Limitation of foreign business activities in Thailand

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foreign business act

Even a foreigner may wholly own a business in Thailand, however for some specific business activity; it is restricted and governed by several laws and regulations. The major law governing foreign business activity is the Foreign Business Act, B.E. 2542 (1999) (the “FBA”).

The FBA limits the rights of foreigners to engage in certain business activities in Thailand. So, foreigner investors need to consider the FBA carefully before setting up business operation.

“Aliens” or “Foreigners” under the FBA is defined as natural persons or juristic entities who do not possess Thai nationality.
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 parson.
(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.

In summary, in case of companies, if 50% or more of their share capital belongs to foreign individuals or juristic entities, it shall be considered as “foreign”. In case of partnership, if 50% or more of the partners are foreign individuals or if the managing partner or manager is a foreigner, it also shall be considered as “foreign”.
There are three business categories/ schedule under The FBA:
Schedule One consists of business activities that foreigner cannot obtain a license;
Schedule Two consists of business activities that foreigner obtain permission from the Minister of Commerce, which in turn can only be issued pursuant to a resolution of the Cabinet. In addition, Thai nationals must hold at least 40% of the capital in that foreign juristic person and two-fifths (2/5) of the directors must be Thai.
Schedule Three consists of business activities that foreigners may engage in these businesses only upon receipt of permission from the Director-General, with the approval of the Foreign Business Board. Upon permission, foreigner can be 100% foreign-owned and there is no requirement for a minimum number of Thai directors.

However, there are some exemptions that this FBA shall not be applied to, for instance:
(1) Exemptions granted by the Board of Investment and the Industrial Estate Authority of Thailand;
(2) Exemptions Granted by the Thai Government or by Virtue of a Treaty;
(3) Exemption for U.S. Companies under the U.S.-Thai Treaty of Amity

The Cabinet or the Director-General, as the case may be, must complete consideration of an application for a Foreign Business License within 60 days from the date of receipt. However, it can be extended for not exceeding 60 days if necessary.

The businesses not permitted for aliens to operate due to special reasons:
(1) Newspaper business, radio broadcasting or television station business
(2) Rice farming, farming or gardening.
(3) Animal farming
(4) Forestry and wood fabrication from natural forest
(5) Fishery for marine animals in Thai waters and within Thailand specific economic zones.
(6) Extraction of Thai herbs.
(7) Trading and auctioning Thai antiques or national historical objects.
(8) Making or casting Buddha images and monk alms bowls.
(9) Land trading

The businesses related to the national safety or security or affecting arts and culture, tradition, folk handicraft or natural resource and environment.
Group 1: The businesses related to the national safety or security
(1) Production, selling, repairing and maintenance of:
(a) firearms, ammunition, gun powder, explosives.
(b) Accessories of firearms, ammunition, and explosive
(c) Armaments, ships, air-crafts or military vehicles.
(d) Equipment or components, all categories of war materials.
(2) Domestic land, waterway or air transportation, including domestic airline business.

Group 2 : The businesses affecting arts and culture, traditional and folk handicraft:
(1) Trading antiques or art objects being Thai arts and handicraft.
(2) Production of carved wood.
(3) Silkworm farming, production of Thai silk yarn, weaving Thai silk or Thai silk pattern printing.
(4) Production of Thai musical instruments.
(5) Production of goldware, silverware, nielloware, bronzeware or lacquerware.
(6) Production of crockery of Thai arts and culture.

Group 3: The businesses affecting natural resources or environment:
(1) Manufacturing sugar from sugarcane;
(2) Salt farming, including underground salt;
(3) Rock salt mining;
(4) Mining, including rock blasting or crushing;
(5) Wood fabrication for furniture and utensil productio

The business which Thai national are not yet ready to complete with foreigners:
(1) Rice milling and flour production from rice and farm produce
(2) Fishery, specifically marine animal culture.
(3) Forestry from forestation.
(4) Production of plywood, veneer board, chipboard or hardboard.
(5) Production of lime.
(6) Accounting service business.
(7) Legal service business.
(8) Architecture service business.
(9) Engineering service business.
(10) Construction, except for:
(a) Construction rendering basic services to the public in public utilities or transport requiring special tools, machinery, technology or construction expertise having the foreigners’ minimum capital of 500 million Baht or more.
(b) Other categories of construction as prescribed by the ministerial regulations.

(11) Broker or agent business, except:
(a) Being broken or agent for underwriting securities or services connected with future trading of commodities of financing instruments or securities.
(b) Being broker or agent for trading or procuring goods or services necessary for production or rendering services amongst affiliated enterprises.
(c) Being broker or agent for trading, purchasing or distributing or seeking both domestic and foreign markets for selling domestically manufactured or imported goods in the manner of international business operations having the foreigners’ minimum capital 100 million Baht or more.
(d) Being broker or agent of other category as prescribed by the ministerial regulations.

(12) Auction, except:
(a) Auction in the manner of international bidding not being the auction of antiques, historical artifacts or art objects which are Thai works of arts, handicraft or antiques or having the historical value.
(b) Other categories of auction as prescribed by the ministerial regulations.

(13) Internal trade connected with native products or produce not yet prohibited by law.
(14) Retailing all categories of goods having the total minimum capital less than 100 million Baht or having the minimum capital of each shop less than 20 million Baht.
(15) Wholesaling all categories of goods having minimum capital of each shop less than million Bath.
(16) Advertising business.
(17) Hotel business, except for hotel management service
(18) Guided tour.
(19) Selling food or beverages.
(20) Plan cultivation and propagation business.
(21) Other categories of service business except that prescribed in the ministerial regulations

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By: Ekkapon Yuangnark