A practical guide to choosing the right legal structure when entering the Thai market
Thailand remains one of Southeast Asia’s most attractive destinations for international business expansion, including Swiss companies seeking to establish a subsidiary, regional office, or local presence in Asia. With its strategic location, well-developed infrastructure, competitive operating costs, skilled workforce, strong tourism sector, and growing digital economy, Thailand offers a promising base for companies looking to access the Thai market and the wider ASEAN region.
For Swiss companies and investors, however, entering the Thai market requires careful planning. One of the most important first steps is choosing the right legal structure. This decision directly affects foreign ownership rights, shareholder control, liability, tax treatment, licensing requirements, ability to generate income, employment options, work permits, and ongoing compliance obligations.
Understanding the different business forms available in Thailand can help Swiss companies, SMEs, entrepreneurs, and investors select the most suitable structure for their objectives, whether they plan to open a Thai subsidiary, establish a representative office, form a partnership, or explore other market-entry models.
Main business forms in Thailand
Foreign investors commonly choose one of the following structures:
- Thai limited company
- Branch office
- Representative office
- Regional office
Each structure has a different legal status, capital requirement, liability exposure, and ability to conduct revenue-generating activities. Relevant laws are the Thai Civil and Commercial Code and the Foreign Business Act B.E. 2542.
Thai Limited Company
A Thai limited company is the most commonly used structure for foreign investors doing business in Thailand.
It is a separate legal entity from its shareholders. This means the company can enter into contracts, hire employees, own assets, open bank accounts, apply for licences, and be liable for its own obligations.
A private limited company must have at least two shareholders and at least one director. There is generally no high minimum capital requirement under company law, although practical capital requirements may apply depending on the business activity, foreign ownership structure, work permit needs, or licensing requirements. The minimum par value of shares is THB 5 per share.
A limited company is usually the most flexible option for investors who want to operate commercially in Thailand, issue invoices, generate income, employ staff, and build a long-term business presence.
Branch Office
A branch office is an extension of a foreign company registered to conduct business in Thailand. Unlike a Thai limited company, it is not a separate legal entity. This means the overseas head office remains legally responsible for the branch office’s contracts, debts, obligations, and liabilities.
A branch office may carry out revenue-generating activities in Thailand, provided that the relevant business activity is legally permitted and the required licences or approvals have been obtained. In practice, this structure is often considered when a foreign company wants to operate directly in Thailand without setting up a separate Thai subsidiary.
However, because the branch office is legally part of the foreign parent company, it offers less liability protection than a limited company. Any obligations incurred by the Thai branch may be enforceable against the overseas company.
A branch office normally requires an authorised officer in Thailand who can act on behalf of the foreign company. Depending on the business activity, the branch may also need a Foreign Business Licence before commencing operations.
The required investment is generally at least 25% of the estimated average annual operating expenses for the first three years, but not less than THB 3 million. A branch office is also subject to Thai corporate income tax on profits derived from its business activities in Thailand.
A branch office may be suitable for foreign companies that want a direct operating presence in Thailand, especially where the parent company wants to maintain close control over the Thai operations. However, investors should carefully assess liability exposure, tax implications, licensing requirements, and whether a Thai limited company would offer a more practical structure.
Representative Office
A representative office is a non-revenue-generating structure used by a foreign company to support its head office or group companies.
It is commonly used when a foreign company wants to explore the Thai market, coordinate with local suppliers, gather business information, or provide support to the overseas head office before making a larger investment.
A representative office is not allowed to sell goods, provide paid services, issue invoices, negotiate contracts on behalf of the head office, or generate income in Thailand. Its activities are limited to specific support functions, such as:
- sourcing goods or services in Thailand for the head office;
- checking and controlling the quality or quantity of goods purchased or manufactured in Thailand;
- providing information or advice concerning products sold by the head office;
- sharing information about new products or services of the head office;
- reporting on business trends in Thailand.
Because it cannot generate income, a representative office is usually funded by the overseas head office. It is also not a separate legal entity, meaning the foreign head office remains responsible for its activities and liabilities.
