Thailand, the 2nd largest economy in Southeast Asia, is one of the fastest-growing economies in the world. Small and Medium Enterprises (SMEs) are the key drivers of the country’s development success. They constitute more than 99% of all the enterprises and contribute nearly 45% to the country’s GDP.
The statistics prove that there is tremendous scope for small sole proprietorship businesses to grow and expand in Thailand.
Further, the country’s economic stability, presence in the global market, tax incentives, easy registration, and booming business environment offer additional advantages to foreign investors wanting to establish a business presence here. In fact, the country ranks among the top 25 economies of the world for ease of doing business.
But first, you must understand what it takes to start a sole proprietorship in Thailand.
Who can be a sole proprietor in Thailand?
Sole proprietorships are the most straightforward business organization in Thailand owned and run by a single person. A person starts sole proprietorship in Thailand with his assets and assumes total personal liability in case of legal action.
In Thailand, your nationality determines whether or not you can register as a sole proprietorship. Foreign nationals are usually restricted from setting up a sole proprietorship business in Thailand. The only exception is if you’re a US citizen falling under the US-Thailand Amity Treaty.
In this case, you are allowed to register a sole proprietorship in Thailand. However, some foreigners residing in Thailand for a long time marry a Thai national. In that case, they can register their sole proprietor business in the name of their Thai spouse.
All foreign businesses in Thailand are governed by the Thailand Foreign Business Act of 1999. The act prescribes businesses that foreigners may or may not carry out in Thailand. Certain businesses restricted to foreigners under the act include:
- Agriculture, animal husbandry, forestry, or fishery
- Handicraft industries
- Auction sale
- Transportation
- Legal service and lawsuit work
- Extraction of Thai medical works
Benefits of sole proprietorship in Thailand
A sole proprietorship in Thailand has many benefits compared to other forms of business organization. Some of them are:
Minimum legal requirements
Registering a sole proprietorship in Thailand does not require extensive documentation and legal formalities. Any person or group can start a sole proprietorship with a few simple identity documents and essential registrations. Also, one can work according to one’s comfort zone and directly control production and marketing.
No additional operation costs
The sole proprietorship Thailand cost is the bare minimum compared to other business structures. People can start a business at their residence without renting office space. This will bring down the operational cost to a large extent.
Sole proprietors usually drive a small annual turnover as compared to business forms. Hence the accounting and control requirements are also lighter in this business form. Though the owner faces unlimited liability, he can set up his financial control policy to prevent debt accumulation.
Simpler Income Tax
There is no distinction between the owner and business in a sole proprietorship. The taxation of a sole proprietorship in Thailand is also based on the same principle.
The business will be taxed as per the tax slabs applicable to a natural person, and no corporate taxes apply to them. Hence, the owner pays the tax expense as a personal tax, not a business one.
The current sole proprietorship Thailand tax slabs can be observed in the table below.
Taxable Income (baht) | Tax Rate (%) |
0-150,000 | Exempt |
more than 150,001 but less than 300,000 | 5% |
more than 300,001 but less than 500,000 | 10% |
more than 500,001 but less than 750,000 | 15% |
more than 750,001 but less than 1,000,000 | 20% |
more than 1,000,001 but less than 2,000,000 | 25% |
more than 2,000,001 but less than 5,000,000 | 30% |
Over 5,000,001 | 35% |
Secrecy
In a sole proprietorship, the owner is his own boss. The entire management and control of the business are in his own hands. It is easier to make decisions and revoke deals, but the chances of business information being leaked to outsiders are also minimal. You can maintain utmost confidentiality while working as a sole proprietor in Thailand.
Documents required for registering your business in Thailand
The following documents are necessary to register as a sole proprietor in Thailand.
