ownership and enjoyment rights to things on or arising from the land, such as crops or rocks, but not the land itself. It allows unrestricted use (except destruction) without landowner permission, lasts 30 years (renewable), and is transferable but not inheritable upon the holder’s death.

Before purchasing land, conducting a Title Search is crucial to ascertain the land’s title deed type and legality. Understanding Thai title deeds clarifies ownership rights, confirming their authenticity and more.

For foreigners, getting through this process can be challenging. That’s where PropertySights Real Estate comes in. As a licensed agency, we prioritize the needs of individuals seeking to purchase land in Thailand, providing first-hand experience and comprehensive real estate advice to ensure a successful land acquisition journey.