The minimum required investment is generally THB 2 million. Although a representative office does not conduct profit-making activities, it may still have certain tax and compliance obligations, for example in relation to employees, withholding tax, or interest income.
A representative office may be suitable for foreign companies that want a low-risk initial presence in Thailand for market research, sourcing, supplier coordination, or quality control. It is not suitable for companies that want to trade, invoice customers, or provide paid services in Thailand.
Regional Office
A regional office is a structure used by a foreign company that already has branches, subsidiaries, or affiliated companies in Asia and wants to use Thailand as a regional coordination or support hub.
Like a representative office, a regional office cannot generate income in Thailand and is not a separate legal entity. Its role is to provide internal support to the foreign company’s group operations in the region.
Typical permitted activities include:
- coordinating and supervising regional branches or affiliates;
- providing consulting or management support;
- human resources training and development;
- technical assistance;
- financial management support;
- marketing and sales promotion planning;
- product development;
- research and development services.
A regional office cannot accept purchase orders, make sales offers, negotiate commercial contracts, or provide paid services to customers in Thailand. It is therefore suitable for internal group support, but not for direct commercial operations.
The minimum required investment is generally THB 2 million. If the business operates in Thailand for less than three years, the minimum capital may need to be fully remitted within the first six months of business commencement. A regional office must also appoint a local manager or authorised officer.
This structure may be useful for multinational groups that want Thailand to serve as a regional base for coordination, management, training, technical support, or strategic planning. However, where the business intends to sell goods or services in Thailand, a Thai limited company or branch office is usually more appropriate.
Foreign Business Restrictions
Before setting up a business in Thailand, foreign investors should check whether their planned activities are restricted under the Foreign Business Act B.E. 2542. Some activities are prohibited or require a Foreign Business Licence, Foreign Business Certificate, treaty protection, or another exemption.
In addition, foreign investors may be eligible for investment privileges through the Board of Investment, governed by the Investment Promotion Act B.E. 2520, which may allow greater foreign ownership and provide tax or non-tax incentives.
This section is only a brief overview. For more detail, please see our separate blog posts on the Foreign Business Act and BOI promotion in Thailand.
Tax Basics
Companies incorporated in Thailand are generally subject to corporate income tax on their net profits. The standard corporate income tax rate is 20%.
VAT may also apply if the company supplies goods or services in Thailand and exceeds the VAT registration threshold of THB 1.8 million per year.
Depending on the business model, other tax issues may also be relevant, such as withholding tax, specific business tax, customs duties, transfer pricing, and double tax treaty relief.
Which Business Form Should You Choose?
For most active commercial businesses, a Thai limited company is the most practical option. It offers a separate legal identity, operational flexibility, and a clear structure for hiring employees, signing contracts, applying for licences, and paying tax.
A branch office may be suitable where the foreign parent company wants to operate directly in Thailand and accepts that liabilities remain with the overseas company.
A representative office is useful for market research, sourcing, and quality control, but it cannot earn income.
A regional office is useful for multinational groups that need a coordination or support hub in Thailand, but it cannot trade or generate revenue.
Basic Steps to Set Up a Thai Limited Company
Step 1: Reserve the company name
The company name must be reserved with the Department of Business Development, or DBD. Once approved, the name is reserved for a limited period, during which the incorporation documents must be submitted.
Step 2: Prepare the Memorandum of Association
The Memorandum of Association usually includes the company name, registered office, business objectives, registered capital, shareholder liability, and promoter details.
Step 3: Subscribe the shares
The initial shareholders subscribe for shares in the company. The promoters must also be among the first shareholders.
Step 4: Hold the statutory meeting
The statutory meeting approves the company documents, appoints the director or directors, and appoints the auditor.
Step 5: Pay up the share capital
At least 25% of the subscribed shares must be paid up before registration.
Step 6: Register the company with the DBD
The directors file the company registration with the DBD. Once registered, the company receives a registration number, which is also used for tax purposes.
