FEMA and ODI Rules for Setting Up a Company in Thailand (2026): RBI Filings, DTAA and Indian Tax

FEMA, RBI & Indian Tax Rules for Thailand Company Owners (2026)

Under the FEMA and ODI rules for setting up a company in Thailand, your investment is Overseas Direct Investment. Your AD Category-I bank reports it on Form FC and obtains a UIN before you remit, and most bona fide business investments go through the automatic route without prior RBI approval. You then file the APR by 31 December each year. Thai law, not FEMA, sets the 49% ownership limit. Our Thailand company formation page covers the Thai side.

The real complexity begins when you connect:

• Indian FEMA regulations
  
• RBI Overseas Direct Investment (ODI) rules
  
• India–Thailand Double Taxation Avoidance Agreement (DTAA)
  
• Thailand corporate tax system
  
• BOI incentives and ownership structures

Together, these frameworks determine:

Whether your Thailand structure is legally compliant and tax-efficient from an Indian perspective.

This guide breaks down everything Indian founders need to know in 2026.

Can Indians Own a Company in Thailand?

Yes, Indian residents can own shares in a Thai company.

However, ownership must comply with both:

Thailand law

• Foreign Business Act (FBA)
  
• BOI rules (for 100% ownership eligibility)

Indian law

• FEMA (Foreign Exchange Management Act)
  
• RBI Overseas Investment rules and directions (Form FC, APR, FLA)

This creates a dual compliance system.

FEMA Rules for Indian Entrepreneurs Investing in Thailand

FEMA governs how Indian residents can invest abroad.

Under FEMA, an Indian entrepreneur can invest in a foreign company through:

Overseas Direct Investment (ODI)

RBI ODI Route for Thailand Companies

The RBI allows Indian residents to invest in:

• Foreign subsidiaries
  
• Joint ventures
  
• Wholly owned foreign entities

Thailand companies are fully eligible under ODI rules.

ODI Investment Modes

Indian investors can invest via:

• Equity shares
  
• Preference shares
  
• Capital contribution
  
• Convertible instruments (in some cases)

ODI Limit Structure (Key Rule)

Indian residents can invest within:

Resident individuals invest through the Liberalised Remittance Scheme (LRS), up to USD 250,000 per financial year across all permitted remittances, and can make ODI only in an operating foreign company that is not in financial services. Indian companies and LLPs invest under the ODI limits linked to their net worth.

This allows:

• Business expansion abroad
  
• Holding structures in ASEAN
  
• Investment in Thai Co Ltd or BOI companies

BOI Thailand + Indian Investors

BOI promotion is highly relevant for Indian founders.

If your Thai company is BOI-approved:

• You may own up to 100% of the company
  
• You may receive tax holidays (3–13 years)
  
• You gain easier work permits
  
• You get import duty exemptions

From a FEMA perspective, BOI structures are fully permissible under ODI rules.

49% Ownership Rule vs FEMA Compliance

Thailand’s Foreign Business Act limits ownership in many sectors to:

49% foreign ownership

However:

• FEMA does NOT restrict ownership percentage
• FEMA only regulates outbound investment reporting

So the constraint is:

• Thailand law (FBA), not Indian law

This distinction is critical for structuring.

India–Thailand DTAA (Double Taxation Avoidance Agreement)

The India–Thailand DTAA prevents income from being taxed twice in both countries.

This is one of the most important tools for Indian entrepreneurs operating in Thailand.

Key DTAA Tax Rates

Dividends

10%

Interest

10%

Royalties

10%

Why DTAA Matters for Entrepreneurs

DTAA helps:

• Avoid double taxation on profits
  
• Optimize dividend repatriation
  
• Reduce withholding tax burden
  
• Structure IP licensing efficiently

For SaaS, manufacturing, and export businesses, DTAA is a key tax planning tool.

Foreign Tax Credit (FTC) in India

The Income-tax Act 2025 replaced the 1961 Act from 1 April 2026. India continues to give relief for Thai tax through:

Foreign tax credit under the India-Thailand DTAA

This means:

• Tax paid in Thailand can be offset against Indian tax liability
  
• Prevents double taxation on same income

Example:

When your Thai company pays you a dividend, Thailand withholds 10%, and you claim that 10% as a credit against the Indian tax on the dividend. Whether any part of the company’s own 20% corporate tax can also be credited depends on the treaty terms and who holds the shares, so take advice before you count on it.

