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How to Start a Manufacturing Company in Thailand
07/02/2024
Thailand has become an attractive destination for foreign investors looking to start a manufacturing company. With its growing industrial sector and favourable business environment supported by the BOI and IEAT, Thailand offers attractive opportunities for growth and success in the manufacturing industry.
In this blog post, we will take a look at the process of starting a manufacturing company in Thailand, including the key requirements, benefits, and considerations.
Key points
- Thailand generally imposes restrictions on 100% foreign ownership in certain industries, including manufacturing.
- A Foreign Business Certificate, BOI promotion, or IEAT support allows for 100% foreign ownership.
- Applying for a BOI promotion provides special benefits including 100% foreign ownership and the ability to undertake restricted business activities and the ability to hire foreign specialists.
- Specific sectors eligible for BOI promotion, including automotive, chemicals, pharmaceuticals, and more.
- The IEAT also offers significant benefits for manufacturing companies including; 100% foreign ownership and ownership of land within IEAT zones, permission to hire qualified foreign individuals, no import/export conditions within IEAT zones.
What is the best company structure for a Manufacturing Company?
A limited company is the preferred choice for many foreign investors who wish to start a business in Thailand. A limited company has directors and shareholders (Thai and foreign) and offers limited liability to its shareholders. Limited liability means that shareholders can only lose the capital they have invested in the company, providing them with a high level of security and protection.
What are the Requirements for Setting up a Private Limited Company in Thailand?
To start a private limited company in Thailand, you will need:
- 2 shareholders
- One or more directors
- 50,000 THB minimum capital (2M THB if you want to hire a foreign employee) – but a significant investment is required if you apply for BOI based on the financial projections on 3 year plans.
- A registered corporate address in Thailand
The shareholders must be individuals for the company registration process. Once registered, the shares can be transferred to corporate shareholders.
The directors must be individuals. It is not possible to have corporate directors in Thailand.
Can Manufacturing Companies be 100% Foreign Owned?
Thailand offers many significant advantages for foreign owned companies to set up their business here. Promotions from the Board of Investment (BOI) and Industrial Estate Authority Thailand (IEAT) provide benefits and advantages many other companies are not eligible for.
The schemes from the BOI and IEAT have been well received and Thailand has seen many 100% foreign owned companies start a manufacturing company. There has also been a very noticeable influx of companies who used to produce goods in China moving their business to Thailand for tax purposes. Such businesses are taking advantage of and greatly appreciate the incentives and benefits offered, the skilled staff, the well established legal framework, environment and social conditions Thailand has to offer.
What are the BOI Promotions for manufacturing?
Applying for a Board of Investment (BOI) promotion in Thailand is a strategic move for foreigners looking to establish a business in the country. Companies approved for a BOI promotion can take advantage of a range of special incentives and benefits to help their businesses.
The key advantages of a company obtaining a BOI promotion are as follows:
- 100% foreign ownership of a company
- Ability to undertake restricted business activities
- Freedom to hire foreign skilled experts
- Streamlined visa and work permit Applications
For more information about the benefits of a BOI promotion, please see our blog post here.
Are Manufacturing Promotions Eligible For Tax Benefits?
Another significant advantage to receiving a promotion from the BOI is the possibility of receiving tax benefits and/or Import Duty Exemptions or reductions. Manufacturing projects may be eligible for the following tax benefits:
Corporate Income Tax Exemption
Eligible projects may receive corporate income tax exemptions for a specified period, depending on the industry and location.
Reduction of Corporate Income Tax Rates
After the tax exemption period expires, the BOI may grant a reduced corporate income tax rate for a certain duration.
Import Duty Exemption or Reductions
Eligible projects may receive corporate import duty exemptions for a specified period, depending on the industry and location.
Import Duty Exemption
Projects may enjoy exemptions on import duties for machinery, raw materials, and essential items.
Reduction of Import Duties
In some cases, the BOI may offer a reduction in import duties on specific items related to the project.
It is important to note, that while the BO offers a range of tax privileges to manufacturing businesses, these benefits are not available to all manufacturing companies and are awarded at the discretion of the BOI.
What Type of Manufacturing Projects are Eligible For a BOI Promotion?
