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1. Introduction

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1.1 Why Thailand? Opportunities for Australian businesses

The Kingdom of Thailand is fast becoming a rich northern frontier for Australian business, and a gateway to the region's economic powerhouses India and China, as well as Indochina and the Greater Mekong sub-region. Already, 300 Australian companies have built a presence there and two-way Thai-Australian trade is pushing towards $16 billion a year, with opportunities arising for expansion and growth.


Economically, this country of more than 67 million people has been characterised as one of steady growth. Abundant natural resources combined with a skilled and cost-effective workforce have allowed Thailand to attract foreign investment. While Thailand has traditionally limited foreign business ownership to a maximum of 49 per cent in a few select industries - the business savvy government has now established generous foreign investment schemes, along with a range of other incentives, enticing more foreign business than ever before. Australian investors are now getting a range of additional benefits under the Thailand-Australia Free Trade Agreement (TAFTA).

Consider some key facts:

  • Thailand is the second-largest economy in Southeast Asia
  • In 2014, Thailand ranked second in Southeast Asia for external world trade volume
  • Thailand brings together an array of agricultural expertise, drawing on leading technologies and underpinned by strong government support for food research and development
  • Two-way trade between Australia and Thailand has grown more than two-fold over the last decade
  • Australian businesses are leveraging the growing opportunities to trade with Thailand under two existing free trade agreements (TAFTA and AANZFTA). These are opening up a diverse range of markets across both goods and services
  • The Thai Government is committed to significant investment in social and economic infrastructure, having recently announced a THB 1.8 trillion infrastructure upgrade across the country

Hub of ASEAN: Thailand was one of the founding members of the Association of Southeast Asian Nations (ASEAN) and has been instrumental in the formation and development of the ASEAN Free Trade Area (AFTA). The alliance's total consumer spending is forecast to grow to $2 trillion by 2020, representing growth of 45.7 per cent (2013 to 2020).

Foreign direct investment policies: The country's well-defined investment policies focus on market liberalisation and encouraging free trade. Foreign investment in Thailand is actively encouraged.

Government support and incentives: Numerous Thai government agencies reach out to investors with tax incentives, support services and import duty concessions available to an extensive range of businesses. The key conduit for such assistance is Thailand's Board of Investment (BOI).

Long-established and newly emerging industries: Thailand's industrial production has expanded and diversified rapidly. The government has put an emphasis on attracting investment in six key sectors: agriculture and agroindustry, alternative energy, automotive, electronics, fashion, and information communications technology. Value-added services including entertainment, healthcare and tourism are also earmarked for attention.

Thailand has a large and competent manufacturing sector: The physical infrastructure of the sector is well developed and the BOI offers a range of incentives to attract foreign businesses.

Particular areas of opportunity for Australians (especially under TAFTA) lie within:

  • Horticulture
  • Dairy
  • Processed food and beverages
  • Education
  • Automotive products

The freeing up of agribusiness trade rules has led to increased Australian exports of grain, cotton and milk powder to Thailand and growing rice exports from Thailand to Australia. Education also dominates Australia's service exports to Thailand.

For more information, access the full Thailand Country Starter Pack

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1.2 Thailand overview

Geography

Thailand is situated in Southeast Asia, flanked by the Indian Ocean and the Gulf of Thailand, and covers 513,120 square kilometres. Its climate is tropical with the average temperature around 29o C and humidity usually sitting between 73 and 82 per cent.

Culture

Religion is a core feature of Thai life. While Buddhism is regarded as the national religion, practised by more than 90 per cent of the population, Islam, Christianity, Hinduism and other faiths are also represented. Religious freedom is enshrined in the Thai constitution.

Thailand is a collectivist society, which dictates that the needs of the group are placed ahead of those of the individual. Subtlety and indirect forms of communication are highly valued in Thai society, which is hierarchical. Individuals are viewed as being either higher or lower in status – younger or older, weaker or stronger, junior or senior, subordinate or superior, and rarely equal.

Status can be determined simply by someone's clothing and general appearance, their age or job, education, family history, as well as their wealth and social connections. Status dictates that subordinates will generally listen to and accept direction from superiors without question. Superiors have an unstated obligation to lead and be mentors in return.

Notions of respect and saving face are highly prized. Conflict and angry outbursts are to be avoided at all costs. Differences of opinion and disputes need to be handled delicately and with a smile: no attempt should be made to assign blame. Thais also place great emphasis on the concept of sanuk – the sense that life should be fun and enjoyable.

Politics and government

Thailand is a constitutional monarchy. The King exercises his legislative power through the Parliament, executive power through Cabinet and judicial power through the courts. The bicameral Parliament is made up of the House of Representatives and the Senate. Generally, the former consists of 500 members, with 375 of these drawn from single-seat constituencies and a further 125 elected on a party-list basis. Members of the House of Representatives are normally elected for four-year terms; senators get six years at a time. Thailand's 77 provinces are administered by governors (appointed by the Interior Minister), divided into amphurs (districts), tambons (sub-districts) and villages

The current political situation

After political and civil unrest starting in 2005, Thailand's army chief, General Prayuth Chan-ocha, staged a military coup in 2014. While initially clouding the political and economic outlook, the military government has been able to generally restore business confidence, with the Thai economy showing strong signs of recovery.

This has been further strengthened by the new administration's commitment to:

  • Free market principles, and further integration with the economies of the Greater Mekong sub-region, ASEAN and Northeast Asia
  • The promotion of a value-added, innovation-driven economy
  • Upgrading and expanding connectivity and infrastructure
  • The launch of digital technology platforms.

The ruling National Council for Peace and Order has introduced an interim constitution, established a National Legislative Council, created a National Reform Council and appointed a provisional civilian-led Cabinet.

Thailand historically has shown economic resilience in the face of political upheaval. Thailand's economy remains export dependent, with exports accounting for more than two-thirds of the country's gross domestic product (GDP), and despite the civil unrest, the military-backed rulers have stayed committed to Thailand's open-door policies.

Economy


Thailand is the second largest economy in the ASEAN region and widely recognised as one of the great development success stories, with a celebrated history of strong and sustained growth paired with impressive poverty reduction. Highlighting this success was the Kingdom's recent shift from a low-income nation to an upper-income nation in less a generation. Thailand's strategic geopolitical position at the centre of the world's fastest growing region will continue to provide unprecedented economic potential as a key leader in promoting regional cooperation and integration going forward.

From the 1980s, Thailand enjoyed high economic growth in excess of 8 per cent before the Asian Financial Crisis hit in 1997-1998. After such time, the Kingdom's economic growth has been impeded by a range of factors, most notably global economic shocks, natural disasters and socio-political tensions. However the renowned resilience of Thai people and the Thai economy saw it recover considerably well from the global financial crisis, before severe floods hampered the recovery in 2011 which caused GDP growth to fall from 7.8 per cent in 2010 to 0.1 per cent in 2011.

On the back of a global economic recovery and higher domestic consumption, Thailand's GDP grew 7.3 per cent in 2012. Since this time though, growth has continued to be constrained by cautious private consumption stemming from high household debt, weak merchandise exports due to a decline in competitiveness to low cost emerging regional economies, and the sluggish recovery of the tourism sector following seven months of prolonged political protests in 2013-14. Thailand's economy expanded by only 0.9 percent in 2014, but the IMF forecasts a rise to 3.2 per cent by 2017.

The Thai economy, as it has for decades, continues to be characterised as heavily export-dependent, with exports contributing more than two-thirds to total GDP. A breakdown at the industry level shows that the services and manufacturing industries account for almost 90% of total economic output. While in terms of the local labour force, over one-third are employed in the agriculture industry, followed by manufacturing, wholesale/ retail and construction which are prominent employers.

Uniquely, tourism in Thailand has traditionally accounted for a larger proportion of its economy than any other Asian nation.

Other major industries include automobiles and automotive parts, electric appliances and components, medical tourism, textiles and garments, agricultural processing (rice, rubber, corn, sugarcane), beverages, cement and other light manufacturing.

Legal system

Thailand has an independent judiciary with a legal system combining the principles of traditional Thai and Western laws. The courts can be divided into civil, criminal, municipal and provincial. Judges are appointed or removed by the King, based on the recommendations of the Judicial Commission. There are no juries in Thailand. The decisions of the Supreme Court are highly authoritative but do not establish binding principles of law. Specialist courts deal with labour, tax, bankruptcy, intellectual property, international trade and administrative matters.

Infrastructure

Thailand's spending on infrastructure has lagged behind some regional neighbours. Rankings issued by the World Economic Forum underscore the degree of difficulty: out of 140 countries, it placed Thailand's road network 51st, rail 78th and port infrastructure 52nd. Thailand's air transport infrastructure comes in at 38th place.


