Foreign Direct Investment Regulations
Thailand has been relying heavily on foreign direct investment during the past several decades. However, it has never been an easy task for foreign individuals and corporations to legally operate in Thailand as there are numerous Thai laws that either outright prohibit or somehow restrict foreign parties from engaging in various businesses in Thailand, the most notable of which is the overarching law called the Foreign Business Act (FBA).
In a nutshell, the FBA generally prohibits foreigners including foreign-owned locally-incorporated companies from engaging in more than 40 broad categories of businesses in Thailand unless they have successfully obtained a foreign business license from the Thai government (which is hard to obtain in practice) or unless they are otherwise legally exempted from the restrictions (based on limited exemptions which are sometimes subject to controversial interpretations by the regulator). It is also possible for foreigners to be exempted from such restrictions if they have successfully obtained an approval from the Board of Investment (BOI), but the BOI only grants such approvals to qualified investments based on their criteria.
Apart from the FBA, there are many other Thai laws which also regulate foreign direct investment in Thailand in parallel, such as, the Land Code, the Financial Institution Business Act, the Insurance Act, the Telecommunications Business Act, the Broadcasting and Television Business Act, the Land Transport Act, the Air Navigation Act, the Private Schools Act, the Tourism Business and Guides Act, etc.
Therefore, any foreigners who are interested in investing in Thailand should carefully consider the implications of the applicable Thail laws before they establish their local presence in Thailand or acquiring a majority stake in any existing Thai businesses.
Types of Entities Available
Private limited companies are the most used form of entities for doing businesses in Thailand. Each company must have a minimum of two shareholders and at least one director. The director may or may not need to reside in Thailand, depending on the circumstances.
The Civil and Commercial Code which governs the incorporation of private limited companies in Thailand does not directly specify any minimum capital requirement. However, other Thai laws may require companies to have a particular amount of capital as a condition to maintain a permit or license. For example, companies which hire foreign employees must obtain work permits for it employees. The work permit law then requires companies to have a minimum capital of THB 2 million for each work permit quota. As another example, the FBA requires each foreign company to have at least THB 2 million capital for each non-restricted business and at least THB 3 million capital for each restricted business (as a condition for maintaining a foreign business license). The BOI also typically requires companies to maintain a certain amount of minimum capital in order to receive an investment approval & legal privileges that comes with it.
Other types of entities for doing business in Thailand include ordinary partnerships, registered partnerships, limited partnerships, public limited companies, etc. But these entities are less common.
It is also possible to register branch offices of foreign companies in Thailand. However, there are no practical benefits to do so in our opinion because, although such branch offices are technically not separate legal entities, they are nevertheless required to separately prepare books, accounts, taxes and other filings pursuant to local requirements similar to private or public companies under Thai laws. On the downside, local parties in Thailand including government agencies are generally not familiar with branch offices of foreign companies. This typically leads to more paperwork and translations required when such branch offices deal with local parties.
Another option is to register representative offices of foreign companies in Thailand. However, representative offices have a very limited scope of activities that they can legally engage in Thailand. Basically, representative offices are just ‘eyes and ears’ in Thailand of the foreign companies. They cannot solicit customers, sell any goods, provide any services, enter into any commercial contracts, or otherwise generate any revenues in Thailand.
Regardless of the type of entities chosen, each business must have a registered office address in Thailand. It is possible to register a company in Thailand with a virtual office address, but physical offices are required under certain circumstances, for example, if the company is required to be registered for value added tax (VAT) purposes.
The main government agency responsible for company registrations, FBA compliance, and accounting requirements in Thailand is the Department of Business Development (DBD) of the Thai Ministry of Commerce. Apart from the DBD, most businesses would also need to be registered with the Revenue Department (RD) and the Social Security Office (SSO) for taxes and employment-related purposes, respectively.
Article written by
Wayu Suthisarnsuntorn,
Senior Partner
Pisut and Partners Co., Ltd.
3 Rajanakarn Building, 8 th Floor
South Sathorn Road
Yannawa, Sathorn, Bangkok, Thailand 10120
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