Foreigners intending to start a business in Thailand must comply with the FBA or the Foreign Business Act B.E 2542. Under the FBA, foreigners are not permitted to engage in most business categories in the country unless an alien business activity permit is acquired from the Department of Commercial Registration’s director-general, along with the Foreign Business Committee’s approval.
Separate regulations govern foreign ownership of land and activities like banking, finance, insurance and shipping. This article highlights the essential points about Thai regulations on foreign companies.
Business categories under the FBA
The FBA forbids foreigners to participate in certain business activities in Thailand. The FBA assigned these business activities into three categories:
- List 1: Includes business activities that foreigners cannot participate in as they are being reserved for some special reasons. Businesses under this list include but are not limited to land buying and selling.
- List 2: Foreigners are not permitted to run businesses under this list as they comprise business activities that involve national safety and security, impact art and culture, including folk and traditional handicrafts, and affect the environment or natural resources. However, depending on the circumstances, they may be allowed to participate upon approval by the MOC or Ministry of Commerce, along with the Cabinet’s approval.
- List 3: Include business activities that the locals are not prepared to compete. Nevertheless, foreigners may receive permission to participate from the DBD’s director-general with the Foreign Business Committee’s approval. Exemptions may be granted under the Treaty of Amity and Economic Relations between the United States and Thailand.
Businesses exempt from foreign business license
Foreigners can engage in business activities that fall under the following:
- Not listed under list one, two, or three except for some businesses, such as exporting and manufacturing activities
- Those that the FDA specifically described being exempted from foreign business license requirements
- Promoted by the Investment Promotion Act or have written permission for business operation by the Thailand Act’s Industrial Estate Authority. While exempt from the requirements, foreigners still need to notify the DBD’s director-general to acquire a foreign business certificate
- Through a treated wherein Thailand becomes a party or wherein the country is bound
The US-Thailand Treaty of Amity permits American nationals or companies to hold a majority or the entire shares of a company. However, they do need to meet certain criteria, which includes:
- At least fifty per cent of shares must be owned by the American nationals
- At least half of the directors must be an American citizen
This treaty, however, does not permit American nationals or entities from engaging in reserved activities as follows:
- Communications
- Fiduciary functions
- Transportation
- Land ownership
- Banking including depository functions
- Domestic trade in indigenous agricultural products
- Land exploitation or exploitation of other natural resources
Minimum Capital
Foreigners need to have minimum capital to run a business in Thailand. The required capital may vary depending on their license status. Foreigners with a foreign business license need a minimum capital of at least THB 3 million or twenty-five per cent of the predicted three-year average costs of the applied-for business, whichever is higher.
Foreigners exempt from the foreign business license requirement need at least THB 2 million. Nevertheless, they need to be aware of certain points in the requirement. For instance, foreign entrepreneurs or companies intending to hire a foreign expat need to acquire a work permit. The foreign employer also needs to obtain capital of not less than THB 3 million for every foreign expat, according to the Order of the Immigration Bureau No. 327/2557.
Foreigners exempt from the foreign business license requirement need at least THB 2 million. Nevertheless, they need to be aware of certain points in the requirement. For instance, foreign entrepreneurs or companies intending to hire a foreign expat need to acquire a work permit. The foreign employer also needs to obtain capital of not less than THB 3 million for every foreign expat, according to the Order of the Immigration Bureau No. 327/2557.
Potential Offence
Foreigners engaging in any business without procuring a proper foreign business license, unless they are from the license requirements, shall be subject to fines, imprisonment, or both, as per FDA’s Section 37. Individuals handling the business will also be subject to the same legal charges if the offender is a juristic person under GBA’s Section 41.
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