From July 2019, a service company in Thailand can have 100% foreign shares without being subject to authorization under the 1999 Foreign Business Act. This was established by the Thai Ministry of Commerce through Ministerial Regulation no. 4 Re: “Determination of service activities that are not required to apply for authorization for a foreign trade license B.E. 2562 (2019)”, which was published in the Government Gazette on June 25, 2019. This regulation follows the recent approval by the Thai government to exempt three categories of foreign trade license-free service activities.
A Service company in Thailand with 100% exempt foreign shares pursuant to Ministerial Regulation no. 4 may provide the following services:
- provision of home loans;
- rental of office space (including utilities);
- consultancy services related to administration and management, marketing, human resources or information technology.
The Ministerial Regulation n. 4 defines that the type of relationship between the Service Company with 100% foreign shares and the Thai company connected to it must satisfy at least one of the requirements:
- more than half of the total shareholders or members of one legal person must also be more than half of the shareholders or members of the other legal person;
- at least 25% of the capital of a legal person must be held by shareholders or members who also hold at least 25% of the capital of the other legal person;
- a legal person must be a shareholder or partner and hold at least 25 percent of the capital of the other legal person; or
- more than half of the controlling power in the first legal person must be held by directors or shareholders who also hold more than half of the controlling power in the second legal person.
The most significant change implemented by the new regulation concerns the granting of loans. The Foreign Business Commission believes that international loans between companies of the same group could have a negative impact on the Thai economy and could also risk creating a tax loophole in which a company pays dividends to its foreign parent company in the form of a loan. The notification limits the lending service exemption to domestic loans and any company providing loans to affiliates or associated companies overseas will still be subject to a foreign business license or foreign business certificate.
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