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The consumer

Consumer Profile
Thailand has a population of 69.8 million people, out of which 51.3% are women. The median age in Thailand is 40.1 years in 2020, with 70.8% of people aged between 15 and 64, 12.4% over 65, and 16.8% under 14 years old. There is a strong emphasis on familial connections in Thailand, and often several generations will live under the same roof. However, the average size of household was 3.1 persons per household and only 9% of households consist of six people or more, while 18% of them are one-person households, 45% of houses have two or three people, and 28% have four or five inhabitants. 51.1 % of the population is urban. The main cities are Bangkok, Samut Prakan, Mueang Nonthaburi and Udon Thani. Unequal education quality is a big challenge, with poorer areas being under-served. Still, Thailand has an adult literacy rate of 93%, with 99% of the population having completed primary education. However, only 85% complete lower secondary education. Additionally, at the end of lower secondary education, only 50% have a minimum proficiency level in reading and only 46% in mathematics. The level of education of the majority of the population is incomplete secondary education (60%). Nonetheless, Thailand has successfully addressed much of its problem of low access to education that existed before the 1990s by increasing education enrolment rates at almost every education level. Indeed, the tertiary enrolment rate in Thailand is now among the highest in ASEAN.
Purchasing Power

GDP per capita PPP has reached USD 19,228 (latest World Bank data). Average wages in Bangkok are high compared to other areas of Thailand. The average monthly income per household in Thailand was highest in the Bangkok , which amounted to almost 40 000 Thai baht in 2019. While the overall country average is around 26 000 Thai baht. According to the Bank of Thailand, the private consumption index was 118 in May 2020, a downward trend due to the COVID-19 crisis. Even though poverty has also declined substantially, income inequality, as measured by the Gini coefficient (36.4%), declined less so in recent years. Thailand has the greatest wealth gap in the world. According to the Bank of Thailand’s research institute, the Puey Ungphakorn Institute for Economic Research, approximately 36 percent of Thailand’s corporate equity is held by just 500 people compared to the country’s current population. The institute’s report states that each of these 500 individuals amass some 3.1 billion baht (US$102 million) per year in company profits. This is compared to the average yearly household income of around US$10,000.

Though women earn a majority of the higher education degrees in Thailand, women also make less money and represent the majority of the country’s employees in the informal sector. On average, women make just 77% of the average male salary when performing the same work. Men in disproportionate amounts also fill positions of leadership – particularly in business –, and only 6% of members of parliament are women.

Consumer Behaviour
Rising incomes in the country are generating optimism in the population, and are increasing consumer demand for a wide variety of products. With the increase in incomes, consumers - particularly wealthier ones - have been spending more on experiences, such as eating out, and travelling. The luxury market has also been growing in the country. Price, quality and availability of service are the key selling factors in Thailand. However, consumers are willing to pay more for they favourite brands, and they rarely switch brands - even if the prices are better. Thai consumers are the most brand-conscious and brand-loyal in Southeast Asia. They also spend more than their neighbours, which is reflected in their higher debt levels. Moreover, consumers tend to indulge and make impulse purchases, instead of saving their money - which is typically seen in other Southeast Asian countries. E-commerce is growing fast, especially informal commerce - such as social media accounts that are makeshift shops. Revenue in the eCommerce market is projected to reach US$7,288m in 2020.

When it comes to luxury purchases though, consumers prefer to buy in person rather than on-line, as they say it is impossible for them to make any purchasing decision without seeing the product in person. While advertising is effective, word of mouth recommendations have a big impact on a brand's reputation, which consequently, can boost sales. Consumers also expect high quality customer support and after sales service, both of which are taken into account when deciding whether to make a purchase.

The younger generations tend to be interested in a healthy lifestyle, so they spend a lot on healthier food options and supplement products. Influenced by social media, they are also very appearance conscious, so they also spend their disposable income on the latest trends, gyms, cosmetic procedures, and plastic surgery. With a new economic strategy in 2018, the government of Thailand has decided to open country's market to collaborative platforms such as Airbnb and GrabTaxi.

