Module 6: ASEAN Legal Aspects
Table of Contents
Activities
Activity 6
Read the following information about Thailand and follow the instructions.
- Answer the questions.
- Select a section of your interest, list all the new vocabulary and look for the meanings in a dictionary.
Thailand
3. Types of Business Organizations
The following are various types of business entities available in Thailand’s jurisdiction; however, a foreigner’s ability to engage in them is regulated by the Foreign Business Act.
Question: How is a foreigner’s ability to engage in business entities regulated in Thailand?
3.1 Sole proprietorship – Under the law a person acting as a sole proprietor can engage in almost any lawful type of business with the exception of those businesses which have been otherwise regulated by the government. Taxation of a sole proprietorship business is calculated on a progressive personal tax rate.
Question: How is the taxation of a sole proprietorship business taxed?
3.2 Unregistered ordinary partnership – An Unregistered ordinary partnership is when two or more persons join together to conduct business without formally registering their operation. Unregistered ordinary partnerships are taxed as natural persons, but each partner must also separately file their own personal tax return.
Question: How are unregistered ordinary partnerships taxed?
3.3 Registered ordinary partnership – To form a Registered Ordinary Partnership, all particulars including the partnership contract, capital contribution, management and objectives must be submitted to the Ministry of Commerce. Partner profits are subject to taxation, so profits are subject to two levels of taxation.
Question: How are registered ordinary partnerships taxed?
3.4 Limited partnership – In a limited partnership, the managing partners who are jointly held personally liable for the partnership’s debts with other non-managing partners only liable for the amount of any undelivered or withdrawn capital contribution. Partner profits are subject to taxation, so profits are subject to two levels of taxation.
Question: How are limited partnerships taxed?
3.5 Private limited company – Basically a corporation, a Private Limited Company must have a minimum of three persons join together to start a business with the capital divided into shares of equal par value. A Private Limited Company is taxed as a juristic entity.
Question: How are private limited companies taxed?
3.6 Public limited company – A Public Limited Company is formed in order to offer shares to the general public and must have a minimum of 15 persons join together. A Public Limited Company is a juristic entity and taxed as one. Individual shareholders must pay tax on their earnings, and foreign corporate shareholders pay tax on all dividends.
Question: How are public limited companies taxed?
3.7 Joint venture – In Thailand, a joint venture is not a legal entity under the Civil and Commercial Code. If two parties do enter into an agreement to work together as a joint venture, it is valid as long as it conforms to Thai laws. A joint venture’s income is subject to corporate tax as a single entity.
Question: How are joint venture incomes taxed?
3.8 Branch office – A branch office does business on behalf of a company based outside Thailand, but only for specific business activities granted by the authority under the Foreign Business Act. A company must bring in a minimum capital of at least 3 million baht; however, this is the minimum threshold and the actual amount is calculated at 25% of the average per year of three years estimated expenditures. For tax payment, a branch office is treated as a juristic person.
Question: How is tax calculated for branch offices?
3.9 Representative office – A representative office does business on behalf of a company based outside Thailand and must obtain a business license according to the Foreign Business Act. A representative office cannot engage in any revenue earning activities in Thailand and pays no taxes. A company must bring in a minimum capital of at least 3 million baht; however, this is the minimum threshold and the actual amount is calculated at 25% of the average per year of three years estimated expenditures.
Question: How is tax calculated for representative offices?
3. It is regulated by the Foreign Business Act.
3.1 Taxation of a sole proprietorship business is calculated on a progressive personal tax rate.
3.2 Unregistered ordinary partnerships are taxed as natural persons, but each partner must also separately file their own personal tax return.
3.3 Partner profits are subject to taxation, so profits are subject to two levels of taxation.
3.4 Partner profits are subject to taxation, so profits are subject to two levels of taxation.
3.5 A private limited company is taxed as a juristic entity.
3.6 Individual shareholders must pay tax on their earnings, and foreign corporate shareholders pay tax on all dividends.
3.7 A joint venture’s income is subject to corporate tax as a single entity.
3.8 For tax payment, a branch office is treated as a juristic person.
3.9 A representative office cannot engage in any revenue earning activities in Thailand and pays no taxes.