Manufacturing projects that undertake the following business activities may be eligible for a BOI promotion:
- Metal (preferably steel and iron)
- Battery for electric vehicles (BEV), Plug-In hybrid electric vehicles (PHEV), hybrid electric vehicles (HEV), and BEV platforms
- Modified Starch or Starch from plants
- Glass & Ceramic
- Manufacture and/or repair of rolling stocks, parts, or equipment for rail systems
- Organic Food with health and novel benefits
- Functional fabric or yarn, other fabric or yarn, garments, and household textile
- Manufacture and/or repair of vehicles and weapon systems for national defense
- Bioplastics, biochemicals, and products to develop biotechnology implementation
- Bags or shoes or products made of leather or artificial leather
- Manufacture and/or repair of unmanned systems for national defense and parts used in the manufacture and/or repair
- Medical and Pharmaceutical products and devices
- Toys and Sports Equipment
- Manufacture and/or repair of weapons and exercise-facilitating equipment for national defense and parts
- Targeted core technology development for the materials industry
- Automobile Parts & Machinery
- Manufacture and/or repair of combat-facilitating equipment
- Gems and jewellery or parts including raw materials and prototype
- Chemicals or Chemical Products for Industry
- Prospecting of minerals, mining, mineral dressing, mineral smelting, metallurgy operations of targeted potential minerals
- Furniture or parts
- Industrial Development Projects
- Pulp and paper and/or products out of it
- Non-woven fabric or hygienic products from non-woven fabric, Medical devices, Active pharmaceutical ingredients and Medicines
- These sectors receive focused attention from BOI Thailand concerning tax and non-tax privileges. If your proposed business falls within any of these categories, consider exploring our articles for insights into starting a manufacturing business in Thailand.
What is the Project Approval Criteria for BOI Promotions in Manufacturing?
To be eligible for BOI promotions, businesses must meet specific criteria:
- The project should add value and increase competitiveness in Thailand’s agricultural, industrial, and service sectors.Typically, the BOI will require eligible promotions to have the potential to increase industry employment by at least 20%, with a 10% employment addition for manufacturing units in electronics and metal components.
- Implement and use modern production machinery, including second hand machinery.
- Second hand machinery may still qualify for corporate tax exemptions, but import tax duties are not waived for second hand machines.
- Second hand machines must be under five years old, with certification from a reputable institution.
- Machinery that is between five to ten years old may be eligible for the corporate income tax exemption if the applying company is relocating their facility to Thailand. Import duties will apply, but the BOI board will recognize 50% of its value as part of the capital investment.
What are the Minimum Capital Requirement and Product Feasibility Requirements for a BOI Promotion for Manufacturing?
For BOI approval, manufacturing companies must:
- Allocate a minimum investment of at least 1 million THB per project. This does not include purchasing land and any working capital expenses, unless otherwise stipulated by the BOI.
- Maintain a debt-to-equity ratio below 3:1 for the initial phase of the project.
- A comprehensive feasibility study report for projects exceeding 750 million THB is required. Purchasing land and working capital expenses can not be included.
What is the Industrial Estate Authority in Thailand?
The Industrial Estate Authority of Thailand functions as a state enterprise under the jurisdiction of the Ministry of Industry in Thailand. Its primary objective is the development and effective management of industrial estates and ports, transforming them into strategic production and service hubs equipped with essential infrastructure and facilities. The aim of the IEAT is to offer entrepreneurs a competitive edge, all while ensuring a balance among economic, social, and environmental aspects of growth.
Essentially the IEAT is a comprehensive one-stop service center (OSS) designed to streamline the entire business process for manufacturing companies. This includes facilitating the acquisition of land, whether through purchase or lease, and supporting the establishment of businesses within designated free zones.
What Types of Industrial Estates does the IEAT Offer?
The Industrial Estate Authority of Thailand (IEAT) has established two types of industrial estates in the country.
General Industrial Zone (GIZ)
The GIZ is an area designated for various industrial, service, or related business activities. Within the GIZ, the IEAT offers essential services, including transportation, training centers, and permission to own the land needed for operations.
Free-Trade Zones
In the IEAT Free Zone, operators enjoy the freedom to import merchandise or raw materials and export products without restrictions. Tax and duty relief are applicable to products made for domestic use taken out of the Free Zone, as well as domestically produced raw material components.
Businesses within the IEAT Free Zone can import materials for production, trade, or services without limitations on quantity or value. Import permits/licenses are not required for supplies or raw materials brought into the zone, and they are exempt from standard quality control requirements typically imposed on imports to Thailand. This creates a favorable environment for businesses operating within these Free Zones.
