Thailand tax: Official ruling issued on capital requirements for foreign companies

The Thailand Department of Business Development issued a formal ruling on 21 August 2009 providing guidance on the capital requirements for business operations of foreign entities subject to the Foreign Business Act B.E.2542 (FBA). The ruling provides as follows:

- If a foreign company under the FBA conducts a business activity that is promoted by the Thailand Board of Investment (BOI), the company must have the minimum registered capital as required by the BOI with respect to the promoted activity.

- If a foreign company under the FBA undertakes a promoted business activity by the BOI and wishes to carry out other non-BOI business activities as well (e.g. manufacturing or exporting activities), the company must have registered capital equal to the minimum registered capital required for each additional business activity under the FBA, plus the minimum capital required by the BOI.

- If a foreign company under the FBA wishes to conduct a wholesaling business without permission from the Ministry of Commerce (MOC) under the FBA, relying on the capital exemption provided under the FBA, the company must have additional actual paid-up registered capital of THB 100 million separate from the registered capital for the BOI business and any other additional non-BOI business activity. For example, if a company conducts a BOI-promoted business under a promotion certificate that requires it to have registered capital of THB 30 million and the company also wants to engage in the wholesaling of other products not manufactured by it, and services, it must have registered capital of THB 30 million (according to the BOI promotion requirements), plus THB 100 million (to obtain the wholesaling exemption), plus THB 3 million for operating a service business (as required under the FBA), i.e. a total of THB 106 million registered capital. However, for a service business, the foreign company still has to obtain permission from the MOC to operate the service business under the FBA before commencing operations.

Rulings from the MOC are not binding on third parties and are only effective for the circumstances described in the ruling; however, they show the opinion of the MOC officer.