PEEKING BEHIND THE CURTAIN OF OVERSEAS SHAREHOLDING RULES
We have a few questions about foreign shareholders holding shares in Thai companies, and what a company’s legal obligations are if the foreigner made a transaction. Please offer some suggestions.
1. If the foreign shareholder of a Thai company wants to sell his shares to another foreign investor by making a transaction outside Thailand, is this legal? What about taxes? And what are the company’s obligations?
2. Does a company have to pay dividends to foreign shareholders? Are there any tax concerns? (This company has been granted Board of Investment tax privileges.)
3. If we need to remit dividends to foreign shareholders, what documents are required by commercial banks and the Bank of Thailand for remittance?
4. In the future, if the company is in trouble and needs to close down, what do we do with foreign shareholdings? In other words, how do we remit the equity and retained profit to shareholders based in another country, and do we have to pay tax on this transaction?
5. If the company is in financial trouble and its liability is higher than equity, do the foreign shareholders need to take responsibility for the losses?
Thank you for clarifying the questions.
— Somchai
... Teera Phutrakul, CFP, Chairman, TFPA
1. Foreign investors can buy and sell shares in Thai companies as they wish. If your company is listed, then there is no capital gains tax. But if it is not listed, the foreign investor must declare his or her income with the Revenue Department. If you are the company’s share registrar, your function is purely record keeping. Just make sure the foreign ownership limit does not exceed 49% of total outstanding shares.
2. Withholding tax on dividend income is 10% across the board.
3. Remittance of dividend payments to foreign investors is quite straightforward. Any bank can do it.
4. First, you need to repay all your creditors, then go through asset disposal. Any remaining funds can then be paid back proportionately to the shareholders.
5. Assuming capital is fully paid up, shareholders’ liability shall be limited to the amount of the paid-up capital.