#  >  > Living And Legal Affairs In Thailand >  >  > Doing Things Legally >  >  The road to working for your own business legally

## 9999

For the last 2 years my mrs has been doing sporadic work from home for an overseas client, off the books and clandestine. Well, it started sporadic, and grew into her and a friend working almost full time on this stuff.

They must be doing something right as now their customer wants work done that would require an additional 4 full time employees.

We talked and agreed that they're best off going legit, starting a company, paying tax, and using the building blocks to expand in the same arena and seek new clients.

The business will be in mine and mrs name (mrs 51%, me 49%) and would like the option of selling or issuing shares and diluting our stakes if necessary or prudent.

I think this business has potential and want to be part of it. So looking to play the game until I can work for the company over here legally, in whatever capacity Thai Law allows me to.

So...I'm pretty clueless right now. Haven't even searched TV (hopefully don't need to go there). Now I know full well things can go tits up and there's a billion pitfalls etc etc, just after the facts and hearing from people with experience. Mrs is pretty clued up (she reckons) after speaking with lawyers, accountants, friends etc. whereas my consultations have barely gone past the bar stool.

And LT, mate, if you're reading this, you're the kind of guy that could probably be of some help here so hope you don't hold any grudges pertaining to our past shit-fight.

So, from what little I understand, here's what I think resemble the steps I need to take (no doubt a fishing net - full of holes - of a plan)

* Get a proper Visa. I'm married with a child but still doing tourist visas. Need to change this to a Non-B, marriage visa or something.

* Register the company as mrs being holding 51% and myself 49% of the shares.

* Sit idly by as the business thrives and after a year be able to show all records of a business employing more than 6 Thais and growing, in an industry actively advocated by the Thai Government (in this case out-sourcing office work from overseas).

* After a year go to the powers that be and show that I have been a silent investor, and justify a position in the company for myself that would enable me to further grow the business bringing foreign money into Thailand. 

* Get approved for work permit and whatever type of visa it is these farang business types that get around here legitimately have.

Dreaming? Maybe. But nothing to lose really, as the business is already there and profiting as soon as we register a company and open the doors. So why not have a crack?

There's a lot of specifics I need to cover, like what visa to get, how much does a work permit cost, how much does the business need to be making, etc etc.

Just tossing this out there for the TDers to chew on and no doubt take the absolute piss out of.

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## dirtydog

> I think this business has potential and want to be part of it.


Why bother, it is expanding without you so why even get involved in something you aren't involved in and is doing okay without you.

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## Ratchaburi

> Originally Posted by 9999
> 
> I think this business has potential and want to be part of it.
> 
> 
> Why bother, it is expanding without you so why even get involved in something you aren't involved in and is doing okay without you.


Yes the dog is right.
You can own your percent of the Company but don't work for it. 
If you get a work permit you will need a salary of 60,000b per month.
When it comes to renew your Visa they will look at Company profit.
If they think that the profit is to small they wil not renew your Visa.

 ::chitown::

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## jamescollister

OP Sme or BOI departments. If they think it's winner  they will help. Jim

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## 9999

> Why bother, it is expanding without you so why even get involved in something you aren't involved in


I expect it to expand more if I have an active hand in running it.

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## dirtydog

^So you have run your own businesses before then?

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## 9999

^ Well that depends on what you call 'running a business'. 

I have the ability to source the work, or a specific type of work anyway. The Thai ladys don't. The type of work is simple but also takes a certain amount knowledge overseeing it. I'm not gonna spell out my business model anyway, just after answers and feedback relating to the OP.

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## FarangRed

Go and see a lawyer a farang one if you can find, you don't even know what visa you need,

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## Butterfly

what kind of business ?

registering a company is not difficult, you would still need 2M THB to show though for the capital formation

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## forreachingme

Open an Off Shore company registered in Hong Kong, let customer pay in a Hong Kong based Bank account, transfer payment online from there, works for me in Phils, let all the employees be self employed under a contract from the HK company.

Cost less then 1'000 Us to register the company and bank account, will not solve your possible visa issue, but will solve you tons of Thai paper work !

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## FarangRed

> Open an Off Shore company registered in Hong Kong, let customer pay in a Hong Kong based Bank account, transfer payment online from there, works for me in Phils, let all the employees be self employed under a contract from the HK company.
> 
> Cost less then 1'000 Us to register the company and bank account, will not solve your possible visa issue, but will solve you tons of Thai paper work !


Thats to technical that is for him, he don't even know what visa to get

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## 9999

> what kind of business ?


In a broad sense it's 'out-sourcing'.




> registering a company is not difficult, you would still need 2M THB to show though for the capital formation


Care to elaborate on the difference between a company and a business (like a bar of cafe) in Thailand?

If I do this it needs to be able to expand, so I gotta show 2M bt for the kind of structure I want?

I'm pretty clueless about this in my own country so pretty much in the dark here.




> Thats to technical that is for him, he don't even know what visa to get


Yes, the dodgy boiler room formula is way too technimacal for the likes of me.

What visa do I get? Well that's pretty obvious really which is the end goal. It's going about getting there I'm more asking about. Your helpful contributions are appreciated FR. Seeing a lawyer never crossed my mind  :Roll Eyes (Sarcastic): 

This is just the infant stages of educating myself to the feasibility of what I want to do. It may be a pie in the sky. It could also possibly turn out well. 

Anyway TD is as good a place as any to start. There are people here in business who know the score. I certainly wouldn't go see some sleazy farang lawyer in Thailand completely in the dark first off the bat. That comes after being pwned by the TD bring down brigade  :Very Happy:

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## dirtydog

> If I do this it needs to be able to expand, so I gotta show 2M bt for the kind of structure I want?


