Thailand’s Foreign Business Act

The cornerstone legislation relating to foreign investment and M&A transactions in Thailand is the Foreign Business Act 1999 (FBA).

The operation of certain businesses in Thailand by foreign nationals is restricted by FBA under the administration of the Ministry of Commerce (MOC). For the purpose of the FBA
restrictions, a foreigner is classified as a foreign individual, a company incorporated outside Thailand, or a company incorporated in Thailand that is majority-owned by foreign individuals or foreign companies.

The FBA sets out three lists of business categories in which the participation of foreign nationals is either prohibited or restricted. Foreign nationals are prohibited from participating in the businesses specified in list one, which includes antiques trading, broadcasting, farming and forestry.

Foreign nationals are restricted from participating in businesses relating to national safety, arts, culture, tradition, customs and folklore, handicraft or natural resources and the environment, as specified in list two unless they obtain a permission from the Minister of Commerce and approval from the Thai cabinet.

Foreign nationals are also restricted from participating in the businesses specified in list three unless they obtain a permission from the Director General of the department of business development at the MOC. List three comprises 21 categories of restricted businesses, including accountancy, engineering, construction (with certain exceptions), retailing and wholesaling (with certain exceptions), advertising, hotel operation (excluding hotel management), tour guiding, sale of food and beverages, and the catch-all category other services.

Certain service businesses are exempt from the FBA by virtue of ministerial regulations such as: commercial banking business and the related businesses of commercial banks, bank representative offices, life insurance and non-life insurance businesses, securities business and other businesses under the law on securities, asset management company business and business where a government unit or state enterprise is a party.

If a foreigner obtains a promotion certificate from the Thailand Board of Investment (BOI) under an activity that is restricted under the FBA, the foreigner can obtain a foreign business certificate. A foreign business certificate may also be granted if a foreigner is eligible under an international treaty, such as the Treaty of Amity between the United States and Thailand. Generally, the administrative process for obtaining a foreign business certificate is less onerous than for an FBL.

The formation of a private limited company is the most common approach for foreign direct investment. A private limited company is eligible for investment promotions granted by the BOI. A representative office and a branch office are also common forms of business organisation for foreign investment in Thailand; however, they do not qualify for investment promotions from the BOI.

Board of investment

The board of investment of Thailand oversees various tax and nontax incentives and privileges for various industries, such as agriculture and agricultural products, electronics and electric appliances, technology development, and high value services, including certain service activities.

Under the Investment Promotion Act, the BOI offers both tax and non-tax incentives, as summarised below:

Tax incentives

  • Exemption/reduction of import duty on machinery
  • Exemption of import duty on raw or essential materials imported for use in manufacture of products for export
  • Exemption of import duty on materials imported for R&D purposes
  • Exemption of corporate income tax on the net profit and dividends derived from promoted activities
  • Exemption of corporate income tax on net profit and dividends derived from promoted high technology and innovation activities
  • A 50 percent reduction of the corporate income tax
  • Double deduction from the costs of transportation, electricity and water supply
  • Additional 25 percent deduction of the cost of installation or construction of facilities

Non-tax Incentives

  • Permit to own land
  • Permit to bring skilled workers and experts to work in investment promoted activities in Thailand
  • Permit to take out or remit money abroad in a foreign currency

Investment Incentives for the Eastern Economic Corridor

In 2017/18, the government instituted new investment schemes to support the growth of important economic areas within the Eastern Economic Corridor (EEC) area, initially within the provinces of Chachoengsao, Chonburi, and Rayong. The key privileges are:

  • Exemption or reduction of corporate income tax not exceeding the rights as specified in the Investment Promotion Act or the National Competitive Enhancement Act for targeted industries
  • Exemption of import duty on machinery, and raw or essential materials that are imported for use in manufacture of products for export and R&D.
  • Permission to own land for BOI promoted projects.
  • Rights to enter into the state’s land lease agreement for 50 years, renewable upon approval for a further 49 years.
  • The lowest personal income tax rate (17%) for executives, specialists and researchers who are deemed qualified by the Director-general of Revenue Department under the law relating to the nation’s competitiveness enhancement in the promoted businesses or The Investment Promotion Act.
  • Five-year work visa to investors, specialists and scientists with certain special knowledge or abilities.