Doing Business In Thailand as a Foreigner
Chef LeeZ Thai Cooking Class Bangkok talks about Doing Business in Thailand as a foreigner.
Foreigners doing business in Thailand will find it very different than doing business in say North America.
First you need to understand what businesses Thailand permits you, a foreigner, to do. For example foreigners are not allowed to farm nor can they have an insurance agents licence, they can have an export company but not import/export company.
As in all business you need to know your competition and then judge if you are prepared to compete with them. If you get into say the bar business in Thailand and you are visibly successful you are then cutting into the various mafia’s profits. Are you prepared to pay their insurance fees even in the off season? If not you will have stolen vehicles parked inside your bar and if you don’t get the message you will likely receive a lethal dose of lead poisoning. If you get into starting a language school you are dealing with Thai immigration police and competing with national Thai language schools.
Corruption – exists in all countries and if you believe your country is corruption free then you are naive and should open your eyes. You don’t actually believe that the US President spends 2 billion dollars to run an election campaign for the 300,000 a year tax free salary and all expenses paid do you? Do you actually believe your elected officials who were funded by big business (the war machine, oil, car manufacturers) is not expected to provide work contracts and protection for their foreign interests to those supporting his/her campaign?
In North America business corruption is often disguised in the form of paid vacations (fishing cottages or ocean excursions) for business contracts granted as opposed to cash in pocket or it’s a paved driveway or it’s solar panel roofing, etc.
Here In Thailand it existed (prior to the military coup under Thailand’s democracy) openly and of course it still exists considerably reduced and less visible. Business without the proper paperwork can expect a weekly visit from the police for cash to ignore their existence. Many restaurant businesses run their tables out onto the sidewalk and even the street. These businesses will pay the police to allow them to continue to extend their business beyond the walls of their venue.
If you are caught with a personal quantity of weed it will cost you a trip to the ATM and 20,000 baht to not go down to the station and see the inside of a Thai prison. This fine represents 2 months of the police officers salary.
Police chief position I am told was a purchased position prior to the military coup and with each new police chief came an increase on the fees collected on his behalf to recover the cost of his acquisition. The military coup fired all police that were politically aligned and or reassigned them from high positions to nowhere places with nowhere jobs which cleaned up a lot of this. Many street vendors disappeared as the military police did not accept bribes.
Thailand elected Gov’t can assign Gov’t contracts to contractors (I understand that no bid bond or performance bond or sealed bidding system exists) thus a 1.5 km of road in Pattaya took 7 different contractors and over 7 years to widen and pave. Same job in North America would have taken 7 or less days. This makes being an elected official a very powerful person as he/she can assign all Gov’t contracts to go through his/her family who then select the contractor(s) also usually family which opens the door to rampant corruption.
Thai Schools offering English program or classes require foreigner teachers. To teach legally in Thailand foreigners are required to obtain a work permit and part of getting this work permit is proof of a university degree in their home country. I have personally known over 40 foreigners teaching in Thailand and none of them had work permits not even the teachers having taught at the same school for 3 or more years. If it was not for this corruption there would be no English teachers in Thailand. The schools get paid for their foreigner teachers from the Thai Gov’t Dept. of Education who requires a work permit from Thailand immigration. Yet the schools are getting paid so they can in turn pay their foreigner teachers (average $1000 U.S. for foreigner teacher far below the minimum legally required $1,600 U.S. to be paid to them) and very few foreigner teachers ever receive a work permit.
Chef LeeZ Thai Cooking Class Bangkok is registered and licensed with our local district office and does file its annual financials with the them and does pay the related taxes and thus when the police came around for their ignore money we simply pointed to our licenses and they never came back.
Foreigners can own only 49% of a Thai corporation the other 51% must be cash invested Thai nationals exceptions exist for Americans and huge multi national corporations. Your cash invested needs to be minimum of around $2,000,000 Baht. You need to employ 4 Thai nationals for each foreigner work visa. Watch out for workaround corporate set ups as they are just that and you could lose it all just like that anytime the Thai Gov’t should choose your corporation to review. If you are legally married to a Thai national then the 51% ownership issue is solved so long as the marriage stays together. Remember a cross cultural and cross language marriage is far more fragile than a marriage of the same culture and language. In a Thai marriage a foreigner must be aware of use of phrases common in the home country. Phrases such as “I Don’t Care” meaning it’s not important but to a Thai with limited vocabulary it means literally you don’t love them anymore. What is the failure rate of same culture same language marriages in your country? I’ll bet it’s around 80% in 5 years.
You, as a foreigner and all your foreigner staff will be deemed to earn a minimum salary of 50,000.00 baht per month and taxed accordingly approximately 10% on the first 500,000 annual. (Thailand minimum wage is 9,000 baht for 30, 10 hr. days).
You will require a work permit which requires a specific type of visa to be in place which requires a pile of paperwork including proving you are financially independent and actually don’t need to work while in Thailand before you can apply for a work permit which is a separate application with it’s own pile of paperwork. If your staff is heavy on foreigners your operating expense will be much higher than that of your Thai national corp. competition as they will have a “functioning working relationship” with Thailand immigration allowing them to operate without the proper foreigner staff visas in place and they will not be paying their foreigner staff the minimum monthly 50,000 required by law and that is something you will not be able to arrange.
