Thailand remains an attractive destination for foreign investors and business owners seeking out new markets to open a new or expand an existing business. Nevertheless, those who wish to establish majority or wholly foreign-owned business entities need to be aware of Thailand’s laws and regulations regarding foreign investment.
Thailand’s Foreign Business Act B.E. 2542 (FBA) divides business activities into three lists that either forbids foreigners from engaging in entirely or requires them to seek varying degrees of permission prior to engaging in the listed activities. Over the years, Thailand’s government has been slowly removing business activities from these lists as Thai businesses become more competitive.
List 1: Businesses Not Permitted to Foreigners
The FBA strictly prohibits foreign entities in Thailand from undertaking the following activities:
- Newspaper publishing and radio or television broadcasting stations.
- Rice farming, plantation, or crop growing.
- Livestock farming.
- Forestry and timber processing from a natural forest.
- Fishery, specific only to catching aquatic animals in Thai waters and specific economic zones of Thailand.
- Extraction of Thai medicinal herbs.
- Trading and auction sale of antique objects of Thailand or objects of historical value to Thailand.
- Making or casting Buddha images and monk alms bowls.
- Land trading.
Generally, a registered non-Thai entity cannot embark on any activities from List 1, but there are some exceptions, such as US Amity Treaty companies and foreign companies that meet certain investment and partnering conditions.
List 2: Businesses Permitted to Foreigners under Certain Conditions
The FBA lists activities under three different categories that foreign entities must receive government approval or meet certain ownership conditions before commencing.
Group 1 – Businesses related to Thai national safety or security: production, sales, or maintenance of firearms, ammunition, gun powder, or explosives; or the domestic transportation by land, water, or air of such products.
Group 2 – Businesses affecting Thai arts, culture, traditions, folk handicrafts: trading in Thai art, art objects, or handicrafts; or production of carved wood, etc.
Group 3: Business affecting Thai natural resources and environment: manufacturing sugar from sugar cane, salt farming, or rock salt mining, etc.
Foreign entities can operate businesses categorized under List 2 once they have received proper licensing and approval from the Ministry of Commerce, the Board of Investment, or the Industrial Estate Authority of Thailand. There is a list of other factors that will determine which regulatory body should be involved.
List 3: Businesses Permitted to Foreigners who Obtain a Foreign Business License
The FBA classifies these activities as businesses in which Thai nationals may not yet be ready to compete alongside foreigners.
- Rice milling and flour production from rice or farm plants
- Fisheries, only in respect of the hatching and raising of aquatic animals
- Forestry, from a replanted forest
- Production of plywood, veneer boards, chipboards or hardboards
- Production of (natural) lime
- Provision of accounting, legal, architectural, and engineering services
- Construction, with some exceptions
- Brokerage or agency business, with some exceptions
- Sale by Auction, with some exceptions
- Domestic trade related to native agricultural products or produce not yet prohibited by law
- Retail sales with an aggregated minimum capital of less than 100 million Baht, or with a minimum capital of each store of less than 20 million Baht
- Wholesale trading with a minimum capital of each store less than 100 million Baht
- Advertising business
- Hotel business, except for hotel management services
- Guided touring
- Sale of food and beverages
- Cultivation, propagation and development of plant varieties
- Other service businesses, except those otherwise prescribed by Ministerial Regulations
A foreign entity seeking to engage in any of these business activities must first obtain a Foreign Business License (FBL) from the Foreign Business Committee and the Director-General of the Department of Business Development (DBD). There are also cases for exemptions or special permissions from the Board of Investment or Industrial Estate Authority of Thailand, as well as through free-trade agreements and treaties between Thailand and certain nations.
GPS Legal Can Help You Sort Through the Requirements
In June 2018, news media reported that the DBD was reviewing the possibility of removing five activities from List 3, thereby allowing foreign-owned business to engage in them without the need for an FBL. These include accounting, consultancy, money lending, space leasing, logistics and certain legal services. However, it is still unclear whether the foreign entities will be able to operate the same as a Thai company or whether the foreign entity will only be able to provide these services to an affiliate or subsidiary.
GPS Legal & Consulting has experience helping clients navigate through the process of setting up a business in Thailand. If you would like to find out more about doing business in Thailand and the feasibility of your planned investments, please feel free to contact us.