Looking at the Asia Development Bank's (ADB) September forecast for the Thai economy, which is recovering from COVID-19, the situation for Thai consumers will be more complicated. According to Mintel’s Global Consumer research in July, Thais are much more concerned about the financial impact of COVID-19 on them and their families (63%), the economic impact on their community (56%) or life not being the same as it was before the pandemic (45%), than they are about their family getting sick (29%) or sick themselves (27%). Mintel research highlights that 90% of Thais chose convenience as a key driver, more than budget.
Consumer Recourse to Credit
With the continued economic growth in Thailand, consumer confidence has been rising, which has encouraged higher spending. As a result, the high level of household spending benefited consumer lending, especially credit cards, personal loans, hire purchase agreements and mortgages - making Thai consumers rely heavily on credit to finance their spending. Millennials are the biggest segment in consumer lending, consequently, consumer credit available through mobile banking are gaining popularity in the country. The market is highly competitive - especially in auto lending and credit cards - and consumer credit is expected to further grow in the upcoming years. The most common forms of credit - as well as the most delinquent debt - are car and motorcycle loans.
Growing Sectors

Financial sector, manufacturing, agriculture, fishery, automotive industry, IT, biofuel and biochemical, healthcare, food processing, and tourism.

Consumers Associations
Office of the Consumer Protection Board of Thailand
 

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Importing & Distributing

Import Procedures
All goods imported into Thailand must be reported to the Customs department. In order to register for the e-customs system, the importer (either as an individual or business entity) must already possess a ‘digital certificate’, an electronic signature file used to confirm the identity and authenticity of the sender of electronic documents.

Before importing the goods, it is necessary to check whether the goods require an import permit, and secondly, to ascertain whether the goods are considered "red line". A range of goods require import permits issued by different agencies prior to their arrival. For example, used motor vehicles and motorcycles require a permit from the Department of Foreign Trade, while imports of medicines and food supplements require permission from the Food and Drug Administration of the Ministry of Health.

General customs clearing procedures for both imports and exports in Thailand require the submission of a Customs’ export entry form or import entry form. The form should be accompanied by standard shipping documents, which include: commercial invoice, packing list, bill of lading/airway bill, and letter of credit. 
Some products may require import/export license and/or authorisation from relevant agencies. These include food products (processed or unprocessed), pharmaceuticals, medical devices, healthcare products, cosmetics, hazardous substances, animals, and some agricultural products. 

Thailand has already eliminated its requirement of a certificate of origin for information technology imports pursuant to the WTO Information Technology Agreement. The use of a freight forwarder to deal with import and export customs clearing in Thailand is highly recommended.
For more information, please visit the website of Thai Customs.

Specific Import Procedures
Licenses are required for the import of many raw materials, petroleum, industrial, textiles, pharmaceuticals, and agricultural products. Additionally, several products are subjected to import control:

  • Importation of processed foods, medical devices, pharmaceuticals, vitamins, and cosmetics require licensing from the Food and Drug Administration, Ministry of Public Health.
  • Importation of tungsten oxide, tin ores, and metallic tin in quantity exceeding two kilograms require permission from the Department of Mineral Resources, Ministry of Industry.
  • Importation of arms, ammunition, or explosive devices requires licensing from the Ministry of Interior.
  • Importation of antiques or objects of art, whether registered or not, require permission from the Fine Arts Department, Ministry of Education.  

Red line goods are those considered to be high risk or requiring extra certification and verification upon arrival, including foodstuffs, drinks, and plants.

Distribution channels
According to the National Economic and Social Development Council’s forecast before the pandemic, Thailand's economic growth would be around 2.5% for 2020. However, the overall Thai economy is projected to contract significantly by 7.1% due to the COVID-19 pandemic (World Economic Outlook Database, October 2020). The growth of the Thai retail industry has been largely driven by economic growth. Although the impact of the COVID-19 outbreak on the entire retail sector is high, with an estimated contraction of 5-10 percent for the first quarter of 2020, growth in Thailand's food retail sector is expected to be mild to moderate, with online food retail experiencing a rapid growth rate.

The Thai Retailers Association reported that Thailand’s retail sector in 2019 expanded by 2.8%, with a total value of approximately U.S. $116 billion. In 2019, grocery retail accounted for approximately 54% of total retail sales.

The retail food market structure continues to grow with hypermarkets, supermarkets, cash and carry and convenience stores serving different segments. The latter is continuing to gain market share while traditional retailers gradually decline. Modern food retailing accounts for approximately 70% of total retail sales as the flow of local shoppers has been diverted from wet markets and grocery stores to hypermarkets and supermarkets. Although supermarkets have fewer numbers of outlets compared to larger hypermarkets, their influence on the lifestyles of urbanised Thais, expatriates and upper-income communities has been significant.

