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Open a restaurant in Thailand
Everything you need to know about opening a restaurant in Thailand
15/09/2022
Many foreigners dream of opening a restaurant in Thailand to showcase their cooking talents and the culinary delicacies of their home countries. However, in reality this is harder than it seems. The Foreign Business Act restricts this activity for foreigners, meaning 100% foreign ownership is not possible.
In this article we take a look at what is required for a foreigner to be able to open and operate a restaurant in Thailand.
Key points
- Foreigners cannot 100% own a restaurant in Thailand as stipulated by the Foreign Business Act.
- A Thai company which has at least one Thai national shareholder (who owns > 50% of the shares) must be used.
- Restaurants require business licences/certificates in order to legally operate.
- In practice leases with a 3 year term (with option to renew) are the most common form of leases for restaurants. Register the lease with the land office in order to secure a longer term.
Can I 100% own a restaurant in Thailand?
Unfortunately, selling food and beverages is a restricted activity under the Foreign Business Act (FBA). Specifically, selling food and beverages can be found under List 3 of the Foreign Business Act as an activity in which Thai nationals are not yet ready to compete with foreigners. Therefore, since these activities are a key component of owning and operating a restaurant, the FBA makes it impossible to have a 100% foreign owned restaurant.
However, while it is a restricted activity, there are some options available to foreign restaurateurs. In order for a foreigner to operate a restaurant, they will need to set up a company with at least 3 shareholders. Out of these 3 shareholders, at least one must be a Thai person who will hold more than 50% of the shares.
While having a Thai person(s) hold a majority shareholding may seem like an issue, in practice, many foreigners operate under a majority Thai owned company, to avoid the restrictions of the FBA. This is usually done with a preference share structure and a shareholder agreement to allow foreign control.
Just like any other business, a restaurant in Thailand needs to be registered with the Department of Business Development (DBD) before being allowed to operate. Our team of experts will be able to help foreign investors to gather the necessary documentation and to apply for business registration.
Can I hire foreign staff?
One of the most important requirements for opening a restaurant in Thailand is related to hiring employees. The requirements for hiring foreigners in Thailand largely depend on the type of structure used to incorporate the business.
Assuming the restaurant will be incorporated using the most common structure, the Thai Limited Company, the following criteria must be met in order to hire foreign employees.
- A ratio of 4 Thai employees per foreign employee hired is required to support a Work Permit.
- There is also a minimum capital requirement of 2 million Baht per foreign employee as well.
Once these requirements have been satisfied, the employee will be able to apply for their business visa and work permit.
It is also important to note that every employee of a restaurant must pass certain tests in order to prove they are qualified for their position. An inspection of the premises will be completed by the relevant authorities in order to confirm these standards before the restaurant license is issued.
What type of lease should I get for my restaurant?
In practice, most restaurants will be given a 3 year lease with the option to renew for 1 or 2 further terms. The owners of such premises tend to only offer 3 year leases due to Thai law stating that any lease longer than 3 years must be registered at the Land Office. Registering a lease at the Land Office involves the payment of registration fees and a time consuming trip to the Land Office, both of which owners are keen to avoid.
However, having a registered lease has certain advantages which may be beneficial to a business. Firstly, registered leases can be valid for 30 years. Should the owner sell the property in the future, the lease right contained within a registered lease will be transferred to the new owner and will still be enforceable. This offers your business protection for the term of the lease.
Another issue with a non-registered lease, is that after 3 years you may want to renew the lease but the owner doesn’t want to. Such a scenario is dependent on how the option to renew has been drafted. Usually such a right is not guaranteed and is merely an option which can be declined by the owner, therefore you run the risk of losing your business.
Furthermore, back-to-back leases could be viewed by the authorities as trying to circumvent the regulation that states a lease with a term of longer than 3 years must be registered at the land office. Should this issue arise, your business would again be put at an unnecessary risk.
It is highly recommended that you register the lease at the land office in order to protect your rights. To help smooth the process, you can offer to pay for the transfer fees on behalf of the owner, as this is usually the sticking point for the owner’s refusal to do so.
