The Foreign Business Act of 1999 sets out the rights and limitations on foreigners doing business in Thailand.
1. Foreign Business Act of 1999 and Activities Restricted to Thai Nationals
Thai law regulates the activities in which the companies designated as foreigner may engage in. While some activities are completely prohibited, some may be engaged in with prior approval from a designated government agency, and some do not require any special approval at all.
1.1 Definition of a Foreign Company
According to the Foreign Business Act of 1999 (FBA), the term foreigner means:
(1) Natural person not of Thai nationality.
(2) Juristic person not registered in Thailand.
(3) Juristic person registered in Thailand having the following characteristics:
(a) Having half or more of the juristic person’s capital shares held by persons under (1) or (2) or a juristic person having the persons under (1) or (2) investing with a value of half or more of the total capital of the juristic person.
(b) Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager.
(4) Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2) or (3), or a juristic person having the persons under (1), (2) or (3) investing with the value of half or more of its total capital.
The Foreign Business Act of 1999 has identified 3 lists of activities in which foreign participation may be prohibited or restricted, as follows:
Activities stated in List 1 are designated as businesses not permitted for foreigners to operate due to special reasons. Foreign companies are completely restricted from engaging in the activities contained in List 1.
Activities stated in List 2 are designated as businesses related to national safety or security, or affecting arts and culture, traditional and folk handicraft, or natural resources and environment. Foreign companies may only engage in the activities stated in List 2 with prior Cabinet approval.
Activities stated in List 3 are designated as businesses which Thai nationals are not yet ready to compete with foreigners. To engage in activities stated in List 3, the foreign company must apply for and obtain a Foreign Business License prior to commencing the activity.
There are two common exceptions to the above stated rules:
– If a foreigner is operating a business that is classified in List 2 or List 3 with the permission of the Government of the Kingdom of Thailand i.e. Board of Investment or the Industrial Estates Authority of Thailand, such foreigners shall notify the Director-General of Commercial Registration Department in order to obtain a certificate.
– If a foreigner is operating a business that is classified in the Lists under a treaty to which Thailand is a party or is obligated to abide by, it shall comply with the provisions of the treaty which may in return include the entitlement of Thai nationals and Thai enterprises to operate the businesses in the country of the foreigners, i.e. Treaty of Amity Between U.S. Thailand.
1.2 Restricted Business Activities under the Foreign Business Act of 1999
List 1 – Businesses that foreigners are not permitted to engage in for special reasons:
- Newspaper business, radio-broadcasting station or radio/television business.
- Farming, cultivation or horticulture.
- Animal husbandry.
- Forestry and timber conversion from natural forests.
- Fisheries, especially fishing in Thai territorial waters and in specific economic areas of Thailand.
- Extracting Thai herbs.
- Trade and auction sale of Thai antiques or objects of historical value.
- Making or casting Buddha images and alms bowls.
- Trading in land.
List 2 – Businesses concerning national security or safety that could have an adverse effect on art and culture, customs, or native manufacture/handicrafts, or with an impact on natural resources and the environment:
Group 1 – Businesses concerning national security or safety
Manufacturing, distribution, repair or maintenance of:
- Firearms, ammunition, gunpowder, and explosive materials.
- Components of firearms, ammunition, and explosive materials.
- Armaments, ships, aircraft, or military vehicles.
- Equipment or parts of any type of war equipment.
Domestic land transportation, water transportation, or air transportation, including domestic aviation.
Group 2 – Businesses that could have an adverse effect on arts and culture, customs, and native manufacturing/handicrafts
- Trading of antiques or artifacts that are Thai works of art or Thai handicrafts.
- Wood carving.
- Silkworm rearing, manufacture of Thai silk, Thai silk weaving, or Thai silk printing.
- Manufacturing of Thai musical instruments.
- Manufacturing of gold-ware, silverware, nielloware, bronzeware, or lacquerware.
- Making bowls or earthenware which are of Thai art and culture.
Group 3 – Businesses that could have an adverse effect on natural resources or the environment
- Manufacturing of sugar from cane.
- Salt farming, including rock salt farming.
- Mining of rock salt.
- Mining, including stone quarrying or crushing.
- Timber processing for making furniture and utilities.
List 3 – Businesses in which Thais are not ready to compete in undertakings with foreigners:
- Rice milling and flour production from rice and plants.
- Fisheries, specifically breeding of aquatic creatures.
- Forestry from re-planting.
- Production of plywood, veneer, chipboard or hardboard.
- Production of lime.
- Legal services.
- Construction, except:
Construction of infrastructure in public utilities or communications requiring tools, technology or special expertise in such construction, except where the minimum foreign capital is 500 million baht or more.
Other construction, as prescribed in regulations.
Agency or brokerage, except:
- Brokerage or agency of securities or service related to future agricultural commodities futures or financial instruments or securities.
- Brokerage or agency for the purchase/sale or procurement of goods or services necessary to production or providing services to affiliated enterprises.
- Brokerage or agency for the purchase or sale, distribution or procurement of markets, both domestic and overseas for the distribution of products made in Thailand, or imported from overseas in the category of international business, with minimum foreign capital of not less than 100 million baht or more.
- Other brokerage or agency activities, as stipulated in ministerial regulations.
Auctioneering in the manner of international bidding, not being auctions of antiques, ancient objects or artifacts that are Thai works of art, Thai handicrafts or antique objects, or with Thai historical value.
Other types of auctioneering, as stipulated in ministerial regulations.
- Domestic trade in local agricultural products not prohibited by law.
- Retailing all categories of goods having less than 100 million baht capital in total or having the minimum capital of each shop of less than 20 million baht.
- Wholesaling, all categories of goods having minimum capital of each shop less than 100 million baht.
- Hotel operation, excluding hotel management.
- Sale of food and beverages.
- Planting and culture of plants.
- Other services, except those prescribed in the ministerial regulations.
1.2.1 Foreign Business License Application
As stated above, foreigners seeking to engage in List 3 activities are required to apply for and obtain a Foreign Business License prior to commencing operations.