Cash is trapped for structural reasons, not banking ones
The call usually comes in the third year: the Thai subsidiary is profitable, the group wants the cash, and it will not move.
The cause is almost never the bank. It is a set of decisions taken at incorporation, by people optimising for speed of setup, that left the company with no clean channel for money to leave.
This guide covers those decisions. For withholding rates, treaty relief mechanics and the outbound-payment reporting requirements, see our foreign investor guide, which publishes them in full — this page does not restate them.
General information only, not advice on a specific matter. Rates, thresholds and documentary requirements change — confirm the current position for your structure.
1. Debt versus equity: decided once, at incorporation
The single most consequential funding decision, and the one most often made without thought.
Equity is permanent capital. It comes out through distribution, which depends on the company having distributable profit and completing its approval requirements. That can be years away for a business investing heavily up front.
A shareholder loan creates a repayment channel that can operate before there are distributable profits.
But it must be a real loan: documented before the money moves, on commercial terms, actually drawn, and actually serviced. Interest that is never charged, repayment dates that pass unremarked, and drawdowns with no facility agreement all point the same way — that this was equity with a different label.
What does not work is recharacterising after the fact. Calling something a loan in year three because you now need a repayment channel is the request we most often have to refuse.
Get the mix right at incorporation, informed by your actual funding profile: how long until profit, how much working capital, and how the group expects to be repaid.
2. Where the IP sits
Decide before the brand or technology has value. Moving it afterwards is a transaction with consequences, not an administrative step.
- Outside Thailand, licensed in. The licence must exist, on defined terms, before revenue depends on it. It also has to be real: scope, quality control, and terms that a third party would recognise as a licence.
- Inside the Thai company. Simpler, no licence chain — but the IP is then tied to an entity you may one day want to sell, restructure or wind down.
Either can be right. The wrong answer is discovering at diligence that ownership was never settled. Our trademark and IP ownership guide covers the mechanics.
3. Charges to the Thai entity: substance and benefit
Any charge from the group to the Thai company — management fees, cost recharges, technical services, brand or licence fees — is tested on substance and benefit. What was actually done, by whom, and what the Thai company received that it needed.
The failure is almost always evidential, not conceptual. The service was genuinely provided; nobody wrote down what it was.
Build the file as you go:
- A written agreement, in place before the charges start
- A scope of services describing what is actually delivered
- Records of who performed the work — time, output, deliverables
- A rational, documented basis for how the amount was calculated
- Evidence of the benefit to the Thai company specifically, not to the group generally
Reconstructing this two years later is visibly reconstruction, and it reads that way to anyone examining it.
Royalties and brand licence fees are only as strong as the IP ownership behind them. A charge for the use of a mark that the charging entity does not clearly own is weak twice over.
4. What the bank and the Revenue Department will want
Evidence that the payment is what you say it is:
- The underlying agreement
- An invoice consistent with it
- Proof the service or supply actually happened
- Board or shareholder approvals where the payment type requires them
- Tax documentation appropriate to the payment type
- Residence or status evidence for the recipient where relief is claimed
Requirements vary by payment type and by bank. The delay is almost never the bank being difficult — it is a file assembled after the decision to pay rather than before.
5. How these structures fail
Nominee layers. The ownership on paper is not the ownership in fact. It holds until diligence, a bank review, a licence renewal or a falling-out — and then it does not. See our business classification guide for what is actually being sold when a formation agent offers you a Thai majority holder.
Undocumented recharges. Amounts moved between group companies for years with nothing supporting them. Individually small, collectively material, and impossible to defend retrospectively.
Cash swept before tax. Moving money to the parent before the Thai company's own obligations were settled. Converts a cash-flow convenience into a compliance problem attaching to the company and its directors.
No exit thinking. A structure built for operating and never for selling. Buyers discount for structural problems, and they find them.
6. Pre-incorporation checklist
- Model the funding profile — how long to profit, how much working capital, how the group expects repayment
- Set the debt–equity mix accordingly, and document the loan properly before money moves
- Decide where IP sits, and put the licence or assignment in place before value accrues
- Draft the intercompany services agreement before charging begins
- Agree what evidence will be kept for each charge, and who keeps it
- Confirm what documentation your bank requires for each payment type
- Sanity-check the structure against a future sale — what would a buyer's lawyer ask?
Summary
| Decision | If you get it wrong |
|---|---|
| Debt vs equity | No repayment channel; cash trapped until distributable profit exists |
| Where IP sits | Moving it later is a taxable transaction, not an admin step |
| Service agreements | Charges cannot be supported when examined |
| Evidence discipline | Reconstruction two years later reads as reconstruction |
| Nominee arrangements | Structure collapses at the moment of maximum consequence |
Every one of these is cheap to decide before incorporation and expensive to fix in year three. Restructuring is a project; structuring is a meeting.
We advise foreign parents on Thai subsidiary structure, intercompany arrangements and the evidence discipline behind them. Initial consultation is free — call +66 92 254 2045 or send us the details. See also tax services and accounting and tax compliance.
This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.