For the work permit the company has to have a registered capital of 2mill baht.




> Care to elaborate on the difference between a company and a business (like a bar of cafe) in Thailand?


Your fuked, a company has ltd after its name, it has directors, it has a summary of the businesses it is involved with, many bars are held in company names, many are not.

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## 9999

^ So do I go business or company?

The 2M is referring to the capitalization of the company?

So if I have a company that 'they' perceive to be worth more the 2M bt I can proceed?

What if it's just a share of a muma-pop business that is worth 2M? Do they dish out work permits for those?

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## dirtydog

Company if you want to get a work permit, the 2 mill is the registered capital of the company, you choose how much the registered capital is, ie 2mill for one work permit, or more if you want 2 work permits, etc etc.

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## 9999

I just saw that a Thai limited company requires a minimum of 7 share holders. Is that true? I can't just starting a company with me and the mrs?

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## dirtydog

Think they brought the number of shareholders down to 4 or so, so you need two proxies, normally your lawyer and one of his staff, they sign their shares over to you.

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## 9999

I see you need to dump 500K or so from outside Thailand to show the 2M capital.

Are there options to turn a Thai Partnership business into a company?

If I invest (x) into a small partnership and after a year that business is now worth (y), if the increase in (x) and (y) amounts to capitalization greater than 2M for my share of the business, does that not count for a work permit?

This is something along the lines of how the mrs is trying to hash it out. Show good business income, turn it into a company and gets me a working permit. Probably way off the mark she knows more about it than me and I'm probably misunderstanding.

I'm trying to ignore everything I've heard from the Thais and mrs and figure it out.

After doing a bit of reading it seems pretty straight forward to set up a LTD company if you put up the cash, cross the t's and dot the i's. Especially if the business is legitimate and operable from day one. This wasn't the way we wanted to go about it but so far seems the easiest and possibly only way to go. 

It would be nice if we could roll with what we have and just build. We don't need any more capital as the assets and income are there. Parking 500K, or even a quarter of that in this would make no business sense. Is there a way around it?

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## 9999

> Think they brought the number of shareholders down to 4 or so,


Actually looks like it might be 3 now.

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## dirtydog

> I see you need to dump 500K or so from outside Thailand to show the 2M capital.


Where did you see that? That would mean the majority of Thai companies would never be able to employ a farang, if a company is registered with a 2mill capital it can employ a farang, regardless of where the money comes from.

Just set up a small partnership for your missus, costs around 2k baht, if at a later date you want to go ltd then that isn't a problem, use a lawyer for that and the work permit it costs around 30k baht, or do it yourself for under 10k baht.

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## Breny

Stay as you are 9999, if its not broke don't fix it.

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## Marmite the Dog

Your missus can work legit and only have to pay 3% tax.

If you dick around with this Ltd company bollocks it will cost you more time, effort and a lot more money in taxes.

Keep your head down and just help out in the background or with the overseas contacts.

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## Butterfly

with the LTD structure, you will have to pay VAT and fill out forms for taxes etc...

there is also another option, the "non-for profit association", basically all revenues are taxed at 3% regardless of costs. If you expect to have a high profit margin because of very low cost, the 3% is actually cheap compared to the regulatory 33% on profit.

A lot of small for profit organization uses that structure because of its simplicity and tax savings. It used to be a tax free situation too, but that was closed because too successful and abused by the locals, so now the 3% is taxed on revenues only.

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## Butterfly

> So if I have a company that 'they' perceive to be worth more the 2M bt I can proceed?


it's not perceived, money has to be deposited in the company account. Contrary to what others are saying, you can't get back the money because it's company capital. A lot of people do get the money back but they are using illegal and "fake" costs to justify the money back.

That money is not lost, the capital is needed as an equity tranches to absorb future losses and ensure the company will continue to operate. It's also needed to "setup" the company assets (buying machines, offices etc...) and usually capital needs to be "augmented" after a few years to reflect those new needs and growth of the company. 

Profits can be injected back into the capital to re-enforce the company self-sufficiency.

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## taxexile

^
i think 9999 is starting to get a headache.

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## pickel

A lot of bollocks in this thread. It's not as hard as Butterfly makes it seem. Get a law firm to set up the company, and an accountant to do all the tax work. Three nominees are required. You will have to pay income tax every month if you want a work permit (about 2500 baht) and you will also have to pay social security every month for 4 Thai staff (about 2,000 baht).

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## Tom Sawyer

> Think they brought the number of shareholders down to 4 or so, so you need two proxies, normally your lawyer and one of his staff, they sign their shares over to you.


Yeah they changed it. I think it's three now - two must be Thai. But the main point for the OP is he can't own 51% in any event (49% max I think - needs checking). It's a THAI company/business - just like all the rest, big or small. I think the suggestion of one poster that the OP just invest and not work (if that's needed to make it grow and then prosper providing a financial return) is good. Otherwise forget it like you said - if it ain't broke don't try to 'fix' it.

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## 9999

> t's not perceived, money has to be deposited in the company account.


They way I read it, capitalizing at 2M does not mean 2M in the bank. It means like 25% of that in the bank. Is the 2M not referring to the value of the entire company? If so, who decides it's value?

If I build a business from bugger all and in a year it has 500K in the bank, income and assets that would value it over 2M, and the business turned into a company, the capitalization is already there right?




> That money is not lost, the capital is needed as an equity tranches to absorb future losses and ensure the company will continue to operate. It's also needed to "setup" the company assets (buying machines, offices etc...) and usually capital needs to be "augmented" after a few years to reflect those new needs and growth of the company.