- Copy of your Identification document or passport
- A signed copy of the house registration book of the business address (This can be the sole proprietor’s residence address)
- A letter of consent signed by the owner of the business address if not owned by the sole proprietor
- A map of the business address
- The taxpayer number
- The VAT certificate
- The registration application form
A sole proprietorship in Thailand should be registered at the actual business place, which can be the sole proprietor’s property. Also, sole proprietorship Thailand law restricts proprietorship businesses to a single trading name.
If you would like another trading name, an application for another registration may be made under a different subcategory of a sole proprietorship business.
Other criteria for registering a sole proprietorship in Thailand
Visa
Foreign nationals who wish to conduct business or undertake investment activities in Thailand must apply for a non-immigrant visa. You can apply for this visa at the local Thai embassy of your country.
Among other things, you will be required to provide your corporate documents and evidence of adequate finance to apply for this visa. The visa fee is 2,000 Baht for a single entry with three-month validity and 5,000 Baht for multiple entries with one-year validity.
Work permit
A non-immigrant visa alone is insufficient to establish a sole proprietorship in Thailand. You also require a work permit from Thailand’s Ministry of Labor Office. After submitting all the necessary documents, the work permit will take seven business days to process.
On receipt of the work permit, you will have to comply with the ratio between foreign and Thai staff in your company. You will have to employ four permanent Thai staff for every foreign national in your business.
Sole proprietorship Thailand bank account
After receiving the visa and work permit, you will also require a bank account for a sole proprietorship in Thailand to conduct your business there smoothly.
You can set up an online bank account with your desired bank for convenience and ease of use. The bank may also fulfill your credit card needs after a few years.
Appropriate office space
You will find both serviced and traditional offices in Thailand per your location preference. If you choose a serviced office space, you’re done away with the need to set up your office. These spaces provide you with all the essential items you need for your office, including furniture, telephone, internet, and refreshment for your staff.
How to register a sole proprietorship company in Thailand?
The Thailand Board of Investment lays down the guidelines for starting a business in Thailand. According to the guideline, here is the procedure to register a sole proprietorship in Thailand.
1. Registering the name of the company
The first step to setting up a sole proprietorship in Thailand is registering the entity’s name with the Department of Business Development (DBD) in Thailand. The process can take up to two business days.
You will need to provide three unique names and rank them by your preference. The names provided should not match the names of any governmental unit’s royal family. In addition, they should not be against Thailand’s public morals.
2. Obtaining a certificate of incorporation
After getting the name approved, the next step is issuing a Certificate of Incorporation. The DBD has made the process convenient by providing an e-Registration facility since 2017.
You can be successfully registered by uploading all the required documents to this e-Registration portal. The portal, however, is not available in English. So if you aren’t a Thai speaker, you may need a translator to complete the registration process.
3. Getting a VAT certificate
A sole proprietorship in Thailand needs to get registered on VAT if the business yields an annual income of more than 1,800,000 Baht. Also, a sole proprietorship in Thailand isn’t subject to corporate tax.
Instead, the proprietor has to pay tax on income as per the tax slab of a natural person. An annual income of less than 150,000 Baht is exempt from tax. The highest tax rate is 35% for income above 5,000,000 Baht.
4. Other licenses
Apart from VAT, a sole proprietorship in Thailand may also require other licenses depending upon the nature of the business. For instance, a restaurant business needs to secure liquor and music licenses.
Similarly, a shipping company can’t operate without an import-export license. You may also require an FDA license for importing foods and drugs for your business. Each of these licenses can cost you anywhere between 600 to 2000 Baht.
Conclusion
Thailand can prove to be an attractive spot for a profitable business setting. However, when working with locals in Thailand, you need to comply with all sole proprietorship Thailand laws.
This is where global EOR solutions like Multiplier can come to your aid. Multiplier takes care of your global teams’ payroll, taxes, social contributions & local insurance policies making international compliance easy and risk-free. With the hassle of international recruitment and employee management taken care of, you can fast-track your growth in Thailand.
To learn more, speak with one of our specialists.