4 Challenges of Setting Up a Foreign Business in Thailand

While doing business in Thailand is beneficial for foreign investors, it also opens up a set of unique challenges one needs to overcome in order to thrive in the country. As a member of the ASEAN, Thailand enjoys a strong trade relationship with its neighbouring nations like Singapore, Indonesia, Brunei, Malaysia, and the Philippines. Having access to a global market allows Thai businesses to grow and expand. In addition, the Kingdom is also home to an abundance of rich natural resources, a skilled workforce, and modern infrastructure. Despite the welcoming investment scene and the appealing advantages of setting up a company in Thailand, many foreign investors who want to register a Thai company face several regulatory, legal, and taxation challenges. Difficulty in selecting the ideal business structure In Thailand, there are several business structures to choose from. For instance, you can register a Thai Limited Company, a BOI company, Representative Office, or Thai Partnerships. Each of these structures has its own set of advantages and limitations. As an investor, you need to explore the possibilities each of them can offer you and select the right one that suits your objectives. Choosing the wrong company type may result in further complications like difficulty obtaining a license, incurring unnecessary costs, and more. Limitations on foreign investment and ownership Unlike their local counterparts, foreigners are restricted to some business activities. Under the Foreign Business Act, foreigners cannot engage in certain business activities reserved for Thai nationals only. The law divided business activities into three classifications. The first list contains businesses strictly prohibited from foreign investors. This involves activities in the newspaper and media industries, rice farming, livestock farming, and land trading. The second list contains businesses related to arts and culture, national security, and natural resources like transportation, art trading, mining, and furniture production. Unlike the first list, this list is open to foreigners. However, a majority of foreign-owned company engaging in these activities must have at least 40% of shares allocated to Thai nationals. The third list contains businesses of which foreign investors can have 100% ownership. This includes accounting, architecture, retail and wholesale, advertisement, hospitality, and food and beverage industries. Although this list is open to foreigners, they need to get permission from the Ministry of Commerce and obtain a foreign business license before operating. Not finding the right Thai partner Regardless of your company's industry, finding a Thai partner can give you an advantage in business. For example, they can give you substantial information on the behaviour of the local market or the trends that are shaping the economy. Although this holds true, it's also equally possible that a Thai partner can underperform or take advantage of your business. For this reason, it's important to choose the right partner for your company, which is a challenging endeavour for many foreigners. So before you seal the deal on your partnership, here are some initial steps you need to take: Do background research on your potential partners Evaluate your chemistry with your partner Take advantage of social networking Obtaining construction permits Once you’ve found a partner and are ready to build your office, you have to go through the process of obtaining construction permits. Generally, you need to undergo eight procedures, including inspection, application, approval, and construction overseen by the local Metropolitan Authority. Because of the elaborate processes involved, this can take anywhere from five to six months to complete. With this timeline, you can expect to experience delays in business operations. The best way to overcome these challenges as a first-time foreign investor is to get assistance from field experts. More specifically, corporate services providers, financial advisors, etc., can help make the whole company incorporation process manageable. With the guidance of company registration Bangkok services, you can incorporate your business with utmost ease and convenience.