Foreign Business License in Thailand

Foreign Business License in Thailand | Umpire Legal | Photo credit

If you have heard that applying for a Foreign Business License in Thailand is not a simple process, that is indeed true. However, the lawyers at Umpire Legal can provide step by step assistance throughout the application process, and guide you to successfully obtain the Foreign Business License.

Foreign Business Act

Laws concerning conducting business in Thailand are set to reserve certain rights only for Thai nationals. In order to protect their interest, Thai government issued a Thai Foreign Business Act of 1999 that restricts in which activities “foreign” companies may engage in.

The Foreign Business Act defines the term “foreigner” as:

  1. A natural person not holding Thai nationality
  2. A juristic person not registered in Thailand
  3. A juristic person registered in Thailand but having the following characteristics:
    • Half or more of the capital investment is made by or shares are held by those under (1) or (2)
    • Partnerships having individuals under (1) as the managing partner or manager
  4. A juristic person registered in Thailand with half or majority of the capital investment made by or shares held by (1), (2) or (3)

Restricted Activities

The Foreign Business Act draws a clear line as to what activities are restricted and regulated for foreigners. 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. There are three lists annexed to the Foreign Business Act for the following purposes:

  1. List One – To prescribe businesses that are not permitted for foreigners to operate due to 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
  2. List Two – To prescribe businesses that are related to national safety or security, or affecting arts and culture, traditional and folk handicraft, or natural resources and environment for which foreigners can only operate upon obtaining a special approval from the Cabinet. The business activities include:
    1. 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
    2. 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
    3. 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
  3. List Three – To prescribe businesses that Thai nationals are not yet ready to compete with foreigners. The issuance of the license for foreigners is at the discretion of the responsible government authorities of the Thai Ministry of Commerce. The business activities include:
    • 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
    • Accountancy
    • Legal services
    • Architecture
    • Engineering
    • 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 THB 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 THB or more
      • Other brokerage or agency activities, as stipulated in ministerial regulations
    • Auctioneering, except:
      • 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 of less than 100 million THB capital in total or having the minimum capital of each shop of less than 20 million THB
    • Wholesaling, all categories of goods having minimum capital of each shop less than 100 million THB
    • Advertising
    • Hotel operation, excluding hotel management
    • Tourism
    • Sale of food and beverages
    • Planting and culture of plants
    • Other services, except those prescribed in the ministerial regulations

Foreign Business License

Based on the above definitions, a foreign company wishing to operate in business activities listed in List 2 and List 3 of the Foreign Business Act is required to apply for the Foreign Business License from relevant authorities prior to commencing its business operation in Thailand.

List 1 List 2 List 3
Open to foreigners No Yes Yes
Authority issuing the Foreign Business License N/A The Cabinet Thai Ministry of Commerce
Capital requirements N/A 3 million THB or more 3 million THB or more

Types of Foreign Companies Which May Apply for a Foreign Business License in Thailand

  1. Representative office – A foreign company that wishes to have a presence in Thailand for the purpose of learning about the local market, marketing its company or products, introducing new products offered by the foreign head office, without earning an income or paying taxes in Thailand.
  2. Branch office – A foreign head office that intends to register a branch office by applying for the license and bringing in technology transfer to Thailand, whereby the business activities are not prohibited under the Foreign Business Act and the nature of business allows the foreign entity to register its branch in Thailand under the regulations of the Thai Ministry of Commerce.
  3. Newly incorporated company in Thailand with majority or complete foreign ownership – A company that is registered in Thailand with majority or complete foreign ownership, whereby the business activities are not prohibited to foreigners under the Foreign Business Act, and the company’s business activities involve bringing in technology transfer and helping with the development of Thailand.

There are two notable business structures that favour majority foreign ownership and also allow for easier obtaining of the Foreign Business License. Those are:

  1. BOI-promoted company – A company registered in Thailand that is eligible to receive investment promotion from the Thai Board of Investment based on the nature of its business may also receive the license as a non-tax privilege granted by the office of the Thai Board of Investment (see BOI promotion for further information).
  2. American-owned company – A company registered either in Thailand or the United States of America, having US nationals as majority of the shareholders and directors in the company, may apply for a Foreign Business License and certification to operate the business in Thailand under the Treaty of Amity between Thailand and the US (see Treaty of Amity for further information).

Application Process for a Foreign Business License in Thailand

A foreign company in the form of a Representative Office, Branch Office or a company registered in Thailand with majority foreign capital investment and shareholding must submit an application for the Foreign Business License to the Foreign Business Committee whereby there are two steps involved as follows:

  1. Acceptance of the application by the Ministry of Commerce (MoC). A completed application form for the license along with all supporting documents must be submitted to the MoC for the registrar to review. The registrar may request for further documentation or information to support the business license application.
  2. Review of the Foreign Business License application by the Foreign Business Committee

When the application is accepted by the MoC, the registrar at the Foreign Business Committee will review it within a sixty-day consideration period for which they will consider the advantages and disadvantages of the business to the nation’s safety and security; economic and social development; public order, good morals, art, culture and traditions of the country; natural resources, conservation, energy and environment, consumer protection, size of the enterprises, environment; and technology transfer and research & development.

In the case that an application for a license is rejected, the MoC will inform the applicant within 15 days of the decision in writing, expressly stating the reason for rejection. Applicants may appeal the decision within 30 days from the date on which the applicant received the rejection notice for the business license application, after which the decision of the Minister shall be final.

Capital Requirements

Foreign companies operating in business activities under List 2 and List 3 of the Foreign Business Act in and holding a license must have a registered capital of no less than 3 million THB and comply with other requirements such as those concerning the schedule for the minimum capital to be brought or remitted into Thailand, the ratio of the capital and loans to be used in the permitted business, the number of foreign directors or representatives who may have domicile in the Kingdom as prescribed by the Ministerial Regulations.

If you would like to explore the possibility of applying for a Foreign Business License for your company in Thailand, please contact Umpire Legal to discuss your options. The knowledgeable lawyers at Umpire Legal can expertly assist you with preparation of the government forms for the license application, including the necessary Thai translation of your company documents, the submission process up until collection of the Foreign Business License certificate on your behalf upon receiving approval from the Ministry of Commerce in Thailand.