The Foreign Business Act (FBA) B.E. 2542 (1999) is the primary law regulating foreign business operations in Thailand. The FBA outlines the types of businesses foreigners can and cannot engage in, aiming to protect Thai enterprises while allowing foreign investment under controlled conditions.
1. Objectives of the FBA
The FBA seeks to:
- Protect Thai businesses in certain sectors deemed critical to the economy, culture, or national security.
- Encourage foreign investment in areas beneficial to Thailand’s economic development.
- Define clear rules and restrictions on foreign participation in business activities.
2. Definition of a “Foreign Business”
A business is considered “foreign” if:
- It is registered outside Thailand.
- More than 49% of its shares are owned by non-Thais.
- A foreign entity has control or management authority over a Thai-registered company.
3. Business Categories Under the FBA
The FBA classifies restricted business activities into three annexes:
Annex 1: Prohibited to Foreigners
These sectors are reserved entirely for Thai nationals due to cultural, security, or national interests.
Examples:
- Newspaper and media businesses
- Rice farming and livestock farming
- Trading in Thai antiques or artifacts
Foreign participation is strictly forbidden.
Annex 2: Restricted Activities (Subject to Cabinet Approval)
Foreigners can engage in these activities only with special approval from the Thai Cabinet due to potential national security or economic concerns.
Examples:
- Production of firearms or explosives
- Domestic land, water, or air transportation (excluding international transport)
- Certain types of mining and natural resource extraction
A foreign business license may be granted if the business benefits the economy or advances technology.
Annex 3: Restricted Activities (Requiring a Foreign Business License)
Foreigners may engage in these activities but must obtain a Foreign Business License (FBL) from the Department of Business Development (DBD).
Examples:
- Retail and wholesale businesses
- Construction (except where specialized expertise is required)
- Hotel operations (excluding hotel management services)
- Legal, accounting, and architectural services
4. Foreign Business License (FBL)
4.1 Application Process
To obtain an FBL, foreign businesses must:
- Submit an application to the DBD.
- Provide a business plan detailing the nature of the business, investment amount, and expected benefits for Thailand.
- Obtain approval from relevant government agencies (depending on the business type).
4.2 Approval Criteria
The application is assessed based on:
- Economic contribution
- Employment of Thai nationals
- Technology transfer and innovation
- Alignment with Thailand’s national development goals
The process typically takes 60–90 days.
5. Exemptions and Special Provisions
5.1 Treaty of Amity (U.S.-Thailand)
The U.S.-Thailand Treaty of Amity allows American companies to own a majority or full stake in certain businesses, bypassing FBA restrictions (excluding Annex 1 activities like land ownership).
5.2 Board of Investment (BOI) Promotion
The BOI offers incentives to foreign investors in targeted industries (technology, manufacturing, etc.). BOI-promoted companies may receive:
- Exemptions from foreign ownership limits
- Tax incentives and import duty reductions
- Streamlined visa and work permit processes
5.3 Eastern Economic Corridor (EEC)
Businesses operating in the EEC benefit from relaxed FBA rules, encouraging investment in high-tech industries and infrastructure projects.
6. Penalties for Non-Compliance
Operating a business without the required license can result in:
- Fines up to 1 million THB
- Imprisonment for up to 3 years
- Business closure and confiscation of profits earned illegally
7. Considerations for Foreign Investors
When entering the Thai market, foreigners should:
- Clearly identify whether their business activity falls under the restricted categories.
- Explore options for BOI promotion or Treaty of Amity exemptions.
- Consult legal experts to ensure compliance with the FBA and related laws.
8. Conclusion
The Foreign Business Act plays a crucial role in shaping Thailand’s business landscape. While it restricts foreign participation in key sectors, it also provides pathways for investment through licenses, treaties, and BOI promotions. For foreign businesses, understanding the FBA’s structure and navigating its processes is essential for operating legally and successfully in Thailand.