Thailand is an attractive investment destination for foreign direct investment. Thailand has continuously encouraged foreign direct investment including promoting and privileging foreign investment and investment incentives. Nonetheless, there are certain rights and activities that are reserved only for Thai nationals due to the reasons of national safety and security, and national development.
The primary body of law with respect to foreign participation in various business activities is the Foreign Business Act, B.E. 2542 (1999) (the “FBA”). Foreigners are generally permitted to start a business in Thailand under the provision of the FBA. The FBA defines the definition of “foreigner” is (i) a non-Thai natural person, (ii) a legal entity not incorporated in Thailand, (iii) a juristic entity incorporate in Thailand with at least fifty percent of share capital is owned by foreign individuals or entities, and (iv) a limited partnership or a registered ordinary partnership that having the managing partner or manager is a non-Thai natural person. Based on the aforesaid definition, a private limited company is owned by majority Thai nationals and/or entities with at least fifty-one percent of share capital shall be considered as a Thai private limited company which is not subject to the FBA. Foreigners therefore are generally allowed to participate and own up to forty-nine percent of shares unless otherwise particularly prescribed in specific law.
The FBA regulates the restrictions on certain types of business activities that may be conducted by foreigners. There are 43 business activities which are divided into three difference levels, lists of activities, that are prohibited and/or restricted from foreign participation, unless prior approval is granted from the Ministry of Commerce and obtain a Foreign Business License.
Foreigners are strictly prohibited to operate in any business activities stated in List 1 of the FBA due to special reasons, therefore a Foreign Business License shall not be granted under any circumstances. The activities shall include operation of newspapers and radio broadcasting or television station, farming, forestry, fishery in Thai territorial waters and specific economic zones, trading of Thai antiques and national historical objects, and land trading.
Business activities stated in List 2 are considered as business activities related to (a) national safety or security; such as production and/or distribution and/or maintenance of firearms and ammunition or domestic transportations, or (b) affecting arts and culture, traditional and folk handicraft; such as trading of Thai antique arts and handcrafts, or (c) natural resources and environment; such as mining or timber fabrication. Foreigners therefore are required to obtain a permission from the Thai Cabinet prior to operating in this kind of business activities. In addition, foreigners, a juristic entity, may operate any businesses specified in List 2 only if at least of forty percent of share capital is owned by Thai individuals or entities.
Foreigners are restricted to operate any businesses as stated in List 3 only if a permission is granted from the Ministry of Commerce as well as obtaining a Foreign Business License since these activities are considered as businesses that Thai nationals are deemed not yet ready to compete with foreigners. Business activities in List 3 includes wholesale or retail sale of goods, advertising, hotel business, construction, broker or agent business and all service businesses (accounting, legal, engineering, architecture etc.).
Foreigners may engage in certain business activities restricted in the FBA if:
- Foreigners receive national treatment by virtue of an international treaties that Thailand has entered into and become as a party in order to give special rights and benefits to foreigners who wish to operate their businesses in Thailand, for example the Treaty of Amity and Economic Relations between Thailand and the United States.
- Foreigners receive privileges and protection under the Thailand Board of Investment (BOI) promotion in accordance with Investment Promotion Act, B.E. 2520 (1977). The BOI is responsible for promoting foreign and domestic investment in activities considered to be the most beneficial to Thailand’s economic and national development. The Thai government has granted full foreign ownership rights to foreign nationals who promised to make major investments, and develop and transfer technology to Thailand. The BOI privileges are normally granted for manufacturing products as well as certain non-manufacturing activities. Foreigners who have been promoted under the BOI promotion must strictly proceed in accordance with the conditions prescribed in the BOI Promotion Certificate.
- Foreigners receive privileges and permission from the Industrial Estate Authority of Thailand (IEAT) under the Industrial Estate Authority of Thailand Act, B.E. 2522 (1979). The IEAT is responsible for industrial development and operation of industrial estates. There are two industrial estates categories of industrial estates, consisting of General Industrial Zone and Free Zone. Generally, the IEAT has granted full rights to foreign nationals who intended to operate a business in an industrial estate in Thailand as an industrial operator.
In this respect, foreigners must notify the Ministry of Commerce for the issuance of a Foreign Business Certificate prior to operate their promoted business.
Thailand has continuously encouraged foreign direct investment including promoting and privileging foreign investment and investment incentives.