Setting up a subsidiary company in Thailand involves creating a legally independent entity that is fully or majority-owned by a foreign parent company. Many businesses expand to Thailand to benefit from its robust economy, skilled and cost-effective workforce, strategic location in Southeast Asia, and participation in major regional and global trade agreements, including ASEAN and RCEP.
This blog will cover the key steps to establish a subsidiary in Thailand, including legal requirements, registration procedures, tax obligations, compliance responsibilities, and practical tips for a successful market entry.
Key Takeaways
- Legal Registration Requirements: Subsidiaries must complete legal registration with the DBD, obtain a TIN from the Revenue Department, and secure any necessary licenses or permits.
- Annual Compliance Obligations: Annual compliance includes audited financial statements, corporate income tax filings, VAT returns, social security contributions, and labor reports in line with Thai regulations.
- Local Legal Representation: A local legal representative residing in Thailand is required to ensure compliance with Thai business laws, and this individual must have a local address for the business.
What are the Types of Subsidiaries in Thailand?
Understanding how to establish a subsidiary company in Thailand involves selecting the appropriate structure, which determines the level of control, legal responsibilities, and the type of activities the entity can undertake. The following are the main types of subsidiaries:
Wholly Foreign-Owned Enterprise (WFOE)
This is a company fully owned (100%) by the foreign parent company. It operates as an independent legal entity in Thailand, allowing full control over operations, management, and profits. This structure is ideal for investors seeking autonomy without local partners, making it a preferred choice for business incorporation.
Joint Venture (JV)
A JV involves cooperation between a foreign investor and a Thai partner, with shared ownership and responsibilities. This model is often used in sectors where local knowledge, networks, or legal requirements make full foreign ownership difficult or less effective.
Branch Office
A branch office is an extension of the parent company and not a separate legal entity. The foreign parent retains complete control but is also fully liable for the branch’s operations.
Representative Office
A representative office can only conduct non-commercial activities, such as market research and promotion. It cannot generate revenue or sign contracts, making it a low-cost option for exploring the market.
Step-by-Step Guide to Setting Up a Subsidiary in Thailand
Opening a subsidiary in Thailand involves several legal and administrative procedures. Below is a step-by-step guide outlining the key stages to establish and register your subsidiary successfully:
Step 1: Choose the Appropriate Business Structure
Decide whether your subsidiary will be a WFOE or a joint venture. Your choice will depend on the industry, ownership goals, and whether local partnerships are required by law. A WFOE allows complete foreign ownership and full control, and a JV involves partnering with a local entity.
Step 2: Reserve the Company Name
Register your subsidiary’s name with the Department of Business Development (DBD) to ensure it’s unique and complies with naming regulations. Once approved, the name reservation is valid for use in your registration documents and legal filings.
Step 3: Prepare Required Documents
Prepare the necessary documents for registration:
- Company’s Articles of Association.
- Identification documents for legal representatives.
- Proof of registered address in Thailand.
- Shareholder details (minimum of 3 directors for most entities).
Step 4: Register with the DBD
Submit the required documents to the DBD for registration and receive the Company Registration Certificate and Tax Identification Number (TIN). Once approved, your subsidiary will be officially recognized as a legal entity in Thailand and can begin its business operations.
Step 5: Open a Bank Account
To open a corporate bank account in Thailand, choose a local or international bank that offers business services. You will need to deposit the required minimum capital. Once the deposit is made, the bank will provide you with the necessary account details to begin your business transactions.
Step 6: Register for Taxes
Register with the Revenue Department to obtain a Tax Identification Number (TIN) and comply with the requirements for CIT and VAT. Ensure that your subsidiary meets all local tax obligations, including filing monthly VAT returns and making quarterly CIT payments. Additionally, keep accurate financial records and comply with any specific tax regulations related to your business activities.
Step 7: Fulfill Sector-Specific Licensing and Compliance Requirements
Before starting operations, ensure you have obtained any additional licenses required for your business sector (e.g., retail, education, logistics). You must also register employees for social insurance, comply with labor laws, and secure work permits for any foreign staff. Ongoing compliance is essential.
