Foreign Business Investors In Thailand

This Article is of reference to the complex procedures regarding foreign business investors operating in Thailand.  There are various types of entities in Thailand i.e. partnership, limited company, public limited company and company listed on the stock exchange of Thailand (the “SET”). However, the practical form for foreign investment in Thailand is a private limited company.

In order to set up a private limited company in Thailand, after the name reservation is approved by the Department of Business Development, Ministry of Commerce (“DBD”) which would take approximately one to three business days to complete all required applications and supporting documents, the incorporation process normally takes one business day to register with the DBD. Before incorporation registration, all shareholders (a minimum of three shareholders are required under Thai law) must pay at least twenty-five percent paid-up capital (subscription money) to the person who will become the company’s director.  If the whole registered capital of a new company is Baht 5, 000,000 (five million Thai baht) or more, after incorporation, a new company must proceed with opening  a bank account and transfer said subscription money, from the bank account of  said director who receives money,  to the new company’s bank account within fifteen days from the incorporation date. Thereafter, a new company must request the bank to issue a letter certifying that the new company has deposited said money for the share subscription into its bank account. The said bank letter must be also submitted to the DBD within fifteen days from the date of incorporation. If the registered capital is less than Baht 5,000,000 (five million Thai baht), there is no need to submit the bank letter to the DBD again.

In the case where a new company is regarded as foreign, such company may need to additionally apply for a foreign business licence if the company’s business falls within the scope of List 2-3 of the Foreign Business Act B.E. 2542 (1999) (the “FBA”), unless the intended business is exempt by law. In this regard, in practice, it will take approximately four to six months until the approval is granted.

Considering it is quite complicated to obtain a foreign business licence, foreign investor may wish to set up a joint venture company with a Thai partner at the ratio of the Thai  Partner holding more than 50% of the total shares and the foreigner holding less than 50% of the total shares.

Alternatively, the foreigner may opt to apply for investment promotion with the Board of Investment Promotion (“BOI”), to set up the company under Thai law so that the company can be owned 100% by foreigner. However, there are limitation in the kind of activities promoted by the BOI. Hence, foreign investor may need to check whether the intended business is an eligible activity which will be granted by the BOI. The privileges under the BOI are either or both for tax and/or non-tax incentive depending on the activities granted investment promotion.

Similarly, if the foreign investor will operate business in any industrial areas governed by the Industrial Estate Authority of Thailand (“IEAT”), foreign business licence would also be exempted and the business operator in the said industrial area will be able to obtain the non-tax and/or tax benefits.

In addition to the above, if the business will be engaged in the specific area i.e. Chachoengsao province, Chonburi provice and Rayong province, the Eastern Economic Corridor, the promoted business may be a  better option as they enjoy greater benefits compared to the other options as above-mentioned. However, only certain businesses can be promoted, as listed below:

• Next-Generation Automotive
• Intelligent Electronics
• High Wealth and Medical Tourism
• Advanced Agriculture and Biotechnology
• Food Processing
• Automation and Robotics
• Aviation and Logistics
• Biofuels and Bio-chemicals
• Digital
• Medical Hub
• Thai Defense Industry
• Personal and Education Development Industry

However, the procedure to obtain the benefit is still unclear since the regulations (subordinate regulation) to prescribe on the criteria and qualification for business operators under the (Eastern Economic Corridor Act B.E. 2561 (1992) (the “EEC”) has yet to been issued.

If the intended businesses are outside the scope of activities intended by the BOI or EEC or the business operator does not engage business in the specified IEAT area, as a foreigner, foreign business licence will be required, unless it is exempt.

Certain nationality are exempted for foreign business licence, however, foreign business certificate would still be required, instead, which is much less complicated compared to applying for foreign business licence i.e. American under the Thai-US Amity Treaty which is being actively enforced by the DBD.

The above information serves as preliminary information for foreigners/foreign investors who are interested in investing in Thailand.

(Note : This article is not to be treated as a legal opinion but rather only as a guide on,  Foreign Business Investors in Thailand)