Thailand foreign business license.
Acclime offers complete legal, accounting and business services, including specialization in helping foreign-owned companies obtain a Foreign Business License to make sure the company’s activities are not restricted by the Foreign Business Act.
Application for a Thai
foreign business license.
The Foreign Business Act (FBA) came into force in 1999. One would think this Act regulates business activities conducted by foreigners but this, however, is not the case. The FBA mainly aims at defining the term “foreigner” – or “farang” as Thai people regularly refer to foreigners that way – and sets out what activities cannot be conducted by foreigners or have to remain controlled in a certain way. The process of receiving the permission from the Minister of Commerce (with the approval of the Cabinet) or the Director-General (with the approval of the Committee) is – as are most administrative procedures in Thailand – not self-evident. The FBA foresees oppressive penalties (fines up to 1M THB and even imprisonment) for any foreigner committing an infringement upon the act. Having a reliable partner that keeps an eye on the continuous fulfilment of the conditions is thus an absolute must.
FBA’s definition of a foreigner.
A foreigner under the FBA is a natural person that does not have Thai nationality or a juristic person that is not registered in Thailand. However, also a juristic person that is registered in Thailand but of whom more than half of the capital shares are held by non-Thai natural and/or juristic persons is considered foreign. The same goes for a limited partnership or registered ordinary partnership having a foreign individual as the managing partner or manager. Foreigners as defined here above cannot conduct any business in Thailand without prior approval from the relevant authority. Two types of “special” foreigners may operate (certain) businesses upon obtaining a License from the Director-General:
- Foreigners born in Thailand but not granted Thai nationality
- A person who becomes a foreigner as a consequence of his nationality being revoked under the law governing nationality or other laws
In any case, all foreigners deported (or pending deportation) or staying in Thailand without permission under the law governing immigrants or other laws, shall be prohibited from operating any business in Thailand without any exceptions.
Foreign business license requirements.
The minimum capital used at the commencement of a business operation cannot be less than that prescribed by ministerial regulations and can in any case not be less than 2M THB. Ministerial regulations may also prescribe the time for the minimum capital to be brought or remitted into Thailand. These requirements do not have to be fulfilled in case the money or property is derived from business operation that has previously been in operation in Thailand (section 14 of the FBA). The Minister with the advice of the Committee is empowered to issue the ministerial regulations prescribing other conditions for the foreign licensees to comply with. These requirements can, for example, relate to the ratio of the capital and loans to be used in the permitted business, the number of foreign directors who must have a domicile in the Kingdom or the number and period for keeping the minimum capital in the country. The foreign business license can be suspended or revoked if the conditions would appear not or no longer to be fulfilled (section 18 of the FBA). The following conditions also govern the allocation of the license:
- Having reached the age of 20
- Having a residency or being permitted to temporarily enter into Thailand under the immigration law
- Not being (quasi-)incompetent
- Not being a bankrupt
- Never having been punished by a court judgment or fined for an offence under this Act or Announcement No. 281 of the National Executive Council No dated November 24
- Never having been imprisoned for fraudulent acts, debtor cheating, embezzlement, offences connected with trade under the Criminal Code or for offences relating to fraudulent loans to the public or for offences under the immigration law
- Never having a revoked license issued under this Act or under Notification No. 281 of the National Executive Commercial dated November 24, 1972
The 5th, 6th and 7th condition are subjected to a period of five years up until the date of the application. In case of the juristic person being the license applicant, the foreign directors, managers or the persons responsible for the operation of the juristic person shall also have the qualifications and shall not have the prohibited characteristics as stated here above (section 16 of the FBA).
Thai Foreign Business Act.
|List One||List Two||List Three|
|Reason||These activities touch the very essence of Thai economic culture||Safeguarding national safety and security, art and culture, tradition and folk handicraft and natural resources or environment||Thai nationals are not ready to compete|
|License||Absolute prohibition||Minister of Commerce with the approval of the Cabinet||Director-General with the approval of the Committee|
|Equity restrictions||At least 50% of the capital is held by Thai nationals or Thai companies||At least 40% of the capital has to be held by Thai nationals or Thai juristic persons, or less if approved by the Minister of Commerce (but in any case not less than 25 percent and the number of Thai directors shall not be less than two-fifths of the total number of directors)||At least 50% of the capital is held by Thai nationals or Thai companies|
|Other requirements||None||Minimum capital at the commencement of business cannot be less than that prescribed by ministerial regulations and can in any case not be less than 2M THB. But, in the case where these require the license under List Two or Three, the minimum capital to be prescribed in the ministerial regulations for each of the businesses shall in no case be less than 3M THB. Other conditions in ministerial regulations. Conditions related to the licensee (such as being more than 20 years old, not being bankrupt…)|
Foreigners as described above shall be prohibited from operating the following businesses (enumerated in List One, annexed to the FBA):
- Newspaper business, radio broadcasting or television station business
- Rice farming, farming or gardening
- Animal farming
- Forestry and wood fabrication from natural forest
- Fishery for marine animals in Thai waters and within Thailand specific economic zones
- Extraction of Thai herbs
- Trading and auctioning Thai antiques or national historical object
- Making or casting Buddha images and monks alms bowls
- Land trading
Given the fact that these activities touch the very essence of Thai economic culture, it seems understandable that these activities cannot be conducted by foreigners.