To start a Thailand restaurant all you need to do is put up a table and chairs and you can be a restaurant. There is very little regulation on restaurants. No need to file for a business permit first. No need meet minimum kitchen requirements or bathrooms or flooring. Even being clean is pretty much overlooked as inspectors tell you when they are coming. Thus there is a very high rate of food poisoning and intestinal problems in Thailand especially so among foreign tourists.
Foreigners cannot own land so land development also involves Thai nationals as your 51% partner and the land is registered in their name. There is a special filing for the foreigner to be able to control the land if the Thai partners are not capable of doing so (death or illness), but you can never own the land. Much of foreigners land use is arranged by way of 30 year renewable leases. Most foreigners living here buy condo’s for this reason and or foreigner development compounds as the land ownership issue is properly handled.
Most foreigners rent their business venue and two huge differences exist here:
1) the landlord will charg eyou up to 700% more for your utilities than he pays for the Gov’t provided utility and
2) the landlord usually requires “key money” this is on top of your rent and deposits and for it you get the key to the door. The key money is never refunded. We found key money to be a common number near 2,000,000 baht (in our case the key money represented 12 yrs of rent or our total operating costs for many years) and was one of the reasons why for the first two years we looked for partners with existing locations before finding a location without key money. Landlords charging key money actually hope you will fail so you leave and they can collect key money from the next tenant. There are stories where the landlord owned property next to one rented out as a restaurant and having collected the key money moved a pig farm on the next door property, restaurant of course fails and pig farm is moved away before renting the property to the next tenants for the key money (so you can see how key money works).
There is a Thai con artist for every business scheme and hundreds of stories where foreigners have lost everything.
If your business is website reliant, as is a cooking school business or any tourist reliant business, you will not run a blog on it as the Thailand Gov’t is extremely sensitive to website conversation content. Chef LeeZ, in our first 6 months of business added a blog to our website and the first day of the existence of the blog someone asked us about the red shirt yellow shirt conflict and general safety in Thailand to which we replied not to worry and the next day our website was not visible from any search engine within Thailand for the next 6 months.
If your Thailand business is tourist reliant you will need Thai National staff with English skills and that in Thailand is a rare commodity and you will need to have a financial plan in place to respond to say a military coup that causes foreign countries to warn their citizens to not go to Thailand and tourism drops by 80% for perhaps a year.
Liability Insurance. Thai courts consider each person to be responsible for themselves and Thai culture is Non Confrontational and as such lawsuits for injury are virtually non existent. Example being sidewalks will have all kinds of hazards that do not exist in North America. Hazards such as broken sidewalk blocks, loose sidewalk blocks, holes in the walkway, awnings hanging at head level, tree stumps and roots in the middle of the sidewalk (left there because some deceased relative reside within the roots). Food poisoning is never taken to the courts and the restaurant owner is seldom if ever confronted so it’s perpetrators continue their poor habits and learn of their error by sudden lack of customers.
In our case our Thai cooking class students, being foreigners, are here for a limited time (vacation) and are for the most part coming to us on the last day of their vacation so if they were injured in class (10,000 + students with only 3 band-aide finger cut injuries) there is simply no way our customers would stay around to pursue an international lawsuit.
Superstition and Culture … Thai’s are extremely superstitious .. Your Buddhist staff will need a place within or near the business to make their daily incense and food and water offerings to Buddha. All Thai Nationals will require a picture of their King and or Royal Family be put where they can also place water and food offerings and not doing so will cause you staffing problems. Your staff will not work well with people of black or dark skin as white skin is beautiful and black skin can not be beautiful. Dark skin is also demonstrative of a person working outside and outside work is minimum wage work. In our new school location we had a tamboon (a celebration) including some 30 priests who came to bless the new school location and have the ghosts residing in the on premises tree stumps find their way to the next place before we dared remove the tree stumps. Even today superstition is preventing me from having doors placed in the school where I want them as they can not be across from each other and there can not be two doors on the same wall as that will cause money to go out faster than it comes in. Windows can not be in sets of 3 frames as the business will then fail.
Staff – As an employer you are in control – your employment application will include a picture and ask questions on age, sex, religion, skin color and any other question you desire and you can toss any application you don’t want to interview for any reason without fear of being sued. Most staff will come as a referral from someone you or some Thai person you trust and their suggested staff come vouched for and that means they will very likely be honest and hardworking for you ( a face thing). Having said this you will, as a foreigner, notice in such places as national grocery store chains there being 3 staff to every staff required in a North American grocery store. Wages are low here at $1 US an hour but requiring triple the staff is a headache. You need triple the staff as Thai’s don’t work well alone. They literally get lonely and go to work where they can chat half the day away. Thai nationals are pretty much a lazy bunch of people and as a result Chef LeeZ arranges work permits for Cambodians as contract labor so we do not have to deal with deductions and taxes and all that crap. We pay well above minimum wage and include extras like 4 paid days off a month, paid vacation days, paid for a 10 hour day every day even when they work only 6 hours and include a meal of anything they desire from within the kitchen (usually excesses from the class). Our staff have to work during the class. There’s no chewing the fat once class starts until it ends the goal of every class is to deserve raving Trip Advisor reviews as T A reviews are what drives our business. Chef LeeZ is Trip Advisors Thailand #1 cooking class every day since 2011 and holds Trip Advisor’s Earth 4 year cooking class review record.
