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Understanding the Foreign Business Act in Thailand

posted 3 weeks ago

The Foreign Business Act, B.E. 2542 (1999) (“FBA”), in Thailand furnishes the government with mechanisms to oversee and manage the operations of foreign enterprises within the country, ensuring alignment with national developmental goals and regulatory benchmarks.  This legislation is geared towards safeguarding Thailand’s economic integrity, national security, and cultural heritage by imposing regulatory measures on the involvement of foreign entities in designated sectors.

The FBA delineates precise restrictions on businesses to uphold national objectives and regulate foreign investment activities. Specifically, it set regulatory provisions on sectors such as real estate development and live entertainment organizing, ensuring control over foreign participation in these areas.

The FBA specifies both restrictions and benefits by categorizing businesses into 3 lists. List 1 comprises businesses strictly prohibited for foreign operations. Conversely, businesses listed in Lists 2 and 3 necessitate a Foreign Business License/Certificate for operation, reflecting concerns regarding national security or impacting on arts, culture, traditions, customs, folklore handcrafts, or natural resources and the environment (List 2) and unprepared competitiveness by Thai nationals (List 3). In the light of live entertainment organizer and real estate development businesses, both are categorized as businesses listed in List 3 (21) which are specified as service businesses that require a Foreign Business License/Certificate prior to operating.

To emphasize the difference between a Foreign Business License/Certificate, they both are official written evidence of the permission to operate the businesses. For a Foreign Business License, it is issued for granting permit for operating of the businesses listed in List 2 as permitted by the Minister of the Ministry of Commerce with approval of the Council of Ministers and List 3 as permitted by the Director-General of the Department of Business Development with approval of the Foreign Business Commission of the FBA. On the other hand, entrepreneurs who operate businesses listed in Lists 2 or 3 by virtue of a treaty to which Thailand becomes a party or by which Thailand is bound in consequence of obligations or which they have been promoted by Thailand’s Board of Investment (BOI) shall apply for a Foreign Business Certificate.

Additionally, considering the minimum capital requirement for foreign business operation in Thailand in accordance with the FBA, it stipulates that a foreigner shall inject no less than 2 million THB as capital for the commencement of the operation of any business except for businesses prescribed in Lists 2 and 3 of the FBA which required minimum capital of no less than 3 million THB.

The said minimum capital shall reflect the estimated expenditure which refers to the amount of money the foreigner intends to spend in Thailand to conduct such a business which must be submitted to the Department of Business Development along with the application for a Foreign Business License/Certificate. The aforementioned requirement determines that the minimum capital must be imported into Thailand from overseas within a timeframe of three years, commencing from either the date of business commencement or the date of permission granted.

The FBA enhances the attractiveness of Thailand as an investment destination for foreigners, promoting economic growth and fostering international collaboration together with the protection of Thailand’s national interests and at the same time safeguarding the country’s economic, security, and cultural interests.

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