Probably the smart thing to do would be dump the 500K or whatever in and use it to buy an office outright as a company asset. An office I was looking at, one of those roller door jobs with sliding doors and windows, upstairs / downstairs going for 600K asking price in the area we want to set up. Of course then you need to also make sure you;re getting the best of it in the property market.




> If you dick around with this Ltd company bollocks it will cost you more time, effort and a lot more money in taxes.


That's always been my view. By the opportunity is there to be had and the costs, effort etc, will well be worth it in the unlikely event that we succeed in our business goals.

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## 9999

> Just set up a small partnership for your missus, costs around 2k baht, if at a later date you want to go ltd then that isn't a problem, use a lawyer for that and the work permit it costs around 30k baht, or do it yourself for under 10k baht.


This is what my mrs was talking about and this will probably be how we do it. Too easy huh - cheers Dawg.

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## 9999

> Otherwise forget it like you said - if it ain't broke don't try to 'fix' it.


What if it aint broke, but with minimal effort you could supe it up to be running 1000% times better for negligible cost and a bit of effort?

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## Butterfly

> It's not as hard as Butterfly makes it seem.


what I am saying is not hard to do, it's just the proper way to do it. Law firms can also fuckup by trying to cut corners and you might find yourself in hot water later if someone is looking for problem with you. I speak from experience.




> Is the 2M not referring to the value of the entire company? If so, who decides it's value?


good question, the value of the company is only a PAR value, so basically it's the total value of the shares. A company real value can be more than par value, but at this stage it is not important. Some people claims that they bring "Real" assets to make up for those capital shares at par, like IP, knowhow, their time or their computers etc... to claim this is part of the capital. IMO, it's not really clean for a small company, above all when it's not true.




> Probably the smart thing to do would be dump the 500K or whatever in and use it to buy an office outright as a company asset. An office I was looking at, one of those roller door jobs with sliding doors and windows, upstairs / downstairs going for 600K asking price in the area we want to set up. Of course then you need to also make sure you;re getting the best of it in the property market.


yes, the capital can be used to buy land or properties. A lot of companies do that, however the properties will be liable to special transfer taxes and capital gain tax when you sell. The good news is that you can "amortize" the property over the years, and that's a tax shield to deduct your profit from. The property will be part of the expenses.

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## Marmite the Dog

> it's not perceived, money has to be deposited in the company account.


25% of it has to be paid up, so 500k.

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## 9999

^ Is that still the case if the farang's initial investment has grown? 

Say you have 49% in an ordinary partnership that you initially invested 100K (and of course did no work). Now that company has grown and gas 10M bt float in the bank and worth (capitalized at) 50M bt. The ordinary partnership then becomes a ltd company (still dubious on this process), does the farang still need to bring money in to get a work permit?

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## 9999

> however the properties will be liable to special transfer taxes and capital gain tax when you sell.


Surely the saving on dead rent money would cover that if over a reasonable amount of time, provided your property value goes up a little. Certainly it's the only way I could justify such a cash injection into this venture.

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## Marmite the Dog

> The ordinary partnership then becomes a ltd company (still dubious on this process), does the farang still need to bring money in to get a work permit?


I'm pretty sure the money can come from anywhere. The only money brought in from overseas that matter is when you buy a condo and you can get a tax break, isn't it?

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## 9999

^ Google told me the 25% of the 2M needed to be wired from os. I don't think this is the case though. That is more for insta-front companies all the cashed up old guys over here have I think.

Like pay some lawyer 80K, wire him 500K and wallah, company and visa.

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## nidhogg

Cant be arse to read through.

try this:

http://www.mfa.go.th/internet/attachments/103.pdf

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## Butterfly

I think the wire from overseas is for Money Laundering reason and to protect other shareholders in the company from farang dirty money

not sure if it's really implemented though, would be interesting to see

unless you have "official" income here as a farang, they might assume that money made here in Thailand is illegal, and for that reason, you can't use that for capital formation in a Thai company, it would be regarded as "cleaning money" basically

I am sure it must be the main reason for it, unless you have already official income here, they might ask for proof of overseas transfer

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## Marmite the Dog

^ Complete bollocks.

It assumes that a) Thais don't have any money or b) that they start up any Ltd companies.

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## 9999

> unless you have "official" income here as a farang, they might assume that money made here in Thailand is illegal, and for that reason, you can't use that for capital formation in a Thai company, it would be regarded as "cleaning money" basically
> 
> I am sure it must be the main reason for it, unless you have already official income here, they might ask for proof of overseas transfer


To date (going back 3 years) I've been transferring monthly from family members' accounts or a few other individuals in Aus, straight into the mrs Thai account. I haven't kept a Thai bank acc.

Realise now that this is a mistake and have opened a Thai bank account in my own name to get the monthly transfers. Not sure what they'll make of that and the legitimacy of it. We can use the story that I'm a trust fund brat (defo not the case) hence all the transfers from my mother and 'friends'. I don't hold any cash in Australia (or Thailand) in my own name.

It'll be a strange feeling being back on the grid, even if it is the Thai grid.

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## dirtydog

> What if it aint broke, but with minimal effort you could supe it up to be running 1000% times better for negligible cost and a bit of effort?


You would win the business man of the year award, reading this thread though it doesn't seem likely to happen  :Smile:

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## Marmite the Dog

> Not sure what they'll make of that and the legitimacy of it.


The Thais only care if it's leaving Thailand.

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## pickel

When I got a law firm to form my company, I never had to show them any financial information, or wire money to Thailand.