Most investments have come from the leading international retail chains such as, among others,  hypermarket UK-based Tesco with its Tesco Lotus stores, and cash and carry Netherlands-based Siam Makro. Locally run supermarkets and convenience stores also have increased in numbers and include stores such as Villa Market, Tops Marketplace, Foodland Supermarket, and 7-Eleven.

Most food retailers recently modified their marketing strategies by expanding their private label product offerings, instituting money promotions, providing discounts and starting loyalty programs in order to attract customers and maintain market share.
Distribution market players

Modern food retailing dominates the market with around 70% of total retail sales.
The retail food market is divided as follows:

  • Convenience Stores have experienced a continuous growth in comparison to traditional retailers. Competition in this sector is high as Thailand has a total of 18,240 stores nationwide, with 1,035 stores opening in 2019 alone. Convenience stores serve ready-to-eat meals and fruits, baked goods, healthy snacks and ready-to-eat fresh fruits and vegetables. The main convenience stores are 7-eleven, Tesco Lotus Express, Mini Big C.
  • Supermarkets are highly competitive and are concentrated in Bangkok and in other major provinces. Thailand’s supermarket segment has many players including Central Food Retail (Central Food Hall and Tops Supermarket), MaxValu, The Mall Group (Gourmet Market and Home Freshmart), Villa Market, UFM Fuji, and Foodland. The middle to high income consumers remain the key target segment for supermarkets, driven by a desire for premium products and services.
  • Hyper Market/ Cash & Carry. The main ones are: Tesco Lotus Hypermarket, Big C Hypermarket, Siam Makro.
  • On-line Retailing: Online retail sales are expected to reach U.S. $49 billion in 2020, up from $33 billion in 2017, according to the Electronic Transactions Development Agency (ETDA). A rapid growth in smartphone penetration and rising internet penetration has allowed Thais to access the internet at their convenience and at fast speeds. COVID-19 accelerated the growth of online grocery purchases.
Retail Sector Organisations
Thai Retailers Association

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Operating a Business

Type of companies

Public Limited Company
Number of partners: Minimum 15 shareholders.
The board of directors must have a minimum of 5 members, at least half of whom must have a domicile in Thailand.
Capital (max/min): No minimum capital requirement.
Shareholders and liability: Liability is limited to the amount contributed.
Private Limited Company
Number of partners: Minimum 3 partners.
Capital (max/min): Minimum capital: THB 15 (share’s value must be at least THB 5)
Shareholders and liability: Liability is limited to the amount contributed.
Unregistered ordinary partnership
Number of partners: Minimum 2 partners.
Capital (max/min): No minimum capital required.
Shareholders and liability: Partners' liability is joint and several.
Registered ordinary partnership
Number of partners: Minimum 2 partners.
Capital (max/min): No minimum capital required.
Shareholders and liability: Partners' liability is joint and several.
Limited partnership
Number of partners: No minimum.
Capital (max/min): No minimum capital required.
Shareholders and liability: Liability is limited to the amount contributed for sleeping partners and unlimited for active partners.
 
Setting Up a Company Thailand East Asia & Pacific
Procedures (number) 5.0 7.3
Time (days) 6.0 29.7

Source: Doing Business - Latest available data.

 

Cost of Labour

Minimum Wage
In January 2020, the new minimum wage law came into effect. The increase is applicable to unskilled workers and ranges from 313-336 Baht, depending on the province, representing an increase of five to six Baht from the current daily wage range of 308-330 Baht.
For more information, please visit the ministry of labor website.
Average Wage
Average gross monthly wage: THB 20 840 as of July 2020 (source: Bank of Thailand, latest available data).
Social Contributions
Social Security Contributions Paid By Employers:

The Social Security Act is used to finance compensation to employees for maternity, death, unemployment, accidents, illnesses, and physical disabilities occurring outside the workplace. Employers (with one or more employees) and the government are each required to contribute 5 percent of the employee’s wage to the social security fund, subject in each case to a maximum contribution of THB750 (5 percent of THB15,000) per month.

  • Disability, maternity and death benefits: 1.5%
  • Child and old age benefits: 3%
  • Unemployment benefits: 0.5%

Social Security Contributions Paid By Employees:

The Social Security Act is used to finance compensation to employees for maternity, death, unemployment, accidents, illnesses, and physical disabilities occurring outside the workplace. Employees pay contributions at 5%, subject to a maximum contribution of THB750 (5% of THB15,000) per month.

