Starting a Charitable Foundation in Thailand

[RetiredGreg]

There are a lot of needs for distressed people in Thailand, and even more in surrounding countries, so consequently there is a huge need for non-profit charitable foundations to do some worthwhile work here.  And if you can appreciate some of the tenants of Buddhism, it is also good Karma.  It is sad that it is not simply a task of identifying a need and then doing something about it; there are so many legal hurdles that must be jumped before a charitable foundation can open its doors for business.

First let me make a qualifier:  I am not an attorney or even any kind of high authority on establishing a charitable organization, but I will relate what I have learned from my own experience.  I have looked carefully at the idea of establishing an organization to do good works in Thailand and what it takes to do it.  I welcome any recommendations, comments, criticisms or disagreements from any one that has had some experience in this area.  Please share your information in the comments at the end of this article.

If one were to start up a Thailand based Foundation, it must be understood that the framework is designed to have Thai people running the operation.  Any foundation will have two groups of people:  Directors and Employees (which can be paid or volunteer workers).  A huge degree of scrutiny is done on the directors of the foundation, and it is extremely difficult to have a Thai Foundation with foreign directors (and you must have at least one of the directors be a Thai).  Theremust be four directors, and background, credit, and character are carefully checked.   I have been told that once the foundation is established, it is relatively easy to change directors, and foreign directors can be introduced.

In addition, a Thai foundation must have capital.  There must be a bank account established with 200,000 Baht (about USD $6667) on deposit, and this amount must be maintained in the account forever.

You must have a lot of bureaucratic material ready like a mission statement, directors meetings, location information and tons more.  The amount of paperwork is frankly staggering.  And to make it through the maze of Thailand’s ministries and regulators, you must be prepared (as in most business dealings in Thailand) to “grease the wheels” of progress through the bureaucracy.  So I am going to give the best advice in the world to anyone attempting this that does not have the masochistic wish for great punishment and an unlimited amount of time to get this job done:  hire a good Thai attorney to do this project for you.  Your lawyer will still run into the same obstacles and setbacks in establishing your foundation that you did, but at least their legal experience enables them to correctly interpret what is needed and cut to the chase to get the right permissions from the right offices.

So here is my simple checklist for establishing a Thai Charitable Foundation:

 Have a goodly amount of money.  I would suggest that at least USD $10,000 is needed for the foundation deposit and the startup expenses.

Have relationships with trusted Thai people that can be set up as the directors of the foundation (this can be much harder than it sounds).

Hire a trusted, good Thai attorney to do all the paperwork.

Have an enormous amount of patience.

Have all the operational ducks in the water:  mission statement, clear understanding of what will be done, a strong need, office and people (paid and volunteer) that will get the job done, and a source for donations,

As a Thai foundation, it cannot be set up to simply benefit those establishing the foundation — the benefits have to be directed to the aim of the charitable work.  An Expat can become a paid employee of the foundation, as long as they meet the requirements for a work permit (such as having 4 Thai employees for every foreign employee, and having the foreigner earn a minimum of 50,000 Baht per month).  In addition, any profit (income minus expenses) the foundation earns is taxable (albeit at a lower rate of 1%).

Having a Foreign Charity (like American) do work in Thailand

No question about it, it is a daunting task to establish a Thai Charitable Foundation from scratch, and you may want to look at alternatives.  The obvious one is to establish the non-profit charitable organization elsewhere — like in the US (where perhaps most of the donations will originate from in any case).  And, in fact, if donations are to be solicited in the US, the non-profit (501C IRS) must be established in the US in any case.

But here is the kicker:  foreign non-profits must get approval from the Thai government before doing business in Thailand.  A church or special needs NGO cannot legally simply start doing good work in Thailand without getting permission to operate.  Fortunately, it is less of a hassle than starting a Thai foundation from scratch, but there is some scrutiny of those running the charity and what they are doing.  Plus a foreign NGO operating in Thailand must report back to the Thai Ministry of the Interior every six months.  Again, I will strongly recommend that any NGO that wants to do this should hire a Thai lawyer to take care of this end.

A word about Thai attorneys:  they are not an enormous expense like a lawyer in the US, and I honestly believe that Thai attorneys are more business-like and trustworthy than their American counterparts (but that is a pretty low standard to exceed).  Whenever we think of attorneys in the US, we think of many thousands of dollars, maybe getting well past the average American wage in a month or so (I actually get very nervous in the US even thinking about hiring an attorney). In Thailand, it is a lot less stressful, and we think in hundreds of dollars when hiring a legal office, plus there are plenty of Thai attorneys that have English speaking staff.  So you can relax a little on this point.

Establishing a Charitable Organization in the US that can work outside of the country

Like so much activity in America, the rules for setting up a charity are pretty much set by the Internal Revenue Service (IRS).  But if you also do work outside of the US, you will also have to be involved with rules from other agencies, like Homeland Security.

Setting up an American 501-C non-profit organization (complying with this allows solicitation for donations) is not all that difficult, and plenty of people do it without hiring an expensive attorney.  There are many of do-it-yourself manuals, websites and community college classes that will walk you through the whole procedure.  I won’t go into the details of this as it is covered in great length all over the internet.  But there are some special points if the US charity is involved in work outside of the country:

First, the IRS will not allow a domestic US charity to be simply a “money conduit” to a foreign organization.   The activities in Thailand (or any other foreign country) will be examined under the same scrutiny as charitable work done in the US.  You cannot have a charity to put in a new addition to your house in Thailand — the work must be for the benefit of others in a worthwhile cause.  And there will be annual non-profit reporting requirements just like a charity organization done totally within the US.  So while it may be a bit more difficult for the IRS to oversee where the money is going in the foreign country, they will make a strong effort to oversee exactly what is done.  This is an area that is perceived to be easily abused by unscrupulous charities, but understand that the IRS is well aware of that and will give extra attention to charitable funds heading overseas.  There must be a detailed accounting of the charity’s expenditures, no matter where it is in the world.

Second point, even if the charitable work is done entirely in Thailand or another overseas location, there must be some sort of location in the US — with directors — in order to qualify for the 501-C status.

And third, are the compliance requirements of OFAC – the Office of Foreign Asset Control, administered by the Treasury Department.   OFAC enforces economic and trade sanctions based on US foreign policy and national security against targeted countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction (excluding the CIA, of course), and other threats to the national security, foreign policy or economy of the US.  OFAC acts under Presidential national emergency powers and sometimes specific legislation, to impose controls on transactions and freeze assets.  So you probably cannot do much charity work in Iran or North Korea.  OFAC determines where you can and cannot go and who you can and cannot deal with, regardless of the intentions of the donors.  So up to just recently, only a limited amount of support was allowed in Myanmar (Burma) even though there were great needs and good causes.  Military objectives come first over charity.

The details in this blog posting barely scratch the surface in everything that must be dealt with in establishing a charitable organization in Thailand, but will hopefully serve as a general guide of what needs to be done.  Please share any personal experiences you may have had or information you know in the comments below.  And if anyone has any specific questions on this subject, we will do our best to answer them.