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This is the ultimate guide to a Foreign Business License in Thailand.
The Foreign Business Act specifies certain business activities that are prohibited to foreign companies. However, there is an approach that allows foreign companies to engage in those activities, which is obtaining the Foreign Business License.
Continue reading for more details about the license.
What is the Foreign Business License?
A Foreign Business License (FBL) is a license given to companies with a majority-owned by foreigners or foreign investors who wish to operate business activities restricted to foreign nationals under Thai law.
Foreign Business License requirements
A foreigner who is applying for the FBL must meet the requirements as stated in section 16 of the Foreign Business Act (FBA):
- Being of not less than 20 years of age
- Having a residence in the Kingdom or having been permitted to enter the Kingdom temporarily under the law on immigration
- Not being an incompetent or quasi-incompetent person
- Not being bankrupt
- Not having been punished by a court judgement or ordered to pay a fine in settlement of any offence under the FBA or under the Notification of the National Executive No.281, unless having been discharged for a period of not less than five years prior to the date of the application for the license
- Not having been imprisoned by a court judgement for offences of cheating, cheating creditors, misappropriation or offences related to trade under the Penal Code or the offences related to loans fraudulent to the public of the offences under the law on immigration, unless having been discharged for a period of not less than five years prior to the date of the application for the license
- Not having had a license issued under the FBA or under the Notification of the National Executive Council No.281 revoked within the period of five years prior to the date of the application for the license
Types of business activities
Under the FBA, there are three types of business activities:
- List 1 – Businesses not permitted to foreigners
- List 2 – Businesses permitted to foreigners under certain conditions
- List 3 – Businesses not yet permitted to foreigners
If Thai nationals hold the majority of shares in a company, it is considered as a Thai company and not subject to the FBA. Foreigners are allowed to hold up to 49% of the shares in a Thai company engaging in a restricted business.
In the case of a company with a majority of foreign shareholders, it is required to apply for the FBL to engage in restricted businesses.
Foreign business license application process in Thailand
Capital requirements under the FBA
Pursuant to section 14 of the FBA, the minimum capital for the commencement of a business operation in Thailand shall not be less than THB 2 million.
Businesses listed under List 2 and List 3 of the FBA must have a minimum capital of THB 3 million.
The documents needed to apply for the FBL include:
- A copy of a certificate of juristic person
- A copy of the passport or identification document for foreigners or identification cards of the representative
- A certification by the applicant stating that the applicant, director, manager or representative appointed meets the qualifications and is not prohibited under section 16
- A map indicating the location of the business
- A declaration of the details of the type of business which the license application was made
- A copy of financial statements of the past three years with the Thai translation
- A power of attorney if another person has been authorised to act on the applicant’s behalf
- A copy of the house register, certificate of residence in Thailand or evidence of permission to enter Thailand for a temporary stay of the representative
The FBA prohibits foreign companies from operating in businesses under List 1. However, a foreign company can qualify through foreign trade agreements, such as the US-Thai Amity Treaty or the Thai-Australia Trade Agreement.
The company must have a minimum capital of 25% of its average estimated expenditure for three years. For example, the estimated expenditure for three years is THB 100 million, and the minimum capital is THB 25 million. If the registered capital is less then THB 25 million, the company has to increase its capital.
If the company is qualified, the foreign company must apply for the Foreign Business Certificate from the Department of Business Development (DBD).
The Foreign Business Certificate is issued to foreign companies granted to operate restricted businesses through an international treaty or receiving promotion from the BOI.
Business activities under List 2 are prohibited to foreigners unless the cabinet grants permission. Foreign companies that wish to engage in business activities under list 2 can apply for the FBL by meeting the following criteria:
- Minimum capital of THB 3 million
- Not less than 2/5 of the total number of directors must be Thai nationals.
- A minimum of 40% of Thai shareholding. The Minister together with the Council of Ministers’ approval may reduce the requirement, but to not less than 25% for certain cases.
Once the requirements are met, the foreign company can apply for the FBL through the DBD by submitting the application and supporting documents.
The Minister shall consider whether to approve within 60 days from filing the application. Once the Minister has approved the application, the license shall be issued within 15 days from the approval date. However, the full process may take up to four months.
If the Minister refuses to give permission to the foreign company, the Minister shall notify the foreign company and state the reason of refusal in writing and within 30 days.
In the case that the foreign company has received approval to engage in activities under List 2 from the BOI or a foreign trade agreement, the foreign company will only need to apply for the foreign business certificate.
Business activities listed under List 3 are prohibited to foreigners unless the Director-General of the DBD gives permission.
The criteria to be met for foreign companies seeking to engage a List 3 business are:
- A minimum capital of THB 3 million
- At least one authorised director or member residing in Thailand
The foreign company must submit the application and necessary documents to the Director-General of the DBD.
The Director-General shall approve within 60 days of filing the application, and the Director-General shall issue the license within 15 days after the approval date.
If the Director-General does not approve the foreign company operating activities in List 3, the Director-General shall notify the foreigner and state the reason for such refusal in writing and within 15 days.
Similarly to List 1 and 2, a foreign company that received approval to operate under List 3 by the BOI or under a foreign trade agreement only needs to apply for a foreign business certificate.
Criteria for the foreign business license application
According to section 5 of the FBA, when granting permission for foreigners to operate in businesses in List 1, 2 and 3, the following criteria must be considered:
- Advantageous and disadvantageous effects on national safety and security
- Economic and social development of the country
- Public order or good morals
- National values in arts, culture, traditions and customs
- Natural resources conservation
- Energy and environmental preservation
- Consumer protection
- Sizes of undertakings
- Technology transfer
- Research and development
As specific business activities are only permitted to foreign companies with a Foreign Business License, it is important that you obtain the license before engaging in the restricted activities. Contact Acclime to help you in the process of obtaining the Foreign Business License.
Acclime is Asia’s premier tech-enabled professional services firm. We provide formation, accounting, tax, HR and advisory services, focusing on delivering high-quality outsourcing and consulting services to our local and international clients in Thailand and beyond.