What are the licensing requirements for operating a Thai restaurant?
The licences required by a restaurant depends on the services offered. However, there are a few mandatory licenses which need to be obtained by most restaurants in Thailand.
These licences are as follows:
- A restaurant license. This licence which must be obtained by companies whose premises are a minimum of 200 sqm. A certification of notice is required for any Thai restaurants whose premises is below 200 sqm;
- A liquor license. A liquor licence is required for any restaurant who will be serving alcoholic drinks on the premises;
- A music license. This licence must be obtained if the restaurant will have live music or any kind of music (radio, spotify etc) playing on its premises.
Where do I get the relevant licence from?
The above licences can be obtained from the following places:
- The restaurant license must be obtained from the District Office.
- The liquor licence must be obtained from the Local Excise Department.
- The music licence must be obtained from the Department of Intellectual Property.
What documents are required for obtaining a restaurant license in Thailand?
The set of documents which needs to be filed with the Thai authorities when opening a restaurant in Thailand are:
- the business’ affidavit issued by the Thai Trade Register, which cannot be older than 6 months;
- the certification of registration of the building (the construction permit in case of buildings to be constructed);
- copy of the identification papers of the business owner and proof of residential address in Thailand;
- copy of the identification papers of the company director and proof of his/her residential address in Thailand;
- the application form for the issuance of the license (it must be dated and signed by the representative of the company);
- a power of attorney for the representative in charge with the licensing application;
- a map indicating the location of the Thai restaurant and photos of the outside and inside of the premises;
- information about the size of the restaurant (the number of square meters of each space);
- the blueprints of the restaurant with clear delimitations of the kitchen, storage and sitting places.
What is the process for opening a restaurant in Thailand?
Step 1: Choose the business location for your restaurant and enter into a lease agreement.
Step 2: Identify the right company structure for your business and complete the registration process.
Step 3: VAT registration (mandatory if the company has foreign employees and/or the annual turnover reaches 1.8 million THB).
Step 4: Acquire the relevant visas and work permits.
Step 5: Apply for the relevant business licences.
Important information regarding the set-up of a restaurant in Thailand
It is important to note that if you plan to open a restaurant in Thailand, you must also provide adequate storage places for food and other perishable items, while at the same ensuring that all the health rules are respected. It is essential that the staff of the restaurant can work in safe conditions.
How can Belaws help?
For more information about how our experts can help you open a restaurant 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.
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Frequently asked questions
Can foreigners open a restaurant in Thailand?
Foreigners cannot 100% own a restaurant in Thailand as stipulated by the Foreign Business Act. A Thai company which has at least one Thai national shareholder (who owns > 50% of the shares) must be used.
How do I open a restaurant in Thailand?
- Choose the business location for your restaurant and enter into a lease agreement.
- Identify the right company structure for your business and complete the registration process.
- VAT registration.
- Acquire the relevant visas and work permits.
- Apply for the relevant business licenses.
Can foreigners Open business in Thailand?
Yes, it is possible for for foreigners to open a business in Thailand. However, it is important to note that Thailands Foreign Business Act prohibits certain business activities from being performed by 100% foriegn owned companies.
Can a foreigner open a bar in Thailand?
Yes, but as with a restaurant it cannot be a 100% foriegn owned business and a Thai company which has at least one Thai national shareholder (who owns > 50% of the shares) must be used.
Is Thailand a good place to start a business?
Over the years, Thailand has developed an effective pro-investment policy, supported by an enterprising Board of Investment (BOI). Particular emphasis has been placed on free trade and tax incentives. As a business-friendly destination, foreign investors and entrepreneurs in Thailand can benefit from a large number of privileges actively sponsored by the government, such as exemption from corporate tax or exemption or reduction of import duties. Non-tax benefits include the right to own land through a Thai limited company or the ability to own all the shares in a company by obtaining a foreign business license or a BOI promotion.
How much does it cost to open a business in Thailand?
Incorporating a Private Limited Company in Thailand with Belaws starts at 20,000 THB (excluding VAT).
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