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## 9999

> You would win the business man of the year award, reading this thread though it doesn't seem likely to happen


I'll take the work permit over the trophy thanks.

Are you backing me to fail Dawg? Care to have a wager?

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## 9999

> When I got a law firm to form my company, I never had to show them any financial information, or wire money to Thailand.


Did you get a work permit Pickel? If so, what were the circumstances and what was required?

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## William

things may have changed since my time, but:

* as a foreigner, you cannot own 49% of any business (for example, you cannot own 49% of a farm). It pretty much needs to be in an unrestricted area - so this would be your first issue

* you do need to show the Thais how you have purchased your 49% share. This would depend on the capital value of the start-up. In short, if your money to start-up the company has been earned in Thailand, without an approved income generating visa, difficult questions would be asked

* a limited company would need at least 3 shareholders (in my day it was 7) - so a 51% / 49% spilt doesn't really work, unless you give someone else 1 share [and i would strongly advise against doing this as you would be a minor shareholder]

* any future dilution of a limited Thai company is not really that easy a process - but it really does depend on what area/industry - for example, a BOI or other investment exempt area would be easier - and not necessarily restricted by the same constraints 

but at the end of the day, it does fall down to what you are trying to achieve

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## madjbs

> A lot of people do get the money back but they are using illegal and "fake" costs to justify the money back.


There is no need to do anything illegal to get the money back. All you have to do is pay the 2 million back as a directors loan, the loan can stay on the books for as long as you like. The only risk is that if the company was to go bankrupt and it owed money, you could be taken to court to recover the 2 million baht.

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## William

^ not so easy mate - the Thai Supreme Court has ruled that directors' loans can be ruled as transfer pricing

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## madjbs

> * as a foreigner, you cannot own 49% of any business. It pretty much needs to be in an unrestricted area - so this would be your first issue


Yes, you can. There only a couple of business types where the percentage is lower, and I think they are to do with banking if I remember correctly.

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## madjbs

> the Thai Supreme Court has ruled that directors' loans can be ruled as transfer pricing


Since when? Law firms and accountants were using directors loans to balance the books to account for the missing capital when I last checked a few months ago.

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## pickel

> Originally Posted by pickel
> 
> When I got a law firm to form my company, I never had to show them any financial information, or wire money to Thailand.
> 
> 
> Did you get a work permit Pickel? If so, what were the circumstances and what was required?


Yes, I have a work permit. A 2 million baht company allows for one foreigners work permit. The lawyers that formed my company had staff accompany me to the labour dep't to get mine. All a very easy process.

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## madjbs

Anyhow, if you are doing work from overseas it would be hugely beneficial to do all the business through an offshore company to avoid paying any corporation tax.

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## William

> Originally Posted by William
> 
> the Thai Supreme Court has ruled that directors' loans can be ruled as transfer pricing
> 
> 
> Since when? Law firms and accountants were using directors loans to balance the books to account for the missing capital when I last checked a few months ago.


One of the last cases I worked on in Thailand - 2007 - was on this very issue. You cannot loan an amount at 0% - the Thai tax authority will deemed the loan at market rate - and redistribution of interest back to the director - was seen as transfer pricing of profit from the company.

I will admit that in that case the amounts were much larger than the amounts discussed in this thread, but the principle would probably apply.

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## jamescollister

You have all got me confused now and I have a Limited Partnership company. We just went to the SME Dept and an accountant did the paper work. No money was shown, but we owned the land and the small factory out right. There were loads of permits and licenses needed, that was the accounts job, with the help of the SME Dept. It was not a cheap deal though, from memory 3 major permits were needed to get the license to operate and each was 30,000 Baht and that was the cost not grease. All in all seemed straight forward, but I really don't know the in ins and out, just left it in the hands of those who are paid to do the job. Jim
As a PS I don't have a work permit, didn't move here to work.

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## madjbs

Yes that is correct, you have to charge the minimum interest rate stipulated by the revenue department, which is 5% I believe. I should have mentioned that in my first post.

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## William

> Anyhow, if you are doing work from overseas it would be hugely beneficial to do all the business through an offshore company to avoid paying any corporation tax.


Is this the case? 

In my day you could not have tax residents [180 days or more] of Thailand as directors of an offshore company in a double tax treaty company for the purposes of avoiding Thai tax. So if you have a Hong Kong company [double tax treaty] or Singapore company, or my favourite - Mauritius - then the directors of the company had to be resident there.

As i was leaving the Thai tax authorities were starting look behind the screen to look at where the real money was earned and spent - but that may have changed

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## Butterfly

> You cannot loan an amount at 0% - the Thai tax authority will deemed the loan at market rate - and redistribution of interest back to the director - was seen as transfer pricing of profit from the company.


makes perfect sense,

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## madjbs

Thai tax authorities would have nothing to do with you, keep all the money in an offshore bank account and just use the companies debit card to take what you need from the ATM. Make all payments to staff (who are self employed) from the offshore account, it is up to them if they declare their income or not.

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## William

> Thai tax authorities would have nothing to do with you, keep all the money in an offshore bank account and just use the companies debit card to take what you need from the ATM. Make all payments to staff (who are self employed) from the offshore account, it is up to them if they declare their income or not.


But you can only do this if the income was earned under the 1 year and 1 day rule, otherwise you would fall within the global earning rule.

or has this changed too?