The Thai Government is working towards a major infrastructure overhaul, with 20 priority projects across rail, road, air and port. The blueprint estimates a total worth of THB 1.8 trillion in infrastructure and is set for completion by 2022.

Roads: Thailand has an extensive road network of approximately 400,000 kilometres, most of which is paved. National highways connecting the regions, provinces and districts are well maintained and adequate for long-haul transportation.

Sea ports: More than 120 ports accommodate sea-going vessels engaging in international trade. Deep sea ports are located in Bangkok, Laem Chabang and Map Ta Phut on Thailand's eastern seaboard, while Songkhla, Satun, Narathiwat, Phuket and Ranong are in the south.

Rail and mass transit systems: Thailand's rail transportation covers more than 4000 kilometres. Three mass transit systems have been developed in Bangkok, totalling 85 kilometres. The first system, known as the Skytrain, opened in 1999 and operates on overhead tracks. A second system, which opened in 2004, is a subway. A dedicated overhead line from the city to Suvarnabhumi Airport opened in 2011.

Airports: Thailand has an extensive air transport network encompassing 28 commercial airports, of which nine are international. Bangkok is a major hub for air services in the region.

Telecommunications: Fixed line telephones, mobile phones and access to the internet are readily available. However, while the overall penetration of broadband connections remains quite low, the growth rate is accelerating. Ninety-eight per cent of Thais own a mobile phone. The Thai internet market continues to expand, but despite this, the country's estimated personal computer penetration rate remained at 34.9 percent in 2014. Most importantly, with 3G and 4G services being rolled out in a significant way, mobile broadband is booming.


For more information, access the full Thailand Country Starter Pack

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1.3 Thailand and Australia: the bilateral relationship

Thailand and Australia have extensive and long-standing connections spanning trade, investment, business, regional security and culture. Diplomatic relations date back more than 60 years, but the connections have grown more rapidly in recent times with Thailand's emergence as one of the leading economies of Southeast Asia.

The bilateral economic relationship is strong, with Thailand now Australia's eighth largest trading partner in goods and services. This ranks Thailand as our second largest trading partner among the countries of ASEAN with two-way trade in the financial year of 2014-15 of $19.9 billion (including services). Unlike our trade relationships with some other Asian countries such as China and Japan – in which Australia enjoys a substantial trade surplus – with Thailand we have a deficit in goods and services trade, which means we buy much more from the Thais than they do from us.

In 2014-15, Australia's imports of goods and services from Thailand totalled almost $14 billion, while our exports to Thailand were just under $6 billion. Commercial and passenger vehicles – including popular Toyota and Honda models built in Thailand – make up more than $5.2 billion of our imports from Thailand. Conversely, Australian automotive parts makers have established a valuable, if smaller, business supplying to the Thai car industry.

Australia's biggest export categories to Thailand include gold (almost $900 million) and crude petroleum (worth more than $1.2 billion a year) along with aluminium and coal. Australia also has substantial services exports to Thailand, totalling $976 million in 2014-15 – of which around $669 million was in education-related exports.

The trade and economic relationship has grown strongly since January 2005 when the Thailand-Australia Free Trade Agreement (TAFTA) came into force. Under the agreement, the majority of Thai tariffs on goods imported from Australia have been eliminated. This has given Australian exporters of horticulture, dairy, grain, mining, processed food and beverages an edge over their European and North American rivals. Total two-way trade between Australia and Thailand has more than doubled since the agreement came into operation.

It has led to substantial growth in agribusiness trade in particular. Education dominates Australia's service exports to Thailand. The stock of Thai investment in Australia has also grown spectacularly, from $338 million in 2006 to $6.6 million in 2015. Australian investment in Thailand for 2015 was worth about $3 billion.

Key elements of the TAFTA deal that benefit Australian businesses include:

  • The elimination of 94 per cent of Thailand's tariff and quota barriers on imports from Australia as of 2010, with the remaining tariffs phasing to zero between 2015 and 2025
  • More open access for Australian companies to Thailand's services market and a commitment to liberalise two-way services trade
  • Increased access for Australian investors in Thailand, with majority Australian ownership permitted for businesses in sectors including mining, construction, restaurants and hotels, tertiary education institutions and maritime cargo services
  • More investment protection for Australian direct investors in Thailand, including the right to transfer their funds out of Thailand at any time, and to seek impartial resolution of disputes with the Thai Government over investments
  • Easing of visa and other requirements for the temporary entry of Australian business people to Thailand.


For more information, access the full Thailand Country Starter Pack

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2. Getting Started in Thailand

It is important to become informed on a range of subjects – from labour laws and tax matters, to banking provisions and financial regulations. Smart business operators will also familiarise themselves with cultural norms and the local language.

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2.1 What you need to consider

Location

It is wise to match your choice of location with the market your business is targeting. Increasingly, foreign enterprises are focusing on niche opportunities, and that can dictate a specific location.

Key regions

Geographically, Thailand is broadly divided into four distinct regions:

Central: The location of the capital, Bangkok

Northeast: The most populous region and home to Nakhon Ratchasima (Korat), a major industrial city

North: Takes in the cities of Chiang Mai and Chiang Rai

South: Includes the popular coastal resorts of Phuket, Koh Samui, Hua Hin, Phang Nga and Krabi.

Bangkok, as well as serving as the nation's capital and centre of government, is also its economic, educational and cultural focal point. It accounts for 44 percent of the country's GDP and is a natural drawcard with its numerous industrial estates and gateway to national markets.

Thailand's eastern coastline contains a sweeping industrial zone and is home to Thai and foreign-owned industries including automotive, engineering, large-scale manufacturing, petrochemicals and power generation. The industrial strip straddles the provinces of Chonburi, Chachoengsao, Samut Prakan and Rayong, and includes the leading port of Laem Chabang.

Free trade zones: Free trade zones have been declared throughout Thailand in a bid to entice greater foreign investment. These include industrial estates, of which there are two types: General Industrial Zones (GIZ) reserved for enterprises manufacturing goods for domestic and/or export consumption, and Export Processing Zones (EPZ), earmarked for export-only industries.

These estates are designed to be self-contained industrial communities with reliable, essential infrastructure such as electricity and water, flood protection, as well as access to waste water treatment and solid waste disposal. They also have communications facilities, security systems and banks.

Free trade zones offer special tax treatment and other incentives. Tax-based incentives can include an income tax “holiday", plus exemptions from import duties and value-added (or goods and services) tax. Excise tax exemptions can cover plant and equipment, raw materials, imports into an EPZ and exports from the zone. Benefits can also include the ability to bring in foreign workers, own land and take or remit foreign currency abroad.

Apart from government owned-zones, Thailand has many hi-tech private-sector industrial parks that look to support regional development in specific industrial sectors and those nominated as top priority by the Thailand Board of Investment (BOI). Most offer BOI incentives and privileges.

Using interpreters

Thai is the official language, although English is spoken widely and understood in business circles, particularly in the major cities. However, written English is less commonly used or understood. While using an interpreter won't generally be necessary during business dealings in Thailand, it can be helpful during complex negotiations, especially those of a technical nature, or when dealing with a large group. Brief your interpreter extensively ahead of key meetings or appointments so that they understand your needs and ambition. Make sure they are across key terminology or specific concepts so that they can articulate this clearly.

Interpreters are not necessarily translators; the two skills are very different and not always interchangeable. Interpreters are used for interpreting speech; translators for deciphering the written word.

Financing your Thai business venture

Getting to grips with the likely costs of running your business is critical. Key differences operating in Thailand versus Australia can include:

  • The likelihood of a longer cash flow cycle, and subsequent impact on cash and working capital
  • Potential alienation from clients through distance, raising the risk of default and the degree of difficulty in chasing debts
  • Being paid in foreign currencies, introducing foreign exchange risk and a potentially adverse effect on profits
  • Limited access to finance, should your local bank be reluctant to accept foreign assets as security for loans
  • More time needed to recover upfront costs associated with setting up overseas, which could put the squeeze on funds.

Adequate funding will be critical to your success. You may be eligible for financing from a variety of sources in Australia, including federal and state government grants, venture capital and equity-sharing deals. However, banks remain the easiest and most approachable source of funding.

Business owners might also consider teaming with a Thai partner in a joint venture, or taking on board an equity investor – or so called “angel investor".

Risks

Solid and detailed research into an overseas market is vital to minimising any risks associated with doing business there. Due diligence must be practised actively throughout the drafting and execution of business plans.

A key drawback in targeting Thailand ahead of other Asian markets has been its political instability, difficulty enforcing contracts and volatility of the baht. Australia's export credit agency the Export Finance Insurance Corporation (efic) nominates the vagaries of the business cycle, sovereign default and other risks affecting foreign investors and exporters. Thailand's high reliance on exports, which leaves the economy vulnerable to swings in global demand, is of particular concern.

