Starting a Foreign Company and the Foreign Business License
What is the Foreign Business License?
The Foreign Business License (FBL) is given to foreign businesses to operate their foreign company in Thailand if the activities they wish to engage in fall under List 3 of activities. Under the Foreign Business Act foreign owned companies are restricted in what kinds of businesses they can operate and have different requirements for capitalization. There are three lists of activities, the first two prohibited to foreign entities while the third list is open to foreign companies so long as they apply for a Foreign Business License.
What are the requirements for starting a Foreign Company?
The minimum registered capital must be more than 3 million baht or at least 25% of its estimated expenditures for three years
At least one authorized director or member of upper management must reside in Thailand.
What businesses can foreign companies engage in without a Foreign Business License?
Unrestricted businesses for foreign companies (No Foreign Business License required)
- Manufacture for export only
- Securities businesses
- Derivatives businesses
- Acting as a trustee in a trust for transactions in capital markets
- Financial institution businesses and financial institution related businesses (i.e. commercial bank business and bank representative office service business)
- Life insurance businesses
- Insurance businesses
- Asset management businesses
- Hotel Management
- 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
- Auctioneering in the manner of international bidding (not of Thai articles)
- Representative office of foreign juristic persons
- Regional office of foreign juristic persons
These two can open businesses under List 2 and List 3 without requiring a Foreign Business License but must obtain a Foreign Business certificate.
- Thai – American Amity Treaty companies
- Board of Investment promotion
However, foreign businesses can apply for a Foreign Business License for activities in List 3 on the Foreign Business Act
What activities are entirely prohibited to Foreign businesses?
List 1 activities are entirely prohibited to all foreign entities, including BOI and Amity treaty
- Newspaper business
- Rice farming
- Animal farming
- Forestry and wood fabrication from natural forest
- Fishery for marine animals in Thai waters and within Thailand specific economic zones
- Extraction of Thai herbs
- Trading and auctioning Thai antiques or national historical object
List 2 activities require approval by the Ministry of Commerce and the Cabinet and at least 40% of the capital has to be held by Thai nationals or Thai juristic persons (or less if approved by the Minister of Commerce). BOI and Amity Treaty Companies may apply for a Foreign Business Certificate in these businesses.
- Production, selling, repairing and maintenance of firearms, ammunition
- Domestic land, waterway or air transportation
- Trading Thai arts
- Silkworm farming, production of Thai silk yarn, waiving Thai silk or Thai silk pattern printing
- Manufacturing sugar from sugarcane
- Salt farming and rock salt mining
What activities are on List 3 that require a Foreign Business License?
Activities on List 3 can be performed by Foreign Companies so long as they apply for a Foreign Business License.
- Rice milling and production of flour from rice and economic plants
- Fishery only in respect of the hatching and raising of aquatic animals
- Forestry from a grown forest
- Production of plywood, veneer wood, chipboards or hardboards
- Production of lime
- Accounting services
- Legal services
- Architectural services
- Engineering services
- (Except for the construction of structures for delivery of infrastructure public services in the sphere of public utilities or transportation requiring the use of special apparatuses, machines, technology or expertise, with the minimum capital of five hundred million Baht or upwards from foreigners)
- Construction of other types as prescribed in the Ministerial Regulation
- Brokerage or agency businesses
- (Except the following:
- Acting as a 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;
- Acting as a 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;
- Acting as a 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)
- Acting as a broker or an agent of other types as prescribed in the Ministerial Regulation
- Auctioneering 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;
- 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,
- (Except hotel management services)
- 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
The Committee will consider certain aspects before issuing the Foreign Business License;
- The advantages and disadvantages 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, employment
- Technology transfer and research and development
The application can take 60 days or longer and is quite a complex process. It is important to note that one way to engage in List 3 activities is to start a Thai Limited Company that is majority owned by Thai nationals. However, if you wish to start your own business and it falls under List 3 it is still possible – although difficult – to obtain the Foreign Business License. Get in touch with our lawyers to talk about the best options for you.