True story, as we are personally familiar with it.. A Canadian female .. early 30’s came to help with teaching English to Thai’s and did set up a legal language education corp. using a well respected foreigner operated and managed Thai legal firm. The Canadian invested 100% of her assets. During the first year of operations she returned to Canada to deal with the passing of her father. When she returned to Thailand she found her Thai partner and their lawyer had the company restructured and she was no longer a part of it. Not only did she lose her life savings but she was also legally responsible for all the debt.
Funny story – foreigner takes a Thai partner and buys 50 pregnant cows the Thai national is to take care of the cows then sell the calves the following year. The foreigner returns from a trip to his home country and asks his partner how things are going. His partner says while you were away there was a flood and we lost half the cows. The foreigners says: “well that’s sad but at least we have half the cows.” The Thai national says: “sorry but it was your 50 cows that drowned all my cows got to high ground.” In the Thai’s driveway is a brand new Cadillac. Not a thing the foreigner could do about it as he legally can’t be involved in farming.
Corruption – If your business adventure is very large you will want to discuss it with Board Of Investment Thailand – BOI to arrange exceptions specific for your venture. If you need to finance your project you will find a number of sources of venture capital with large amounts of capital available but they are only interested in venture requiring 5 million plus US (my first venture was 30 + mil US being a water park) and the first thing I was told is find a local contractor to do your construction and he will know who needs a Cadillac and when they need it in order to when to keep your project on schedule and in talking with engineers I was told your projections need to include a padding of 20% for corruption costs. Then if your venture is considered viable you will almost certainly be able to finance it. I couldn’t get my mind around the corruption part of the business and didn’t pursue this venture.
Banking – Thailand banking practices just a few years ago were about 10 years behind North America – on line payment of bills has just recently become user friendly, on line collection of payments is not yet website developer friendly, In the past couple of years a Gov’t employee credit union type bank was swindled of all its funds by its top management. Chef Lee lost her life savings she had in a savings deposit with this bank, a meager 3,000 Cad but it represented 30 years of scrimping and saving. Others on the lost money claim report showed a number of depositors lost 100’s of millions Thai baht and they may never see any of the money again … so beware. In the last 4 years or so PayPal was allowed to come to Thailand and I believe it is the only viable on line payment system at this time.
It matters not what country you do business in there are always those that will knowingly take you for a ride, legally or as a con. So you need to be always aware of this and that is why each partner requires separate legal council. It is also the reason that lawyers kill more deals than they put together.
Chef LeeZ Thai Cooking Class Bangkok had different sets of 3 partners before breaking off on our own and all of the partners failed to uphold their end of the business agreement being promotion.
We are a foreigner and Thai national husband and wife team we did not need a corporation as I am over 50 and I am here on a retirement visa, not requiring a work visa, supporting my spouse in her sole proprietorship business endeavors and these two facts makes our doing business in Thailand much less complicated.
Today, 5 years on her own (no partners), Chef LeeZ Bangkok Thai Cooking Class is Earth’s Trip Advisor cooking school with the most reviews in under 4 years and has held Trip Advisor’s Thailand #1 school position every day since 2011!
This is mostly because Chef Lee BBA, my Thai wife, truly cares about passing on her cooking skills and knowledge and she teaches in a single class what takes 3 classes elsewhere and does so at Thailand’s lowest cost per dish learned and she includes added value for every student in the form of free unlimited access to Chef LeeZ online recipe book (a $12 cost to non students).
It’s a cultural thing but Thai’s appear to fail to understand the value of word of mouth advertising or the value of repeat customers and absolutely fail to address added value. It is so much so that if you become a regular customer of a Thai restaurant you will over time notice your portions ever shrinking until you quit going there.
Thai culture is about what’s called “face” and Thai’s get more face with the bigger their story is regarding how well they ripped off foreigners that day so they totally miss the boat when it comes to dealing with foreigners.
If your business is drawing on Thai nationals like MC D’s does then you change your product to be spicier, more mayo, more sugar, less cheese (80% of Asians are lactose intolerant) and you would put a fat boy (as round as is he is tall) poster outside your front door telling Thai’s by eating there they will get fat as Thai culture still accepts being fat as a sign wealth providing for unlimited food and having servants to do everything for them.
Chef LeeZ Thai Cooking Class Bangkok new, stainless steel, 10 burner, school location, opened May 20th 2016, is 300% larger than our old school location. It is thought to be Thailand’s largest Thai Cooking Class venue.
We’d love to see you in our Bangkok Thai Cooking Class the next time you are in Thailand.