While Thailand has experienced 19 coups in the past 80 years, these have had minimal impact on business. Both sides of Thai politics and the Thai military are pro-business and support foreign involvement.


Thailand has traditionally enjoyed a high and stable credit rating. At the time of writing, Standard & Poor's credit rating for Thailand was 'Stable' at a BBB+ rating, one of the highest in South East Asia

Corruption remains an issue in Thailand, and commonly takes the form of facilitation payments, bribes and the giving and receiving of expensive gifts in order to win business. Australian individuals and companies can be prosecuted in Australia for bribing foreign officials.


Despite its prolonged instability, Thailand advanced six places, to 31, in the World Economic Forum's Global Competitiveness Index 2013-14. It climbed 12 places in the rankings of macroeconomic environments and now sits in 19th position, its best showing among the 12 categories measured.



For more information, access the full Thailand Country Starter Pack

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2.2 Researching Thailand

Nothing beats comprehensive inquiry, including specific market research, when looking to enter new markets including Thailand, with its unique and various features. These can include:

  • Cultural and geographical complexities
  • Evolving markets that can shift quickly
  • Changing rules, regulations and the focus of enforcement authorities
  • Thin consumer data and vagaries of markets and regulations.

When conducting market research, cast your net widely, taking note of import duties and other broad regulations, including reviewing more market-specific issues. What is the market's size and growth prospects, and its demographics? How many competitors are there and what is the state of local production? How will you distribute your product?

Getting help

International accounting and management firms with a major presence in Thailand are valuable sources of information, as are research-specific organisations. Austrade also offers a range of services to Australian businesses investigating prospects offshore, including information on:

  • Market entry and how to grow your business
  • Where to establish your business
  • Locating on-the-ground contacts and tapping into networks
  • Identifying business opportunities.

Relevant state and territory government trade departments and the Commonwealth's Export Market Development Grant scheme (EMDG) may also provide further information.

Market visits

While much of your research can be directed from Australia, you will need to visit Thailand to develop a deeper understanding of your target market and make contacts.

Visit before entering agreements with prospective agents, distributors or other business partners. Consider meeting with several potential partners to give you a basis for comparison. Arrange in-country assistance to help set up your program. This will help you see the right agents and customers who will be briefed and screened for interest and suitability.

Building relationships and making connections

Save valuable time on the ground in Thailand by doing as much as possible before leaving Australia, including any training or research that can enlighten you about doing business there. Organisations such as Asialink Business, Austrade, the Export Council of Australia (ECA) and various state and territory government departments are worthy first ports of call.

Arrange as many of your meetings in Thailand as possible before you leave Australia, and reconfirm them a day in advance. Share business cards routinely and follow up with people who offer you theirs. Send an email within 48 hours of your appointment thanking your contact and providing any follow-up information.

Joining a business association in Thailand can be a handy way to make contacts and learn more about the local business community. AustCham Thailand is the key contact and information point for Australian businesses in Thailand, Australian businesses wishing to trade with or invest in Thailand and similarly for Thai enterprises interested in doing business with or in Australia.


For more information, access the full Thailand Country Starter Pack

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2.3 Possible business structures

There will be pressing practical considerations for getting established in Thailand. What kind of business structure will you deploy? Would a local agent be best, or should you open a branch office? Perhaps you could set up a Thai company?

Having a local presence in Thailand can be the most efficient way of gaining a foothold. A permanent in-country presence can:

  • Demonstrate your commitment to Thai-based customers
  • Cut out the “middle man"
  • Provide direct access to the end customer/supplier
  • Maintain direct control over company strategy and operations
  • Ease the process of doing business.

Several types of corporate structures allow foreign enterprises in Thailand to pursue business activities, including companies, partnerships, branches and representative offices. Private or publicly limited companies owned 50 per cent or more by foreign interests will be subject to the Foreign Business Act, which prohibits the operation of certain businesses. But there is another avenue making it easier to establish a foreign business in Thailand - namely, through Thailand's BOI foreign investment schemes. Foreign investors will usually conduct business through a limited company, branch or representative office.

According to Thailand's Civil and Commercial Code, there are two types of partnerships: so-called ordinary partnerships and limited partnerships.

Ordinary partnerships: In an ordinary partnership, all the partners are jointly and wholly liable for all obligations of the partnership. An ordinary partnership can be divided into two types:

  • A non-registered ordinary partnership, which has no status as a juristic person and is treated, for tax purposes, as an individual
  • A registered ordinary partnership, which is registered with the Commercial Registrar as a juristic person and is taxed as a corporate entity.

Limited partnerships: Limited partnerships must be registered and are taxed as a corporate entity either as:

  • One or more partners whose individual liability is limited to the amount of capital contributed to the partnership
  • One or more partners who are jointly and unlimitedly liable for all the obligations of the partnership.

There are two types of companies in Thailand – private limited companies and public limited companies. A private limited company is the most common structure used for conducting business in Thailand. A company is regarded as a juristic person with the right to own property and carry on business under its name and has liabilities to others separately from its shareholders. At least three shareholders are required to form a company. The shareholders enjoy limited liability and are managed by a board of directors. All shares must be subscribed to, and at least 25 per cent of the subscribed shares must be paid up.

A minimum of three shareholders is required at all times for both Thai and foreign corporations. Under certain conditions, a private limited company may be wholly owned by foreigners. However, in those activities reserved for Thai nationals under the Foreign Business Act, foreigner ownership is generally allowed only up to a maximum of 49 per cent of the enterprise.

A public limited company is an entity established for the purpose of offering shares to the public. At least 15 shareholders are required to form a public company. Unlike a private company, a public company may issue debentures and offer them to the public. Only public companies are able to be listed on the Stock Exchange of Thailand (SET).

Joint venture: A joint venture is described as a group of persons (natural and/or juristic) entering into an agreement in order to carry on a business together. It has not yet been recognised as a legal entity under the Civil and Commercial Code. However, income from a joint venture is subject to corporate tax under the Revenue Code, which classifies it as a single entity.

Before considering which business structure best suits your purposes, there are some key issues to consider, all of which can affect the ease or otherwise of doing business in Thailand. The World Bank and International Finance Corporation (IFC) have identified nine specific areas of interest and noted comparisons with other countries in their Doing Business in Thailand Report.


For more information, access the full Thailand Country Starter Pack

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2.4 Manufacturing in Thailand

Thailand's skilled workforce, rapidly improving infrastructure and pivotal location at the heart of one of the world's fastest-growing and most dynamic economic regions makes the country an attractive destination for foreign investment, particularly in manufacturing. Capitalising on Thailand's status as a regional hub for manufacturers are global brands including car makers Toyota, Ford and BMW. Thai labour is relatively cheap for the skill levels available, while Thailand manufacturers enjoy handy access to the bustling economies of Southeast Asia and global supply chains.

Australian small and medium enterprises currently engaged in manufacturing in Thailand have runs on the board, and prospective Australian investors can choose between establishing their own manufacturing operations or forming partnerships with Thai businesses. Under relaxed trade laws, the Thai Government permits foreign invested companies to be involved in most manufacturing operations.


For more information, access the full Thailand Country Starter Pack

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3. Sales and marketing in Thailand

Having decided on the best structure for your business in Thailand, the next step is to consider the most effective way of introducing your product or service into the local market. Should you sell online or through a local agent? What are the labelling requirements? Would a franchise be best?

The Australian Industry Group (Ai Group) highlights these various market entry options into Thailand and the differing degrees of difficulty and time.

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3.1 Direct exporting

Exporting directly to a foreign market means involving yourself with every aspect, including:

  • Market research
  • Marketing
  • Distribution
  • Sales and receivables.

Advantages include:

  • Greater control including control of the sales process
  • Better margins, as middle men are avoided
  • More direct customer relationships.

However, going it alone may carry a much higher cost as in-house resources are generally more expensive than outsourcing. Different approaches within a direct exporting framework might involve sales representatives, agents and distributors.

Local sales representatives:

  • Use company resources, product advertising and samples, and make presentations to buyers
  • May work on sales commission
  • Present little risk since they have no exposure to the cost of the goods.

Using agents and distributors:

Most Australian firms doing business in international markets rely on agents or distributors. It is critical that the responsibilities of representatives are clearly defined in any agreement you have with them.

Agent: Does not take ownership of goods being exported, but acts simply as a representative of the supplier. Agents are usually paid on commission. Based in the target market, they will often represent several complementary products or services. They can be retained exclusively as the sole agent for a company's goods or services or as one of a number of agents for the exporter in a particular market.

Distributor: Buys the goods from the exporter then resells them to local retailers or consumers. Distributors may carry complementary and competing lines and usually offer after-sales service. Their fees are higher than agents' because of associated costs; they usually carry inventory and are responsible for marketing.

