In
order to set up a limited company in Thailand, the
following procedures should be followed:
1/
Reservation of your Corporate 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 corporate 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 has to 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 the seven 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 baht for every 100,000 baht of registered capital.
The minimum fee is 500 baht, and the maximum is 25,000 baht.
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 are 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 baht per 100,000 baht of registered capital. The minimum fee is
Thai 5,000 baht, and the maximum is 250,000 baht.
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 baht 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 and 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 practised 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 .