What are Advantages of the Industrial Estate Authority in Thailand?
The Industrial Estate Authority of Thailand extends a range of benefits, encompassing both tax and non-tax incentives, to eligible companies.
100% Foreign Ownership: Companies who are eligible to operate within an Industrial Estate Authority of Thailand zone are eligible for 100% foreign ownership of their business.
Ownership of Land: Foreign business owners may purchase and own land within the IEAT zones.
Permission of stay for Foreigners: The IEAT allows companies operating within their zones to hire qualified foreign individuals, for roles including,
- directors,
- presidents,
- finance and administration personnel,
- executive assistants,
- factory assistants,
- marketing,
- export, and
- sales professionals.
No Import/Export Conditions: Within IEAT zones, no import and export conditions are imposed in alignment with the obligations outlined by the World Trade Organization (WTO). Means goods and raw materials can be imported free from tax and duty.
High Standard Infrastructure and Maintenance: IEAT prioritizes maintaining a high standard of infrastructure and maintenance within industrial estates, ensuring a conducive environment for manufacturing operations.
Continuity as an Industrial Estate: Industrial estates under the supervision of IEAT are guaranteed to remain as dedicated industrial areas, providing long-term stability and support for businesses.
Exemption from Environmental Impact Assessment: Unlike factories located outside industrial estates, those within industrial estates are exempted from conducting an Environmental Impact Assessment (EIA).
Strategic Location and Privileges: Industrial estate lands may be more expensive than non-industrial estate lands, but the additional cost reflects the advantages enjoyed by factories located within industrial estates, such as proximity to transportation networks and access to utilities.
How can Belaws help?
For more information about starting a manufacturing company in Thailand, why not talk to one of our experts now?
Please note that this article is for information purposes only and does not constitute legal advice.
Our consultations last for a period of up to 1 hour and are conducted by expert Lawyers who are fluent in English, French and Thai.
Consultations can be hosted via WhatsApp or Video Conferencing software for your convenience. A consultation with one of our legal experts is undoubtedly the best way to get all the information you need and answer any questions you may have about your new business or project.
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Frequently asked questions
How do I start a manufacturing company in Thailand?
To start a manufacturing company in Thailand, you need to incorporate a limited company, fulfill certain requirements including having at least 2 shareholders, one or more directors, a minimum capital, and a registered corporate address in Thailand. Additionally, you can explore options for obtaining BOI promotion or support from IEAT for benefits such as 100% foreign ownership.
Can manufacturing companies be 100% foreign-owned in Thailand?
Yes, Thailand offers opportunities for 100% foreign ownership in manufacturing through schemes such as BOI promotion and support from IEAT.
What are the benefits of obtaining a BOI promotion for manufacturing?
Companies approved for BOI promotion can enjoy benefits such as 100% foreign ownership, undertaking restricted business activities, hiring foreign skilled experts, and streamlined visa and work permit applications.
What tax benefits are available for manufacturing projects in Thailand?
Manufacturing projects may be eligible for tax benefits including corporate income tax exemption, reduction of corporate income tax rates, import duty exemptions, or reductions, depending on the industry and location, subject to BOI approval.
What types of manufacturing projects are eligible for BOI promotion?
Various manufacturing sectors are eligible for BOI promotion, including automotive, chemicals, pharmaceuticals, medical devices, electronics, and more. Specific criteria must be met for eligibility.
What is the Industrial Estate Authority of Thailand (IEAT)?
The IEAT is a state enterprise responsible for developing and managing industrial estates and ports in Thailand. It offers benefits such as 100% foreign ownership, ownership of land within IEAT zones, permission to hire qualified foreign individuals, and no import/export conditions within IEAT zones.
What are the advantages of operating within an Industrial Estate Authority zone?
Advantages include 100% foreign ownership, ownership of land within IEAT zones, permission to hire qualified foreign individuals, no import/export conditions within IEAT zones, high-standard infrastructure and maintenance, exemption from Environmental Impact Assessment, and strategic location privileges.
How can Belaws help with starting a manufacturing company in Thailand?
Belaws can assist with legal and administrative processes involved in starting a manufacturing company in Thailand, including company incorporation, obtaining BOI promotion, navigating regulatory requirements, and more.
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