Ensure you can establish a close working relationship with an agent or distributor – you must be able to build high levels of trust and regular communication. Meet with the potential partner in their own market, to get to know them better and observe how much they know. Ask for trade references and consider using a credit checking agency to confirm their financial stability.

Direct selling

You may choose to contact directly buyers and end users of your product or services. Though low cost and potentially a means of getting a feel for the market at relatively low risk, this DIY approach is not easy.

On the upside:

  • It can eliminate the expense of using middlemen
  • It gives you a first-hand opportunity to get to know the needs of your customers and the chance to customise
  • It demands a sleeves-rolled-up effort but also an opportunity to learn the hard way.

But there are distinct downsides:

  • The lack of a physical presence in the market can stymie efforts to do business with some Thai clients unwilling to engage with enterprises without offices or a representative on the ground
  • A direct selling strategy can require establishing a strong and extensive network of sales agents to cover a diverse area.

Direct to end users: Selling directly to end users means taking charge of all market research and marketing, as well as distribution, shipment, warehousing and delivery, customer and after sales services and the sales order, billing and collection processes all from Australia.

Thai retailers: Exporters of consumer goods may sell directly to retailers. A direct approach to these retailers would be necessary, supported by direct mail material and regular follow-up contact. In return, their intimate knowledge of the Thai market will contribute to the development of products, pricing and marketing. Selling directly to savvy local retailers can cut commissions and reduce travel.


For more information, access the full Thailand Country Starter Pack

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3.2 Franchising

Thailand's franchise industry presents boundless opportunities, propped up by Thai's keen appetite for foreign cuisine, culture and propelled by a rising middle class able to afford the price tag. With rapid growth in recent times - by almost a quarter in size each year - franchising in Thailand is expected to remain a significant future growth potential.

The greater part of franchises in Thailand are in the food and beverage industry and locally owned. This is due to low operating costs, ease of entry and the low market capital investment required. However more foreign franchise operators are successfully penetrating the market every year as Thailand continues to globalise.

While there are no specific laws overseeing franchise operations, the rights and obligations of both parties are well protected by existing laws.


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3.3 Licensing

Licensing can be a quick and assured way of selling trademarks, intellectual property, design and patent rights, copyright and software into a foreign market such as Thailand. Licensing allows rapid market entry with limited capital, since it is unnecessary to set up expensive production facilities. Universally recognised contracts or agreements need to be in place to protect intellectual property, trademarks and design rights.


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3.4 Online sales

The e-commerce market in Thailand is growing fast and presents various opportunities for Australian businesses. In 2015, on-line sales in Thailand were estimated at AUD$81.7 billion, a growth of 3.7% on the previous year. This put Thailand's e-commerce industry as one of the largest in South East Asia, driven primarily by the rapid growth in smart-phone penetration, the deployment of 3G and 4G technology, and significant government investment. New on-line merchants entering the market in Thailand (most notably Alibaba), will also drive competition in an already competitive local market led by established sites such as weloveshopping.com, tarad.com and zalora.com.

Overall though, the online sales market in Thailand shows high growth potential considering the Kingdom's relatively low, but growing, internet penetration (34.9% in 2014, slightly below the global average). As millions of consumers in provinces outside Bangkok come on-line, the rate of growth of e-commerce in Thailand is set to rise considerably.


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3.5 Marketing

Getting a foothold in a foreign market is just the beginning: trade shows and exhibitions are effective ways of identifying and reaching out to potential new customers in a bid to build your business. It is wise to translate all sales and product literature and technical specifications into Thai.

Product and service adaptations: A key determinant of success can be how effectively a company adapts its product range to meet Thai tastes and cultural preferences, and to meet regulatory requirements.

Branding: Thais are very brand conscious, which can help or hinder new entrants. Those with a recognised brand can capitalise with a concerted product launch or news conference.

Sales promotion: Companies with local partners can usually draw on their associate's market knowledge to help draft advertising and sales promotion. In most cases, promotional campaigns should be held at local shopping centres, hotels and convention halls. A popular gimmick is giving away free samples at business and commercial hubs and offices.

Advertising and media: Two popular English-language newspapers – The Bangkok Post and The Nation – are obvious vehicles for carrying your message. But Australian companies should consider Thai-language publications, the most popular of which are Krung Thep Thurakit (Bangkok Business News) and Thai Rath.


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3.6 Labelling requirements

Thailand imposes strict requirements regarding labelling and other product details. A local agent/importer can usually navigate these rules. Food products must be approved and registered with Thailand's Food and Drug Administration (FDA). Specific regulations govern the labelling of cosmetic products.

Special certificates: Certain types of seeds, plants and animals require phytosanitary certificates issued by the approved authority in the country of origin. Meat imports to Thailand must be accompanied by a veterinary health certificate signed by the official authority in the country of origin.


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4. Conducting business in Thailand

It is important for foreign businesses to familiarise themselves with Thai business etiquette and culture, as well as appropriate ways of developing business relationships, negotiating, holding meetings and conducting due diligence.

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4.1 Thai culture and business etiquette

Respect is a cornerstone of Thai culture and underpins business relationships. “Maintaining face" is also important, with anger and even mild irritation to be discouraged. Thais embrace the characteristics of smiling, humbleness and patience, while laughing frequently and speaking softly.

Greetings

The traditional greeting is known as the wai, which is performed by placing the palms of the hands together, raising them to the face with the fingertips at eye level and inclining the head slightly. Much formality is associated with the wai, with the level at which the hands are placed carrying great significance. Younger and lower-ranking people are expected to offer the wai to their senior counterparts first. Generally, Thais will greet each other with a wai but will shake hands with foreign business contacts. Foreigners are not expected to initiate a wai or even return it; a simple smile and a nod of acknowledgement is acceptable.

When addressing others verbally, Thais use Khun (pronounced koon, as in cook), which stands for Mr, Mrs, Ms or Miss. This is followed by a person's first (given) name. For example: Khun John (rather than Khun Smith). Last names tend to be reserved for very formal occasions or formal written communications. Foreign business people can expect to be addressed as Mrs Jane rather than Mrs Smith.

Business cards

Business cards in Thailand are valued highly and always presented when meeting someone for the first time. Ideally, your business cards should have a Thai language version printed on one side. Cards should be handed person to person using the right hand or both hands, and received in similar fashion. When receiving a business card, take a few moments to read it.

Dress code

While high-status Thais often overdress, especially given the climate, appearance is very important. For meetings, businessmen will wear a shirt and tie, and proper footwear (not sandals). Good grooming and a bit of polish on shoes is worth the effort. Women should wear conservative dresses or skirts that are not too short, or business suits, and blouses (not sleeveless tops).

Business culture

Thais will usually expect to spend time working on their relationship with a business contact before exchanging critical information or committing to a deal. “Ice-breaking" informal conversation will often precede and follow business meetings, and inquisitive Thai contacts will be interested to learn personal details about you such as your age, as well as your family and educational background.

Thais will generally avoid disagreeing openly and avoid appearing negative in answer to questions. This can be frustrating when foreign business people assume a deal has been struck only to find nothing eventuates. Having an interpreter on hand can help.

Hierarchy and rank are important in Thai society, and senior officials and business people will usually expect to meet Australian representatives of similar seniority. Age, seniority and rank all have an influence on conversation and dialogue. The less senior person is expected to show restraint, and will rarely disagree openly with superiors.

Bargaining and negotiating are commonplace in Thailand, and normally do not offend. Thais rate a person's ability to bargain and reach what they consider a fair deal as a measure of business acumen. Sometimes, details of an agreement may be altered between negotiation and final sign-off when circumstances change unexpectedly and in such cases both parties are expected to be accommodating.

Exchanging gifts is widely practised among business associates in Thailand and is encouraged. They are given when visiting someone for the first time, but are opened in privacy. Gifts should be modest and appropriate to the occasion. Appropriate gifts include flowers, a basket of nutritional food, good-quality chocolates, a bottle of Australian wine or fruit.

When doing business in Thailand, it is worth observing that:

  • Thais prefer to work into the evening rather than early in the morning. Business is kept separate from home, while family comes first, ahead of business
  • Subtlety is essential, especially when saying “No".
  • Speaking in a loud voice is not appreciated, nor is displaying temper. Never criticise someone publicly.

While business relationships in Thailand tend to be less formal than in other Asian countries, they are not as relaxed as in the West. It is important to arrange an introduction or personal reference before approaching potential business contacts.

Dining

Should you be invited to dinner at the home of a Thai colleague, you should reciprocate. Remember to remove your shoes before entering a Thai house. Usually, a fork and spoon alone are provided as eating utensils, with the fork used to guide food onto the spoon. You may begin eating as soon as you are served. It is customary to leave as little food as possible on your plate, and do not leave rice as to do so is considered wasteful.

