FOREIGN FORMS OF BUSINESS PRESENCE
Prohibited and Controlled Business Activities
Foreign business in Thailand is principally governed by the Foreign Business Act B.E. 2542 (1999). The main objective of the Act is to regulate foreign-owned businesses and protect specific local industries. You surely need an experienced lawyer when dealing with employment law.
“Foreigner” is defined under Section 4 of the Foreign Business Act and applies both to natural persons and juristic persons. Specifically, with regard to natural persons, a foreigner is a person who is not a citizen of Thailand. In case of juristic persons, a foreigner indicates a juristic entity that is not registered in Thailand or registered in Thailand but with foreign shareholding, accounting for at least half of the total number or value of shares. Also, a limited partnership or registered ordinary partnership whose managing partner or manager is a foreigner is considered as a foreigner.
The Foreign Business Act provides several conditions that a foreigner must fulfill in order to set up a business in Thailand if the business activity falls under the scope of the Foreign Business Act. In particular, Section 8 of the Foreign Business Act divides business activities into three categories classified under three lists which are subject to different types of restrictions. Some activities require authorization before commencing operations; others are entirely prohibited to foreigners (see Appendix D for the full list). Specifically, foreigners cannot engage in any of the nine business categories mentioned in List 1. Business categories under List 1 are businesses involving national media, land, historic, religious, agricultural, forestry, and natural resources. For example, a foreign company cannot broadcast radio and television programs, publish newspapers, or trade in Thai national historical objects.
With regard to the business activities that are covered by List 2, foreigners require a license from the Minister of Commerce and approval from the Cabinet. This includes 13 business activities related to national safety and security; art, culture, tradition, and folk handicraft; and natural resources or the environment. A foreigner, for example, is not entitled to produce explosives, sell firearms, produce Thai silk yarn, or manufacture sugar from sugarcane.
In addition, foreigners are allowed to operate the activities under List Two only if Thai nationals or Thai juristic persons hold at least 40% of the shares. The Minister with the approval of the Council of Ministers, however, may reduce this percentage if there is a reasonable cause (Section 15, Foreign Business Act).
List 3 includes 21 business activities in which Thai nationals are not yet ready to compete with foreigners. Thus, foreigners require a license from the Director-General of the Commercial Registration Department of the Ministry of Commerce (Ministry of Commerce) and approval from the Foreign Business Board. These activities include sale of food, sale of beverages, wholesale, retail, hotel business, service businesses, construction, and others.
It is important to note that if the business activity is not listed under the Foreign Business Act, this means that it can be carried out by foreigners without applying to the Ministry of Commerce for a foreign business license. Besides, it is possible to set up business activities mentioned under Lists 2 and 3 without a license, in cases where the business of a foreigner is promoted under the Investment Promotion Act or is permitted in writing to operate the industry or trade for export under the law governing the Industrial Estate Authority of Thailand or other laws (Section 12, Foreign Business Act). Also, there are a number of bilateral agreements which grant special exemptions. The most famous of these bilateral agreements is the Treaty of Amity and Economic Relations between Thailand and the United States.
Apart from the Foreign Business Act, business activities may be subject to special laws that prevent a non-national from engaging in specific sectors, such as banking, insurance, land, and telecommunications as provided by the Land Code B.E. 2497 (1954), Condominium Act, B.E. 2522 (1979), Life Insurance Act B.E. 2535 (1992), the Non-Life Insurance Act B.E. 2535 (1992), Telecommunications Business Act B.E. 2549 (2006) and the Financial Institution Business Act B.E. 2551 (2008), among others.Please contact our law firm in Bangkok or Chiang Mai to receive more detailed advice in company law and investment law matters.