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## Butterfly

> Originally Posted by madjbs
> 
> 
> Thai tax authorities would have nothing to do with you, keep all the money in an offshore bank account and just use the companies debit card to take what you need from the ATM. Make all payments to staff (who are self employed) from the offshore account, it is up to them if they declare their income or not.
> 
> 
> But you can only do this if the income was earned under the 1 year and 1 day rule, otherwise you would fall within the global earning rule.
> 
> or has this changed too?


nope, still the same

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## madjbs

Technically yes, but they would never be able check or link it to you personally. When was the last time you were taxed on cash you took out of your home country bank account via a Thai ATM  :Smile:

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## William

> Technically yes, but they would never be able check or link it to you personally. When was the last time you were taxed on cash you took out of your home country bank account via a Thai ATM


True - as far as I am aware the Thai tax authority has never investigated an average person on the street for tax evasion.

But as advice goes, we have advised the OP to:

* set up an illegal company,
* with illegal methods of payment and revenue

and told him that, really, it's up to his workers to make the declaration - which they would need to do if he wanted some form of work permit, etc.

Hell, why f***ing bother - resume normal positions if you asked me!

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## dirtydog

madjbs, did you read the op? He wants to set up a legal entity, not evade tax and commit other criminal acts.

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## madjbs

> * set up an illegal company,
> * with illegal methods of payment and revenue


Not exactly. 

Whether it was legal or not would depend on other factors as well. 

You could set it up perfectly legally if you wanted and still avoid paying most of the tax. Just leave the income offshore for a year then transfer it to your Thai bank. There might still be work permit problems but if you were just finding overseas clients for an overseas company you would probably be fine.

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## William

^absolutely true - [edit] as the post above mine has been edited I have deleted my response [/close edit]

best advice - see a lawyer if the amounts of revenue you are talking about are more than 2M; otherwise, do what most of us dream of an live off the missus!

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## madjbs

> not evade tax and commit other criminal acts.


Avoid not evade. He could declare all his personal income in Thailand if he wished. Or wait a year.

Only a fool would set up the company out of a tax free zone if they were doing all their business offshore!

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## Tom Sawyer

^Doesn't solve the work permit issue though does it? If he's "here" and doing anything related to the company (offshore or not) he needs a work permit, unless he claims he's here on "business" of his 'overseas' company. It all gets pretty dicey.

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## madjbs

Well it really depends on the volume of trade and if the work the OP was doing in Thailand would require a work permit or not.

If a work permit was really needed then you would just set up a Thai company as well to employ 4 staff in Thailand and give yourself a work permit. Then you would just keep the profits of the Thai company to a minimum while retaining most of the revenue in the offshore company. 

The volume of trade and the profits of the company would dictate whether the tax savings would be sufficient or not to cover the extra fees and hassle, and make it worthwhile.

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## Butterfly

another issue, why does he want ownership in that company if it's only for the work permit ? the girlfriend could own 51% and the others 49%

then he would still get the work permit as an employee,

no need to do silly overseas transfer,

private small companies never grow enough to warrant ownership, unless we are talking 10M THB profit each year for the next 10 years

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## Butterfly

also running a business in a "unstructured" environment without proper accounting might "hide" the real costs of the business, so real profits might be very small at the end after all costs are accounted for professionally.

keep in mind that most Thai confuse profits and sales, some farangs do also actually, so when they setup their company with all the costs being structured, they find out too late that they turning losses, not profits

You need proper accounting analysis before you open the company I would suggest,

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## madjbs

> private small companies never grow enough to warrant ownership


How did you work that out?

Why wouldn't you have equity if you could......

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## Butterfly

> How did you work that out?


the majority of small businesses are family owned and not generate enough profits to increase equity capital. This is particularly true in Asia, where profit margin are small and running the business is more of a lifestyle than an investment choice.

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## madjbs

And if the business grows, you will certainly regret not having that 49% in the future!

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## Tom Sawyer

I'd bet most small businesses with three or four employees even in Bangkok (think foot massage joints, cafes, beer-bars), are lucky if they can pull in 7 or 8,000 baht in revenue per day. If the four Thai staff get paid 1,000 - 1,200 total, that leaves you with around 6,000 baht. If rent is 20,000 per month + 6,000/mo water/power then that eats up another 1,000 per day (and certainly costs would be a lot more in a shopping centre or high-traffic area - though so would revenue). So that leaves you with 5,000 baht per day. Hardly worth the hassle is it?

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## Fondles

> private small companies never grow enough to warrant ownership


The "private small company" that my boss purchased a few moons ago put 60 million USD (NET)  into his pocket last year and that was just from the automotive side of the "company".

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## Butterfly

> And if the business grows, you will certainly regret not having that 49% in the future!


yeah, but he could join later when the business is more solid and proven instead of throwing 500k at risk with no expected return.

10% of something real is better than 50% of very little

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## Butterfly

> The "private small company" that my boss purchased a few moons ago put (NET) 60 million (USD) into his pocket last year and that was just from the automotive side of the "company".


sounds like it was more than a small private company,

anything making more than 30m THB per year in sales or 10m THB in profit, is more than a small private company by Thailand definition

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## madjbs

You don't have to throw 500k at it, you can capitalize the company with nothing, just don't run up any debts. Even if you did have to pay in the capital for real, it would be his girlfriend doing so anyhow.

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## forreachingme

> Yes that is correct, you have to charge the minimum interest rate stipulated by the revenue department, which is 5% I believe. I should have mentioned that in my first post.


If it is 5% annual base and for a time of 3 days only, comes cheap to put it in the books...

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## madjbs

Well it would be for as long as the loan was on the books, unless you actually paid in the 2 million for real. So I guess if you loaned back out the entire 2 million (which is unlikely), you would have to charge yourself 100,000 interest per year (which would go to your own company anyway). I'm not entirely sure thats how it works though, I am not an accountant.