Key Benefits of Establishing a Subsidiary in Thailand
Setting up a subsidiary company in Thailand offers key strategic and operational advantages for foreign investors looking to expand into Southeast Asia. With its open investment policies and strong regional trade ties, Thailand has become a prime destination for international businesses. The following are the main advantages:
- Access to a Dynamic Market: Thailand’s economy is one of the largest and most diverse in Southeast Asia, with a growing middle class and increasing consumer demand, particularly in sectors like automotive, technology, and services.
- Strategic Location in Southeast Asia: Thailand’s central position in Southeast Asia provides easy access to key markets in Asia, including China, ASEAN countries, and important trade routes. This makes it an ideal gateway for businesses looking to enter regional markets.
- Tax Incentives and Preferential Policies: The Thai government offers various tax incentives for foreign-invested companies, especially in sectors such as high-tech, manufacturing, automotive, and energy. Thailand also offers favorable Board of Investment (BOI) incentives for eligible companies.
- Full Legal Control and Ownership: Foreign investors can establish a WFOE, giving them complete control over business operations, finances, human resources, and strategic decisions without the need for a local partner.
- Participation in Global Trade Agreements: Thailand is a member of key Free Trade Agreements (FTAs), including the ASEAN Economic Community (AEC), the EU-ASEAN Free Trade Agreement (EU-ASEAN FTA), and the Regional Comprehensive Economic Partnership (RCEP), which provide preferential trade access to major global markets.
Essential Documents for Registering a Subsidiary
If you’re researching how to form a subsidiary in Thailand, preparing the correct documentation is a critical step in the process. Thai authorities require a detailed set of legal and corporate documents to approve foreign-invested enterprises. Below is a list of the essential paperwork you’ll need:
- Company Name Reservation: A name reservation certificate from the Department of Business Development (DBD) to ensure your company name is unique and available for use.
- Articles of Incorporation: A formal document outlining the subsidiary’s purpose, capital structure, shareholder details, and management structure.
- Proof of Registered Office Address: A lease agreement or property ownership documents confirming the physical address of the subsidiary in Thailand.
- Identification Documents: Valid passports or national ID cards of all shareholders, directors, and legal representatives.
- Tax Registration Forms: Forms required for registering with the Revenue Department to obtain a Tax Identification Number (TIN) and VAT registration (if applicable).
- Bank Account Documents: Proof of the corporate bank account opened in Thailand, including a bank deposit slip showing the required capital investment.
- Certificate of Good Standing (for foreign parent company): If applicable, a certificate of good standing or a legal document from the parent company proving its legal existence in its home country.
- Power of Attorney: If a local agent or representative is handling the registration on behalf of the parent company, a power of attorney granting authority to represent the company is required.
- Social Security Registration: Documents required to register the subsidiary’s employees with the Social Security Office (SSO), if applicable.
Note: If you are not sure about setting up a subsidiary company in Thailand, it’s advisable to work with a local legal expert to ensure accuracy and full compliance.
Legal Structures Available for Subsidiaries in Thailand
When considering setting up a subsidiary company in Thailand, it’s essential to choose the right legal structure. The type of entity you register affects your ownership rights and liability. In Thailand, foreign investors typically establish subsidiaries under one of the following legal structures:
- Limited Liability Company (LLC): A wholly owned entity by foreign investors, offering limited liability and full control over operations.
- Public Limited Company (PLC): A company designed for raising capital and public investment, with limited liability and potential foreign ownership restrictions.
- Branch Office: An extension of the parent company, with full liability for the parent and limited ability to engage in business activities independently.
- Representative Office: Used for non-commercial activities like market research and liaison, without generating revenue or engaging in direct business operations.
Note: For most foreign investors who are looking at how to create a subsidiary in Thailand, an LLC is the preferred choice when forming a subsidiary in Thailand due to its flexibility, control, and legal safeguards.
Taxation Rules and Incentives for Subsidiaries
Understanding Thailand’s tax system is essential when planning how to set up a parent company with subsidiaries in Thailand. The country offers a competitive corporate tax regime along with attractive incentives to encourage foreign investment.