Body language

  • Generally, Thais refrain from showing affection in public. While casual touching or holding hands will be seen occasionally, kissing, hugging and more overt forms of affection are frowned upon in the still relatively conservative society.
  • Avoid touching or passing anything over someone's head.
  • Do not point your feet at anyone or use your feet to move anything or touch others.
  • Smiles reflect many different emotions, ranging from an apology, a thank you or greeting, to showing embarrassment.
  • Foreigners will generally be forgiven for gestures which Thai people may sometimes perceive as odd between themselves. These include waving your hands excessively as you talk (may give Thais the impression that you are angry) or passing anything with your left hand. Pointing with one finger however, particularly at someone else, may be regarded as offensive.


For more information, access the full Thailand Country Starter Pack

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4.2 Building relationships with Thais

The strength of business relationships can have a cascading effect in many aspects of commercial life – in procurement and contracting, gaining credit and for navigating bureaucratic processes. This can take time. Loyalty and trustworthiness are at the core of relationship building in Thailand.

Business partners

Teamwork is paramount to succeeding in Thai business life. In most instances, individual preferences give way to the more valued sense of belonging to a group. Thai business people often expect to establish strong bonds before committing to any deals. Pushing too hard, too quickly, on a deal can be counterproductive.

Relationships in Thailand are based almost universally on familiarity, respect and personal trust. Business relationships tend to be more personal – more likely established between people as opposed to companies. It is vital to keep in place personnel at the forefront of interactions with the local partner. Changing a key contact can risk having to rebuild a relationship from scratch.

Local government and authorities

Australian businesses need to be mindful of key government agencies they may need to consult:

Board of Investment Thailand (BOI): This agency is at the forefront of efforts to promote investment in Thailand, offering information and services for investors, as well as many incentives.

Ministry of Industry: Responsible for the promotion and regulation of industries.

Ministry of Foreign Affairs: Compiles general information and statistical data on foreign trade, overseas import/export laws and legislation, along with responsibility for consular and diplomatic services.

Ministry of Commerce: Together with the BOI, this ministry is responsible for promoting Thailand's economic development, and compiles statistics on international trade.

The Customs Department: Collects revenues such as import/export taxes and duties and fees. It advises on export promotion and privileges.

Revenue Department of Thailand: Responsible for about half of all tax collections.


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4.3 Negotiations and meetings

Courtesy and conformity are core prerequisites: organise appointments before you leave Australia and follow up with telephone calls on arrival to confirm your partner's availability.

Managing Thai business meetings

Meetings can be held over meals – breakfast, lunch or dinner – as well as during business hours. English is commonly used during meetings and presentations, although a translator may be necessary during complex negotiations.

It is customary to wait for your host and hostess to introduce you to other attendees. This allows everyone to grasp your status, thereby understanding who should perform the wai and how low one's head should be bowed. Guests should remain standing until told where to sit.

Surprising your hosts can have the wrong effect. Presentations, for example, can have the best impact when delivered formally and following accepted formats. However, more informal question and answer sessions can often elicit healthy participation among Thais. Allowing those present to submit questions anonymously on paper can encourage participation.

Typically, first meetings produce good humour and easy-going smiles, but polite and measured conversation. Quick results are rare. Second meetings, ideally, should include a meal invitation. Always begin meetings with small talk.

Negotiations the Thai way

Negotiations in Thailand are generally more of a joint problem-solving process focused on compromise. Patience really is a virtue. Do not expect to clinch a deal immediately or on a first visit.

It is common for Thais to change discussions from one topic to another, with no sequential order used to address agenda items. They also tend to use a variety of negotiation techniques, such as fake non-verbal messages showing disinterest, making false demands and concessions, emotive techniques such as grimacing, appealing to personal relationships and making you feel guilty. Nevertheless, being direct should always be avoided.

While Thailand has a pro-business attitude, business decisions can be slow and may involve several layers of authority before being finalised. Planning is usually short term. The upper echelons of management are often filled with family members. Who you know is important; powerful connections are respected. Facts and figures are not valued as highly as personal experiences and feelings, therefore if you expect a risky decision to be made, you need to find a way to make your Thai counterpart feel comfortable.


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4.4 Due diligence and dispute resolution

History shows that many of the problems encountered by foreign companies doing business in Thailand could have been avoided with the benefit of proper due diligence. Different degrees of due diligence may be applicable. For example, a copy of a company's business licence will offer much useful information, but it may be necessary to carry out further research.

A thorough examination of your potential partner will be time consuming and expensive, but valuable insurance nonetheless. There are many accounting and legal firms in Thailand able to assist with due diligence. These range from leading international audit, tax and advisory specialists to private business consultants who have lived in Thailand for some time.

Dispute resolution

It is important for companies involved in any international commercial dispute to seek appropriate legal advice. Austrade is able to provide referrals to legal service providers. A number of international arbitration commissions facilitate international dispute resolution.


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5. Business practicalities in Thailand

Getting to grips with legal regulations and the practicalities of tax and employment laws is a fundamental challenge. Prospective investors should seek professional advice for specific information.

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5.1 Laws and regulations

Investment rules

Thailand is no stranger to foreign investment and welcomes new investors. The Board of Investment (BOI) oversees many incentives aimed at drawing foreign enterprises to Thailand, ranging from tax-associated discounts such as a reduction in import duties on machinery and raw or essential materials, to deductions in personal income tax and dividends. Non-tax incentives focus on permits related to exploring investment possibilities in Thailand, the bringing in of foreign skilled and specialist workers, and the movement of foreign currency. Sectors off-limits to foreign businesses include rice cultivation, mass media and forestry.

Policies for investment promotion

The BOI promotes these key initiatives:

  • Investment that enhances national competitiveness by intensifying activity in the agriculture, industrial and services sectors, as well as for SMEs, through innovation, research, value-adding, fair competition and expansive growth
  • Providing tax and non-tax incentives for businesses to set up International Headquarters (IHQ) and International Trading Centres (ITC) in Thailand.
  • Environmentally friendly activities that can lead to reduced energy use or which incorporate alternative energy sources that encourage sustainable growth
  • A concentration on development and strengthening of supply chains in regional areas
  • Investment in border provinces in southern Thailand that will help bolster the local economy while enhancing security in the area
  • Promotion of special economic development zones that can strengthen economic ties with neighbouring countries
  • Promotion of overseas investment by Thai enterprises that will enhance the competitiveness of Thai businesses and nurture Thailand's role in the global economy.

Thailand-Australia Free Trade Agreement (TAFTA): TAFTA benefits Australian businesses by permitting levels of foreign ownership not generally afforded to other nationalities. The investment levels for Australian corporations have been raised from a previous cap of 49.9 per cent and include:

  • Majority ownership of mining operations (up to 60 per cent)
  • 100 per cent equity in companies established to distribute goods manufactured in Thailand
  • 100 per cent ownership of companies providing certain construction services
  • 100 per cent ownership of companies providing management consulting services through a regional operating headquarters or associated company or branch
  • Majority ownership of major restaurants or hotels (up to 60 per cent)
  • Majority ownership of tertiary education institutions specialising in science and technology (up to 60 per cent), provided the operation is located outside Bangkok
  • Majority ownership of companies providing certain maritime cargo services (up to 60 per cent).

The free trade agreement also incorporates provisions that offer investment protection through a range of guaranteed rights for Australian direct investors in Thailand. These include the right to transfer funds out of the country at any time, and to seek impartial resolution of any disputes they may encounter with the Thai government over their investments.

Land and property rights

Thailand does not generally allow foreigners or foreign businesses to own land. Rather, leasing is the common protocol for foreigners. Land and property rights are usually applied according to two types of usage:

  • Residential leases are for a maximum of 30 years (with the possibility of a further 30 years)
  • Industrial or commercial leases can be for up to 50 years (and may be renewed for a further 50 years).

Nevertheless, in accordance with the BOI's investment incentives, foreign individuals can own land of up to 1600 square metres in specified areas for residential purposes. Under the deal, a THB 40 million investment must be made in specified assets or government bonds beneficial to the Thai economy. Buying an apartment is a simpler way for foreigners to buy residential property in Thailand. As long as Thai nationals own at least 51 per cent of apartments in a building, a foreigner can buy an apartment.

Further, foreign companies with substantial investments already in Thailand that are deemed beneficial to the economy may be afforded special privileges for the duration of their business activity and exemption from more restrictive land ownership rules. The rules and requirements of purchasing and leasing property are complex, and professional local advice should be sought.

Intellectual property (IP)

IP rights for trademarks, patents, designs and plant varieties and integrated circuit topographies can all be registered in Thailand. The Department of Intellectual Property (DIP) within the Ministry of Commerce is the government body responsible for administering Thailand's IP rights system. While Thailand has been regarded by many as a haven for counterfeiting and piracy, the Thai Government has been at pains to reinforce its legal framework. Exporters to Thailand should seek advice regarding any recent changes that may affect their business.


