ISSUES OF OWNING A BUSINESS IN THAILAND – Yesterday we received a number of emails from foreign business owners in Thailand after we told a number of sources that we wanted to pen an article on the issues of running a business in Thailand.
One of our sources ventured;
“To avoid needing a Work Permit in Pattaya – I have heard a few times that all a ¹Farang needs to do is work at City Hall one day a month and volunteer as a Policeman one night a month and the Mayor will sign an exemption for you.
No matter what job you are doing, you will not need a Work Permit.
This, in my view, only perpetrates corruption and goes a long way towards tarnishing Pattaya’s reputation even more than it is.”
¹ Farang is a generic Thai word for someone of European ancestry, no matter where they may come from – see Wikipedia
Well, if true that’s one way to getting around the issue of obtaining a work permit but actually getting a work permit doesn’t appear to be the issue that most foreigners have. From our investigations it would appear that obtaining a work permit does involve a fair degree to effort in that there are reams of paperwork and the requirement to apply for the Work Permit in country outside of Thailand.
Why foreigners are required to apply for the Work Permit in a foreign country, such as Singapore? We were told;
“You can’t apply for a Work Visa in Thailand. You are required to leave the country and apply at one of the Thai Embassies in countries such as Singapore.”
This I find rather perplexing as there appears no logical reason why the Thai authorities would require a person to leave Thailand to apply. You would think that the Thai authorities would have rather kept the fees for such an application within the country and therefore helped the economy.
Surely sending someone out of the country to pay a visa fee in that country only attributes to the bleeding to cash the Thai authorities could use? On that note this requirement is extended for the application of marriage visas and from an outsiders perspective makes no sense.
Once the appropriate Work Permit / Visa has been obtained is it plain sailing? According to our sources running a business is akin to walking on coals due to the extremely restrictive nature of what type of work the foreign owner may do. There are strict rules of what tasks may be performed by the permit holder and anything performed outside this could result in a fine or even jail time.
Accounting appears to be another issue that foreigners have. Yes it’s agreed that all countries have accounting requirements that must be adhered to but many of our sources tell us that the Thai authorities require foreign businesses to go well beyond what is required for a company solely owned by a Thai.
One of our sources, on the issue of VAT and more importantly VAT Refunds told us;
“Traditionally the authorities try to avoid giving VAT refunds. If pushed they will issue you a credit. You work off your credit over a period by not paying any VAT you owe and you eventually end up at zero. This happens with all size companies.
A friend of mine was owed several million Baht by the Revenue Department (RD), i.e. The Royal Thai Government. As he is a determined fellow he got his staff to keep on to the Revenue Department and a deal was struck; but this did take many months.
To get this deal he was required to pay a very large sum of money under the table to an RD official in order to obtain the refund of several million baht that he was legally entitled to.
Despite handing over a considerable sum, in what is nothing more than a bride to get someone to do the job they are paid to do, he is still waiting for the refund.
As yet he has not received his refund, but expecting it soon.”
If this is the case you might be asking yourself what mad person would even bother setting up a business in Thailand.
It appears that setting up a Thai Company is in itself tiresome; you engage the services of a lawyer to collate all the appropriate paperwork, take a trip overseas to obtain your ‘B’ Visa and then return and process more paperwork at the Royal Thai Immigration.
Unfortunately it doesn’t quite end there… Foreigners are only permitted to own 49% of a Thai Registered Company. According to our information foreigners may own 100% of a company for certain activities; for instance under the Thai Government’s Board of Investment privilege (BOI) a foreign company may own 100% on certain conditions of large investments.
Cases of BOI certification are provided by the Thai Government on certain criteria and each application is based on its own merits; it does appear this really comes down to the size of the investment.
For the majority of businesses each are required to have a minimum of three Thai shareholders that hold the majority shareholding of 51%.
It is widely known and accepted that these Thai shareholders are often simply ‘nominees’ and have no financial interest in the company; whilst this appears to be standard practice it does not detract from the fact that it is legally to use ‘nominees’ under current Thai law.
As with most visas issued by the Thai Immigration the holder of a Work Permit (Non-Immigrant ‘B’ visa) is required to renew the visa annually and report to their local Thai Immigration Offices once every 90 days to report their whereabouts.
All countries have differing requirements to allow foreign nationals to set up and operate a business but it appears Thailand’s regime is somewhat at odds with the idea of bringing in foreign investment capital into the economy.
Yes it could be argued that that investment is minimal compared to the large corporations but historically small businesses collectively far exceed the employment, investment and economic benefits of the large corporations.
I have to admit, from an outsiders perspective, that setting up and running a company in a country that is dripping with corruption and almost a xenophobic attitude towards foreign nationals is not attune to attracting foreign investment and I for one would never consider running a business where the playing field is tilted so far against me in order to fill the pockets of corrupt and greedy Thai Officials.
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