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Thailand Routes to Market

So you've decided to expand your business in Thailand and researched your market. Now it's time to decide how you will register or expand the business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Here are your typical options when expanding a business into Thailand.

Investment Zones/Privileges by Location

The Thai government is encouraging foreign investors to specific areas of the Thailand with attractive tax and ownership incentives. There are three different types of zones, offering varying incentives depending on the location and nature of the business. Attractions include:

• Land ownership rights for foreign investors
• Permission to bring in foreign experts and technicians
• Work permit & visa facilitation
• One-Stop-Shop: Visas & Work Permits are issued in 3 hours
• No restrictions on foreign currency remittances
• No export requirement
• No foreign equity restrictions in manufacturing sector
• No local content requirement

Private Limited Company

In Thailand a plc (private limited company) is the most popular form of company for businesses. Plcs are regulated by the Civil and Commercial Code. A plc requires three promoters for registration. A promoter must be over the age of twenty, be available throughout the registration to sign any documentation, and they must also hold at least one share each in the company. Once registration is complete, the promoter is permitted to sell any stock they have. Company registration costs 500 baht per 100,000 baht of registered capital. The minimum fee is 5,000 baht and the maximum is 250,000 baht.

A Memorandum of Association document also needs to be completed. The process entails the presentation of company information, such as share value, and involves a charge that is related to the nature of the business.

A private limited company can be 100% foreign owned (except in specialist activities reserved for the Thai nationals) and the investors liability is limited to the extent of the investment.

Public Limited Company

A minimum of 15 promoters is required to register a public company and the promoters must own their shares for a minimum of two years before they can be transferred. The company requires five people for The Board of Directors, three of which must be Thai nationals. The registration of the business costs 2,000 baht per million baht of registered capital and the shares are available for members of the public to purchase.

Branch Offices or Parent Company

A branch office can be established to carry out business on behalf of an overseas company in Thailand. The branch is subject to Thai taxes and a minimum capital of five million baht must be brought into Thailand within four years of start-up. Approval for a Foreign Business License is required.

Representative Offices

Similar to a branch office but a representative office is not permitted to conduct business transactions in Thailand. The office must transfer at least 5 million baht into Thailand as working capital, of which two million baht must be remitted in the first year, and at least one million baht per year after that. The office is tax-free.

Exporting

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Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

Patent License - The allowance of another party to use your patented product, design or process.

Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

Franchising In Thailand

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in Thailand include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.
Disadvantages of franchising a business in Thailand: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

Thailand is open to trade and investment and is a market for several international franchise concepts. Although there is no franchise specific legislation, brands such as McDonalds and KFC have established a presence in the country through franchising.

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