In Thailand, the Ministry of Commerce and its subordinate Department of Business Development ("DBD") are responsible for formulating and enforcing regulations and policies relating to foreign investment and supervising the business conduct of foreign-invested companies. In 1999, the Thai government enacted and promulgated the Foreign Business Act ("FBA"), which sets out the definition of "foreigner", the restrictions on foreigners conducting business in Thailand, the licensing procedures, and other regulatory requirements.
For foreign enterprises intending to invest and establish
operations in Thailand, a thorough understanding of the FBA and other foreign
investment regulatory requirements is essential to building a sound compliance
foundation and securing long-term development. To help readers better
understand Thailand's restrictions and licensing requirements for foreign
investment, this article serves as the first issue of Xingrui Research's
"Foreign Business Regulation Series" and provides an introduction to
the basic requirements of the FBA regarding foreign business regulation, as
well as the qualification requirements and application procedures for a Foreign
Business License ("FBL").
I. Overview of the FBA
(I) Definition of
"Foreigner"
Pursuant to Section 4 of the FBA, "Foreigner" refers
to:
1. A natural person who does not hold Thai nationality;
2. A juristic person not registered in Thailand;
3. A juristic person registered in Thailand that meets either of
the following conditions:
(1) At least half of the shares are held by persons described in
categories 1 or 2 above, or the investment by persons described in categories 1
or 2 above constitutes at least half of the total investment;
(2) It is a limited partnership or a registered ordinary
partnership, and its managing partner or manager is a person described in
category 1 above;
4. A juristic person registered in Thailand, of which at least
half of the shares are held by persons described in categories 1, 2, or 3
above, or the investment by persons described in categories 1, 2, or 3 above
constitutes at least half of the total investment.
(II) Businesses Prohibited
and Restricted for Foreigners
Pursuant to the FBA, three categories of business lists are set
out in the annexes to the FBA, as follows:
List 1: Businesses prohibited to foreigners for special reasons;
List 2: Businesses relating to national security or public
order, or affecting arts, culture, traditions, customs, folk handicrafts, or
natural resources or the environment;
List 3: Businesses in which Thai nationals are not yet able to
compete with foreigners.
Pursuant to Section 8 of the FBA, foreigners are prohibited from
engaging in businesses listed under List 1; foreigners may engage in businesses
listed under List 2 upon approval by the Cabinet and a licence granted by the
Minister of Commerce; and foreigners may engage in businesses listed under List
3 upon approval by the Foreign Business Committee and a licence granted by the
Director-General.
(Note: The specific contents of
"List 1", "List 2", and "List 3" referred to
above are set out at the end of this article.)
From the above, it can be seen that for foreign enterprises
intending to invest and conduct business in Thailand, whether directly or
through a Thai company under their control, they should first assess whether
their business activities fall within the categories of businesses prohibited
or restricted under the FBA. If so, the relevant licence required under the FBA
must be obtained before commencing operations.
II. Overview of the FBL
(I) Meaning of the FBL
FBL stands for "Foreign Business Licence", which is a
licence issued by the Department of Business Development (DBD) under the
Ministry of Commerce of Thailand to foreign natural persons or
foreign-controlled companies that wish to engage in businesses restricted to
foreigners under the FBA.
If a foreigner engages in a restricted business without having
obtained an FBL, such conduct constitutes an illegal act and may result in
legal consequences including fines, imprisonment, and business closure.
In practice, the Thai government primarily utilizes the FBL
system to control and regulate the extent of foreign participation in sensitive
or culturally and economically significant commercial sectors, with the aim of
protecting Thailand's domestic industries and national economy, while
continuing to encourage foreign investment in areas beneficial to national
development. For businesses not falling within the scope of the FBA
restrictions, foreigners remain free to conduct such businesses without restriction.
It should be noted that, in addition to the FBL, for foreigners
who meet certain specific conditions (such as enterprises holding a BOI
Investment Promotion Certificate, enterprises licensed to operate in IEAT
industrial estates, or enterprises to which certain international treaties
apply, such as the Treaty of Amity between Thailand and the United States), the
DBD permits an application for a Foreign Business Certificate ("FBC")
as an alternative means of obtaining the right to engage in businesses restricted
to foreigners. Furthermore, the application procedure and timeline for an FBC
are more expeditious compared to those for an FBL. We will introduce
FBC-related content in other articles in this series.
(II) Application Conditions
and Documents for the FBL
1. Application Conditions
Taking a foreign-controlled company as an example, the
conditions that a foreign-controlled company (the "Applicant") must
satisfy when applying to the DBD for an FBL include:
(1) Has been duly registered and incorporated with the DBD;
(2) The Applicant's registered capital must not be less than THB
3,000,000 or 25% of the estimated operating costs for the next three years,
whichever is applicable;
(3) At least one director must be resident in Thailand and
remain in office during the period of operations;
(4) Submit to the DBD an application form and its attachments in
accordance with the DBD's requirements.
