Foreign Business License (FBL) in Thailand

Foreign Business License in Thailand

Foreign Business License in Thailand (FBL) allows foreign investors to own the 100% of shares of a Thai Limited Company, in exception of usual law imposing at least 51% of Thai shares.

1. Reference Laws

The Foreign Business License (FBL) in Thailand is primarily governed by the Foreign Business Act B.E. 2542 (1999). This Act delineates the scope of business activities that foreign entities can engage in within Thailand and outlines the regulations for obtaining necessary licenses. Key sections of the Act relevant to the Thailand Foreign Business License include:

  • Chapter 3: This chapter outlines the businesses restricted to foreigners unless they obtain special permission.
  • Ministerial Regulations: Various ministerial regulations provide additional guidance and specify businesses that may be exempt from requiring an FBL under certain conditions.

2. Description of Foreign Business License in Thailand

A Foreign Business License (FBL) in Thailand is a permit that allows foreign entities to legally operate businesses in industries where foreign participation is otherwise restricted. This license aims to protect local businesses while also encouraging foreign investment in sectors beneficial to Thailand’s economic development. Without this license, foreign companies are prohibited from engaging in many types of business activities listed in the Foreign Business Act. Obtaining an FBL enables 100% foreign companies in Thailand to participate in these restricted business activities legally.

3. Businesses Not Requiring FBL as per Ministerial Regulation B.E. 2556

Under the Ministerial Regulation B.E. 2556 (2013), certain business activities are exempt from requiring an FBL. These exemptions are designed to promote investment in specific sectors and facilitate the entry of foreign businesses that contribute positively to the Thai economy. The twelve categories of businesses that do not require an FBL include:

  1. Category 1: Securities Business and Other Businesses Under the Law on Securities and Securities Exchange
    • Securities trading
    • Acting as an investment or financial consultant
    • Mutual or private fund management
    • Granting loans for a securities business
    • Acting as a private fund custodian
  2. Category 2: Derivatives Business Under the Law on Derivatives
    • Acting as a derivatives dealer, advisor, or fund manager
  3. Category 3: Acting as a Trustee Under the Law on Trust for Transactions in the Capital Market
  4. Category 4: Financial Institution Business
    • Commercial banking business
    • Bank representative office service business
    • Financial institution agent
    • Purchase or assignment of loan debts
    • Financing service
    • Debt collection
    • Hire purchase and leasing
  5. Category 5: Life Insurance Business
    • Still subject to the permission under the Life Insurance Act
  6. Category 6: Non-Life Insurance Business
    • Still subject to the permission under the Non-Life Insurance Act
  7. Category 7: Asset Management Business
    • Purchase or acceptance of transfer of non-performing assets from a financial institution
    • Management service of non-performing assets
    • Consulting service for debtors, financial institutions, or financial business providers in debt restructuring
  8. Category 8: Representative Office of Foreign Juristic Person for International Trading Service
  9. Category 9: Regional Office of Foreign Juristic Person for International Trading Service
  10. Category 10: Service Business to Which a Government Agency Under the Law on Budgetary Procedures Is a Party
  11. Category 11: Service Business to Which a State Enterprise Under the Law on Budgetary Procedures Is a Party
  12. Category 12: Service Businesses Provided to Affiliated Companies
    • Providing loans to affiliates in Thailand
    • Renting out office space, including public utilities
    • Providing consultation services relating to:
      • Administrative management
      • Marketing
      • Human resources
      • Information technology

4. Procedure to Get the Foreign Business License in Thailand

The procedure to obtain a Foreign Business License in Thailand involves several steps, ensuring that the applicant meets all legal and regulatory requirements:

  1. Application Preparation: Compile all necessary documents, including the business plan, company registration, and financial statements.
  2. Submission: Submit the application to the Department of Business Development (DBD) at the Ministry of Commerce.
  3. Review by the Committee: The application is reviewed by the Foreign Business Committee, which evaluates the economic and social impact of the proposed business.
  4. Additional Information: The Committee may request additional information or documents to support the application.
  5. Decision: The Committee makes a decision based on the provided information. If approved, the FBL is issued.
  6. Notification: The applicant is notified of the decision and must pay the required fees to obtain the license.

5. Requirements for a Foreign Company Applying for FBL

A foreign company applying for an FBL in Thailand must meet the following requirements, ensuring they contribute positively to the Thai economy and adhere to local regulations:

  1. Minimum Capital
    • The company must have a minimum registered capital of 2 million THB, or 3 million THB for certain restricted businesses. This ensures the company’s financial stability and commitment to long-term operations in Thailand.
  2. Transfer of “Know-How”
    • The company must demonstrate plans for transferring technology and knowledge to Thailand. This helps enhance local capabilities and promotes technological advancement within the country.
  3. Advantage for Thailand
    • The business must show clear benefits to the Thai economy, such as job creation, technological innovation, and contributions to the local industry. This requirement ensures that foreign businesses positively impact Thailand’s economic development.
  4. Employment of Foreign Staff
    • Every non-Thai employee must obtain a work permit to work legally in Thailand. Generally, the ratio between Thai and foreign employees must be 4:1, promoting local employment and ensuring that foreign businesses contribute to the development of the Thai workforce.
  5. No Effect to Other Thai Companies
    • The foreign business must not negatively impact existing Thai companies. This ensures fair competition and protects local businesses from being adversely affected by foreign enterprises.

6. Penalties for Unobservance of FBL According to Chapter 36 of the FBL

Chapter 36 of the Foreign Business Act outlines the penalties for non-compliance with the FBL requirements. These penalties are designed to enforce the regulations and ensure that foreign businesses operate legally and ethically within Thailand. Penalties include:

  • Fines: Monetary fines ranging from 100,000 to 1,000,000 THB, depending on the severity of the violation.
  • Imprisonment: Imprisonment for a term not exceeding three years for serious violations.
  • Business Closure: Authorities may order the closure of the business if it continues to operate illegally.
  • Asset Seizure: Seizure of assets if the business fails to comply with the regulations.

Conclusion

Navigating the complexities of obtaining a Thailand Foreign Business License can be challenging, but it is essential for foreign companies wishing to operate legally within the country. Only specific categories, such as foreign manufacturers of devices not produced in Thailand that provide new technologies and know-how, are generally allowed to apply for an FBL. Siam Trade Development can support you throughout the entire process, from company incorporation to the obtainment of the FBL, ensuring compliance with Thai laws and regulations.

Keyphrases in this article:

  1. “Thailand Foreign Business License”
  2. “100% foreign company in Thailand”

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