Foreign Business Act and Other Foreign Business Restrictions
Chaninat & Leeds Co., Ltd., Thailand
rights of aliens in Thailand are derived primarily from Thai domestic
law, although international law and bilateral treaties impose on Thailand
certain obligations toward resident aliens. Generally, aliens have the
same basic rights as Thai nationals, unless a right is explicitly reserved
for nationals or denied to or restricted to aliens.
on the percentage of alien ownership for commercial banks, commercial
fishing, aircraft, commercial transportation, commodity export, mining
and other enterprises exist under various laws.
The Alien Business
most important law governing alien-controlled businesses in Thailand is
the Alien Business Law (National Executive Council Annoucement No. 281)
of 1972. Before the introduction of the Alien Business Law in 1972, foreigners
were generally permitted to do business in Thailand with few restrictions.
The Foreign Business Act divided various types of business into three
main categories and subjected each category to different limitations with
respect to foreign ownership. Other laws control the foreign ownership
of land and specialized activities such as banking, insurance, finance
1999, a new Act was passed which supercedes the earlier Alien Business
Law. The new Act is entitled The Foreign Business Act, B.E. 2542 (1999).
In some areas, the new Act has liberalized the areas in which a foreigner
may to do business in Thailand. However, the Act also appears to be more
restrictive in other regards.
Categories. The Foreign Business Act divides businesses into three Categories.
Generally those businesses listed in Category One are absolutely prohibited
to foreigners unless there is an exception contained in a special law
Two refers to businesses owned by aliens that were in existence and actually
operating prior to the enactment of the Foreign Business law. These businesses
were permitted to apply for a special Alien Business License and to continue
operating. Foreigners, however, are not permitted to start new businesses
listed in this category unless they obtain special permission from the
Minister with the approval of the Cabinet.
Three businesses are treated in a manner similar to those in Category
Two except that the power to grant an Alien Business License to foreigners
who wish to start a new business is vested with the Director General and
although businesses in Category Three may be open to foreigners (subject
to ministerial regulation), the authorities have observed a policy of
issuing no new licenses to such incoming businesses unless they are convinced
that these activities could not be competently conducted by firms in which
the majority ownership is Thai.
A Thailand company
registered with an alien business licenses may be sold to foreigners who then may
continue with the use of the company's alien business license. Generally,
transfers are permitted but due care and caution should be used to examine
the details of the license to see whether restrictions may apply.
of "Foreigner" A business is considered " foreigner"
if: (1) it is established under foreign law; or (2) half or more of its
capital is owned by foreigners even if the company is incorporated under
Thai law, or (3)half or more of the value of the total capital being invested
by foreigners even if more than half the capital is owned by Thai nationals.
(The third requirement is effectively a bar on the use of Thai national
the earlier Alien Business Law there was a requirement that both the shareholding
and the shareholders be predominantly Thai for the company to qualify
as Thai. Thus, in companies with seven shareholders (7 is the minimum
number of shareholders for a limited company) in order to be considered
Thai, at least four of the shareholders must be Thai and the Thai shareholders
must own more than 50% of the shares. This requirement of majority Thai
shareholders is not present in the current Foreign Business Law.
Alien Business Licenses. Foreign businesses seeking to engage in a
Category Two business may apply for an Alien Business License provided
that approval has been granted by the Minister and Cabinet. Foreign businesses
may apply to operate businesses in Category Three provided that they have
permission for the Director-General with approval of the Committee.
Offices established in accordance with Ministry of Commerce regulations
and other types of business such as petroleum service companies and those
engaged in activities involving high technology routinely apply for licenses.
Ministry of Commerce will attach conditions to the Foreign Business License.
These conditions include that the business bring into Thailand Baht 3,000,000
in capital during the first year. In cases where the businesses require
licenses under the Lists Two and Three the minimum capital prescribed
by the ministerial regulations is three million Baht. Retail and wholesaling
business are covered by List Three and have much higher capital requirements.
Foreigner may operate businesses under List Two only if at least 40% of
the capital is Thai owned. Other conditions have not yet been announced.
a Royal Decree of 1973, an "alien" enterprise granted promotional
privileges by the Board of Investment is permitted to engage in a Category
Two business. In addition, the Law is not applicable to aliens engaging
in business by permission of the Thai Government for a definite duration,
or by agreement between the Thai government and foreign governments. Thus,
several American-owned enterprises have invoked the provisions of the Treaty of Amity and Economic Relations between Thailand and the United
States to claim exemption from the Law. There is an accelerated procedure
for issuing the necessary license or permit for aliens who have been granted
promotion by the BOI. The Law does not apply to businesses not falling
within Categories A, B or C.
Penalties: Unlike the previous Alien Business Law, the new Foreign Business Act provides
for more severe criminal penalties. Any foreigner who operates a business
excluded to foreigners by the Foreign Business law and without an Alien
Business License is liable for a fine from 100,000 to 1,000,000 Baht and
imprisonment of up to three years. Further, a Thai national or juristic
person that assists a foreigner in avoiding the Foreign Business Act by
means of holding shares as a nominee or being a nominal owner of the company
shall also be liable for a fine of 100,000 to 1,000,000 Baht and imprisonment
of up to three years.