2. Application Documents
The Applicant must submit the following application documents to
the DBD:
|
No. |
Application Documents |
|
1 |
Application form, including but not limited to the following
information: |
|
2 |
A copy of the certificate of incorporation or registration,
which must contain the following information: |
|
3 |
Copy of passport, copy of alien identity card, or copy of
identification document of the duly appointed representative |
|
4 |
A declaration issued by the applicant certifying that the
applicant, directors or managers satisfy the qualification requirements under
Section 16 of the FBA and that there are no disqualifying circumstances |
|
5 |
A brief location map of the business premises in Thailand |
|
6 |
Detailed description documents of the business proposed to be
licensed |
|
7 |
Power of attorney (applicable where the matter is handled by
an authorized representative) |
|
8 |
Where a business licence has previously been granted, the
following must be submitted: |
|
9 |
Corporate power of attorney (POWER OF ATTORNEY), executed by
the applicant's authorized signatory to appoint a business representative in
Thailand |
|
10 |
The duly appointed representative must provide a copy of one
of the following documents: |
(III) Application Procedure
for the FBL
|
No. |
Procedure Steps |
|
1 |
Submit the FBL application documents to the Foreign Business
Administration Office on the 8th floor of the Department of Business
Development (DBD) under the Ministry of Commerce of Thailand. |
|
2 |
If the business applied for is listed under List 2: |
|
3 |
The DBD shall issue the FBL certificate to the applicant
within 15 days after the application is approved. |
|
4 |
If the applicant's application is not approved, the applicant
has the right to file an appeal with the Minister of Commerce within 30 days,
and the Minister of Commerce shall deliberate and issue a decision on the
appeal within 30 days. |
III. FBA's Three Lists of
Businesses
|
List 1: Businesses
Absolutely Prohibited to Foreigners Due to Special Reasons such as National
Security, Arts and Culture, and Conservation of Natural Resources |
|
Publishing or newspaper businesses, radio broadcasting
stations, or radio and television station businesses |
|
Rice growing, farming or gardening |
|
Animal husbandry |
|
Forestry and timber processing from natural forests |
|
Fisheries (specifically, the catching or collection of aquatic
animals in Thai waters and the exclusive economic zone) |
|
Extraction of Thai herbal medicines |
|
Trading and auctioning of Thai antiques or objects of
historical value to the nation |
|
Casting or making of Buddhist images and monk's bowls |
|
Land trading |
|
List 2: Businesses Relating to National Security or Public
Order, or Affecting Arts, Culture, Traditions, Customs, Folk Handicrafts, or
Natural Resources or the Environment |
|
Businesses Relating to National Security |
|
Production, distribution, and maintenance of the following
items: |
|
• Firearms, ammunition, gunpowder, or explosives |
|
• Firearm and ammunition components |
|
• Weapons or military equipment, military aircraft, and
vehicles |
|
• All types of military warfare equipment and components
thereof |
|
Domestic transport services (including land, water, and air
transport, and domestic aviation operations) |
|
Businesses Affecting Thai Arts, Culture and Traditions |
|
Trading of Thai antiques and works of art (referring to Thai
traditional handicrafts) |
|
Production of wood-carved products |
|
Thai silk-related industries: silkworm farming, Thai silk yarn
production, Thai silk weaving, Thai silk printing |
|
Production of Thai traditional musical instruments |
|
Production of gold and silverware, lacquerware, nielloware,
bronze ware, and lacquer ware |
|
Production of Thai cultural clay products |
|
Businesses Affecting Natural Resources and the Environment |
|
Sugarcane sugar production |
|
Salt production (including sea salt and rock salt production) |
|
Rock salt mining |
|
Mining (including blasting and rock-crushing operations) |
|
Timber processing for furniture manufacturing |
|
List 3: Businesses in Which Thai Nationals Are Not Yet Able to
Compete with Foreigners |
|
Rice milling and flour milling from agricultural crops |
|
Aquaculture (limited to aquatic animal farming) |
|
Plantation forestry |
|
Manufactured wood products (including plywood, veneer,
particle board, and hardboard) |
|
Production of quicklime |
|
Accounting services |
|
Legal services |
|
Architectural services |
|
Engineering services |
|
Construction (except for: construction works involving public
infrastructure that require specialized machinery/equipment/technology, with
a minimum registered capital of THB 100 million; and other permitted types
prescribed by Ministerial Regulations) |
|
Brokerage or agency services (except for: securities brokerage
services; procurement agency services between affiliated companies;
international trade intermediary services with foreign capital of THB 100
million or more; and other permitted types under Ministerial Regulations) |
|
Auction services (except for: international bidding not
involving Thai antiques; and other permitted types of auctions under
Ministerial Regulations) |
|
Domestic trading of agricultural products and processed
agricultural products (except futures trading) |
|
Retail trade (where any of the following conditions apply):
total registered capital less than THB 100 million; or per-shop capital less
than THB 20 million |
|
Wholesale trade (per-shop capital less than THB 100 million) |
|
Advertising |
|
Hotel business (except hotel management services) |
|
Tourism business |
|
Sale of food and beverages |
|
Plant breeding |
