Changes to the Thai Foreign Business Act with Certain Business Types Open to Foreign Operation

john@fosrlaw.com

John P. Formichella

July 31, 2019

Naytiwut Jamallsawat contributed to the content of this article

According to Thailand Foreign Business Act B.E. 2542 (FBA), there are 3 types of business activities that govern foreign participation in Thai commerce:

List 1: Business Not Permitted to Foreigners

List 2: Business Permitted to Foreigners under Conditions

List 3: Business Not Yet Permitted to Foreigners

Lists 1, 2, or 3 of the Foreign Business Act in Thailand essentially cover nearly all economic sectors with a few exceptions.

However, a recent Ministerial Regulation, issued on 13 June 2019, will open up certain types of services from foreign operators to its affiliates, which means that a Foreign Business License will not be required for a registered Thai company having majority foreign ownership.

Service businesses providing services to affiliates that do not require a Foreign Business License are as follows:

1.       Providing Domestic Loan Services

2.       Leasing Office Space with Utilities

3.       Consulting Services in the following:

a.       Administration

b.       Marketing

c.        Human Resources, or,

d.       Information Technology

Juristic persons with the following characteristics are regarded as “affiliates”:

1.       juristic persons that have shareholder(s)/partner(s) who constitute more than half of the total number of shareholder(s)/partner(s) of each company transacting business together;

2.       juristic persons that have shareholder(s)/partner(s) who own 25% or more of the share capital of one juristic person (Company A) and also own 25% or more of the share capital of another juristic person (Company B) with which Company B is transacting business with Company A;

3.       a juristic person that owns 25% or more of the share capital of another juristic person (again, assuming the juristic persons are engaging in a transaction with each other); or

4.       juristic persons that have the same director(s)/partner(s) (who constitute a majority) with managerial authority. This would imply such persons have authorized director status under a Company Affidavit (for each company interacting in a transaction).

The regulation is relatively new and it remains to be seen as to how it will be administered by the relevant authority but it is to be expected that some creative structuring will result.

This article is for information purposes only and should not be relied upon as legal advice. For more information, please contact John P. Formichella at john@fosrlaw.com