Thailand Corporate Tax 20% Base Rate

Thailand’s standard corporate income tax is:

20%

However, effective tax can be:

• 0% (BOI tax holiday)
  
• Reduced (SME incentives)
  
• Optimized through DTAA planning

BOI Tax Holidays + FEMA Structuring Advantage

BOI incentives include:

• 3–13 years corporate tax exemption
  
• 100% foreign ownership (in promoted sectors)
  
• Import duty exemptions

From an Indian ODI perspective:

BOI structures maximize post-tax returns on foreign investment

RBI Reporting Requirements for Thailand Investments

Indian investors must comply with:

Mandatory reporting includes:

• Form FC through your AD Category-I bank, with a UIN, before you remit
  
• Annual Performance Report (APR) by 31 December each year
  
• FLA return to RBI by 15 July, only if an Indian company or LLP is the investor
  
• Financial statements submission (in some cases)

Failure to comply can result in penalties under FEMA.

Repatriation of Profits from Thailand to India

When transferring profits back to India:

You must consider:

• Thailand withholding tax
  
• DTAA reduced rates
  
• Indian tax obligations under FTC

Common flow:

Thailand Profit → Withholding Tax (if applicable) → Dividend → India taxation adjustment under FTC

ASEAN Strategy: Why Thailand Matters

Thailand is not just a standalone market.

It is a strategic hub for ASEAN expansion.

Key advantages:

• Access to 650M+ ASEAN population
  
• RCEP trade agreement benefits
  
• Strong logistics infrastructure
  
• Manufacturing ecosystem
  
• Automotive supply chain hub

RCEP (Regional Comprehensive Economic Partnership)

Thailand is part of RCEP, which enables:

• Reduced tariffs across Asia-Pacific
  
• Easier export access to member countries
  
• Supply chain integration

For Indian companies (India is not in RCEP), Thailand becomes a bridge market into ASEAN supply chains.

Thailand as Manufacturing Base for India

Many Indian companies use Thailand for:

• Export manufacturing
  
• ASEAN distribution hubs
  
• Automotive component production
  
• Electronics assembly
  
• Regional warehousing

This aligns with India’s broader Act East Policy.

India Act East Policy + Thailand

India’s Act East Policy encourages:

• Trade expansion into Southeast Asia
  
• Infrastructure connectivity
  
• Economic partnerships

Thailand is important as:

A gateway economy between India and ASEAN

Structuring Options for Indian Founders

Option 1: Indian Parent → Thai Subsidiary

• Common structure
  
• ODI compliance required
  
• Suitable for manufacturing/export

Option 2: Personal ODI Investment

• Individual Indian invests directly
  
• Requires LRS/ODI compliance
  
• Suitable for startups

Option 3: Holding Company Structure

• Multi-jurisdiction structure
  
• Tax optimization using DTAA
  
• Used by scaling startups

Common FEMA Mistakes by Indian Entrepreneurs

• Not filing ODI reports
  
• Ignoring RBI compliance timelines
  
• Improper dividend repatriation
  
• Misunderstanding FBA vs FEMA difference
  
• Not structuring BOI eligibility correctly
  
• Missing tax credit documentation

Who Should Use Thailand for Expansion?

Thailand is ideal for:

• Manufacturing exporters
  
• SaaS companies targeting ASEAN
  
• Automotive supply chain firms
  
• Logistics and trading companies
  
• Indian companies expanding eastward

Final Thoughts

Thailand offers one of the most strategically important expansion platforms for Indian entrepreneurs.

However, success depends on understanding three layers of regulation:

• FEMA (India outbound investment rules)
  
• Thai Foreign Business Act (ownership rules)
  
• India–Thailand DTAA (tax optimization)

Set up correctly, with BOI promotion where your activity qualifies, Thailand gives you a low-tax base with good access to ASEAN markets.

Beyond incorporation, the key is compliant cross-border structuring under the ODI and DTAA frameworks.

Frequently asked questions