Business challenges – Incorporating a retail business in Thailand
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Incorporating a retail business in Thailand
As one of the leading economies in Southeast Asia, Thailand continues to be a major investment destination for many of the world's leading retail corporations wanting to establish physical retail stores in the Kingdom. But as large retailers from Britain, France, Japan and elsewhere will attest, it takes more than a good product to stay the course in the 'Land of Smiles'.
There are myriad of financial and strategic reasons why companies decide to shutter their business but perhaps one of the biggest stumbling blocks is that outright foreign business ownership in Thailand is complicated. The Foreign Business Act (FBA) requires that international investors apply for a foreign business license if a non-Thai national owns the majority stake of a company registered in Thailand.
Furthermore, Thailand's Foreign Business Act has identified three lists in which foreign participation may be prohibited or restricted. Industries which must be majority-owned by Thais include land trading, mining, newspaper publishing, radio and television stations, restaurants, rice farming, wholesaling, and retailing.
The definition of “foreign company” under Thai law is a company registered under the following laws must be deemed a foreign company:
1. The laws of another country (including all branches, representative offices, and regional offices of companies abroad operating in Thailand);
2. Thai law, but where 50% or more of its shares are held by foreign individuals or business entities. The Foreign Business Act has identified three lists of activities in which foreign participation may be prohibited or restricted.
The operation of retail and wholesale business falls under List 3 of the Foreign Business Act Restrictions, which states “Businesses in respect of which Thai nationals are not yet ready to compete with foreigners.” To limit the domination of multinationals in the local marketplace, the FBA requires a minimum investment of 100 million Baht (to conduct a retail or wholesale business), which allows for up to five retail stores or one wholesale store. For companies wanting to conduct both retail and wholesale businesses, a minimum of investment of 200 million Baht is required.
Whereas these laws may seem restrictive at the outset, the same rules do not apply for Thai nationals. As a consequence, Thai nationals and foreign investors often co-exist where Thai shareholders hold 51% or more of the shares. This alternate route to establishing a business means the operation is not subject to the Foreign Business Act.
Mazars in Thailand offers international businesses of all sizes a global integrated partnership that is localized by more than 350 professionals spanning eight nationalities and more than half a dozen languages. So, whatever you need to achieve business-wise, we have the personnel to show you the way.
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David Louey Outsourcing Director - Bangkok
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