Business Model and Company Setup

Setting up your Thailand Business

Step 1

Determine your Business Model

  • By setting up a Factory in Thailand, you can up value your goods and obtain a Thailand Certificate of Origin. This will allow your products to be exported to the world as if it is a Made in Thailand product. This method is great to circumvent certain Trade Sanctions.
  • If your goal is to retain some of your profits in Thailand instead of your home country, ie: Myanmar or China, by setting up a Marketing Company in Thailand, you'll use this company to invoice your client and the goods are shipped to your client from your home country.

Step 2

Establish a Thai Entity

  • Register a company in Thailand (typically a limited company), with a Thai partner (trustee) to comply with local laws.
  • Proper structuing of your Thai Company is important to ensure compliance with International Business Law such as Transfer Pricing Regulation and etc.

Step 3

Open Bank Accounts

  • Open Thai Corporate Bank Accounts to facilitate international transactions. Most Thai banks supports the following currency: US Dollar (USD), British Pound (GBP), Euro (EUR), Japanese Yen (JPY), Australian Dollar (AUD), Canadian Dollar (CAD), Danish Krone (DKK), Swiss Franc (CHF), Hong Kong Dollar (HKD), New Zealand Dollar (NZD), Chinese Yuan (CNY), Singapore Dollar (SGD), Malaysian Ringgit (MYR), and Indonesian Rupiah (IDR)

Set up a Factory in Thailand or a Marketing Office?

Factory in Thailand

By setting up a factory in Thailand, your products may obtain Made in Thailand Certificate of Origin and with this you can export it to many countries including USA

  • We can assist you with your Thai Company Setup, Bank Account Opening, Monthly Accounting & Tax Filing
  • We can assist you with Factory Set Up (rental or land acquistion), acquire necessary license and permit, maximize potential gov't grant and support
  • We can assist you with Importation and Custom Clearance of your raw materials and machineries
  • We can assist you to obtain Export License and Permits as well as specialize approval such as FDA and also obtain Thailand Certificate of Origin
  • We can introduce you to our our logistic partners who can ship to USA and other countries
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Marketing Office in Thailand

This method is great for those who wants to retain your profit in Thailand and continue to ship your goods from your home country (China or etc) directly to your client.

  • We can assist you with your Thai Company Setup, Bank Account Opening, Monthly Accounting & Tax Filing
  • We can assist you with your Office Rental and Renovation
  • We can assist you with your Recruitment
  • We can assist you with your Tax Planning to optimize your Tax Saving
Talk to us today!

Questions? Speak to our Business Consultant today!

We speak: Chinese, English, Russian, Burmese

Understanding Thai Taxes

Tax and Dividend Flow

Step 1

Pay Corporate Tax in Thailand

  • The Thai company is subject to a 20% corporate tax on its profits (standard corporate tax rate).
  • After paying the 20% tax, the remaining profit is available for distribution as dividends.

Step 2

Declare and Distribute Dividends

  • The Thai company declares dividends to its shareholders (whether Thai or foreign).
  • The dividends are paid from the after-tax profits.
  • There is no additional withholding tax on dividends at the company level, making the distribution efficient.

Step 3

Withholding Tax on Dividends on Personal Shareholder Level

  • Thai law applies a 10% withholding tax on dividends paid to foreign or local individual shareholders. However, the rate can be reduced if the country of residence of the shareholder has a valid tax treaty with Thailand (e.g., China, Hong Kong, etc.).
  • For Thai shareholders, this tax is considered the final tax, meaning no further reporting or tax is required in Thailand.
  • For foreign shareholders, your own country's tax laws apply. See below for further clarification for Chinese citizen.

Step 4

Handling Tax on Dividends in the Shareholder’s Country

  • The shareholder, whether Thai or foreign, will need to report the dividend income and pay personal taxes (if any) based on the tax laws of their country of residence.
  • For example, a Chinese shareholder may benefit from a tax treaty between China and Thailand, which may reduce the personal tax rate further.

Money Transfer and Profit Repatriation

As the Thai company has no direct relation with the parent company, the Thai company cannot repatriate the money back to the Parent Company and need to employ other mechanisms.

Repayment to Parent Company

The profits can be retained in the Thai company for reinvestment or holding or can be channel via the means of payment for management services, intellectual property rights, or royalties, which are subject to applicable withholding taxes.

