One of the biggest challenges for foreign investors who intend to set up and operate a business entity in Thailand, whereby foreign shareholding of 50 percent or more in such business entity is preferred, is the restriction of businesses to be carried out by ‘foreigners’ or ‘foreign companies’ in Thailand under the Foreign Business Act. The said Act provide a list of businesses that are prohibited to foreign companies from operating in Thailand, which is divided into 3 Schedules, including:
- Schedule 1 – The businesses completely prohibited for foreigners to operate due to special reasons.
Examples: newspaper publishing, rice and animal farming, and land trading.
- Schedule 2 – The businesses related to the national safety or security or affecting arts and culture, tradition, folk handicraft or natural resource and environment. These businesses may be permitted to foreigners to operate subject to the approval of the Minister of the Ministry of Commerce.
Examples: Domestic land, waterway or air transportation, including domestic airline business, production of firearms, mining, and sugar production.
- Schedule 3 – The business which Thai national are not yet ready to complete with foreigners. These businesses may be permitted to foreigners to operate subject to the approval of the Director-General of the Bureau of Foreign Business Administration (BFBA).
Examples: retail and wholesale of goods, selling food and beverages, hotel, engineering, construction, and other types of service business
Realistically, foreign companies may only apply for permission to operate the businesses under Schedule 3, and each business applied will require a minimum capital investment of at least Baht 3 million. In order to be permitted to operate the business, foreign companies must apply for the Foreign Business License (FBL) from the Bureau of Foreign Business Administration (BFBA), operating under the Department of Business Development, the Ministry of Commerce. Under the current practice, the FBL application process is at least 90 days, and requires a detailed presentation of information relating to the business to be applied, such as business plan, financial forecast and transfer of technology, to be presented to the relevant authorities.
Silk Legal has expertise in the specialized service of procuring FBL for our clients. Our team would be happy to consult with your company on all your activity and advice on procuring the right licenses for the right business activities. After evaluating your business, Silk Legal can advise you about your options for doing business in Thailand, and if the FBL is needed, we are able to give detailed advice on how to approach and plan the FBL application efficiently and effectively.
Exceptions to the FBL requirement for businesses under the Foreign Business Act
- Manufacturing – Manufacturing business is not prohibited for foreigners and, thus, is not subject to the FBL. However, the extent or degree of ‘manufacturing process’ as well as size of investment must first be examined.
- BOI Investment Promotion – Foreign companies that have been granted the investment promotion by the BOI will not be required to apply for the FBL for the business listed in the Foreign Business Act.
- International Treaty – Foreign companies may be exempted from applying the FBL for certain businesses permitted to operate in Thailand under an international treaty to which Thailand is a party to. For example, the Thailand – US Treaty of Amity and Economics Relations.