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What are the requirements for starting a business in Thailand and Singapore for foreigners? And how do these two countries compare as bases for headquarter.
Hello! Thanks for your question about the requirements for starting a business in Thailand and Singapore for foreigners, and how these two countries compare. The short version is that I was able to find and have created an outline of requirements for starting a business in both these locations, including financial requirements, necessary business and tax registrations, and other legal requirements. Additionally, per your query on the requirement of businesses in Thailand to be part Thai owned, while foreigners in Thailand can own a business independently, they face complex restrictions on what type of businesses they are able to own as well as requirements for who they can employee. In Singapore, while there are some restrictions on what type of businesses foreigners can own, they are fairly straight forward and somewhat less restrictive. Below you will find a deep dive of my findings.
METHODOLOGY
In order to answer this question, I consulted government websites, international business news sources, legal resources, economic data, and the websites of the various business departments of these locations. Per your request, I also consulted resources that compare and rank various countries for suitability for starting and operating a business.
THAILAND
RESTRICTIONS FOR FOREIGN OWNED BUSINESSES
Many of my sources suggest that Thailand is a challenging place for a foreigner to start a business. The key thing to understand as related to starting a business in Thailand is the gamut of restrictions under the country's Foreign Business Acts and Alien Business Laws, which restrict the type of businesses that can be started by non-Thai citizens.
The Foreign Business Act restricts businesses based on three categories which they refer to as Annex 1, 2, & 3, with each category having separate legal exemptions and license restrictions. Annex 1 are business categories that foreigners can generally not engage in at all, and include newspaper publishing, radio or television broadcasting, rice farming, arable farming or orchard farming, rearing livestock, forestry, fisheries, medicinal herb extractions, trading Thai antiques, manufacturing Buddha images, and real property trade.
Annex 2 are businesses that require special license and approval, and generally have to be at least 40 percent Thai ownership. They include businesses concerning national safety and security, firearms or weapons manufacturing, domestic transportation, businesses “which have an impact on art, culture, customs, local handicrafts”, wood carving, manufacturing of silks, musical instruments, gold, silver, bronze, and lacquer products, or manufacturing products related to Thai culture or Thai art. Also included are businesses impact natural resources, including cane sugar production, salt farming or mining.
Annex 3 categories require special approval from the Foreign Business Committee, but as a whole are generally are completely restricted to foreigners, as Thailand sees this categories as ones where Thai businesses are not yet developed enough to compete with foreign businesses. These include rice milling and manufacturing of rice flour, plantation forestry, manufacturing plywood, wood veneers, and lime, accounting services, legal services, architectural services, engineering services, construction, advertising, hotels, tourism, food and beverage sales, plant cultivation, and a range of service businesses.
As you can see, there are quite a few categories of businesses that are not allowed to be foreign owned, narrowing down potential choices for foreign entrepreneurs. However, it is noted that outside of the categorical restrictions, US citizens in particular are more easily allowed to own 100% of a business based in Thailand due to the Amity Treaty between the two companies, which makes US citizens exempt from many of the Alien Business Laws that make applying for foreign business permits without partial Thai ownership challenging for some foreigners. However the exemptions are at the discretion of the Thai government and subject to change.
BUSINESS REQUIREMENTS
One of the key requirements for foreigners starting a business in Thailand is that there is a required minimum capital of two million Thai baht/ $65,000 (USD). This financial requirement may be higher for businesses in some categories. Additionally, registration and legal fees to set up a Thai business are estimated to be around $3,000, and US companies that are registering using Amity treaty exemptions are required to pay an additional $1,320 for special certification.
Foreign business are also generally required to hire a certain percentage of Thai workers depending on type of business, as well as providing a physical workspace as the Thai government does not yet recognize the validity of remote/location independent work.
Once the basic requirements are met, the steps to starting a company involve reserving a business name with the Department of Business Development, depositing paid-in capital in a Thai bank, holding a statutory meeting that meets national requirements, obtaining a corporate seal, getting approval for for memorandum of association, and applying and registering the company as a legal entity. Companies employing one or more people are also required to register employees for social security and workers’ compensation insurance at the Social Security Office. Companies are also required to register for Value Added Tax (VAT) at the Revenue Department.
SINGAPORE
BUSINESS REQUIREMENTS
Singapore on the other hand is in the top ten places globally for starting a business, with the requirements for a foreigner to start a business being somewhat straightforward. To start, the key requirement for a company is to have at least $50,000 in paid capital.
Foreigners are also required to apply for an EntrePass, the registration required for foreigners to start and operate a business in Singapore. This is applied for via the Ministry of Manpower (MOM). Similarly, any foreigners who will be working as employees are required to apply for Employment Passes from MOM. EntrePasses must be updated every two years.
Additionally business registration is required via the Accounting and Corporate Regulatory Authority (ACRA), which is available online. Company name search, incorporation, and filing for a tax number can all also be performed online in Singapore. Business owners are also able to purchase a national online business profile when registering with the ACRA, after which the ACRA will issue a notice of incorporation via e-mail.
RESTRICTIONS FOR FOREIGN OWNED BUSINESSES
A company is required to meet one of four qualifications to receive an EntrePass; it either has funding from a Government-accredited VC or business angel, holds an intellectual property, has research collaboration with A*STAR or a university, or is an incubatee at a Government-supported incubator. Thus the following companies would not be eligible for foreign ownership: coffee shops, food courts, bars or night clubs, massage parlors, or employment agencies.
SINGAPORE VS. THAILAND COMPARISON
When comparing Singapore and Thailand as potential bases for a business, it may be most valuable to look at the economic prosperity in both regions. Singapore is highly urbanized and is the worlds fourth leading financial center and has the third highest per capita income in the world, whereas the average income in Thailand is low and there is still a high level of economic challenges. In fact, the average income in US for Singapore is $52,090, compared to just $5,620 in Thailand. While Thailand does generate quite a bit of revenue from the tourism sector, most of these businesses are limited to Thai nationals.
Additionally, Singapore was ranked second in the world for doing business and sixth for starting a business, whereas Thailand ranked at 46th in the world for doing business and 78th for starting a business. These rankings take into account a range of factors like registering property, construction permits, electricity/utilities, paying taxes, enforcing contracts, and trading across borders. It’s also noted that Singapore is considered to have less corruption compared to many developed country, whereas Thailand ranked low in both enforcing contracts, protecting investors, and resolving insolvency.
So in summary, Thailand appears to have a great deal more restrictions for foreign nationals starting a business than in Singapore, with Singapore's registration process and requirements much more straight forward as well. Business ownership in Thailand is not limited to Thai nationals, but many business categories are restricted or off limits for foreigners. Overall, based on both legalities and economics, Singapore appears to be a more advantageous location to start a business. Thanks for using Wonder! Please let us know if we can help with anything else!