Shareholder loan vs equity: funding a Thai company

A foreign owner can fund a Thai company in two ways: lend it money as a shareholder, or put in new share capital. A shareholder loan is quick to set up. If the agreement sets interest, it is capped at 15% a year; for an individual lender or a foreign company not carrying on business in Thailand, the company withholds 15% tax on it, unless a tax treaty sets a lower rate for your lender. You are repaid under the terms of the loan agreement. New capital needs a special resolution, which is registered with the Department of Business Development (DBD) within 14 days. That money stays in the company; shareholders can receive dividends from profit, while the capital itself is returned only through a formal reduction of capital or on liquidation.

In short

• We recommend documenting a shareholder loan in a written agreement. New capital needs a shareholders' resolution, registered with the DBD.
• If the loan carries interest, it is capped at 15% a year; for an individual lender or a foreign company not carrying on business in Thailand, the company withholds 15% tax on it unless a tax treaty lowers the rate.
• A loan does not pay for shares, and it does not count as paid-up capital for the work permit test.
• Shareholders can receive dividends from profit; the capital itself is returned only through a formal capital reduction or on liquidation.
• Thailand has no general thin-capitalisation rule, but the Revenue Department can see both interest payments and interest-free loans between shareholders and their companies.

Raising capital: procedure and DBD registration

Increasing a Thai company's registered capital starts with a special resolution of the shareholders, passed under section 1220 of the Civil and Commercial Code (CCC). New shares are offered first to the existing shareholders, in proportion to what they already hold (section 1222); only shares the current shareholders do not take up may be offered to other shareholders or taken up by the directors. The special resolution approving the increase is registered with the DBD within 14 days (section 1228); the DBD's own procedure for completing the capital increase itself has not been separately confirmed. At least 25% of the par value of each new share has to be paid up before registration (section 1105).

For a company with both Thai and foreign shareholders, a capital increase is also a moment when the shareholding ratio can shift. If the Thai shareholders do not subscribe for their share of the new stock, the 51/49 balance that keeps the company Thai under the Foreign Business Act can change without anyone meaning it to. Our lawyers check how a planned increase would move the split before the resolution is filed, so there are no surprises once the new shares are registered. For the capital a company needs at formation, see a Thai company's minimum capital.

A shareholder loan: agreement, interest, withholding tax

We recommend documenting a shareholder loan in a written agreement, which also attracts stamp duty under the Revenue Department's stamp duty schedule: THB 1 for every THB 2,000 of the loan or part thereof, capped at THB 10,000. Our lawyers draft the agreement in Thai and English, so both sides read the same terms.

If the agreement provides for interest, it is capped at 15% a year under CCC section 654. On the interest actually paid, the company withholds 15% tax: under section 50(2)(b) of the Revenue Code when the lender is an individual, and under section 70 when the lender is a foreign company not carrying on business in Thailand. A Thai tax resident who lends as an individual may treat that 15% withholding as the final tax on the interest, with nothing more to pay. Under the Russia treaty, the lower treaty rate on interest applies only to a bank or financial institution, not to an ordinary shareholder, so Thailand's 15% domestic rate applies in full (Art. 11). We have not confirmed how the UK, US, Australian and German treaties treat interest paid to an ordinary shareholder — check the applicable treaty article before the interest is paid.

Interest on a genuine business loan can be a deductible expense for the company, subject to the usual tax conditions: for a loan from a related foreign party the rate needs to be at arm's length, and interest on a loan funding an asset still under construction is normally capitalised rather than deducted straight away. Dividends, by contrast, are paid only out of profit that has already been taxed. We have not confirmed every condition for interest deductibility, so check your own case before relying on it; which route suits you depends on the company's cash position and your own plans.

Thailand has no general thin-capitalisation rule limiting how much debt a company may carry relative to its capital. A debt-to-equity condition sometimes mentioned for BOI-promoted companies has not been officially confirmed, so we would not plan around a fixed ratio without checking your own promotion conditions first. One thing worth knowing: in a published ruling, the Revenue Department required a director-shareholder who had lent money to two companies to register and pay Specific Business Tax on the interest he received (Revenue Department ruling 0706/3184). That ruling concerned one director and two specific loans to two companies — it does not establish a general rule that every shareholder loan, or every loan from a holder of more than 25% of the shares, is taxed this way. We have not confirmed how SBT applies to an occasional shareholder loan by an individual; the ruling does not establish that every such loan is taxable or exempt.

Capital for a work permit or FBL: what counts

A shareholder loan is not paid-up capital. The work permit benchmark — broadly, THB 2 million of paid-up capital for each foreign employee — is tested against what has actually been paid in for shares, not against money a shareholder has lent the company. A company that is otherwise well funded on paper can still fall short of this test if most of its money came in as loans rather than capital. For the full rule, see capital for a work permit.

