June 27, 2022

🇹🇭 WHY SHOULD I OBTAIN A FOREIGN BUSINESS LICENSE?

🇹🇭 WHY SHOULD I OBTAIN A FOREIGN BUSINESS LICENSE?

A Foreign Business License (FBL) is a license given to companies with a majority-owned by foreigners or foreign investors who wish to operate business activities restricted to foreign nationals under Thai law.

When a Foreign company would like to apply for a foreign business license, they must first check the “Foreign Business Act” to verify if the business type that they wish to operate is permitted by Thai Law.

In Thailand, if 50% or more of a company’s shares are owned by a foreigner, it is deemed foreign owned. The definition takes into account the “ownership” and not the effective control of the company.

Foreigners or foreign-owned businesses can apply for a Foreign Business License at the Foreign Licensing Department of the Ministry of Commerce in Thailand.

The process of obtaining a Foreign Business License (FBL) is often expedited if Boad of Investment (BOI) approval is obtained.

On 25 June 2019, the Royal Gazette announced the new Ministerial Regulation No. 4 (“Regulation”) to exempt ‘additional service types rendered to related companies’ from the foreign business license (“FBL”) requirement under the Foreign Business Act as follow :

  • Provision of loan in Thailand;
  • Lease of office space with utility;
  • Provision of consultation services relating to management, marketing, human resources, and information technology to affiliates and subsidiaries.

The purpose of the FBL exemption for the above additional services is so that foreigners can provide these to facilitate foreign investors in Thailand regarding the provision of services to their related companies as well as to promote foreign investment in Thailand.

Understanding the Foreign Business Act in Thailand

The Foreign Business Act (FBA) established in 1999 was set to organise business activities into three categories upon which various restrictions are placed. These predominantly concern the degree of severity on foreign ownership and operation of these businesses.

Additionally, according to the Foreign Business Act B.E. 2542 (1999) (FBA), it defines a foreigner as follows:

I. A person who is not a Thai national

II. A juristic person registered under foreign laws; or

III. A juristic person registered under Thai law with more than 50 percent or more of its shares held by foreign parties (who can be either natural or juristic persons).

Foreigners conducting business in Thailand must comply with FBA requirements, and other applicable local laws. The FBA details businesses that are reserved for Thai nationals into the following three lists:

Business activities which are prohibited to foreigners by special reasons (e.g., press, radio, broadcasting, farming, forestry, land trading, etc.);

Foreigners are prohibited from operating businesses in list one for “special reasons” and there is no approval available for a foreigner or foreign entity to obtain.

Business activities related to national safety, security, or which have an impact on arts, culture, traditions, customs, folklore handicrafts, natural resources and the Environment (e.g., production and trading of firearms, antiques, mining, etc.)

Foreigners or foreign entities can operate a business engaged in list two activities if approval has been given by the Minister of Commerce and the Cabinet.

Business activities in which Thai nationals are not yet ready to compete with foreigners (e.g., provision of accounting services, legal services, architecture and engineering services, advertising business, trading activities, and other kinds of services).

It is possible for foreigners and foreign entities to receive approval from the Director-General of the Commercial Registration of the Department of Business Development and the Foreign Business Committee for these activities. List three consists of “other categories of service business except those prescribed by ministerial regulations”.

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