Thai Business partnerships are a common form of enterprise, particularly for foreign investors seeking to enter the Thai market. The legal structure of partnerships in Thailand is governed by the Civil and Commercial Code (CCC) and is classified into three main types: unregistered ordinary partnerships, registered ordinary partnerships, and limited partnerships. Each type carries different liabilities, tax implications, and regulatory requirements.
Foreigners engaging in business partnerships in Thailand must also consider restrictions under the Foreign Business Act (FBA), taxation issues, and compliance with Thai business laws. This guide provides an in-depth analysis of Thai business partnerships, covering legal structures, liability considerations, taxation, registration procedures, and strategic challenges.
1. Legal Framework for Business Partnerships in Thailand
Business partnerships in Thailand are regulated under:
✔ Civil and Commercial Code (CCC) – Defines types of partnerships, rights, and liabilities.
✔ Foreign Business Act (FBA) B.E. 2542 (1999) – Limits foreign ownership in certain industries.
✔ Revenue Code of Thailand – Governs taxation of partnerships and corporate entities.
✔ Department of Business Development (DBD), Ministry of Commerce – Responsible for business registration and compliance.
Understanding the different partnership types is crucial for choosing the right business structure in Thailand.
2. Types of Business Partnerships in Thailand
2.1 Unregistered Ordinary Partnership
✔ Formed by two or more individuals or entities conducting business together.
✔ Not a separate legal entity, meaning that partners are personally liable for all debts and obligations.
✔ No requirement for formal registration with the Department of Business Development (DBD).
✔ Subject to personal income tax (PIT) rather than corporate tax.
✔ Ideal for small-scale businesses and professional services.
Risks:
❌ Unlimited liability – Each partner is fully liable for the debts of the partnership.
❌ Difficult to raise capital – Lenders prefer registered entities.
2.2 Registered Ordinary Partnership
✔ Similar to an unregistered partnership, but officially registered with the DBD.
✔ Considered a separate legal entity, which enhances credibility and allows contractual dealings in the partnership’s name.
✔ Partners remain jointly and severally liable for debts and obligations.
✔ Subject to corporate income tax (CIT) at 20%, rather than personal income tax.
Advantages:
✔ Provides a higher level of legal recognition.
✔ Easier to enter into contracts, lease agreements, and government transactions.
Risks:
❌ Partners still have unlimited liability.
❌ Regulatory and tax obligations increase with registration.
2.3 Limited Partnership
✔ Composed of two types of partners:
- General Partners – Have unlimited liability and manage business operations.
- Limited Partners – Have liability limited to their investment but cannot participate in management.
✔ Must be registered with the DBD, making it a separate legal entity.
✔ Subject to corporate income tax (20%).
Advantages:
✔ Limited partners have liability protection.
✔ Easier to attract investors compared to ordinary partnerships.
Risks:
❌ General partners still bear unlimited liability.
❌ Foreigners may face ownership restrictions under the Foreign Business Act.
3. Foreign Ownership and Business Partnership Restrictions
Under Thai law, foreigners face restrictions when forming partnerships in Thailand.
3.1 Foreign Business Act (FBA) Restrictions
✔ Unregistered and registered ordinary partnerships – If foreigners hold 50% or more ownership, the business is considered foreign and must comply with the FBA.
✔ Limited partnerships – If a foreigner is a general partner, the business is classified as foreign-owned and must obtain a Foreign Business License (FBL).
| Business Type | Foreign Ownership Allowed? | FBL Requirement |
|---|---|---|
| Unregistered Ordinary Partnership | Yes, but <50% | Required if ≥50% foreign-owned |
| Registered Ordinary Partnership | Yes, but <50% | Required if ≥50% foreign-owned |
| Limited Partnership | Yes, but foreigners must be limited partners only | Required if a foreigner is a general partner |
Strategies for Foreign Investors:
✔ Use a Thai partner to maintain majority ownership and avoid FBL restrictions.
✔ Apply for Board of Investment (BOI) promotion for certain industries, which allows 100% foreign ownership.
✔ Consider a joint venture structure with a Thai partner to comply with the FBA.
4. Registration Process for a Business Partnership in Thailand
Step 1: Partnership Agreement Drafting
✔ Partners must draft a written agreement outlining ownership structure, responsibilities, and profit-sharing.
Step 2: Register with the Department of Business Development (DBD)
✔ Unregistered ordinary partnerships skip this step.
✔ Registered ordinary partnerships and limited partnerships must submit:
- Application form
- Partnership agreement
- Identification documents of partners
- Business address proof
✔ Processing time: 3–7 business days.
Step 3: Obtain Tax Identification and VAT Registration
✔ Partnerships earning more than THB 1.8 million per year must register for Value Added Tax (VAT).
Step 4: Apply for Business Licenses (If Required)
✔ Certain industries (e.g., tourism, import/export, construction) require specific operating licenses.
5. Taxation and Accounting for Partnerships in Thailand
| Tax Type | Unregistered Partnership | Registered Partnership & Limited Partnership |
|---|---|---|
| Corporate Income Tax (CIT) | N/A (partners taxed as individuals) | 20% |
| Personal Income Tax (PIT) | Yes (progressive rate 5%–35%) | Only for distributed profits |
| Value Added Tax (VAT) | Required if revenue exceeds THB 1.8 million/year | Required if revenue exceeds THB 1.8 million/year |
✔ Limited partnerships file annual financial statements.
✔ Ordinary partnerships may file personal tax returns for each partner.
6. Challenges in Business Partnerships in Thailand
| Challenges | Solutions |
|---|---|
| Foreign ownership restrictions | Use Thai majority partners or apply for BOI promotion. |
| Legal liability of general partners | Consider a limited partnership to limit liability. |
| Business disputes between partners | Draft a detailed partnership agreement covering exit strategies. |
| Tax complexity | Hire a Thai accounting firm to handle CIT, VAT, and withholding tax. |
7. Conclusion
Thai business partnerships offer flexibility and lower setup costs but come with liability risks and foreign ownership restrictions. While ordinary partnerships are simple to establish, they expose partners to unlimited liability. Limited partnerships, on the other hand, provide partial liability protection but require strict compliance with Thai business laws.
Foreign investors should carefully assess ownership structures, legal requirements, and tax implications before forming a partnership in Thailand. By working with legal advisors and accountants, businesses can ensure full compliance and operational success in the Thai market.