Foreign Business Act

The Foreign Business Act B.E. 2542 (1999) (“FBA”) is Thailand’s principal statute regulating the participation of foreigners in business activities within the Kingdom. Enforced by the Department of Business Development (DBD) under the Ministry of Commerce, the FBA defines what constitutes a “foreign business” and outlines specific business categories that are either prohibited or restricted to foreign entities or persons.

While the FBA is protective in nature—designed to preserve Thai interests in sensitive sectors—it also provides legal mechanisms through which foreign entities may obtain licenses, exemptions, or promotional privileges to operate legally and competitively in Thailand.

This article explores the legal structure and intent of the Foreign Business Act, analyzes its three-tiered restriction system, and outlines compliance procedures, penalties, and exemption pathways for foreign businesses operating in Thailand.

1. Legal Basis and Objectives of the Foreign Business Act

1.1 Legislative History

• The FBA replaced the Alien Business Law B.E. 2515 (1972).

• Enacted on 3 March 1999; enforced by the Ministry of Commerce.

• Reflects a national policy of economic protectionism balanced with conditional openness.

1.2 Objectives

• Regulate the scope of foreign ownership in Thai businesses.

• Reserve specific industries for Thai nationals or entities.

• Facilitate foreign investment in permitted sectors.

• Ensure national interests in strategic or culturally sensitive areas.

2. Definition of “Foreign” Under the FBA

A business is considered “foreign” if:

1. It is not registered in Thailand, or

2. It is registered in Thailand, but foreigners own 50% or more of:

   • Registered capital (for private limited companies), or

   • Voting rights (in practice, corporate control is also scrutinized)

Even a Thai company may be deemed foreign if nominee shareholding or control structures are found to circumvent the law.

3. The Three Lists of Restricted Businesses

The core of the FBA is its three annexed lists, which designate business activities foreigners may not engage in without approval.

List 1: Completely Prohibited

Activities that affect national security, culture, arts, religion, and natural resources.

Examples:

• Newspaper and broadcasting

• Rice farming

• Forestry

• Land trading

• Thai herb production

• Fishery in Thai territorial waters

No exceptions or licenses are granted under List 1.

List 2: Restricted Unless Approved by Cabinet

Activities related to national safety, arts and culture, traditional medicine, and natural resources.

Examples:

• Domestic transport (land, air, water)

• Firearms production

• Antique trading

• Mining

Requirements:

• Thai nationals must hold at least 40% of shares (sometimes 51%)

• Cabinet resolution needed for foreign participation

List 3: Restricted Unless Licensed

Activities in which Thais are not yet deemed competitive, but which are open to foreign entry upon approval.

Examples:

• Retail and wholesale trading

• Restaurant and hospitality services

• Construction (excluding infrastructure)

• Advertising

• Legal, accounting, architecture, and engineering services

• Brokerage, agency services

Requirements:

• Must obtain a Foreign Business License (FBL) from the DBD

• Reviewed by the Foreign Business Committee

4. Legal Pathways for Foreign Business Operation

Foreigners may operate in List 3 (and some List 2) sectors under these permitted pathways:

4.1 Foreign Business License (FBL)

• Issued by the Director-General of the DBD

• Application must demonstrate:

  • Necessity of foreign participation

  • Technology transfer or employment benefits

  • Non-threat to Thai security or traditions

• Process includes review by a multi-agency committee

• May involve conditions (e.g., Thai directors, capital thresholds)

4.2 BOI Promotion

Companies approved by the Board of Investment (BOI) may:

• Be exempted from FBA restrictions

• Receive tax incentives and visa/work permit benefits

• Operate with 100% foreign ownership, depending on the activity

BOI applications must show:

• Value-added contribution to Thailand

• Innovation or high-tech elements

• Potential for Thai employment or exports

4.3 Treaty Exemptions

U.S.-Thailand Treaty of Amity (1966)

• U.S. nationals and companies may own majority or 100% of a business in Thailand

• Exempt from List 3, with some restrictions

• Still barred from:

  • Land ownership

  • Natural resource exploitation

  • Transportation

Japan–Thailand Economic Partnership Agreement (JTEPA) and Australia–Thailand Free Trade Agreement (TAFTA)

• Provide sector-specific liberalization for Japanese and Australian businesses

• Must apply via relevant ministries and DBD for certificates

5. Minimum Capital and Registration Requirements

Under the FBA:

• Foreign businesses must have a minimum registered capital of THB 2 million per business line

• If operating in a restricted activity with FBL: THB 3 million per business

• Capital must be fully paid-in (not just registered)

• Must be used for business operations and declared to the DBD

6. Penalties for Non-Compliance

6.1 Criminal Penalties

• Unauthorized operation in a restricted sector:

  • Fine: THB 100,000 to 1,000,000

  • Daily fine: THB 10,000 per day during continuation

  • Business closure

• Use of nominee shareholders to evade foreign restrictions:

  • Imprisonment: up to 3 years

  • Fine: THB 100,000 to 1,000,000

  • Both penalties may apply

6.2 Nominee Shareholding:

Illegal under Section 36 of the FBA

• Foreigners cannot hold land or businesses through Thai “name-only” shareholders

• Thai nationals acting as nominees may also be prosecuted

The government has increasingly cracked down on false structures, particularly in real estate, tourism, and services sectors.

7. Examples of Business Structures under the FBA

✅ Legal Structure

• Thai majority company with real Thai shareholders (active, with actual investment)

• BOI-promoted company in digital or export sector

• U.S.-owned company certified under Amity Treaty (non-restricted business)

❌ Prohibited or High Risk

• Thai company with nominee shareholders fronting for a foreigner

• Use of bearer shareholding agreements or unofficial trusts

• Foreign-led businesses operating in restricted fields without license

8. Common Foreign Business Scenarios

Scenario 1: Foreign Restaurant Owner

• Restaurants fall under List 3

• Foreigners must:

  • Apply for FBL, or

  • Operate under a Thai-majority company, or

  • Seek BOI promotion (if applicable)

Scenario 2: Tech Startup

• Apply for BOI promotion

• May receive:

  • 100% foreign ownership

  • Visa/work permit fast-track

  • FBA exemption

• No need for FBL if BOI-approved

Scenario 3: Legal Consultancy

• Legal services are restricted under List 3

• Foreigners cannot practice Thai law, but may provide international legal advice

• Joint ventures with licensed Thai law firms possible under strict terms

Conclusion

Thailand’s Foreign Business Act forms a critical element of its economic legal infrastructure, balancing the country’s desire for foreign investment with the protection of domestic industries. While the law imposes significant restrictions, it also offers clear legal channels for foreign entities to participate in the Thai economy through licenses, promotional incentives, and treaty privileges.

Any foreigner seeking to do business in Thailand must understand their classification, ensure compliance with the FBA, and avoid illegal nominee or proxy structures. With proper structuring and legal guidance, the FBA should be viewed not as a roadblock, but as a regulatory map for responsible and legally secure business activity in Thailand.