Firsthand experience with Thailand’s Board of Investments
Bangkok’s changing. 5 years ago the startup scene didn’t exist. Last week, almost 800 tech entrepreneurs got together at Echelon, talking about their own businesses, plans for apps, massive companies, small businesses and general progress in the region which is all rather exciting. Investors large and small are eyeing the developments in South East Asia, and the tech industry here is starting to snowball.
I’ve always wanted to start my own business. No boss, no fixed hours, and I can put a focus on the parts of the job I really enjoy. What everyone keeps telling me is that isn’t the reality. The customer will quickly become your boss, no fixed hours actually means 80+ hour weeks, and as the boss I’m going to be doing everything myself. Not the sort of 4-hour workweek lifestyle Tim Ferris is selling, but the excitement comes with actually creating something of value, and for a true entrepreneur it’s all rather thrilling.
After finishing up my last contract here in Bangkok I’ve been steadily progressing towards getting my own company up and running. Trust me on this, starting a business in Thailand is tough! Once you start seeing traction on your idea it’s an exciting time, but as the brains behind it all you can’t always be selling. The biggest learning I’ve had since branching out on my own is that working “in” the business is very different to working “on” it.
The first hurdle is structuring your company. It’s relatively easy to create an offshore company in Hong Kong and Singapore, but personally, I wanted to do it locally, so I’m above board with taxes and work permits – and every part of my new business is legit. As a foreigner here in Thailand that means there are really only two options:
1. Opening a Thai Company Limited, where you need:
- A local Thai partner to own 51% of your business
- 2 million THB in registered capital (although it doesn’t need to be paid upfront)
- 4 local Thai staff per foreign employee to get a work permit
2. Getting promoted by the Board of Investment, which means:
- You can own 100% of your company
- You have flexibility on both the amount of registered capital, and
- There’s also flexibility on the local Thai staff you need to get a work permit
Of the two options, getting promoted by Thailand’s board of investments is the most interesting. I won’t need to work through a Thai partner, and the staffing flexibility means I can bring on new team members as I scale up operations (giving an ability to bootstrap the first few months until I have a steady base of clients on board). If you do choose to go with a Thai Company Limited, I’ve been told time and time again to make sure to at least have these two in place:
- There’s a pre-signed (but yet unnamed) share transfer agreement from the 51% local owner in your possession (just in case your partner decides to do anything amiss you can instantly transfer their shares).
- There’s a term in the shareholders agreement stating 100% of shareholders need to agree on any changes in CEO (so you can’t be ousted from your own company by the majority shareholder)
A good lawyer will be able to advise a few more things to keep in mind, so with all of this, please don’t take what I’m saying as legal advice. Make sure you get a Thai lawyer on board to help you set your company up correctly, or call the team at Sutlet.
Personally, I chose to tackle the BOI. I have a couple of friends who have successfully navigated the application process, so it made sense for me and my business to head down this path. The only downside is the time. It takes ages to even hear back on your submitted application (10 days in my case), and I am still waiting on interview timings to discuss my plans with the board of investments officers. Typically you can expect the timeline to look like this, however it fluctuates depending on the type of business and the amount of investment you’re making in Thailand:
- 8-10 weeks to get approved by the board of investments
- + 4 weeks to set up everything you need for the company
- + 8 weeks to get VAT approval (to be able to issue invoices)
Based on this, I’m looking at 5-6 months to get operational! If time is a factor for you, speak to a lawyer and go down the Thai Limited Company path. You’ll be up and running much, much faster.
When doing business in Thailand the devil is always in the details, so the next step was finding out everything I needed to know to get my business BOI promoted. At the time, I had a pretty good idea my intended business would be eligible, but if you’re worried speak to a company which specializes in helping companies get BOI approval. They’ll be able to tell you straight up, or at least do the research for you. Every single person I’ve talked to about the BOI wishes they brought a lawyer in to help earlier in the application process, as it would have made everything simpler. Again, this is up to you.
For me, I like the DIY approach, as it’s also a fun learning curve. Right now I’m tackling this on my own, but I’m lucky to have a great set of contacts (including the team at Sutlet) that are patient, helping out, and answer my questions (trust me there is a lot). If you want to do this yourself the best resource I can recommend is the Guide to the BOI. It’s quite technical, but the goldmine inside is the list of the specific businesses which are eligible for promotion. Have a look, and see if your business fits into one of these categories.
Once you determine your business is eligible for promotion, go online and fill out an application. It’s not rocket science, and if you’ve already put together a business plan, filling out the details is easy because the information the BOI asks for is more or less the same. So head here, make a profile, create an application and start filling it out. One tip, use Internet Explorer to lodge your application. The layout for the online application goes haywire in other browsers.
The first thing you need to choose is the category you’re applying for promotion under. This is very important, so make sure you choose the right category for your business (these are listed in the Guide to the BOI). If you get this wrong, you have to resubmit your entire application (and wait even longer to hear back a second time). I did this. Don’t do this.
As you follow through each section of your application, my advice is to give as much detail as possible. There are fields asking for information on your intended product/services, what a typical production processes looks like, who your end users will be, estimated market size and so on. Fill it all out, but you may also hit the same problem I did. Sometimes the online application just doesn’t let you save. For no apparent reason. It took longer than I care to admit to figure out it was because of the symbols I was using in the input fields, the dashes (-) and apostrophes (‘) were what was causing the error. So be careful as you cut and paste from your business plan, and get the formatting right.
Second, clearly outline how each product/service you’re offering ties back to the category you’re applying for promotion under. I made a mistake on this because I was too brief in what I gave to the BOI, and my initial application was rejected. I had grand plans in my head, but this didn’t translate across in the 2 sentences I wrote, and they (understandably) misunderstood my plans for my business. A few emails with the team in the BOI cleared this all up, and I’m now waiting on my interview session where I’ll run through my business in detail and (fingers crossed) get a green light to progress. I’d have done my interview already if I gave them all the relevant information they needed at the start, so make sure you spend the time to create a great application!
Another important part is forecasts for revenues and costs. You need these for the next three years, so make sure you do the calculations. The tricky one is working out depreciation costs, which needs to be done in line with Thailand’s Revenue Code. Either talk to your accountant, or the team in Sutlet and get their advice. If you’re interested in the details of calculating the depreciation yourself, its covered here, about halfway down the page in Section 4, point 11.
Once the numbers are in, fill out your headcount requirements, and choose the dates for your proposed interview. The dates I picked actually passed before I heard back from the BOI, so I wouldn’t worry too much on these at this stage. Just focus on getting all the relevant information into your application, and getting it submitted. Then you can kick back and wait to hear from the officers.
For me now, the officers I’ve been speaking to have advised I’ll have my interview scheduled by the end of the week, so stay tuned as I’ll cover everything that goes down in my discussion with them in my next post. Wish me luck!