Whether a shareholder loan counts toward the minimum capital set for a Foreign Business Licence under the Foreign Business Act is a separate question, and we have found no official answer to it. Until the DBD says otherwise, we treat paid-up capital, not loans, as the safer figure to plan around for both tests.

Loans and nominee structures: what worries the DBD

Since 1 August 2026, DBD Order 2/2569 requires a company where foreigners hold less than 50% of the capital, or where a foreigner is an authorised director, to file additional investment documents: an Investment Explanation Letter when the company is set up, or an Investment Confirmation Letter when such a company later files an amendment — in both cases together with three months of the Thai shareholders' own bank statements and a statement of the account that received the money. The checks reach existing companies as well as new ones, once they amend their registration. The DBD is looking for one thing above all: whether the Thai shareholders actually paid for their own shares with their own money.

A structure where Thai shareholders hold shares only on paper, while a foreigner supplies the money and runs the company, is a nominee arrangement under section 36 of the Foreign Business Act, and it is a criminal offence: up to three years in prison and/or a fine of THB 100,000 to 1,000,000, with directors personally liable under section 41. Lending money to Thai shareholders so that they can "buy" their shares points in exactly this direction, and we don't structure funding through Thai shareholders for that reason.

The lawful routes to a company a foreigner controls more fully are BOI promotion, a Foreign Business Licence, or simply keeping the company genuinely Thai-controlled and funding it as a minority shareholder. We do not advise on how to get a loan-funded structure past a DBD check — our job is to set up the funding so that it does not need to pass as something it is not. For a typical example of such a check, see a DBD check proving real shareholders.

Getting money back: loan repayment or dividends

A shareholder loan is repaid under the terms of the loan agreement itself. Repaying the principal is not a dividend and is not subject to the profit-and-reserve test that applies to dividends; whether your own company's articles require a board or shareholder approval to repay it is a question for your company's own documents.

Dividends are a return paid out of profit, not a return of the capital itself: they can be paid only after at least 5% of that profit has gone to a legal reserve each time, until the reserve reaches 10% of the capital (CCC sections 1201–1202). Under Revenue Department rules, the company withholds 10% tax on a dividend paid to an individual or to a foreign company not carrying on business in Thailand. The capital itself is returned separately: through a formal reduction of capital, which needs its own special resolution, a newspaper notice, and written notice to every known creditor, who then has 30 days to object before the reduction can be registered (sections 1224–1226), or on liquidation of the company.

If the company is sending the money abroad, Bank of Thailand rules ask for supporting documents once a single outward transfer reaches USD 200,000 or more; the bank may waive them for a customer who has already completed its own KYB process if the transfer does not call for additional scrutiny. Check the current document list with your own bank before sending it. Our team can walk you through which route — loan or capital — fits better with your own plans for taking money out of the company later.

Which to choose: a comparison table

We usually look at both routes together with your plans for staffing and work permits, since the choice affects more than just today's cash need.

	Shareholder loan	New share capital
Setting up	Written agreement recommended; stamp duty applies to the loan instrument	Special resolution of shareholders
Registration	No DBD registration for the loan itself; a director-shareholder lender may have a separate SBT registration duty	DBD registration of the special resolution within 14 days
Tax on the lender/investor's income (individual lender, or foreign company not carrying on business in Thailand)	15% withheld on interest, subject to any lower tax treaty rate	10% withheld on dividends, paid only from profit
Deduction for the company	Can be deductible if the usual tax conditions are met (arm's length, no capitalisation duty)	Not a deductible expense
Effect on shareholding and the 51/49 split	None	Can shift the ratio if Thai shareholders do not subscribe pro rata
Work permit capital test	Does not count	Counts once paid up
Getting the money back	Repaid under the loan terms	Dividends, a formal capital reduction with creditor notice, or liquidation
Stamp duty	THB 1 per THB 2,000 or part thereof, capped at THB 10,000 (Revenue Department stamp duty schedule)	Not confirmed; check whether duty applies to the share certificates

What's still unclear

A few points have no settled official answer yet. Converting an existing loan into share capital by simple offset is not allowed under CCC section 1119; paying for shares in a form other than cash is possible under section 1221 by special resolution, but how the DBD handles that kind of in-kind payment in practice has not been officially described. Whether interest-free loans from an individual shareholder carry any imputed interest for tax purposes is likewise not covered by published Revenue Department guidance. And the debt-to-equity condition sometimes quoted for BOI-promoted companies has not been confirmed from an official source — we would check your own promotion certificate rather than rely on a general ratio.

What next

If you are deciding how to fund a Thai company you already own, send us the articles of association and the current shareholder list. We reply within 24 hours, and the fee is fixed before work starts. Before you file anything with the DBD, we check how a loan or a capital increase would affect your shareholding and your work permit capital test, and we can help with company registration with a lawyer if the company is still to be set up. For the wider picture of running a business in Thailand as a foreigner, see opening a business in Thailand.