Doing Business in Thailand under the Form of a Fully Foreign Owned Investment

The first question that a foreign businessman who wants to invest in Thailand must ask is: Is the business activity in I want to invest in open to foreigners?

Principles Applicable to Foreign Investment in Thailand

It is the Foreign Business Act (“FBA”) that determines whether an activity is open to foreign investment or not.

The principles set by the FBA are simple. All activities that are not prohibited or the exercise of which is not subject to prior authorization are open to foreign investors. To know which activities are opened or restricted it suffice to consult the 3 annexes of the Foreign Business Act

The FBA three annexes are as follows:

Annex 1 contains a list of activities that are prohibited to foreign investors such as for example the press, radio, television, agriculture, fishing, sale or purchase of land and so on. …

Annex 2 contains a list of activities that are related to national security, safety or the exercise of which by foreign investors could have a negative effect on art and culture, customs, and crafts, or have an impact on natural resources and environment. Are included in this category manufacturing, distribution, repair or maintenance of firearms, ammunition, gunpowder, and explosive materials, components of firearms, ammunition and explosive materials, armaments, vessels, aircraft, vehicles, domestic land transport, river or sea transportation air transportation, including domestic aviation, raising silkworms, manufacturing of Thai silk, Thai silk weaving, printing or Thai silk, the manufacture of Thai musical instruments, mining, processing wood to make furniture and so on. ……

Annex 3 which is in my opinion the most questionable lists the activities for which Thais are not ready to compete with foreign nationals, including, accounting, legal Services, architecture, engineering, and all service activities for which the ministry has not granted a special exemption. This means among others that Thai are not ready to compete with foreigners in the sector of bars, restaurants and so on… which I find is a little bit farfetched.

 How does the FBA works?

As explained in the FBA lists in its annexes the activities which cannot be carried by foreigners (annex 1) or which exercise by foreign investors is subjected to prior authorization (annexes 2 and 3). This means that:

• All activities that are not listed in the appendices of FBA can be exercised under the form of a 100% investment by foreign investors (most industrial activities are opened to foreign investors).
• Some activities listed in annex 3 of the FBA are actually opened to foreigners (for example Hotel Management Services) or are only subject to authorization up to a certain amount of investment ( for example retail trade is open to foreigners who invest more than 100, 000,000 THB) .
•  An activity that is listed as subject to prior authorization in Annexes 2 and 3 of the FBA may be authorized by the Board of Investment “BOI”
• An activity that is listed as subject to prior authorization in Annexes 2 and 3 of the FBA can be authorized through a foreign business license application. But don’t hold you breath, Foreign Business License applications are rarely successful and they are sector of activities where we know that there is no point to apply because the FBL application will be unsuccessful.
• Then if you are a US citizen please note that but for 7 activities which are closed to you you can invest in Thailand under the form of a 100% US owned investment.

Finally the fact that an activity is prohibited by the Foreign Business Act does not mean that foreign investors can not invest in this particular sector of activity but that if they do they will have to do it under the form of a minority. (Between 25 and 49% depending on the sector activity)

Therefore before to think about starting a company in Thailand you should first determine whether the activity you are about to invest in is open to foreign investment or not.

Do not hesitate to contact us for a free initial consultation on investing into Thailand

Originally posted 2012-03-28 07:05:13. Republished by Blog Post Promoter