For more information, access the full Thailand Country Starter Pack

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5.2 Import duties, tariffs and regulations

Tariffs and import regulations are frequently revised and subject to change without notice, so it is important to stay informed and to reconfirm rates before selling goods into Thailand. A tariff is a tax applied on imports only, whereas duty is a tax that also applies to domestic goods. In the context of sending goods from Australia to Thailand, tariffs refer to custom import duties.

Tariffs/import duties

Tariffs are levied on numerous import items either according to value or at a specific rate, whichever is higher. The invoices of suppliers or manufacturers generally determine values and quantities, but the customs authority has the right to reassess the value of goods.

Most imported goods are subject to tariff duty and value added tax (VAT). The former is calculated by multiplying the CIF (cost, insurance and freight) value of the goods by the rate of duty. This is added to the value of the goods to determine a final tax. VAT is then levied on the total sum of the CIF value, duty and excise tax (if any).

Preferential tariff rates may apply to selected imports from ASEAN countries, Australia and New Zealand under the ASEAN Australia New Zealand Free Trade Agreement (AANZFTA). Australian exporters also enjoy preferential rates on many goods as a result of its free trade agreement with Thailand, TAFTA.

FTA Tool: To further explore the benefits of TAFTA and AANZFTA, consult the FTA Tool developed by the Export Council of Australia. This website helps Australian exporters navigate the basics of Australia's Free Trade Agreements (FTAs) quickly and easily. www.ftatool.com.au

An overview of TAFTA

  • The agreement came into force on 1 January 2005 and is chiefly responsible for a doubling of trade between Thailand and Australia. Thailand eliminated tariffs on 2934 items, which account for 78 per cent of current Thai imports from Australia.
  • A further 41 per cent of Thai tariffs – covering 17 per cent of current trade – were slashed to zero in 2010.
  • All remaining tariffs, including tariff rate quotas, are being phased out in 2015 or in 2020, with the exception of skim milk powder and liquid milk and cream, for which tariff rate quotas will be eliminated in 2025.

Import regulations

TAFTA regulations: Preferential rules of origin (ROO) are contained in the TAFTA. These ensure that only goods originating in either Thailand or Australia benefit from the agreement's reduced duties. A certificate of origin (COO) is required to import goods into Thailand from Australia under TAFTA.

Customs and excise duties: Should a product being exported to Thailand not meet the TAFTA requirements, customs duties may be imposed under the Customs Act and the Customs Tariff Decree.

Duties are levied on a specific, ad valorem or a combined basis, with the applied ad valorem duties ranging between zero and 80 per cent. Exemptions from import duties are available on particular items. Generally, the value of imports is based on their CIF (cost, insurance and freight), whereas exported goods are based on their FOB (free on board).

Excise tax is imposed on the sale of a selected range of commodities whether manufactured locally or imported. Tax rates are based on ad valorem, specific rate or a combined basis. Tax liabilities arise on locally manufactured goods when leaving the factory and at the time of importation for imported goods.

Import restrictions: While most goods can be readily imported into Thailand, provided appropriate import duties have been paid, restrictions do apply to some products (i.e. art, food and ammunition).


For more information, access the full Thailand Country Starter Pack

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5.3 Taxation

Thailand imposes a wide-ranging tax regime that incorporates income taxes (corporate and personal), turnover and indirect taxes (VAT and specific business tax), as well as property tax and taxes such as stamp duty, excise tax, customs duties and municipal taxes. Not all taxes are covered here. Professional advice from firms operating in Thailand is vital for understanding tax rules specific to your business.

Corporate income tax

Corporate income tax (CIT): This applies to company residents of Thailand. Residence is determined by the place of incorporation and not the place of management or ultimate control. Companies incorporated under Thai law are regarded as resident companies and are taxed on their global income. A foreign incorporated company, however, is taxed on profits arising from business carried out in Thailand. The current corporate rate of tax is 20 per cent for accounting periods that commence between 1 January 2013 and 31 December 2015. A foreign company that is not operating a business in Thailand is nevertheless subject to withholding tax (WHT) on assessable income such as interest, dividends, royalties, rentals and service fees that are paid from or in Thailand. Generally, the rate of WHT is 15 per cent, except for dividends, which attract a 10 per cent rate. A company incorporated in another country but carrying on business in Thailand (e.g. a branch office) will need to pay CIT on profits arising from any business conducted in Thailand. Should after-tax profits be repatriated to head office, a final 10 per cent WHT is imposed.

SMEs with a paid-up capital not exceeding THB 5 million at the end of any accounting period, and having derived income from the sale of goods and/or the provision of services not exceeding THB 30 million in the same period, will be subject to CIT at the following rates:

Net profit (THB) CIT rate (%)
0 to 300,000 0
300,001 to 1 million 15
Over 1 million 20

Tax treaty: Thailand and Australia share a tax treaty that seeks to eliminate double taxation rates. However, it does not reduce the domestic law applied WHT rates for dividends (10 per cent), interest income (15 per cent) and royalties (15 per cent).

Capital gains tax: Capital gains earned by companies are treated the same as ordinary revenue for tax purposes.

Thin capitalisation rule: There is currently no thin capitalisation or prescribed debt-to-equity law applicable in Thailand.

Wage tax and social security contributions: As in Australia, employers are responsible for withholding income tax from their employees and forwarding it to the tax authorities. Social security contributions are mandatory for both employers and employees levied at the rate of 5 per cent of an employee's salary, subject to THB 750 per month cap per employee.

Indirect taxes

Value added tax (VAT): This is an indirect national tax levied on the sales of goods and the provision of services. However, exports do not incur VAT, while a number of goods and services are exempt. The standard rate of VAT is 10 per cent.

Specific business tax (SBT): This tax is imposed on the gross revenues of certain businesses that are not subject to VAT. Commercial banking, finance and securities firms are taxed at 3 per cent and life insurance operations at 2.5 per cent.

Other taxes

Excise tax: A form of consumption tax imposed on so-called “luxury" goods and services, whether manufactured locally or imported, and can include tobacco, alcohol, motor vehicles, perfume and appliances. Rates range from 5 per cent to 60 per cent.

Stamp duty: Applies to 28 different types of documents and instruments, including contracts for commissioned work, as well as loans, share transfers, leases for land or buildings, and insurance policies. Stamp duty rates vary.

Petroleum income tax: A tax is imposed on income derived by any company that owns an interest in a petroleum concession granted by the Thai Government, or a company that buys oil for export from a concession holder. Companies taxed under the Petroleum Income Tax Acts (PITA) are exempt from taxes and duties on income imposed under the Revenue Code and under any other laws.

Local taxes

House and land tax: Levied at the rate of 12.5 per cent of assessable rental income.

Local development tax: Levied at rates ranging from 0.25 per cent to 0.95 per cent on the value of land assessed by local authorities. Tax does not apply if the property is already subject to house and land tax.

Individual (personal) income tax

Both residents and non-residents who earn an income for some form of work performed in Thailand are liable for personal income tax in Thailand, regardless of whether the income is paid within or outside the country. There are no concessions for foreigners or short-term residents.

Individual income tax rates 2016

Taxable net income (THB) Tax rate (%)
0-150,000 Exempt
More than 150,000 up to 300,000 5
More than 300,000 up to 500,000 10
More than 500,000 up to 750,000 15
More than 750,000 up to 1,000,000 20
More than 1,000,000 up to 2,000,000 25
More than 2,000,000 up to 4,000,000 30
Over 4,000,000 35

Regional Operating Headquarters (ROH) tax concession: Expatriates employed by an ROH can opt to pay a personal income tax rate of 15 per cent of the WHT flat rate for the first four years.

International Headquarters (IHQ) tax concession: Expatriates employed at an IHQ in Thailand are exempt from 15 per cent WHT indefinitely.

Capital gains: Capital gains and investment income earned by residents from sources outside Thailand are not taxable unless the gains are remitted in the year they were made. Most types of domestic capital gains rank as personal income for tax purposes.

Dividends: Thai residents who receive dividend payments from foreign companies listed on the local stock exchange and a company incorporated in Thailand are subject to WHT of 10 per cent.

Interest income: Interest received from bank deposits, loans to finance companies, government bonds, debentures, and bills issued by a corporate entity is liable for WHT at 15 per cent.

Exemptions: Certain types of income are exempt from personal income tax, namely work-related income derived in the form of per diem allowances, travelling expenses and fringe benefits such as medical treatment.


For more information, access the full Thailand Country Starter Pack

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5.4 Audit and accountancy

Companies and businesses operating in Thailand must maintain thorough and up-to-date accounting records and prepare annual financial statements in accordance with the Thai Accounting Standards (TAS). TAS essentially follows the International Financial Reporting Standards (IFRS), with some exceptions.