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## Butterfly

> you can capitalize the company with nothing


for a farang investor during capital formation ? not sure if this is true,

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## Butterfly

> you would have to charge yourself 100,000 interest per year


and that would be taxable at the company level, so not sure if there is any savings at the end

the director debt thing is a stupid idea IMO, and not clean, something a Thai would do for cheating, not a good way to start a company

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## madjbs

Officially there must be 2 million baht capital per work permit, fully paid up. But if you show the cash capital as being loaned back out to a director on the balance sheet, then you don't actually have to have any of the cash in hand to show the 2 million baht 100% capitalisation.

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## madjbs

> the director debt thing is a stupid idea IMO, and not clean, something a Thai would do for cheating, not a good way to start a company


Complete rubbish. Their is nothing wrong or dirty with it, many companies do it. The only risk is that you are liable to 2 million baht which you probably don't have, if the company became insolvent and creditors took you to court to claim back the loan.

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## madjbs

> and that would be taxable at the company level, so not sure if there is any savings at the end


It's not about savings, it is about setting up a company and getting yourself a work permit in the case of not having 2 million baht in cash or equipment to capitalize the company properly. If you have the two million baht to hand then great, no need to do anything.

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## 9999

> if you are doing work from overseas it would be hugely beneficial to do all the business through an offshore company to avoid paying any corporation tax.


Good point. If all the business income is payments from overseas, are their any extra tax obligations (technically exporting labour product). Obviously this is beneficial for Thailand so I hope it's not a road block.

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## 9999

> a BOI or other investment exempt area would be easier


There's actually a chance our business model will qualify for BOI.

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## madjbs

> are their any extra tax obligations


It would depend on lots of factors such as, company structure, how you employ the staff in Thailand, whether you need a work permit or not etc.. 

You really need to talk to some decent lawyers and accountant about the best way to set it up, preferably one which has experience in companies operating offshore.

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## 9999

> Only a fool would set up the company out of a tax free zone if they were doing all their business offshore!


This is intended to be a Thai company, employing Thai staff, paying Thai tax. The fact the the business is coming from overseas is irrelevant. This is nothing like an 'off-shore' company, and the goal is to do everything legitimately to build a solid Thai business that will be saleable in the future.

These shady HK set-ups do not compliment the business model but cheers for the input.

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## 9999

> why does he want ownership in that company if it's only for the work permit ?


It's not just a work permit for the purpose of staying here. It's a work permit intended to allow me to legally do the work necessary to reach our targets.

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## madjbs

Well you could do both actually, build a legitimate solid Thai company while minimizing it's tax liabilities, and it wouldn't be "shady" but sensible. I think you will find that many companies offering outsourcing work from abroad operate similar structures around the world.

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## 9999

> You need proper accounting analysis before you open the company I would suggest,


Sure, I will do my due diligence. This thread is the start of it.

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## 9999

> And if the business grows, you will certainly regret not having that 49% in the future!


Exactly.

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## dirtydog

> build a solid Thai business that will be saleable in the future.





> Well you could do both actually, build a legitimate solid Thai company while minimizing it's tax liabilities, and it wouldn't be "shady" but sensible.


And on the sale when he shows bank statements from some off shore tax haven that will inspire confidence and trust in any potential buyer.

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## 9999

> I'd bet most small businesses with three or four employees even in Bangkok (think foot massage joints, cafes, beer-bars), are lucky if they can pull in 7 or 8,000 baht in revenue per day. If the four Thai staff get paid 1,000 - 1,200 total, that leaves you with around 6,000 baht. If rent is 20,000 per month + 6,000/mo water/power then that eats up another 1,000 per day (and certainly costs would be a lot more in a shopping centre or high-traffic area - though so would revenue). So that leaves you with 5,000 baht per day. Hardly worth the hassle is it?


No but when I'm looking at conservatively having 20 employees and those overheads are inflated. The business will pay the staff about half of what is paid into the business for the work they do. Think about that and multiply it a few times.

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## 9999

> yeah, but he could join later when the business is more solid and proven instead of throwing 500k at risk with no expected return.


That's something I had not thought of but worth considering.

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## madjbs

> hat will inspire confidence and trust in any potential buyer.


Like I said, it's very common for companies taking work from abroad to operate that way. Whether it would work for 9999's line of work I don't know, because he hasn't stated what it is.

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## 9999

> ou really need to talk to some decent lawyers and accountant about the best way to set it up, preferably one which has experience in companies operating offshore.


Sure, just want to be as clued up as possible before doing so. I'd rather not waste time with basics and get straight to the gritty stuff with those guys. There's some knowledge here at TD so this is a kind of free pre-session. Cheers Dawg.

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## 9999

> ell you could do both actually, build a legitimate solid Thai company while minimizing it's tax liabilities, and it wouldn't be "shady" but sensible. I think you will find that many companies offering outsourcing work from abroad operate similar structures around the world.


Fair enough, worth checking out. Do you have a link for a good starting point on this by any chance?

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## dirtydog

> Like I said, it's very common for companies taking work from abroad to operate that way.


I doubt that, first off when dealing with new customers there has to be trust, it comes down to, so your in Thailand, I am in America, and where do you want me to send the money? That doesn't instill trust, and that is just the beginning.

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## Butterfly

> The only risk is that you are liable to 2 million baht which you probably don't have, if the company became insolvent and creditors took you to court to claim back the loan.


which is by definition "dirty", it's not clean accounting, you are tricking the system, and like I said, not a good way to start a company.

there is a good reason why you need to have capital in a company, if you take it away immediately, it's saying a lot about the purpose of that company or the confidence you have into it. It's also sending the wrong signal to other shareholders.