  • Disability, maternity and death benefits: 1.5%
  • Child and old age benefits: 3%
  • Unemployment benefits: 0.5%
 

Intellectual Property

National Organisations
The institution responsible for the registration and protection of industrial property is the Trade Department in the Ministry of Commerce. Information on the regulation body, the Department of Intellectual Property, can be found on its website.
Regional Organisations
Thailand has signed the ASEAN Framework Agreement on Intellectual Property Cooperation.
International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)
 

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Tax Rates

Consumption Taxes

Nature of the Tax
Value-Added Tax (VAT)
Tax Rate
The standard rate of VAT is 10%, but the rate is currently reduced to 7% until 30 September 2021.
Reduced Tax Rate
Exports of goods and services are zero-rated. If the services are partially used in Thailand, the part of the services used in Thailand (if can be segregated) is subject to VAT at a rate of 7%.
Other zero-rated items include International transport services by aircraft or seagoing vessels; the sale of goods and provision of services to United Nations Organization, an embassy, legation, consulate-general or consulate; the sale of goods and provision of service between bonded warehouse and the other bonded ware-house between the supplier who carries on the business in a free trade zone.
There is no other VAT reduced rate in Thailand.
Other Consumption Taxes
Some goods and services are subject to excise tax, including: alcoholic and certain non-alcoholic beverages, tobacco products, boats, motor vehicles, playing cards, certain entertainment services, crystal glassware, etc.
 

Corporate Taxes

Company Tax
20%
Tax Rate For Foreign Companies
A company incorporated in Thailand is considered as resident, as well as companies carrying on business in Thailand (which may include the presence of an employee, representative, etc.).
Capital Gains Taxation
Capital gains are treated as ordinary income and taxed accordingly for corporate income tax purposes. As such, capital losses can be used to offset net taxable profits.
Capital gains paid to overseas recipients are subject to a 15% withholding tax, although an exemption may apply to gains derived by investors from certain countries with which Thailand has signed a double taxation agreement.
Main Allowable Deductions and Tax Credits
In general, taxes are deductible except corporate income tax and VAT. Interest on money borrowed for the purpose of acquiring profit or business is deductible. Start-up expenses, such as incorporation expenses and registration fees, are deductible when incurred. Bad debts written off are deductible (subject to conditions and procedures), same as provident fund contributions.
Losses may be carried forward to offset profits of the following five accounting periods. The carryback of losses is not allowed.

Donations to specified charities or for public benefit, as well as those to education or sport associations are deductible in the amount actually paid but not exceeding 2% of net profit.
Royalties, management service fees, and interest charges paid at arm’s length to foreign affiliates are also deductible.

Other Corporate Taxes
A specific business tax (SBT) is collected at fixed rates on the gross revenue of certain businesses not subject to VAT, such as commercial banking, similar financial businesses, and the sale of immovable property, which are taxed at 3%, and life insurance, which is taxed at 2.5%. Certain revenue derived by commercial banks and finance, securities, and credit foncier businesses are taxed at a rate of 0.1%. An additional 10% is levied at municipal level.

From 2020, a Land and Construction Tax Act replaced the house and land tax and the local development tax. The maximum tax rate depends on the type of land/building and the appraisal value, as follows:
- for land used for agricultural purposes, the progressive tax rates range from 0.01% on land valued up to THB 75 million to 0.1% on land valued above THB 1 billion
- for land used for residential purposes, the progressive tax rates range from 0.02% on land valued up to THB 50 million to 0.1% on land valued above THB 100 million
- for land used for commercial purposes, the progressive tax rates range from 0.3% on land valued up to THB 50 million to 0.7% on land valued above THB 5 billion
- for land that is left unattended or that is not being utilized to the extent appropriate for its nature, the progressive tax rates range from 0.3% to 3% (the tax rate will increase by 0.3% annually if the land is not used).

Stamp duty is levied on different types of documents and instruments, including contracts for hire of work, loans, share transfers, leases of land or buildings, and insurance policies.

Capital duty does not officially exist in Thailand; however, there is a one-time fee when registering a company.

Employers are required to contribute 5% of the employee's remuneration to the Social Security Fund (capped at a contribution of THB 750/month). Nevertheless, for January, February and March 2021, the contribution rate has been temporarily reduced to 3% (capped at THB 450/month).

Other Domestic Resources
Revenue Department of Thailand
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
See the list of the double taxation agreements signed by Thailand
Withholding Taxes
Dividends: 10%; Interest: 15% (certain types of interest are also subject to an advanced withholding tax of 1%); Royalties: 3% (if paid to a Thai company)/15%.

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