Thailand is of course famous as a tourist destination, with its numerous islands with awesome beaches, its cultural and natural highlights, but it’s also becoming a great place to open a business, especially in new technologies. Many travelers are actually surprised by the modernity of Bangkok that boasts a vast skyline of skyscrapers, and actually quite a lot of startups.
Bangkok is changing, there is now a burgeoning startup environment in the city with its technology fairs, regular meetups about tech topics, the multiple investors, incubators, co-working spaces make Bangkok one of the startup hubs in Southeast Asia and a crossroad for digital nomads and tech savvy enthusiasts looking to relocate. At the same time, it somehow makes sense to work in Bangkok as it is a great place to live, with its rich culture, unmatched food choices, vibrant nightlife, nice weather and relatively low cost of living.
Starting a company in Thailand can somehow be complicated but there are some government agencies that can help, one of them is the Board of Investment, whose mission is to promote foreign investment in Thailand by providing information, services and incentives to interested foreign investors. Our company Outsourcify Co., Ltd. was created nearly 3 years ago as a BOI approved company. I will try in this article to explain our experience creating and running this company in regards to the Board of Investment of Thailand, what we obtained from it and what are the consequences and obligations that come with it.
What is the BOI and what is its purpose?
It can be troublesome for foreigners to set up a company in the kingdom of Thailand as a lot of regulations protect local business against foreign competition. It’s obviously much easier in other Southeast Asia countries like Hong Kong or Singapore. The main issues are the ability to own a Thai company as a foreigner and the ability to hire as many foreigners as you want. I won’t go in details here but a majority of the company shares should normally be owned by Thais and a certain number of Thai employees must be hired for each foreigner hired (4 local Thai staff per foreign employee to get a work permit), and there are specific costs for the work permit as well as complicated procedures to obtain visas. You are also supposed to have 2 million THB in registered capital (it doesn’t need to be invested upfront though).
The Thailand Board of Investment (BOI) is an inward investment promotion agency under the Office of the Prime Minister that offers frames in which new companies can be created with specific rules that loosen the constraints of the standard regulations. The BOI services are free of charge, they assist foreign investors in identifying business opportunities, providing tax incentives and privileges, and supporting foreign companies seeking to expand into the Asian market. That said the purpose of the BOI is not only to help foreigners but in general to encourage the initiation of new projects in Thailand.
Many different fields of the economy are concerned, not only IT or new technologies, though a few of them are reserved to Thai nationals (in agriculture and mining for example) and some types of businesses are not eligible, you should check first that your business is in the scope of their support.
The benefits of a BOI approved company
The main benefits of opening a company approved by the BOI vary widely depending on the domain of activity and the project presented, they have to be negotiated with the BOI. Some are the possibility to have 100% foreign ownership, flexibility on the amount of registered capital, on work permits for foreigners and in some specific cases tax exemptions on benefits tax and when importing machinery from abroad. None of those are guaranteed and depend on the industry and project.
The BOI also offers a specific office in Bangkok, the one-stop-service at Chamchuri Square Building, which is more centrally located (Sam Yan MRT near Silom) and where there is usually less waiting queues compared to the Chaengwattana Immigration Office. Visa issuing, extensions of stay, notification of address every 90 days or re-entry permits can be obtained there. It should be noted that most of these tasks can be handled by a secretary or lawyer, but some do require to go there in person.
The BOI application process
To initiate a request to get the BOI approval, paperwork is needed, a document has to be submitted, it should provide the description of the company creation project, a business plan for 3 years (with revenue and costs estimations), details about the number of people that will be hired, at which skills and salary. The main number the BOI is interested in, at least in our application as a IT company was the number of staff we where expecting to hire and the overall combined sum of salaries paid each year. That amount and the turnover you expect is what they are interested in mostly. The BOI required our employee hiring plan to reach a certain yearly amount after 3 years of running the company. It should be noticed that they don’t have unreasonable expectations, we reached this number much faster than expected, and after 3 years the salaries we pay monthly are 6 times higher than what we had planned (being very cautious though).
Another element that is important to the BOI is the amount of shares in the company held by foreigners, which can potentially be 100% but they of course prefer if the project is planned as a collaboration between foreigners and Thai people. We created Outsourcify with Kwanruedee Sangkhep, who is Thai and she is now our CEO, so we didn’t get any remarks on that points from the BOI but it seems they are very reasonable on that point, 100% foreign companies are possible, of what we know the consequence is often that a larger part of the company capital is expected to be transferred to Thailand shortly after the company creation.
From experience, it’s difficult to get the document approved the first time, the BOI staff taking care of your industry usually have remarks on what you submitted as they need to fit your project in what of the numerous types of BOI approval possible. As often with bureaucracy, you have to adapt to it more than it will to your project. An important decision to take is to chose the correct category you’re applying for promotion under. The BOI provides a guide book with dozens of different industries and categories for each, you need to choose the right category for your company, getting this wrong means your application will be rejected and you will have to resubmit it. The BOI is here to help and they can be contacted to help you select the correct category. This category will set the benefits your business will get by being approved by the BOI.
The application process can take time then, in our case the overall process took something like 3 months but overall, the process is not that complicated and can be done without the help of a lawyer, the documents to fill in are in English, the project can be presented in English (all BOI officers speak decent English). A lawyer or registration services company can be helpful though as they will know right away how to formulate the documents as the presentation in order to fit in the BOI expectations, they can also help to make the whole process faster. For the creation of Outsourcify, we didn’t need any help apart from the BOI officers themselves who were very cooperative.
Interview and company creation
Once the document is approved, a meeting at the BOI office in Bangkok will be planned where you must present your project to the BOI team concerned by your industry. The BOI office is close to Phahon Yothin MRT, just north of Chatuchak Park. It’s a large government building with hundreds of staff, each industry has its own area with dozens of collaborators and meeting rooms. The company founders need to be there and explain their project, pitch it with slides as they would to investors. For a private limited company, a minimum of 3 company founder and initial shareholders are usually needed. This interview is quite formal but should be seriously prepared, the company creators have to explain their business idea and also what they can bring to Thailand by starting it here. You should show that you have yourself experience and a background in the field, and be able to answer any questions that might rise. That said our interview was quite laid back, no need to worry much about it, if you filled the proposal correctly, your project should already be fitting in the scope of the BOI, the only thing left is convincing the BOI agents you know what you’re talking about and you have the experience to meet your business goals.
The presentation should take around 30 minutes, slides can be projected, a printed version of the slides should be handed to the BOI agents, which can be 2 or more. When the interview is finished, you’re usually told directly if you will get the BOI approval, you then have to wait for them to send you a formal approval letter within 1 month which needs to be officially accepted within maximum 1 more month, and you then have 6 months to register your business.
Once the project is approved by the BOI, the company creation can proceed as for any other company in Thailand with company registration, VAT and tax registration (which can take another 2 months). A money transfer of at least 25% of the capital to the company bank account has to be at the company creation.
It should be noted that the company might need to be created in one of the specific regions promoting your industry. A company in IT can be created in Bangkok, Chonburi, Chiang Mai, Phuket, Koh Samui for example.
We will go in details about our experience being a BOI company in a further article, how was the approval process, what benefits it brings us and what are the consequences of being a BOI approved company.
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