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## madjbs

Again, you are missing the point. Some people don't have 2 million baht to leave in the company and therefore have little option but to take back the money until they can afford to pay it back in.

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## 9999

^ I think he gets the point. He's just saying it's a dodgy way of doing things. It also makes for messy accounting which is bad for resale. If someone doesn't have 2 Mill bt to invest then they're in no position to legitimately take this fast track route.

There must be a million ways to circumvent the system and use creative accounting to get a work visa or save on some taxes. This thread was to look at how to go about doing everything with complete transparency and having a squeaky clean company from day 1.

Anyway, input from all who contributed to this thread is appreciated. I have a much better understanding than a few days ago, and many comments have prompted me to look into certain key areas I need to know about. Would have taken much more effort if not for this discussion. Cheers fellas. It's about time to go see lawyers and accountants now.

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## madjbs

Directors loan account is a perfectly normal and legitimate section of any companies accounts and balance sheet. This method is just a way to comply with the regulations with minimum cash investment. The revenue department are used to seeing it all the time and find it acceptable.

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## Butterfly

> Directors loan account is a perfectly normal and legitimate section of any companies accounts and balance sheet.


for directors ? don't think so. Or did you mean partners ? directors in a corporation are to supervise the "company" objectives and management. Don't think for small businesses you would need that, it's usually for big organizations. And important director loans is a big red flag in corporate governance.

For the partners though, not directors (or maybe they are called directors in Thai laws, need to check), it's legitimate for partners to borrow or lend money to the company. Usually, as a shareholder, you will "lend" to the company capital to make it grow, not "borrow" to withdraw funds from it. If you don't have the cash for capital and start taking your capital share out of the company, while others might not, you are basically "abusing" your rights as a shareholders to the detriments of the company and other shareholders.

it's not because it's an accepted practice that it means it's justified in every sense,

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## Butterfly

> The revenue department are used to seeing it all the time and find it acceptable.


it's not a violation of tax or revenue department, but a violation of company formation laws

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## Tom Sawyer

It's all moot. If you don't have a trustworthy Thai "pooyai" partner you'll get screwed at every turn. That was the point several were making earlier on. All the accounting tricks in the world won;t work for you if you don't have a Thai pooyai on board. The farangs married into established hi-so or mid-so chinese-thai merchant families do ok. For (most) of the rest, it can be a real struggle.

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## madjbs

> but a violation of company formation laws


No it's not not, directors loan acount can either be in surplus (in case of investment in the company), or deficit. 

It is not a violation in any law.... :Roll Eyes (Sarcastic):

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## Butterfly

> directors loan acount can either be in surplus (in case of investment in the company), or deficit.


directors or partners ? again, not sure we are talking about the same thing

directors don't necessarily have shares in the company,

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## madjbs

Could be either. 

How a director's loan account works | Business Link

From the UK, but the same principles apply.

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## Butterfly

^ ok so that confirms what I am saying, Directors loan is a big red flag in good corporate governance, and it's an abuse of the system when they are indefinite or have no stated maturity. It would actually be a violation if it was in fact "abuse" of company capital, which is exactly what you are advocating here.

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## madjbs

Righhhht Ok..... :Roll Eyes (Sarcastic):

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## madjbs

Basically what I am saying is that taking the money back out of a small company as a directors loan when the only shareholders are yourself and your girlfriend and you have no intention of selling the business any time soon, is ok. If you have the 2million capital or cash to put in the company then great, all the better.

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## liveinlos

> ^ I think he gets the point. He's just saying it's a dodgy way of doing things. It also makes for messy accounting which is bad for resale. If someone doesn't have 2 Mill bt to invest then they're in no position to legitimately take this fast track route.
> 
> There must be a million ways to circumvent the system and use creative accounting to get a work visa or save on some taxes. This thread was to look at how to go about doing everything with complete transparency and having a squeaky clean company from day 1.
> 
> Anyway, input from all who contributed to this thread is appreciated. I have a much better understanding than a few days ago, and many comments have prompted me to look into certain key areas I need to know about. Would have taken much more effort if not for this discussion. Cheers fellas. It's about time to go see lawyers and accountants now.


1. Using a reputable lawyer with some power, they can get your around ever having to show the 2,000,000 capital requirements. Pay the lawyer and they will get it all done and set up.
2. Once you have the company, apply for your resident B visa. It is best you have the lawyer do all this paperwork at the same time and once again if they have the power, get the letter from the department of labor and everything else you need.
3. Will the business generate the required income for you as a resident B visa holder (60,000 thb per month) because you will be responsible to file and pay tax on that amount each month.
4. There is a major headache if you need to close the company down and cost involved to legally dissolve the company. Research all these costs now so that if the business goes upside down during the next protest or coup, you will know how much you are in for.

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## Simon43

You can also set up a Limited Company Partnership which needs a minimum of 2 persons, and 1 can be a foreigner.  But the Director/main share-holder must be Thai.  

I use this structure for one of my small hotels.  It cost 12,000 baht to register and tax is about (fcuk-all minus a large amount that my accountant thinks up).

The downside is that the foreigner is not in control of the business, but if your business is fcuked without your input, then you effectively have control by withdrawing your support.

Simon

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## 9999

> 3. Will the business generate the required income for you as a resident B visa holder (60,000 thb per month) because you will be responsible to file and pay tax on that amount each month.


Yes. After a year, with zero growth, the business will generate profit of more than 60K pm even after paying me a low 6 figure wage.




> There is a major headache if you need to close the company down and cost involved to legally dissolve the company.


One of the few things I know about business is to always have an exit strategy. The goal is to build the business and sell it in 5-8 years (or dilute to a minority share holder and perhaps non-executive director).

