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The Foreign Business Act and Other Foreign Business Restrictions

Chaninat & Leeds Co., Ltd., Thailand Attorneys


The 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.

Restrictions 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 Law

The 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 and shipping.

In 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 or treaty.

Category 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.

Category 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 a committee.

Moreover, 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.

Definition 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 as nominees.)

Under 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.

New 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.

Representative 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.

The 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.


Under 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.

Part 2

US Visa Attorney Thailand assisted with translation and providing content for the Thailand Law Forum. Chaninat & Leeds, a Thailand Law Firm specializing in Purchasing Land Thailand. also assisted with administrative support. For any submissions, comments, or questions, e-mail the Thailand Law Forum at: Please read our Disclaimer.

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