Corporate Expansion

Majority Foreign-Owned Companies and the Constraints of the Foreign Business Act

An alternative to establishing a Thai company is to register a foreign company in Thailand. As previously mentioned, a company is deemed foreign if more than 50% of its shares are held by non-Thai nationals.

 

One of the most significant distinctions between Thai and foreign companies lies in the legal limitations imposed by the Foreign Business Act (FBA). This legislation restricts foreign entities from engaging in most business activities within Thailand. For those few sectors that are open to foreign participation, operation is only permitted upon securing a Foreign Business License (FBL) issued by the Department of Business Development under the Ministry of Commerce. In certain cases, exemptions may be granted under international agreements, such as the U.S.-Thailand Treaty of Amity, or under the auspices of special government initiatives, such as Board of Investment (BOI) promotion.

​

In addition to these restrictions, foreign companies are subject to several specific legal and regulatory requirements. For example, they must maintain a minimum registered capital of at least THB 3 million and are generally prohibited from owning land*, except under special circumstances. On the positive side, companies that obtain an FBL enjoy full or majority ownership rights and benefit from a more favorable work permit quota compared to their Thai counterparts.

​

Option 1: Obtaining a Foreign Business License (FBL)

Under the current framework of the FBA, business activities are categorized into three lists:

• List 1: Activities absolutely prohibited to foreigners

• List 2: Activities involving national safety or culture, in which foreign participation requires Cabinet approval

• List 3: Activities in which Thais are not yet ready to compete, but which may be open to foreigners with prior approval

​

Only the activities listed under List 3 are generally accessible to foreign companies through the FBL process. Interested companies must apply for the license before beginning any business operations. The application is reviewed by the Foreign Business Committee, and the process can be lengthy and often results in rejection.

​

Nevertheless, applications that demonstrate a unique business model, do not pose direct competition to Thai businesses, or involve intra-group transactions among affiliated entities stand a higher chance of approval.

​

The Foreign Business License serves a purpose similar to that of a work permit for individuals. Just as foreign nationals must obtain a work permit to engage in employment within Thailand, foreign companies must be licensed to conduct specific types of business. This mechanism enables the Thai government to maintain oversight over foreign business activities and safeguard local economic interests. Non-compliance—i.e., operating without an FBL—can result in penalties ranging from fines of THB 100,000 to THB 1 million and/or imprisonment for up to three years.

​

Common Business Activities Open to Foreign Investors

In practice, foreign investors in Thailand commonly pursue four main types of business:

• Manufacturing

• Trading

• Export

• Services

Of these, manufacturing, export, and certain forms of trading (where goods are sold exclusively to foreign markets) are generally not restricted by the FBA, thus allowing 100% foreign ownership.

The service sector, however, remains largely protected and is considered an area where domestic industries are still developing. As such, foreigners wishing to engage in service-based businesses typically must rely on special permissions such as BOI promotion or the U.S. Treaty. These alternatives will be discussed in greater detail in a subsequent article.

​

*Note: Certain exceptions may apply to restrictions on land ownership and specific business categories.

​

Option 2: BOI Promotion

The second route to achieving full foreign ownership is through promotion by the Thailand Board of Investment (BOI). The BOI is a government agency responsible for fostering investment in industries deemed vital to the country’s long-term economic development. By attracting and supporting foreign businesses in strategic sectors, the BOI aims to boost Thailand’s regional competitiveness, aligning it with economic hubs like Hong Kong and Singapore.

​

While the general regulatory environment in Thailand may appear restrictive to foreign entrepreneurs, BOI promotion can significantly streamline the process for businesses operating in qualified industries. The benefits extend beyond financial incentives, offering structural and operational advantages as well.

​

Eligible Sectors for BOI Promotion

Sectors currently prioritized for investment under the BOI scheme include:

• Agriculture and agricultural products

• Minerals, ceramics, and basic metals

• Light industry

• Metal products, machinery, and transport equipment

• Electronics and electrical appliances

• Chemicals, paper, and plastics

• Services and public utilities

​

Benefits of BOI Promotion

To qualify, companies must meet the BOI’s eligibility criteria and submit a comprehensive investment proposal. Upon approval, BOI-promoted companies may enjoy a broad range of benefits, including:

• Corporate income tax holidays

• Exemptions or reductions in import duties

• Deductions for transportation, electricity, and water expenses (varies by project)

• Facilitation of foreign ownership (up to 100%)

• Land ownership rights (for industrial projects)

• Streamlined work permit processes for foreign employees​

​

When compared to standard Thai companies, BOI-promoted companies benefit from both greater ownership flexibility and operational support, making this route highly attractive for strategic, long-term investments in Thailand.