How Expats can Start a Business in Thailand

Thailand expat businessA Western expat in Thailand often has to think about making money.  Thailand is for sure a paradise in so many ways, but if you don’t have any money, it can be a hell.  Even if one is getting a steady pension check or social security or trust fund payout, there is always the fear that the dollar or other home currency can lose value in comparison with the Thai Baht, so it is important to find some kind of income stream locally.  One of the ways to do that is to start your own business, but in Thailand there are special considerations that must be taken into account.

First of all, being an independent entrepreneur is not for everyone.  Incomes go up and down, and there are always strange things that hit the business owner, making stress part of the price that must be paid.  But that’s the same everywhere. You have it, or you don’t.

In order to establish a corporation or partnership in Thailand (a Limited Company), a foreigner can own only up to 49% of the equity.  That means there must be Thai partners that will own the majority.  There are exceptions possible if you work through the Ministry of Commerce to set up a Foreign Business License, but these are typically granted for companies that start out with large capital amounts and will employ a lot of Thai people.  An existing company that wants to set up manufacturing in Thailand for export would be a good candidate for that type of business license.

Even with only having a minority share of the equity, control can still be held by the expat if he designs the business so that he is the managing director, and so that no one Thai partner has a larger portion of the ownership than the farang (foreigner).  Perhaps having three or four or even more partners will keep the farang in control.   And it is essential that a Western expat employ professional Thai accountants and a lawyer that reports to him to set up the company in Thailand.

In order for an expat to work at the Thai corporation, a work permit must be obtained (with fees) and four Thai nationals must be employed for every one foreigner working at the company.  And once working with a permit, you must pay yourself a minimum of 50,000Baht per month (about $1650 USD).

There are businesses for sale in Thailand, but even with an existing business, the same rules apply for the new expat buyer.

For my own situation, I partnered with my wife (a Thai national) and a couple of her close Thai relatives to establish our corporation, originally designed as just a travel and tour agency (known as Top Thai Travel, Ltd.).   As a company, we offer tours within Thailand and localized travel services, such as specialized tours, Thai cooking schools, Elephant Farm experiences, hotel reservations and domestic air tickets.   For us, our main goal was to earn a little income while having fun with Thai adventures, and in that regard, we have done very well.  I found that actually establishing the corporation in Thailand was less cumbersome than back in the US, where we had to report to so many different redundant government agencies.  Thailand has regulations, but is not over regulated like so much of the US (especially over-regulated California, our American home State).

An alternative for entrepreneurs to the restrictions of setting up a Thai company is to establish a sole proprietorship in the home country (like in the US).  One can work this way as an independent contractor, such as writing articles for websites or publishing an ebook, a small export business, or various services such freelance writer or photographer.  A sole proprietorship that avoids Thai regulations must be on a small scale in a home of small office, and be flexible, with much of the work being done on a virtual basis.

Anyone that can work as an independent contractor with good writing talent, internet skills, sales, administrative work, or one of several other should be signed up for ELANCE.  This is a site where jobs are posted and independent contractors can “bid” on them.  It is not difficult to participate, and it appears to me that professionals from the US have an advantage, with those with an American background preferred.   I have found it is not difficult to earn somewhere around USD $500 to $1000 per month working around 15-25 hours per week.  To place job bids, you need to build a “contact” bank.  You are given some with sign-up, and if you say that I referred you (use my email as the referrer), you (and I) will get ten extra contacts in our bank (takes 1 or 2 to bid on a job).  Here’s the link to get started:  Elance sign-up.

In practicality, a work permit requirement is enforced only if the work is involving a Thai company or directly competes with Thai companies.  For instance, if you are a financial consultant that is employed by Thai companies, you will likely need a work permit, and the same would be true if you operated a sole person travel agency serving foreigners visiting Thailand that competed with local Thai businesses.  But if you are trading US stocks on the computer or building websites for American shops online, you probably don’t have to worry about getting a work permit or other documentation.  The Thai laws in this regard are vague and are subject to local interpretation, but generally if you don’t rock the boat for Thai businesses, you can probably work with little worry about permits.

A Few Words on the Treaty of Amity

There is a special agreement between the United States and Thailand to allow American businesses to operate in Thailand “on the same footing as Thai companies.”  It is reciprocal, in that Thai companies can do the same in the US.  This treaty was signed in 1966, and was due to expire in 2006, but it has been renewed for 3 months every quarter since it was due to expire.  The point is that the treaty at this point is a bit tenuous and may go away at any moment.  The relationship between the US and Thailand is not the same as it was in ’66 when Thailand greatly assisted the US in their war with Vietnam.  During the sixties, there were many treaties between the two nations in many different areas.    Rules are now being interpreted with the Treaty of Amity differently at different times by the Thais, so it is essential to have a good Thai attorney working in your behalf to set this up, who also will have the latest word of how it is working.

The amount of capital that must be in a Thai bank to make the program work has gone up and down.  American sole proprietorships (a single person working as a consultant or otherwise alone) under this treaty was not required to employ Thais, but lately have been required to hire 4 Thais for every American work permit. There are types of businesses that are not permitted by Americans under the treaty, such as Land Ownership, Communications, Transportation and pulling out of any natural resources, like wood, precious metals or oil.

While the Treaty is designed to put the American and Thai companies on equal footing, the Thais enjoy “Most Favored Nation” status with exports to the US having very low (or none at all) tariffs, while US imports into Thailand have very high tariffs.  Just try buying a bottle of California wine or Skippy Peanut Butter at the Thai supermarket to see how these high tariffs on US products affect things.  It is hardly “equal footing.”

Applying the Rules

So like so many Agreements made between nations, the Treaty of Amity is not one that has matured into business fairness.  It may work for some, but it is not an easy task under this framework.

Generally, Thai regulations allow the expat entrepreneur to get involved in a lot of small business that are independent but not interfering into the Thai marketplace.  So for an expat to start up a little food cart businesses competing with Thai street vendors would really be impossible to do.  Establishing a restaurant with Thai partners and employing Thais as staff is “do-able” with a little planning and business set-up.  And an independent computer consulting business for international clients from a home office is very easy to establish as long as it does not involve Thai business as clients or Thai competitors to any great level.

There are lots of expats in Thailand involved in exporting Thai products.  Some sell directly online through websites like Amazon and ebay, or on a dedicated shopping website.  That usually involves pretty hefty shipping charges added on to the products sold if shipped from Thailand, so many expat exporters partner up with someone in their home country to ship individual orders out to end users.  Shipping a large amount via a container or even a partial container that will set costs on a square meter basis can be a lot more economical that sending out individual small shipments from Thailand.  Finding unique Thai products that will have a steady market back home is a trick.

I met an entrepreneur from Seattle that spent most of his time in Thailand raising orchids in his large greenhouse next to his house.  The resources are plentiful in Thailand, and the climate is ideal for having this product grow and develop unique colors and strains of the flowers.  Then once a year he would head back to Seattle with a near full container load of his finest orchid plants.  Within a month back in his home country, he had it all sold with enough sales and profits to keep him going till the next trip.

The limitations for an entrepreneur in Thailand, like a self-employed person anywhere, is to develop a business that you can do well and there will be a viable market, while working under the Thai legal regulations.  The more creative, hard-working and skilled enterprises will always be the successful ones.