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* Prohibited and Restricted Businesses

The Act limits the rights of foreigners to engage in certain business activities in Thailand. Investors contemplating new business ventures in Thailand must carefully consider the Act before attempting to set up operations. A foreigner may wholly own a business in Thailand, unless the specific activity of that business is restricted under the Act or is otherwise prohibited by another law. 

The Act defines “aliens” or “foreigner” as natural persons or juristic entities (companies, registered partnerships, etc.) who do not possess Thai nationality. Companies are considered “foreign” for these purposes if 50% or more of the partners are foreign individuals or if the managing partner or manager is a foreigner.

The Act lists three categories, or schedules, of controlled business activities.

Schedule One consists of business activities from which foreigners are barred for “special reasons” and for which they can not obtain a license.

Schedule Two lists businesses that may affect national security or safety, art, culture, customs, native manufacturing/ handicraft production, natural resources, or the environment. Foreigners may only engage in Schedule Two businesses if they obtain permission from the Minister of Commerce, which in turn can only be issued pursuant to a resolution of the Cabinet. In addition, Thai nationals must hold at least 40% of the capital in that foreign juristic person and two-fifths (2/5) of the directors must be Thai. With a resolution of the Cabinet, the Minister of Commerce may alter these requirements, but in no circumstances can the percentage of Thai shareholding in a Schedule Two business be less than 25%.

Schedule Three contains business activities in which Thais consider that they are not adequately prepared to compete on an equal footing with foreigners. Foreigners may engage in these businesses only upon receipt of permission from the Director General and with the approval of the Foreign Business Board. If the foreign enterprise receives this permission, the foreign juristic person can be 100% foreign-owned and there is no requirement for a minimum number of Thai directors.

The Foreign Business Board must review the businesses listed in the Schedules at least once a year and propose any necessary changes to the Minister of Commerce.

* Exemptions Granted by the Thai Government or by Virtue of a Treaty

In some instances, foreigners may be exempt from certain requirements imposed by the Act. These include the followings:

-     Foreigners operating a business under the protection of a treaty to which Thailand is a signatory;

-     Foreigners who engage in regulated businesses with the permission of the Thai government for a set duration; or

-     Foreigners operating a business under a treaty imposing obligations to which Thailand conforms, even though Thailand is not a signatory.

The exemptions may include permission to engage in an otherwise prohibited or restricted business free of the requirements respecting percentages of Thai shareholders and directors. Entitled parties must first notify the Ministry of Commerce and procure a Certificate from the Director-General. The Director-General shall issue the Certificate within 30 days from the date of receipt of the notification.

* Exemption for U.S. Companies under the U.S. Thai Treaty of Amity

Under the 1966 Treaty of Amity and Economic Relations between Thailand and the United States, United States nationals (including companies) are permitted to hold a majority share in Thai companies carrying on certain business activities that would otherwise be prohibited under the Foreign Business Law.

* Exemtions granted by the Board of Investment and the Industrial Estate Authority of Thailand

Foreigners that have been granted investment promotion from the Board of Investment (“BOI”) or permission to operate industrial or export businesses by the Industrial Estate Authority of Thailand (“IEAT”) with respect to the businesses described in Schedule Two or Three are also exempted from the Act. In this respect they must notify the Ministry of Commerce and procure a Certificate from the Director-General. The Director-General shall issue the Certificate within 30 days from the date of receipt of the notification.

 

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