As prescribed by business laws in Thailand, not all types of businesses in the Kingdom are open for foreign investors. The Foreign Business Act of 1999 have set the definition of a “foreign company” and has also enumerated the restricted business activities into three different “lists.”
What is a Foreign Company?
The FBA defined a foreign company as:
- A natural person who is not a Thai national.
- A juristic person that is not registered in the Kingdom.
- A juristic person but has these distinct qualities:
- 50% or more of the capital shares of such entity is held by non-Thai nationals or unregistered in Thailand juristic person or;
- A limited partnership or registered ordinary partnership with a non-Thai national as its manager or managing partner.
- A Thailand-registered juristic entity but 50% or more of its capital shares are held by non-Thai natural persons, non-Thailand registered juristic persons or that it is a juristic entity with 50% or more of its capital shares are held by non-Thai nationals or juristic persons which are not registered in Thailand.
Restrictions of Foreign Business License
As what have been discussed, not every type of businesses in Thailand are open to foreign companies thus the types of businesses are categorized into three different lists:
- List 1 – these are types of businesses that foreign companies are not allowed to engage in.
- List 2 – are the types of businesses that are allowed to foreign companies but on certain conditions. Permission to engage on activities under this list must be granted by the Cabinet.
- List 3 – these are businesses that are not yet allowed to foreign companies however, the Director-General of the Commercial Registration Department (CRD) may grant companies to engage on activities under this list.
Application for a Foreign Business License
A foreign business entity who is about to do a business activity listed either with List 2 or List 3 must apply for and be granted with a Foreign Business License first before it will start its operation in Thailand.
Its application for a foreign business license should be applied with the Commercial Registration Department and it is the Cabinet or Foreign Business Committee which will review the application.
The review will be based on various considerations such as its positive or negative impact to Thailand’s economy or the size of potential local employment among others.
Apart from having a process which is really complicated especially for foreign business entities who are unfamiliar with the laws and employed processes in Thailand, the actual process in itself can go on for quite a long time. This may lead for some to also consider being promoted by the Board of Investment as another route for them to be allowed to operate in Thailand although the probability of being promoted by the BOI can also be very slim.