List two and three give an overview of the activities that can be conducted by foreigners, but only if they have received special permission to do so. It concerns two groups of businesses, subdivided based upon what is protected. First of all, national safety and security, art and culture, tradition and folk handicraft and natural resources or environment are safeguarded. A foreigner cannot start up a business affecting these areas, unless permitted by the Minister of Commerce with the approval of the Cabinet. It concerns:
Group 1: Businesses related to the national safety or security
- Production, selling and maintenance of:
- Firearms, ammunition, gun powder, explosives
- Accessories of firearms, ammunitions and explosives
- Armaments, ships, air-crafts or military vehicles
- Equipment or components, all categories of war materials
- Domestic land, waterway or air transportation, including domestic airline business
- Production, selling and maintenance of:
Group 2: The businesses affecting arts and culture, traditional and folk handicraft
- Trading antiques or art objects being Thai arts or handicraft
- Production of carved wood
- Silkworm farming, production of Thai silk yarn, weaving Thai silk or Thai silk printing
- Production of Thai musical instruments
- Production of gold ware, silverware, nielloware, bronze ware or lacquerware
- Production of crockery of Thai arts and culture
Group 3: The businesses affecting natural resources or environment
- Manufacturing sugar from sugarcane
- Salt farming, including underground salt
- Rock salt mining
- Mining, including rock blasting or crushing
- Wood fabrication for furniture and utensil production
In order to conduct a business of List two, at least 40% of the capital has to be held by Thai nationals or juristic persons that are not foreigners under the FBA. The FBA also states that unless there is a reasonable cause, the Minister (with the approval of the Cabinet) may reduce the proportion requirement but it shall not be less than 25 percent and the number of Thai directors shall not be less than two-fifths of the total number of directors.
The Thai legislator annexed a Third List to the FBA, listing all businesses in which Thai nationals are not ready to compete unless permitted by the Director-General with the approval of the Committee. Do note that this permission will most probably be subjected to certain conditions. The activities mentioned in List three concern amongst others:
- Rice milling and flour production from rice and farm produce
- Fishery, specifically marine animal culture
- Forestry from forestation
- Production of plywood, veneer board, chip board or hardboard
- Production of lime
- Accounting or service business
- Legal service business
- Architecture service business
- Engineering service business
Construction, except for:
- Construction rendering basic services to the public in public utilities or transport requiring special tools, machinery, technology or construction expertise having the foreigner’s minimum capital of 500M THB or more
- Other categories of construction as prescribed by the ministerial regulations
Broker or agent business, except:
- Being a broker or agent for underwriting securities or services connected with future trading of commodities or financing instruments or securities
- Being broker or agent for trading or procuring goods or services necessary for production or rendering services amongst affiliated enterprises
- Being a broker or agent for trading, purchasing or distributing or seeking both domestic and foreign markets for selling domestically manufactured or imported goods in the manner of international business operations having the foreigners’ minimum capital 100M THB or more
- Being broker or agent of other category as prescribed by the ministerial regulations
- Auction in the manner of international bidding not being the auction of antiques, historical artefacts or art objects which are Thai works of art, handicraft or antiques having the historical value
- Other categories of auction as prescribed by the ministerial regulations
- Internal trade connected with native products or production not yet prohibited by law
- Retailing all categories of goods having the total minimum capital less than 100M THB or having the minimum capital of each shop less than 20M THB
- Wholesaling all categories of goods having minimum capital of each shop less than 100M THB
- Hotel business, except for hotel management service
- Guided tour
- Selling food or beverages
- Plant cultivation and propagation business
- Other categories of service business except that prescribed in the Ministerial regulations
The list is not only long. A carryall clause has been inserted as well: ‘other categories of service business except that prescribed in the ministerial regulations’. This clause gives the Director-General extensive powers; every activity can be subjected to his approval, except for those expressly authorised (e.g. hotel management service).
Foreign business license timeframe.
Once the application is submitted, there is a commitment (under the Act) to approve or give reason for rejection with 60 days. Once approval is granted, the FBL is normally issued within 15 days.
|List Two||List Three|
|1. License application||1,000 – 2,000 THB|
|a) License for certain foreigners||5,000 THB|
|b) License for List Two Businesses||40,000 THB|
|Natural persons||10 THB for each registered capital of 1,000 THB with the minimum of 40,000 THB and the maximum of 500,000 THB|
|Juristic persons||Fraction of capital of 1,000 THB is treated as 1,000 THB|
|c) License List Three Businesses||20,000 THB|
|Natural persons||5 THB for each registered capital of 1,000 THB with the minimum of 20,000 THB and the maximum of 250,000 THB|
|Juristic persons||Fraction of capital of 1,000 THB is treated as 1,000 THB|
|3. Certificate||20,000 THB|
|4. Replacement of License of Certificate||5,000 THB|
Appealing a foreign business license rejection.
If the application is rejected the foreign-owned company will be notified in writing. The company is entitled to lodge an appeal with the Minister within 30 days of the date on which the decision was received. The Minister shall make a decision on the appeal within 30 days of the date on which the appeal is submitted. The decision of the Minister shall be final.
Other restrictions for foreigners.
Banking, insurance and finance businesses must have at least 75% Thai shareholders, companies engaged in domestic shipping have to be at least 70% Thai.
Alternatives to foreign business license for foreign ownership.
There are two possibilities:
- You can ask the Board of Investment (BOI) or the Industrial Estate Authority of Thailand (IEAT) to grant you a special privilege (“promotion”)
As long as the US Thai Amity Treaty has not been renewed, set up a company under the latter act permitting American companies and citizens to maintain a majority shareholding or to wholly own a company, branch office or representative office located in Thailand
You can find out more about other options here: 100% foreign business ownership.