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## 9999

> if your business is fcuked without your input, then you effectively have control by withdrawing your support.


Without my input the business is non-existent. This is why I need to get legal.

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## madjbs

> 60K pm even after paying me a low 6 figure wage.


What he means is that you have to pay yourself a salary of 60,000 a month in order to get a work permit. The company needs to be making a profit after paying yourself 60,000 a month if you want to continue renew your work permit.

In practice, if you cant afford to pay yourself 60,000 baht per month at the start, you just need to pay the income tax on 60,000 to get the work permit.

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## Butterfly

> Yes. After a year, with zero growth, the business will generate profit of more than 60K pm even after paying me a low 6 figure wage.


before making those claims, make sure to include all your costs and revenue in some comprehensive analysis

too often there are hidden costs that have failed to be taken into account, and that can sink the profits and the rest of the business model, something you would typically see with Thai opening businesses. Don't listen to your girl friend for reporting costs, she probably forgot half of them, and women have a tendency to "minimize" or ignore certain costs when they are too high  :Smile: 

there is also the Cash Flow issue, hence the need for the 2M THB capital, as a company you have certain payment obligations to do on a monthly basis. If you don't have revenues for a few months for whatever reasons, you would still need to make those payments without delay, and that can be very annoying and stressful, because you need to "feed" the company with Cash, and for a small personal business, it can be an important cash draw. This is particular true when it includes also your personal cash flow. This is why most small companies closes, it's not necessarily the lack of clients or the business model, it's often the lack of cash flow to continue to operate during a small downtime.

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## Fondles

> Originally Posted by 9999
> 
> 60K pm even after paying me a low 6 figure wage.
> 
> 
> What he means is that you have to pay yourself a salary of 60,000 a month in order to get a work permit. The company needs to be making a profit after paying yourself 60,000 a month if you want to continue renew your work permit.
> 
> In practice, if you cant afford to pay yourself 60,000 baht per month at the start, you just need to pay the income tax on 60,000 to get the work permit.


When did it raise from 50k to 60k ?

I actually thought the minimum specified "salary" was related to obtaining an extension on your permission to stay stamp and not for actually gaining a work permit, volunteers by definition do not get paid a salary yet they are required to possess a work permit to be able to "volunteer" to work or is there a special exemption for volunteers ?

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## Thetyim

^
"A foreign employee must have paid personal income tax of at least 18,000 Baht in the previous personal tax year or if the foreign employee has not worked in Thailand previously, documents for potential employers confirming that, the foreign employee will obtain income in Thailand of at least 50,000 Baht per month for an employee who is single and 60,000 per month for a married person, must be presented."

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## Fondles

> ^
> "A foreign employee must have paid personal income tax of at least 18,000 Baht in the previous personal tax year or if the foreign employee has not worked in Thailand previously, documents for potential employers confirming that, the foreign employee will obtain income in Thailand of at least 50,000 Baht per month for an employee who is single and 60,000 per month for a married person, must be presented."


Cut and paste from Thai Visa ?

Must be salary exemptions in place for Volunteers then.

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## Thetyim

^
I always thought the minimum wage for a work permit depended on nationality.
50,000 for European and 60,000 for USA but I might be wrong

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## madjbs

Actually you are right, I think it is for the extension of a buisiness visa, not the work permit which you need a salary of 60,000 for. As the OP has a familly here he has other options for the visa.

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## madjbs

And apparently the salary requirement was reduced to 50,000 in 2006. Also, if you are married to a Thai they only require 1 million baht capital and 2 Thai staff for the work permit.

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## Ratchaburi

> And apparently the salary requirement was reduced to 50,000 in 2006. Also, if you are married to a Thai they only require 1 million baht capital and 2 Thai staff for the work permit.


 
I have 6 staff & 25 employees , last year Immigration told me that I need to have 
more Staff in the office.
Staff do not earn you money it is the Employees that earn you money

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## madjbs

Sorry that doesn't make sense. As long as they are working for your company full time, it does not matter if you call them staff or employees. You only need 4 of them per foreigner, unless you are BOI sponsored.

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## 9999

> What he means is that you have to pay yourself a salary of 60,000 a month in order to get a work permit. The company needs to be making a profit after paying yourself 60,000 a month if you want to continue renew your work permit.


KK gotacha. So I have the wage covered and the 60K profit pm over a year would make the business capitalized at 2M+ I would think.

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## 9999

> before making those claims, make sure to include all your costs and revenue in some comprehensive analysis


Yeah I have tried to do so and been conservative by inflating running costs iin the draft plan / model I'm going off.





> too often there are hidden costs that have failed to be taken into account, and that can sink the profits and the rest of the business model, something you would typically see with Thai opening businesses. Don't listen to your girl friend for reporting costs, she probably forgot half of them, and women have a tendency to "minimize" or ignore certain costs when they are too high


I hear ya. This is all part of due diligence. Will defo be prudent about that costs are there to run the business that I could never be told about. Need to avoid getting slapped with random bills that were never account for. I will make a stance with the mrs on this.

STarting as an ordinary partnership would probably make the 'hidden cost' factor you brought up easier to be on top of until we go ltd.

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## Tom Sawyer

> if you are married to a Thai they only require 1 million baht capital and 2 Thai staff for the work permit.


Didn't know that little nugget. Link?

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## William

> And if the business grows, you will certainly regret not having that 49% in the future!


very true; but at the same time, he may grow to regret not setting the company up properly in the first place as he sees his 49% being diluted to new shareholders to the benefit of the 51% shareholders on the back of such success.

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