Tax year and tax returns: The general tax year is a calendar year in Thailand, but corporate entities can choose an alternative 12-month period.

Frequency of reporting: A corporation's financial statements must be presented at least annually.

Accounting books: Typically, a journal, general ledger and inventory records, all maintained in Thai, must be kept. Thai translations must be provided where a foreign language is used.

Preservation of books and records: These documents and records must be retained for at least five years.

Financial statements: A complete set of the required financial documents consists of a statement of financial position (balance sheet), a statement of comprehensive income, a statement of cash flows and a statement outlining any changes in equity, as well as any notes to the accounts.

Audited requirements: All incorporated business entities – except partnerships registered under Thai law with capital of THB 5 million or less as well as assets and income not exceeding THB 30 million – must submit financial statements (audited by a certified public accountant) within five months of the end of its financial year.


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5.5 Employing workers

Labour market

Thailand's Government is looking to steer the country away from its heavy reliance on cheap labour towards an industrialised economy with a burgeoning middle class. The Thai government is ramping up education and reorganising its industrial base. Skills shortages have been identified as a key impediment to Thailand's future. While the Government has sought to facilitate skills training for the country's labour force, the Thai labour market remains skewed by low-skilled workers.

Literacy: According to UNESCO, Thailand's literacy rate for adults is approximately 97 per cent.

Skill level: Approximately 12 per cent of the Thai workforce has an advanced education.

Minimum wage: Since 2013, the national daily minimum wage has been set at THB 300. Despite former plans to change the way the minimum wage is calculated, as well as pressure to increase it to 360 THB, it remains at THB 300 in 2016.

Human resources and employment law

With a rising demand for skilled labour, greater effort has been taken to bring into harmony the needs of both employers and employees. This is overseen by industrial legislation.

Labour protection laws: The Civil and Commercial Code spells out the rights and duties of an employee and an employer regarding an employment contract. But employees are entitled to additional protections broadly covering minimum working hours, rest periods, holidays, wages, employment of women and children, severance pay and compensation.

Working hours: These should not be more than 48 hours per week for industrial and commercial work or 42 hours per week for work potentially harmful to the health of the employee.

Holidays: An employee is allowed at least one day per week off and at least 13 holiday days per year to observe traditional holidays, plus a minimum of six working days per year as annual leave, if they have completed one year's service.

Overtime: Employees are entitled to overtime at the rate of at least 1.5 times their normal hourly rate, and at least two times the regular rate on public holidays.

Sick leave: A maximum of 30 days' paid sick leave applies in Thailand. Women are entitled to up to a maximum of 45 days' maternity leave.

Compensation: Thailand enforces workers' compensation in the event that an employee suffers illness, injury or death while performing their job, or contracts a disease as a result of their working conditions.

Workers compensation fund: Employers conducting certain types of operations with at least one employee must register with and contribute to the workers' compensation fund. Contribution rates vary between 0.2 per cent and 1 per cent of the business's total wages bill.

Social Security Fund: Workers may also have a claim to compensation under the Social Security Act, even though an injury, illness or death may not be the direct result of work. All businesses with at least one employee must register with the Social Security Fund. Employees, employers and the government must each contribute 5 per cent of an employee's salary (up to a maximum salary of THB 15,000 per month) to the Social Security Fund. The fund provides medical services and expenses, compensation and/or funeral expenses, and pensions at rates prescribed by the law.

Pensions and social security: The Social Security Fund also assumes responsibility for pensions, which can be received by employees from the age of 55.

Labour relations law: The Labour Relations Act monitors industrial relations across the Thai economy, providing resolution of any labour conflicts.

Labour Court: Workplace disputes and any incidents leading to claims against employers or unions must be submitted to the Labour Court.

Severance pay: Employees generally have the right to severance pay, provided they have worked a minimum of 120 days and are not being dismissed for breaching workplace rules.

Work permits

Having obtained a visa to enter Thailand, expatriates wishing to work there must also apply for a work permit. Applications can be filed in two ways. The preferred route for employers who meet certain criteria is Thailand's One Stop Service Centre, established ostensibly to fast-track applications. Where an individual or employer does not qualify for this service, work permits should be sought from the Ministry of Labour and visas from the Immigration Bureau. Immigration law in Thailand is complex, and it is recommended that professional advice be sought on these matters on a regular basis.

Managing a Thai team

Thai workers are attuned to a strict chain of command and it is important that managers maintain their role as “boss". However, when a manager needs to work collectively with their team this requirement should be outlined very clearly. Tolerance for change in Thailand remains low. Even the most effective managers must factor in plenty of time to implement changes in work practices. Also, deadlines and schedules can be fluid in Thailand and patience is vital. It's worth reinforcing the importance of agreed deadlines, citing how these may affect the rest of the operation.


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5.6 Banking in Thailand

There are several different types of banks and financial institutions operating in Thailand, including traditional domestic commercial banks and well-known international banks. There are also six government banks with specific mandates, including the Government Housing Bank and the Export Import Bank of Thailand.

ANZ is the only Australian bank operating in Thailand. Aside from major local banks such as Bangkok Bank, Kasikorn Bank and Siam Commercial Bank, international banks such as Citibank, HSBC and Standard Chartered operate in Thailand.


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5.7 Repatriating profits

Currencies other than THB are generally used for the repatriation of profits and other transactions, with the BOT regulating payments and responsible for any ceiling. When these payments are calculated in THB, they are converted into the appropriate foreign currency at the time of repatriation and transacted through a commercial bank.

The repatriation of investment funds and monies for repaying overseas loans is permitted provided the bank sights all documentation. Should funds be taken as cash, foreign currency amounts exceeding US$20,000 must be declared to Thai Customs on entry or exit from Thailand. Also, transactions that involve the sale, exchange, withdrawal or deposit of foreign currency totalling more than US$50,000 must be documented and submitted to the authorised bank.


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6. Visiting Thailand

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6.1 Visas

Australian passport holders do not require a visa in advance to enter Thailand for tourism. Provided they can show proof of their return – or onward – travel on arrival at immigration checkpoints, they will normally be permitted to stay in Thailand for up to 30 days. Visitors engaged in any business activities must acquire a non-immigrant B visa before entering Thailand. However, Thailand has made some changes for temporary business entrants. Australian business visitors who are conducting business meetings in Thailand for up to 15 days (up to 90 days for APEC Travel Card holders) no longer require a work permit.

Non-immigrant B Visa: This visa is for business people engaging in any activities in Thailand related to business including working, meetings and conferences. The single entry visa allows stays up to 90 days and requires a supporting letter from the Australian employer or Thai business counterpart. The multiple entries visa allows multiple entries for one year and permits stays up to 90 days for each entry. Both visas require supporting documentation and photos, and fees are payable.

Thailand has made changes to other visas and work permits for longer stays. Contact your Thai Embassy or Consulate for more information.


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6.2 Currency

There are two simple options for acquiring THB at the airport – ATMs or money changers. Commercial banks are always the safest and most reliable option. ATMs throughout Thailand accept most major international credit and cash cards, although withdrawal fees are relatively high. All major credit cards are accepted at most retailers and restaurants.


VAT refund: Refunds of value added tax (VAT) are available to tourists on meeting key requirements. Travellers wishing to claim a refund must present their passport, along with a VAT Refund Application Form (which can be obtained online or at the airport), original receipt(s) of goods purchased and be in possession of the goods.

Opening bank accounts: Foreign nationals are allowed to open accounts with any Thai bank once they have a work permit. Some banks allow foreigners to open an account without a work permit.


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6.3 Air travel and airports

Airlines: Thai Airways International is the country's national airline and operates domestic and international services. Other local airlines include Bangkok Airways, Nok Air, Thai AirAsia, SGA (Siam General Aviation), Orient Thai Airlines, Happy Air and SkyStar Airways. Domestic flights are available to all major cities and tourist resorts throughout Thailand.

Airports: Suvarnabhumi International Airport is about 30 kilometres from Bangkok central business district. Thailand's international airports also include Don Muang in Bangkok, along with Chiang Mai, Chiang Rai, Hat Yai, Phuket and Samui.


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6.4 Ground transport

Taxis

It is important to allow sufficient time travelling to and from appointments in Bangkok, where traffic congestion is burdensome and can cause lengthy delays. This can be tricky because arriving at meetings on time is critical for good business relations as it signifies respect for the person with whom you are meeting. Business travellers should plan appointments in the Thai capital well ahead of time given traffic congestion. Taxis and limousines provided by hotels are the best options for visitors. While some taxi drivers speak English, their grasp may be rudimentary. An address written in Thai can help. Taxis do not carry street directories.

