A business from Tokyo to Bangkok: What could possibly go wrong?

Chapter 2: Why Can’t My Japanese Employee Work Here?

After several online meetings and planning sessions with the Lex Bangkok law team, Ken settles on a plan. He will start a Japanese food manufacturing business, producing ramen noodles and ready-made sauces. He will use a Thai limited company and apply for BOI promotion, because manufacturing of this kind qualifies far more easily than a restaurant.

Next, he prepares to send some of his Japanese employees to his office in Thailand, including the Chef and the Waiter. Months of preparation pass, and his employees are finally ready to set off. Then, a month before departure, he realises something important. He never checked the work permits and visas his employees need in order to work in Thailand.

Visas, work permits and how they connect

Like other countries, Thailand regulates foreign nationals who work there. In general, they need work permits, the relevant visas, and the company itself needs the appropriate licences and registrations. Diplomats, government officials and certain approved roles fall outside this.

Even unpaid activity counts. Volunteering, for example, can amount to work and require a permit.

Simply attending a business meeting does not automatically require a work permit. However, the appropriate visa is still needed. Moreover, once the activity goes beyond attending and amounts to working, a permit may be required.

The visa and the permit are linked. Because the visa must come first, the permit also becomes invalid as soon as the business visa expires or ceases to be valid.

Requirements for employees and employers

Ken must also ensure that every employee meets a range of requirements before he applies for their Thai work permits. Not everyone can work in Thailand.

Those requirements can include a valid working visa, relevant work experience, a well-educated background and no criminal record.

Furthermore, Ken himself must meet conditions as an employer before he sends Japanese employees to Thailand. As a general rule for ordinary non-BOI companies, these cover the financial security of the firm and the staffing mix:

• 2 million THB of paid-up registered capital per foreign employee
• Minimum salary levels, which vary with the nationality of the employee
• A Thai-to-foreign staffing ratio of four Thai employees per one foreign employee

These are general criteria rather than rules that apply in every case. The BOI assesses promoted companies under its own conditions, and it commonly exempts them from the standard capital and staffing ratios.

Also, Thailand restricts some professional, diplomatic and selected job fields to Thai nationals. Ken must therefore make sure his foreign employees do not take part in those.

The company registration steps Ken followed

Moreover, Ken should re-confirm that his company registration in Thailand is complete before he applies for any permits. Without complete registration, he cannot bring foreign employees such as his Japanese food technologists into Thailand, and he cannot obtain their work permits.

Registering the company itself takes only a few days once the documents and shareholders are ready. However, BOI promotion and the other licences a food manufacturer needs may take several months. Ken should therefore start the whole process roughly a year, or more, before he actually opens.

These are the steps Ken took for his company registration:

1. Reserve the company name. Ken’s lawyer had to check that the name was available in Thailand, meaning it was not already in use, and then reserve it.
2. File the Memorandum of Association. Two or more promoters, who are the initial shareholders, must sign the MoA and file it with the Department of Business Development (DBD). It must include the necessary business information, such as the registered capital, the share division and the registered address.
3. Hold a statutory meeting. At this meeting, the promoters and share subscribers adopt the articles of association and appoint the directors and the auditor. In practice, it often takes place on the same day the MoA is filed.
4. Register with the DBD and open a bank account. The directors must apply for registration within 3 months of the statutory meeting, in accordance with Thai law. The corporate bank account follows once the company exists, and before operations begin.
5. Apply for the company tax ID card. This goes to the Revenue Department within 60 days of incorporation. If annual revenue exceeds 1.8 million Thai Baht, the company must also register for VAT within 30 days of passing that threshold. In practice, VAT registration is also needed earlier if the company intends to apply for work permits.
6. Register as an employer. Once the company hires its first employee, it must register with the Social Security Office within 30 days.

Chapter 3: Advice From What I’ve Learnt So Far

After investing in the Thai market and hiring employees, Ken learnt several lessons. He also found major differences from the Japanese market that he had to understand before operating. Regulatory differences between Thailand and Japan are difficult to grasp without a lawyer. Moreover, underestimating the complexity of Thai law can cost far more money and time than expected.

Accuracy and deadlines decide the outcome

Firstly, MoA documents and procedures must be accurate, and you must complete them strictly within the time limits. Capital requirements per foreign employee, the 3-month registration deadline after the statutory meeting, and the registered address all follow a prescribed form.

Missing a step or submitting incorrect information carries a real cost. The company may have to restart the registration process from the first stage, which is name reservation, or the authorities may simply refuse the documents.

Again, always expect a BOI application to take six months or more, and plan your time frames well. Company registration in some countries, such as Japan, can take as little as 2 to 4 weeks.

Language, risk and the right advisers

Furthermore, language barriers created their own problems. Much like companies in other foreign markets, Ken’s company struggled to structure its rights and understand its risk margin in Thailand.

This is where a Thai law firm that provides Japanese or English support becomes necessary for successful operation. With a clearer understanding of risk margins and business structure, Japanese businesses can avoid legal risks and misunderstandings of Thai law. Investment law, labour law, trade marks and copyright all matter here.

If the law firm also provides accounting and financial services in Japanese, running a business in Thailand becomes smoother still. Ken receives full, well-rounded legal advice, from starting up a company through to continuous legal consulting, long-term tax planning and property protection. Meanwhile, business managers can keep working in Japan and rely fully on certified professionals in Thailand.

Frequently Asked Questions

This article provides general information on doing business in Thailand and does not constitute legal advice. Requirements vary with the activity, the structure and the profile of each investor. Obtain advice on your specific position before acting. Official guidance is published by the Thailand Board of Investment and the Department of Business Development. Further background is available in our guide to foreign ownership in Thailand.