Dividend Distribution

If dividends are to be paid to the Chinese shareholders or other foreign shareholders, ensure the correct tax is withheld and that the money is transferred in accordance with Thai laws and international banking regulations.

International Business is Complex but not Difficult

Key Considerations

Trustee Structure

The use of truustee in Thailand should be done carefully to comply with Thai corporate governance laws and ensure the arrangement is legitimate in the eyes of Thai authorities. The Thai nominee shareholders should not be directly affiliated with the parent company.

Transfer Pricing

Proper transfer pricing rules should be adhered to when setting prices between the Thai company and its Chinese suppliers. It’s crucial that the transactions between the Thai company and the Chinese parent are conducted at "arm’s length" to avoid triggering scrutiny from tax authorities.

Substance Requirements

Thailand has been tightening its rules regarding tax avoidance strategies. The Thai company should have real economic substance, such as local employees, office space, or operations in the country, to avoid being seen as a shell company. Use of professional C level and management as a service is acceptable here.

Tax Treaties

Ensure that the Thai company takes full advantage of any tax treaties that Thailand has with other countries, especially with China. This can help in reducing the withholding tax on dividends and other payments.

Summary

This structure allows foreign companies to move revenue to Thailand, reduce tax burdens, and efficiently manage profits while adhering to international tax regulations.

1

Establish a Thai company with a trustee structure for non-Thai (could be Chinese or other nationalities) shareholders.

2

Import products from home country (for example China) to Thailand and sell them to customers internationally, keeping profits in Thailand.

3

Pay Thai corporate tax at 20%, then distribute profits as dividends to shareholders.

4

Withhold 10% dividend tax when the dividend is distrubted, which can be reduced based on tax treaties with the shareholder’s home country.

5

Ensure compliance with transfer pricing and substance requirements in Thailand.

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Additional Information

China-Thailand Tax Treaty: Dividend Taxation

The China-Thailand Double Taxation Agreement (DTA) provides preferential tax treatment for dividends paid between companies in both countries. When Chinese shareholders receive dividends from a Thai company, the following rules generally apply based on the treaty:

1. Withholding Tax on Dividends in Thailand

Under the China-Thailand DTA, Thailand generally imposes a 10% withholding tax on dividends paid to foreign shareholders (including Chinese shareholders). However, if certain conditions are met, this rate may be reduced.

  • Standard withholding tax rate in Thailand: 10%
  • Reduced withholding tax rate: The tax treaty may reduce the rate to 5% for dividends if the Chinese company holds at least 25% of the voting stock of the Thai company paying the dividend.
  • Further reduction: If the Chinese shareholder is an individual, different rates might apply, depending on whether the shareholder holds a substantial stake in the Thai company.

2. Taxation in China (Tax on Overseas Dividends)

For Chinese tax residents (both individuals and companies), the income they receive from foreign sources is subject to individual income tax (IIT) or corporate income tax (CIT) in China. However, the dividend income from Thailand may be subject to favorable treatment under China's tax system:

  • Corporate Shareholders: If a Chinese company owns shares in a foreign company, the dividends it receives from the Thai company are generally subject to CIT (25% standard rate) in China. However, the tax burden can be reduced if the Chinese company qualifies for foreign tax credits.
  • Individual Shareholders: If a Chinese individual receives dividends from a Thai company, the dividends are subject to individual income tax (IIT) in China. The standard rate is 20%, but a foreign tax credit may be claimed for taxes already paid in Thailand (such as the withholding tax).

3. Foreign Tax Credit Mechanism (for Chinese Companies)

Chinese companies can claim a foreign tax credit for taxes paid in Thailand (i.e., the withholding tax on dividends). This allows the Chinese company to offset the tax paid in Thailand against its corporate income tax liability in China. The amount of credit will generally be the amount of tax paid in Thailand, but it cannot exceed the amount of tax due in China on the same income.

  • Example: If a Chinese company receives THB 1,000,000 in dividends from a Thai company and the withholding tax in Thailand is 10% (THB 100,000), the company can claim a foreign tax credit of up to THB 100,000 (or the equivalent in RMB) to offset its Chinese corporate tax liability (25%) on that income. To qualify for this, proper and notarized documentation must be obtained from the Thai Revenue Department.

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Thailand as my Second Home.

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