Setting Up a Business

Setting Up a Business in Thailand for a Foreign Investor,Thailand is still one of the best places for foreign investors who want to expand their business in Southeast Asia. This is because Thailand has a strategic location, competitive costs, and well-developed infrastructure. However, it is important for foreigners to understand that business ownership by foreigners is regulated, and investors must be very careful about the legal requirements.

A “foreign company” is defined as a company where 50% or more of its shares are held by foreigners, directly or indirectly. Before making a decision, it is recommended for every foreign investor to consider the following points. This will help to prevent unexpected issues during the business establishment:

1. Know exactly which business you will operate in Thailand.

Different businesses have different restrictions and licensing requirements. For example, setting up a factory in Thailand to manufacture products is generally considered “manufacturing” and does not require a foreign business license. However, if this factory also produces made-to-order products, it can be considered “service provision” and will require a foreign business license. Understanding this clearly in advance will help to make the licensing process smoother, if required.

2. Check if the Business is regulated by any specific law (Specific Law).

If the Business is regulated by specific laws, certain licenses will be required for its operation. Additionally, certain businesses are reserved for Thai nationals only. These are clearly stated in Specific Laws, for example, laws related to life and non-life insurance, financial institutions, securities, telecommunications, recruitment, and education. In such cases, foreign majority ownership will not be allowed.

3. Check if the Business is prohibited or restricted under the Foreign Business Act B.E. 2542 (1999) (FBA).

If the Business is not prohibited or restricted by any Specific Law, you must also review if it falls under any of the three Lists of the FBA:

• List 1: Completely prohibited (e.g. land trading, farming and broadcasting).
• List 2: Allowed only with Cabinet approval (e.g. local transportation, trading of Thai antiques and mining).
• List 3: Allowed with permission from the Foreign Business Commission (e.g. construction, retail, wholesale, advertising, hotels, guiding and service provision).

If your Business falls under List 2 or List 3, you must obtain a Foreign Business License (FBL) from the Ministry of Commerce. This process can be long and may not always have a guaranteed outcome. To avoid this, you can review if your Business qualifies for an available exemption pathway, explained below.

4. Check if the Business can be exempted from the FBL requirement.

Some businesses can be exempt from obtaining an FBL if certain conditions are met, such as a minimum capital investment of THB 100 million for wholesale, retail, or international trading businesses. In addition, certain regulations also provide automatic exemptions for businesses like representative offices, regional offices for international trade, services performed under agreements with the government or state enterprises, or services for group companies in Thailand.

5. Check if the Business can obtain a Foreign Business Certificate (FBC) instead of an FBL.

Unlike the FBL, an FBC can be granted if the Business is qualified under certain conditions, including:

• The Business operates under a treaty to which Thailand is a party, i.e. the ASEAN Comprehensive Investment Agreement (ACIA), the ASEAN Framework Agreement on Services (AFAS), the U.S.–Thailand Treaty of Amity and Economic Relations (Thai-US Treaty), the Thailand–Australia Free Trade Agreement (TAFTA), or the Japan–Thailand Economic Partnership Agreement (JTEPA). In particular, the Thai-US Treaty allows American companies to have 100% ownership and provides more benefits than other treaties.
• The Business falls under List 2 or List 3 of the FBA and is promoted under the Investment Promotion Act B.E. 2520 (1977) (BOI Promotion), or has permission to operate within zones governed by the Industrial Estate Authority of Thailand Act B.E. 2522 (1979) (IEAT) or the Eastern Economic Corridor Act B.E. 2561 (2018) (EEC). BOI Promotion, IEAT, and EEC offer incentives and benefits such as import duty exemption for machinery and raw materials, import/export privileges, tax and duty benefits, and streamlined regulatory procedures.

6. Consider a joint collaboration with a Thai partner if needed.

If the Business is restricted by Specific Laws or the FBA and cannot be wholly or majority-owned by a foreign investor, a joint collaboration with a Thai partner may be necessary. The rights and benefits of the foreign investor can be protected through agreements such as a joint venture agreement, collaboration agreement, or shareholders’ agreement. However, setting up nominee shareholding structures — where Thai shareholders hold shares for the benefit of a foreign party — is illegal and is strictly monitored by the Thai authorities.

7. Even if the Business is not restricted, still comply with the FBA.

If the Business is not prohibited or restricted by Specific Laws or the FBA, and can be fully or majority owned by foreigners, you must still comply with the requirements of the FBA. This includes having a minimum registered capital of at least THB 2 million and obtaining a 13-digit registration number in Thailand.

These points provide only an initial understanding for foreign investors. To obtain more details and ensure full compliance with Thai laws and regulations, it is highly recommended to consult a qualified legal consultant.