Step 7: Register for VAT if required
A business that sells goods or provides services in Thailand must register for VAT if its annual turnover exceeds THB 1.8 million.
Takeaway
Setting up a business in Thailand is usually manageable from a registration perspective. The more important question is whether the intended business activity can legally be carried out under the planned ownership structure.
Before registering, investors should confirm:
- the correct legal structure;
- whether the business activity is restricted for foreigners;
- whether a Foreign Business Licence or exemption is required;
- whether BOI promotion may be available;
- the capital, tax, VAT, licensing, and work permit implications.
For many investors, the Thai limited company remains the preferred starting point. However, careful planning at the beginning can help avoid foreign ownership, licensing, tax, nominee shareholder, and compliance issues later.
FAQ: Setting Up a Business in Thailand
1. What is the most common business form for foreigners in Thailand?
The most common business form for foreign investors in Thailand is a Thai limited company. It is a separate legal entity, can generate income, hire employees, enter into contracts, open bank accounts, and apply for relevant business licences.
2. Can foreigners own 100% of a company in Thailand?
In some cases, yes. However, foreign ownership depends on the type of business activity. Certain activities are restricted under the Foreign Business Act B.E. 2542. Foreign investors may be able to own 100% of a company if an exemption applies, such as a Foreign Business Licence, Foreign Business Certificate, treaty protection, or BOI promotion.
3. What is the difference between a Thai limited company and a branch office?
A Thai limited company is a separate legal entity from its shareholders. A branch office, on the other hand, is an extension of a foreign company. This means the overseas parent company remains liable for the branch office’s obligations, debts, and contracts in Thailand.
4. Can a representative office in Thailand generate income?
No. A representative office cannot generate income, issue invoices, sell goods, or provide paid services in Thailand. It is mainly used for non-commercial activities such as market research, sourcing goods or services, quality control, and reporting business trends to the foreign head office.
5. What is a regional office in Thailand?
A regional office is used by a foreign company to coordinate and support its branches, subsidiaries, or affiliates in Asia. It may provide internal support such as management assistance, technical support, training, financial coordination, marketing planning, and research and development. It cannot generate income in Thailand.
6. How long does it take to set up a company in Thailand?
A standard Thai limited company can often be incorporated within a few weeks, depending on the complexity of the structure, document preparation, name reservation, shareholder arrangements, and whether additional licences are required.
7. What is the minimum capital required to set up a company in Thailand?
There is generally no high minimum capital requirement for a standard Thai limited company under Thai company law. However, practical capital requirements may apply depending on foreign ownership, business activities, work permit needs, or licensing requirements. Foreign-owned companies often need to consider minimum capital rules carefully.
8. Does a Thai company need to register for VAT?
A company must generally register for VAT if it sells goods or provides services in Thailand and its annual turnover exceeds THB 1.8 million. VAT registration should be considered early, especially if the company expects to reach this threshold quickly.
9. What taxes apply to companies in Thailand?
Companies in Thailand are generally subject to corporate income tax on net profits. VAT, withholding tax, specific business tax, customs duties, and other tax obligations may also apply depending on the business model.
10. Do foreign investors need a Foreign Business Licence in Thailand?
Foreign investors may need a Foreign Business Licence if their planned business activity is restricted under the Foreign Business Act. This should be reviewed before incorporation, especially for service businesses, retail, wholesale, advertising, hospitality, and other regulated sectors.
11. What is BOI promotion in Thailand?
BOI promotion refers to investment incentives granted by Thailand’s Board of Investment under the Investment Promotion Act B.E. 2520. BOI-promoted companies may receive tax incentives, non-tax incentives, permission for greater foreign ownership, land ownership rights, and easier work permit and visa processes, depending on the approved activity.
12. Which business form is best for foreign investors in Thailand?
For most active commercial businesses, a Thai limited company is the most practical option. A branch office may be suitable for direct operations by a foreign parent company, while a representative office or regional office is better suited for non-revenue-generating support activities. The best structure depends on ownership, business activity, liability, tax, and licensing considerations.