Here’s an overview of the taxation rules and benefits for foreign-invested subsidiaries:
Corporate Income Tax (CIT)
Thailand applies a standard Corporate Income Tax (CIT) rate of 20% for most businesses. However, businesses in certain sectors such as energy, banking, and real estate may face higher rates. The CIT is calculated based on taxable income in accordance with Thai Accounting Standards (TAS).
Tax Incentives for Foreign-Invested Subsidiaries
To attract foreign investment, Thailand provides a range of tax incentives, particularly for industries like high-tech, automotive, energy, manufacturing, and agriculture. Key incentives include:
- Reduced CIT rates for businesses in designated sectors and special economic zones (SEZs).
- Deductions for research and development (R&D) expenses.
- Exemptions or reductions in land use and rental fees for businesses operating in industrial zones or underdeveloped areas.
Tax Compliance
All foreign-invested subsidiaries in Thailand must register for CIT with the Revenue Department. They are required to submit annual tax returns within 150 days after the end of their fiscal year and make quarterly tax payments throughout the year. Additionally, subsidiaries must ensure that financial statements and tax reports are prepared in compliance with Thai Accounting Standards (TAS).
Regulatory and Compliance Requirements in Thailand
Whether you’re setting up a subsidiary or a parent company in Thailand or exploring how to start a parent company in Thailand, understanding ongoing compliance is essential. Businesses must meet legal, tax, and reporting obligations to operate smoothly and avoid penalties. The following are the key compliance requirements:
- Tax Filings: Subsidiaries must file annual CIT returns within 150 days of the fiscal year-end. Quarterly CIT payments, VAT, and Withholding Tax filings are also required.
- Accounting Standards: Financial statements must comply with the Thai Accounting Standards (TAS) and be prepared in the Thai language. Annual audits are mandatory for larger companies.
- Labor and Insurance: Companies must register employees for social security and comply with labor laws, including those related to work contracts, wages, and working conditions. Work permits are required for foreign employees.
- Licensing and Reporting: Any changes to the business scope, shareholding structure, or capital must be updated with the Department of Business Development (DBD). Business tax filings are required annually.
- Transfer Pricing: Companies involved in related-party transactions must maintain transfer pricing documentation as per Thai regulations.
Note: Post-incorporation, subsidiaries in Thailand must register for CIT, file annual returns, make quarterly tax payments, and comply with Thai Accounting Standards (TAS). They must also maintain accurate records and adhere to labor laws.
Do You Need a Physical Address for a Subsidiary in Thailand?
Yes, a physical, commercially zoned address is required when setting up a subsidiary company in Thailand. This address serves as the registered office for legal and administrative purposes, including receiving official correspondence and tax notices. The address must be in Thailand and can be either a commercial office space or a virtual office.
Operational Setup for a Subsidiary in Thailand
After registration, the operational setup is the next step for setting up a subsidiary company in Thailand includes hiring local staff per labor laws, securing work permits for foreign employees, and appointing a resident legal representative. A physical office with a valid lease is required, with industrial zones needed for manufacturing. Businesses must establish payroll, open a bank account, and maintain accounting records under TAS. Reliable infrastructure and sector-specific licenses (if applicable) are also essential.
How to Open a Business Bank Account for a Subsidiary in Thailand?
Opening a bank account is essential when setting up a subsidiary company in Thailand. It allows for capital contributions, daily transactions, and tax compliance. Here are the key steps:
- Select a bank: Select a local or international bank operating in Thailand, such as Bangkok Bank, Siam Commercial Bank, or Kasikornbank, that offers corporate banking services.
- Prepare required documents: To open a business bank account for a subsidiary in Thailand, you’ll need the Company Registration Certificate, Tax Identification Number (TIN), shareholder details, Articles of Association, proof of registered office address, identification documents for directors, and corporate seal (if applicable).
- Visit the bank: The legal representative (or authorized person) must open the account in person.
- Submit documents and open the account: Provide all required paperwork to the bank officer.
