What is it and is it a better option for my business?
The Foreign business license allows foreign owned companies to operate in Thailand without majority Thai partners. However, it is important to note that there are restrictions on what kinds of businesses foreigners can have and so if you are looking at going into one of these businesses then a Thai Limited Company is the better path for you.
First, what defines a Foreigner?
The Foreign Business Act BE2542 defines one as such
- Natural person not of Thai nationality.
- Juristic person not registered in Thailand.
- Juristic person registered in Thailand having half or more of its capital shares held by person or juristic person as mentioned in (1) or (2).
- Juristic person registered in Thailand having half of more of its capital shares held by (1), (2) or (3).
What businesses are restricted by the Foreign Business Act BE 2542?
The Foreign Business Act limits foreigners from engaging in certain businesses, some of which were recently changed. List 1 is entirely prohibited while List 2 is allowed to Board of Investment companies with certification and Thai Amity treaty companies and List 3 is open to all companies with a Foreign Business License (including BOI and Amity).
is entirely prohibited and includes;
- 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.
List 2: “Businesses related to national safety or security, or affecting arts and culture, traditional and folk handicraft, or natural resources and environment”. Foreign companies may only engage in the activities stated in List 2 with prior Cabinet approval (unless BOI or Amity companies)
- 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.
- Businesses that could have an adverse effect on art and culture, customs, or native manufacture/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.
- Businesses with an impact on natural resources and the environment.
- Manufacturing of sugar from cane.
- Salt farming, including rock salt farming and mining of rock salt.
- Mining, including stone quarrying or crushing.
- Timber processing for making furniture and utilities.
List 3: “Businesses which Thai nationals are not yet ready to compete with foreigners”. The foreign company must apply for and obtain a Foreign Business License before starting the activity (unless BOI or Amity)
- 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.
- Legal services.
- 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 500 million Baht or more. Other construction, as prescribed in regulations.
- Brokerage or agency businesses, with the exception of
- Broker or an agent in the sale or purchase of securities or in services related to futures trading of agricultural commodities or financing instruments or securities;
- Broker or an agent in the sale, purchase or procurement of goods or services necessary for the production or the provision of services amongst affiliated enterprises;
- Broker or an agent in the sale or purchase, procurement, distribution or acquisition of domestic and foreign markets for the distribution of domestically manufactured or imported goods, which is in character the operation of international trade, with the minimum capital of one hundred million Baht or upwards from foreigners,
- Broker or an agent of other types as prescribed in the Ministerial Regulation.
- Sale by auction, with the exception of a sale by auction which, in character, involves international bidding of items other than antiques, objects of antiquity or artistic objects that are artistic works or handicrafts or objects of antiquity of Thailand or of historical value of the country; sales by auction of other types as prescribed in the Ministerial Regulation 20
- Internal trade related to traditional agricultural products or produce not yet prohibited by law, except agricultural futures trading in the Agricultural Futures Exchange of Thailand without delivery or taking delivery of agricultural commodities within the country.
- Retail sale of goods of all types with the total minimum capital in the amount lower than one hundred million Baht or with the minimum capital of each store in the amount lower than twenty million Baht.
- Wholesale of all types with the minimum capital of each store in the amount lower than one hundred million Baht.
- Advertising business.
- Hotel business, with the exception of hotel management service.
- Guided touring.
- Sale of food and beverages.
- Cultivation, propagation or development of plant varieties.
- Other service businesses, with the exception of service businesses as prescribed in the Ministerial Regulation.
So, what business can a Foreign Business License company do?
Five activities were removed from the list last year:
- Legal services given to subsidiaries
- Space and facility rental
- Lending to subsidiaries
- Consulting services
In addition, the Thai government relaxed some restrictions in 2018 and allows businesses engaging in the following activities to work without a Foreign Business License. However, the foreign entity must inform the Department of Business Development and obtain a Certification Letter which will allow them to request a tax ID, register VAT, social security, open bank accounts, and other necessary matters to start operating their business
- Asset management business under the law governing asset management company.
- Service business by acting as a representative office of a juristic person abroad in international trading business.
- Service business by acting as a regional office of a juristic person abroad in international trading business.
- Service business having a governing agency as a contracting party under the law governing budgetary procedures.
- Service business having a state enterprise as a contracting party under the law governing budgetary procedures.
What are the advantages to a Foreign Business License?
Thai law was recently changed so that those foreigners who act as directors and owners of a company with a foreign business license are no longer required to obtain a work permit.
This means, no more need for four Thai employees paying into the social security fund.
Many foreigners prefer holding majority ownership in their businesses and the FBL allows for that.
Branch offices and Representative offices find having a Foreign Business License much easier than navigating partnerships.
So, what are the disadvantages of a Foreign Business License?
Obtaining the FBL can be a lengthy, time-consuming process.
A company with an FBL cannot purchase or own property while a Thai Limited Company with minority foreign ownership may do so provided the company is actively trading and the Thai partners can show their investment into the company.
A director cannot obtain a one-year extension on the NON-B visa since a work permit is required.
It may be difficult to obtain the one-year multiple entry non-B visa – in general you will need to apply for that in your home country and, as the regulations are so new, they may be unaware of the changes and may ask for evidence of the work permit application. We have found that by showing them the relevant changes in the laws, Embassy personnel may issue the visa.
There are a great number of restricted activities.
Depending on which category the company applies to it may be required to have a capitalization of 3 million baht, or it could be required to remit into Thailand 25 million baht. However, if applying under lists 2 and 3, and it operates under a Treaty or BOI, then it only needs to apply for the foreign business certificate.
How do you apply for a Foreign Business License?
First you form the company and then apply for the Foreign Business License from the Ministry of Commerce.
The Ministry of Commerce reviews the application and either accepts or rejects it (appeals are possible). This can take up to 60 days.
Foreign companies in List 2 and List 3 holding a license must have registered capital of no less than 3 million baht. They must also follow a schedule for bringing in capital to Thailand, the number of foreign directors and the ratio of the capital and loans to be used.
So, should I consider a Foreign Business License?
Sunbelt Asia’s lawyers are happy to sit down with you and discuss the pros and cons of a Foreign Business License and if it is the right step for you. Please contact us at 0943387625 to make an appointment for a free initial consultation.
Contact Us for a Free Consultation