Taxis can be hired at a fixed rate, negotiated in advance, but usually it is best to use the meter. A trip into the heart of Bangkok from Suvarnabhumi International Airport can take as long as an hour. Tips are not required, although it is usual to round up the fare. Taxis do not accept credit cards or issue receipts.

Thai “tuk-tuks" are famous, but are less safe than other forms of transport, and suitable for short distances only. Fares must be negotiated beforehand.

Driving in Thailand

Renting a car from one of the international companies operating in major Thai cities is an option. An International Driving Permit (IDP) is required and driving is on the left-hand side of the road. Be prepared for some unusual driving practices.

Public transport in Bangkok

In Bangkok, it is often quicker to navigate the city by public transport than by car. All systems operate seven days from 6am to midnight.

BTS The Bangkok Transit System, or Skytrain, runs services nearly every five minutes in regular hours with increased frequency during peak times. The BTS connects the most important business areas – Silom and Sukhumvit – and is currently being expanded. Fares for the Skytrain are set between TBH 15 to 52 for a one-way journey. Stored value cards are available.

Metro: The first MRT subway line became operational in July 2004, covering 20 kilometres and linking 18 stations. Expansion to include five more lines is under way. Fares cost TBH 16 to 40 for adults.

BRT: The 16-kilometre bus rapid transit system route moves between 12 stations and connects with two BTS stations on the Silom line – Chong Nonsi and Talat Phlu. Fares range from TBH 12 to 20. BRT operates daily from 6am to midnight.

Public transport elsewhere

Outside of Bangkok, the bus network is reliable and abundant with the Thai government subsidising the transport company Baw Khaw Saw (BKS). Every city and town in Thailand linked by bus has a BKS station, even if it's a dirt patch on the side of the road. Bus companies (state owned or private) operating out of the government-run BKS stations are the most reliable. Minivans run by private companies are becoming popular. Discuss this option with your hotel.



For more information, access the full Thailand Country Starter Pack

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6.5 Hotels and dining

Staying in Bangkok

Bangkok is divided into 50 districts, which are further split into 154 sub-districts, for administrative purposes. However, visitors will find these more colloquial divisions of greater use for getting around.

  • Siam Square: This area, which also takes in Ratchaprasong and Ploenchit Road, is Bangkok's modern commercial core, full of shopping malls and top hotels. The Skytrain intersection at Siam Square is the nearest thing Bangkok has to a centre.
  • Sukhumvit: The long Sukhumvit Road, populated by quality hotels and restaurants, is an exclusive district popular among expatriates and wealthy locals.
  • Silom: Thailand's sober financial centre by day, the area around Silom and Sathorn roads is Bangkok's primary party district by night when quarters such as the infamous Patpong come to life.
  • Rattanakosin: Between the Chao Phraya River and downtown lies densely packed “Old Bangkok", location of many of the capital's best-known sights, including the Grand Palace and Wat Pho.
  • Dusit: This leafy, European-style area is the political centre of Thailand, home to numerous political institutions and the monarchy.

Increasingly, multinational businesses are scattered across Bangkok, both in the CBD and suburbs, but the main business zone remains in the Silom-Sathorn area. Many major hotels operate around Bangkok's main commercial areas.

Business, dining and entertaining

The focus of business lunches in Thailand tends to be strictly work-related, while dinners often signify a more relaxed and informal catch-up between business acquaintances. Business lunches and dinners nearly always take place in a restaurant rather than in the home, and seating arrangements are mostly orchestrated so that senior individuals take their place at the head of the table. Drinking alcohol is a normal part of social activity for men and is acceptable for women, while smoking is acceptable among both sexes.

Tipping

Although tipping is viewed widely as optional, hotels and some larger restaurants routinely add a 10 per cent service charge to bills. Guests who feel they have received exceptional service will sometimes offer a tip that is gratefully received by staff.

Electricity

Thailand's power supply is 220 volts, 50Hz and uses type A, B, C and F plugs. Travellers will need an adapter for Australian appliances.


For more information, access the full Thailand Country Starter Pack

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6. Health and welfare

Australians should always consult the Australian Government's Department of Foreign Affairs and Trade (DFAT) for up-to-date information on travelling to Thailand, particularly on health risks and personal safety.

Health insurance

Australians should take out comprehensive travel insurance before heading to Thailand, ensuring that it covers any overseas medical costs.

Food and water

Travellers to Thailand should drink only bottled water and avoid specific types of seafood, such as clams, ensuring that all food is freshly cooked.

Other health risks

It is worth consulting a doctor before travelling to ensure that vaccinations against diseases such as hepatitis and tetanus are up to date. Vaccination against typhoid is recommended for people heading to Thailand who may wish to eat in markets or street stalls where sanitation may be poor.

Malaria and other insect-borne disease: The threat of malaria exists throughout the year, mostly in rural areas and particularly near the borders with Cambodia, Laos and Myanmar. Dengue fever is particularly common during the rainy season. Other insect-borne diseases – chikungunya virus, Japanese encephalitis, filariasis – also present risks in many areas. Authorities recommend travellers consider extensive vaccinations and taking precautions against malaria where necessary.

HIV/AIDS: The rate of HIV/AIDS infection in Thailand is high.

Rabies: This is a very real threat in Thailand where the potentially fatal viral disease can be found in dogs, monkeys, bats and other mammals. Australians are routinely treated with rabies immunoglobulin on their return to Australia after being bitten by dogs, or suffering bites or scratches from monkeys.

Water-borne, food-borne, parasitic and other infectious diseases: Outbreaks of such diseases, which can include tuberculosis, cholera, hepatitis, leptospirosis and typhoid, can occur irregularly. Travellers should boil all drinking water or drink bottled water, avoid ice cubes and raw and undercooked food, and avoid unpasteurised dairy products.

Hospitals and medical services

Public hospitals and medical clinics do not always match expected Australian standards, particularly beyond the capital and on the islands. Excellent private hospitals do exist, but can be expensive. Many hospitals require the guarantee of payment before they will start treatment. It is vital to ensure adequate travel health insurance and accessible funds to cover the cost of any medical treatment and potential repatriation to Australia.

Personal safety

FAT advises travellers to:

  • Exercise a high degree of caution due to the possibility of civil unrest and the threat of terrorist attacks, including in Bangkok and Phuket.
  • Stay well clear of any demonstrations, political events, rallies, processions and large-scale public gatherings as they may turn violent.
  • Be aware of the risks of hiring jet skis and motorcycles. Tourists have been detained and arrested by police following jet-ski and motorcycle accidents until compensation, often in the thousands of dollars, is negotiated between parties.
  • Watch out for scams and more serious criminal activity. Be aware that food and drink spiking occurs in Thailand.
  • Do not travel to the southern provinces of Yala, Pattani, Narathiwat and Songkhla due to continuing violence in these areas, including terrorist attacks and bombings.

Crime penalties

Penalties for drug offences in Thailand are severe and include the death penalty. The possession of even small quantities of “soft drugs" for recreational purposes can result in lengthy jail terms.

Beyond drugs, it is also a criminal offence to make critical or defamatory remarks in any format, including online, about the King or other members of Thailand's royal family. This is known as lese majeste and is punishable by prison sentence.

By law, travellers must carry their passport with them at all times in Thailand.


For more information, access the full Thailand Country Starter Pack

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6.7 Useful phrases and public holidays




For more information, access the full Thailand Country Starter Pack

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7. Engage with us

Asialink Business

Asialink Business provides high-calibre opportunities for Australian businesses to build the Asia capability of their executives and team members. Our business-focused cultural competency programs, professional development opportunities and practical research products allow businesses to develop essential knowledge of contemporary Asian markets, business environments, cultures and political landscapes.

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Helpful links

Australian Embassy, Thailand

thailand.embassy.gov.au/bkok/home

Australian-Thai Chamber of Commerce

www.austchamthailand.com

Customs Department, Thailand

www.customs.go.th

Ministry of Labour, Thailand

http://www.mol.go.th/

Thailand Board of Investment

www.boi.go.th

Thai Chamber of Commerce and Board of Trade of Thailand

www.thaichamber.org

Royal Thai Embassy, Australia

canberra.thaiembassy.org

The Bangkok Post

www.bangkokpost.com

Bank of Thailand

www.bot.or.th

Digitalbusiness.gov.au

www.digitalbusiness.gov.au

Export Council of Australia

www.export.org.au

Export Finance and Insurance Corporation

www.efic.gov.au

Thai Ministry of Foreign Affairs

www.mfa.go.th/main/en

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Contact us

Get in touch to learn more about our open programs, online training and events, or to access further research, insights and information products.

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App category: Other
Updated: May 5, 2020
App Publisher: Asialink Business
Compatible with: iOS 6+, Android 4+, Blackberry 10+ and Windows Phone 8+.
Legals: Terms of use

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