- Transfer charter capital: Deposit the registered capital from the parent company to the capital account.
- Register with tax authorities: Notify the tax office of the account details as part of compliance.
Is an Operating Agreement Necessary for a Subsidiary in Thailand?
In Thailand, an Operating Agreement is not legally required for a subsidiary. However, it is highly recommended, especially for LLCs or JJSCs, to outline the operational structure, roles, and responsibilities of shareholders and directors. Having an Operating Agreement can help clarify profit distribution, decision-making processes, and provide a clear framework for resolving disputes, ensuring smoother management and operations.
Opening a Branch vs. a Subsidiary: What’s the Difference?
When expanding into Thailand, foreign companies can choose between establishing a subsidiary or opening a branch office. Both structures allow a business presence, but they differ significantly in terms of legal status. Here is a concise comparison table outlining the key differences between the two:
Aspect | Subsidiary | Branch |
Legal Status | Separate legal entity. | Not a separate entity; extension of the parent company. |
Liability | Limited to capital invested in Thailand. | The parent company holds full liability. |
Tax Treatment | Separate taxation may qualify for tax incentives | Subject to CIT and withholding taxes. |
Business Scope | Broad, based on registered activities. | Restricted to approved scope. |
Control | Operates independently. | Directly controlled by the parent company. |
How Commenda Can Help You Expand in Thailand
Expanding into Thailand requires navigating complex legal, tax, and operational processes. Commenda offers end-to-end support to make your market entry smooth, compliant, and strategic.
With deep local expertise, Commenda assists with every step of incorporation, from choosing the right business structure to securing investment licenses and completing company registration. We help ensure your subsidiary or parent company is properly established under Thai law.
Our team also provides ongoing compliance, payroll, and legal support to keep your operations running seamlessly. Book a demo today to see how Commenda can simplify your expansion into Thailand.
FAQs
Q. How much does it cost to set up a subsidiary in Thailand?
The cost to set up a subsidiary in Thailand can vary based on the company type, capital, and services required. For a Limited Liability Company (LLC), the government registration fee is approximately THB 5,500 per million THB of registered capital. Additional costs for documents and services may also apply. For a Public Limited Company (PLC), the registration fee is around THB 1,000 per million THB of registered capital, with similar additional expenses.
Q. How long does it take to register a subsidiary in Thailand?
The process of registration of a company in Thailand depends largely on the selected company structure and can take from 3-5 business days for a simple Thai Limited Liability Company to as much as 90 days for a more complex Board of Investment subsidiary.
Q. Can a foreigner fully own a subsidiary in Thailand?
Yes, foreigners can fully own a subsidiary in Thailand, particularly in most sectors. However, there are some exceptions, particularly in restricted sectors such as banking, telecommunications, and real estate, where foreign ownership may be limited or require approval.
Q. What are the common challenges when opening a subsidiary in Thailand?
Common challenges include managing bureaucracy, meeting document legalization requirements, language barriers, delays in government approvals, and understanding local labor and tax compliance laws. Having local legal support helps avoid costly mistakes.
Q. Do subsidiaries in Thailand need a local director or representative?
Yes, subsidiaries in Thailand must appoint a legal representative who resides in Thailand. This person does not need to be a Thai national but must have a local address and be legally responsible for the company’s activities.
Q. What are the annual compliance requirements for subsidiaries in Thailand?
Subsidiaries must file annual tax returns, including Corporate Income Tax (CIT) and VAT returns, as well as prepare audited financial statements in compliance with Thai Accounting Standards (TAS). Other filings include social security contributions for employees.
Q. Can a subsidiary hire employees directly in Thailand?
Yes, a subsidiary can hire employees directly in Thailand. It must comply with Thai labor laws, which include signing employment contracts, registering employees for social security, managing payroll, and adhering to workplace regulations.
Q. What happens if a subsidiary fails to meet compliance rules in Thailand?
Failure to comply can lead to penalties such as fines, late payment interest, administrative sanctions, suspension or revocation of the business license, and potential legal actions, all of which can disrupt business operations and damage reputation.