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Holding Company in Thailand

Holding Company in Thailand

holding company is a company opened in Thailand which owns outstanding stocks of other businesses. This terminology is generally used for a company that does not yield services or goods by itself; instead, its aim is to own shares of different companies in order to arrange a corporate group. Holding businesses enable the decrease of the risk for its owners and might permit the control and proprietorship of a number of various companies. Our lawyers in Thailand can give you more details about this matter.

As a separate service, you can also rely on our assistance if you are interested in immigration to Thailand.

What does a holding company in Thailand mean?

Actually, a holding company in Thailand implies two separate legal business bodies. As an alternative to subscribing shares in a foreign investor’s operating business, a second company – the holding company in Thailand – is opened to own most of the shares of the foreign investor’s operating business. This holding company has a much lower registered capital (only THB 100,000, the equivalent of USD 2,830) compared to the operating business, serving the only purpose of holding most of the shares of the operating business as an investor.

Therefore, the foreign investor needs to associate with a Thai investor who is able to reliably finance 51% of THB 100,000, rather than 51% of more than THB 1,000,000 (approximately USD 28,300). The Thai holding company necessitates a loan from the foreign investor’s head office to finance the acquisition of most of the shares of the operating business. Through a loan and warranty agreement, these shares are warranted to the head office as a collateral for this loan.

The operating business will be owned with 51% by the holding company in Thailand and 49% by the foreign investor. The holding company will be owned with 51% by the Thai investor and 49% by the foreign investor. Consequently, both companies will be registered as Thai companies and they will be able to involve in business activities.

Foreign investors can rely on our immigration lawyers in Thailand for legal advice concerning this matter.

What kind of Thai investor is needed for a holding company in Thailand?

According to the Thai legislation, partaking with a Thai shareholder who owns shares on behalf of someone else without having financed with his or her own funds (“Nominee Shareholder”) is illegal.

Consequently, our lawyers in Thailand recommend finding a reliable Thai partner to associate with in your business endeavor. Nevertheless, it could be problematic to find an affluent Thai investor to form such an association through a holding organization in Thailand. It is important to know that a wealthy local investor is not necessary, being enough to find a trustworthy Thai party.

If you wish to know more about the conditions for immigration to Thailand before you look for a Thai business partner, we can assist you.

The main advantages of a holding company in Thailand

Opening a holding company in Thailand has increased its popularity because of the following two main reasons:

  • when an entity opens a holding company in Thailand, it enables business progress and expansion into new companies through domestic and/or foreign subsidiaries, which may be connected or not to the current activity;
  • an increasing number of affiliated firms with different organizations wish to have their stocks listed on the Exchange;
  • because it is not involved in economic activities, the Thai holding company will not need special permits and licenses;
  • the holding can be incorporated by foreign nationals and, although investment restrictions apply in certain protected business fields, holding securities is permitted.

In order to avoid problems that could arise because of contradiction among the lines of business of various companies from within a group, the Exchange has set special listing criteria for companies that have company-like structures and that invest in the local markets or abroad.  Besides assisting you with business incorporation, if you need practical help in other matters, the services of our agents are at your disposal. For instance, if you are planning to apply for a residence permit in Thailand, our agents can assist you. Keeping in view the fact that the Thai government issues a very minimum number of permits each year, it is important to get professional assistance while applying. 

Our lawyers in Thailand can provide more information on the current listing criteria. We can also help you with other relevant information about the treatment of securities. They can also handle the entire process of opening a bank account in Thailand.

Holding company listing requirements

Below, our team describes the main requirements set forth by the Stock Exchange for the listing of a holding corporation:

  • it has no significant operations and invests in local or foreign firms;
  • its revenue is derived from dividends;
  • it needs to pass the profit test and the market capitalization test;
  • it must have more than 50% stake in the core company;
  • the core company is not a listed company and it engages in its primary business field/core business.

Holding company taxation in Thailand

When opening a holding company in Thailand, investors will be interested in knowing more about the holding regime.

Our Thai lawyers list some of the key issues concerning the holding regime:

  1. Listing: a holding company that is listed on the Exchange is subject to an application fee of Baht 50,000, an initial listing fee, and an annual fee; please keep in mind that these fees can be subject to change;
  2. Dividends: in general, dividends are subject to full taxation in Thailand; dividends received from a Thai subsidiary by a Thai company that is not listed on the Exchange are subject to a 50% exemption; a 100% exemption can also apply in some cases;
  3. For local shareholdings, a Thai limited corporation or a listed firm is exempted from corporate income tax on dividends acquired from another limited organization, if it has held a minimum of 25% of voting stocks for a minimum of three months before and three months after the date of dividend payment without cross-shareholding; 
  4. For shareholding in alien subsidiaries, the Thai holding corporation is exempt from corporate income tax on dividends paid from the net profit, which is taxed at 15% in the country where the foreign subsidiary is localized. The Thai holding corporation is obliged to have held minimum 25% of the voting stocks for minimum six months prior to obtaining the overseas dividends.

Our attorneys in Thailand can provide more details on this subject.

There is no separate tax on capital gains. This means that income arising from the disposal of assets is treated as ordinary income that is subject to corporate income tax.

Tax losses can be carried forward for five years. There is no option to carry-back tax losses in Thailand.

The standard corporate income tax in Thailand is 20%.

Holding company incorporation in Thailand

Investors who open a company in Thailand for the purpose of holding shares in other legal entities, or other types of assets such as the intellectual property will need to follow the standard company registration steps.

The limited company is the most popular business form in Thailand, and it is also preferred by foreign investors. We list some of the most important steps for its creation below:

–          reserving the company name;
–          drawing up the company’s documents
–          depositing the capital;
–          registering the company.

At least 3 founders are needed to open this business form and they are the ones to submit the company’s Memorandum of Association. This is done within 30 days of receiving the approval for the company name.

The next step is for the company directors to sign the request for company registration within 3 months of the statutory meeting of the founders/promoters. This is an essential step and the registration of the holding company will not be complete without this meeting.

Special information for foreign investors

According to law, all foreign nationals doing business in Thailand or working here need to have a valid and proper visa (or work permit, as may be required).

This also means that foreign investors interested in opening a holding company will need a visa to remain in the country for the purpose of registering the company and acting as founders.

Our team can give you more details on the conditions for obtaining the visa, the required documentation, and how to apply before you travel to Thailand.

Opening a holding company in Thailand can be a suitable option for investors interested in entering the Southeast Asian market.

Our Thailand law firm can provide you further assistance on this matter. Please contact us if you need to know more. 

Our immigration lawyers in Thailand are able to answer all your questions if you wish to apply for a visa.