English English ไทย ไทย 简体中文 简体中文

A Guide to Understanding the Foreign Business Law in Thailand

a-guide-to-understanding-the-foreign-business-law-in-thailand

For the longest time, foreigners have understood the economic potential of Thailand. They realize the possibilities and opportunities that they can seize as a foreign entity. Hence, setting up a company in Thailand for foreigners has become an appealing option.

a-guide-to-understanding-the-foreign-business-law-in-thailand

To understand the ins and outs of setting up a company in Thailand, you must be familiar with state laws and regulations as mentioned in the Foreign Business Act.

What is the Foreign Business Act?

Introduced in 1999, the Foreign Business Act is the predominant legislation by which all foreign businesses operating in Thailand must abide. According to the act, a business is recognized as foreign if it meets the following criteria:

  • If it has been established under a foreign law;
  • If foreigners own half or the majority of the business’ capital; and
  • If foreign investors have contributed half or more of the capital.

According to the Foreign Business Act, for foreigners to legally operate in the country, they must acquire a business operation permit from the Director-General of the Department of Commercial Registration and have it approved by the Foreign Business Committee. Only then can they begin to register a Thai company and operate as a separate legal entity. 

What Businesses Can Foreigners Enter into?

The approval requirement takes into consideration the business category under which foreigners can operate. Based on Foreign Business Act B.E. 2542, there are three main business categories in the country, mainly:

  • List 1

Businesses under List 1 include industries relating to national safety and security. As such, these are prohibited to foreigners. Unless a special treaty has been issued, an exemption to this list cannot be granted. 

  • List 2

Businesses under List 2 include industries in culture and arts. These are reserved primarily for Thai nationals and are not open to new foreigners. However, foreign-owned businesses that have existed and operated under this category prior to the enactment of the Foreign Business Act are granted a special Business License and are permitted to continue their operations.

  • List 3

Businesses in List 3 include the environment and natural resources. These are businesses in which Thai entrepreneurs are not yet ready to venture into. As such, these businesses are open to foreign investors and entrepreneurs. Although a Foreign Business License is required, foreigners can have 100% of the total business shares and can operate independently.

How do you Obtain 100% Foreign Business Ownership?

There are three methods to own 100% of the foreign business under Thai Law. 

  • Receive the Board of Investment (BOI) Promotion

The Thailand Board of Investment aims to encourage more foreign investors to decentralize the industrial base while contributing to the country’s overall economic growth. When a company is certified with the BOI, it can experience major advantages such as beneficial tax waivers, faster processing time for work permits, and the ability to own land. Businesses that operate under certain industries are qualified to apply for the BOI Promotion. These include foreign-owned businesses in agriculture, mining, transportation, technology, and public utilities. 

  • Register through the Treaty of Amity (limited to American citizens only)

This treaty between Thailand and the United States permits American-owned companies and corporations to acquire a majority of the shares or completely own the company, the branch, or the representative office. The process to register through the treaty is complex and time-consuming, which is why the best course of action is to consult with an attorney or a business services provider.

  • Obtain Foreign Business License

To obtain a foreign business license, the applicant must be more than 20 years of age. He/she has a residency in Thailand under the laws of immigration, is financially stable, and has never been punished or imprisoned by the court. Additionally, he/she must abide by the Foreign Business Act and acquire a minimum capital that should be remitted back to the country.

What are the Minimum Capital Requirements for Foreign Businesses?

In addition to complying with the Business Categories, the law also requires that foreign businesses maintain a minimum amount of total capital, which can be one of two options.

If the foreign company falls under a non-specified business category, the minimum requirement is 2 million Baht. However, if the company operates under any of the lists of industries mentioned in the Foreign Business Act, the minimum requirement is increased to 3 million Baht.

Why Do Foreigners Need to Hire Professional Services?

Dealing with the requirements and complying with the Foreign Business Act can be challenging, especially for first-time business owners. You need the guidance of expert professionals who have acquired years of expertise and experience in the field of business to guide you through the whole process from company registration to operation. That’s the sure way to succeed.

Posted in Company Incorporation
Tagged , , .