Exploring 100% Foreign Business Ownership in Thailand
As an investor looking to enter the Thai market, one of your first considerations may be whether you can own 100% of your business in Thailand. While Thai partners who own over 50% of the shares will typically be required, some potential avenues offer 100% foreign ownership.
In this blog post, we’ll explore the options for foreign entrepreneurs looking to establish their ventures in Thailand while taking advantage of 100% foreign ownership.
- If foreigners own more than 49 percent of the shares in a company, they must obtain a Foreign Business License (FBL) to undertake restricted activities as per the Foreign Business Act.
- The Foreign Business Act restricts foreigners from undertaking about 50 types of businesses, including most service activities.
- Companies eligible for a BOI promotion can obtain a Foreign Business Certificate (FBC) to undertake activities restricted as per the Foreign Business Act as 100% foreign-owned companies.
- Some activities are not restricted to Foreigners, such as Export activities.
- The Treaty of Amity allows companies majority-owned by US citizens to operate in Thailand and do not need an FBL. They are restricted from specific sectors.
The Foreign Business Act
The Foreign Business Act (FBA) splits business activities in Thailand into three distinct lists, each subject to specific restrictions. These regulations primarily revolve around the level of foreign ownership and operation allowed for these businesses.
These 3 lists restrict foreigners from undertaking about 50 types of business, including:
- List one includes newspaper businesses, animal farming, land trading and other activities. Foreigners are prohibited from operating businesses in list one for “special reasons,” and no approval is available for a foreigner or foreign entity to obtain.
- List two has three groups and includes businesses related to national security and domestic land, waterway, or air transportation (including the domestic airline business). Foreigners or foreign entities can operate a business engaged in list two activities if approval has been given by the Minister of Commerce and the Cabinet. However, it is difficult to obtain such approval.
- List three Foreigners and foreign entities are prohibited from engaging in list three activities because “Thai nationals are not ready to compete” with foreigners. Foreigners and foreign entities can receive approval from the Director-General of the Commercial Registration of the Department of Business Development and the Foreign Business Committee for these activities. List three consists of “other service business categories except those prescribed by ministerial regulations”.
Are there any options for 100% Foreign Ownership?
While these restricted activities may prohibit 100% foreign ownership, there are 3 potential options open to foreigners.
The three methods are:
- Obtaining a Foreign Business License
- Board of Investment (BOI) promotion
- Registration through the Treaty of Amity (for the US citizens only)
For more information about the Foreign Business Act, please check out our blog post here.
Foreign Business Licences
Foreign companies interested in undertaking in business activities restricted by the Foreign Business Act must apply for a Foreign Business License (FBL) before commencing operations. To get an FBL, companies must submit the necessary documents to the Foreign Business Committee and await their decision.
It is worth noting that this procedure can be time-consuming, and rejections are not uncommon. However, if the proposed business is unique, non-competitive with Thai enterprises, or involves transactions among affiliated companies, the likelihood of obtaining the license increases significantly.
This system allows the Thai government to regulate the entry of foreign businesses into the failure to obtain an FBL before commencing operations can result in penalties ranging from 100,000 THB to 1M THB and a potential prison sentence of up to three years.
What business activities do not require a Foreign Business Licence?
Typically, foreigners in Thailand are interested in starting a business in the following sectors: manufacturing, trading, export, and services. While the FBA does not restrict most manufacturing and export activities (specifically those targeting the export market), allowing foreigners to have full ownership, the opportunities in the service sector are significantly limited. The service industry is viewed as an area where Thai businesses are not yet ready to compete.
Thailand’s Board of Investment is a special government agency that focuses on promoting foreign investment within Thailand.
Furthermore, the BOI also provides the following incentives for qualifying projects:
- 100% foreign ownership of a company.
- Reduced requirements for supporting work permits, i.e., no quotas for hiring foreigners.
- The ability to own land.
- Tax benefits such as income tax exemptions for a fixed period. Please note that tax incentives depend on specific promotions and are unavailable to all.
A BOI promotion removes many barriers to doing business in Thailand, such as the restrictions of the Foreign Business Act. Business activities eligible for a BOI promotion include:
- Agriculture and agricultural products
- Mineral, ceramics, and basic metals
- Light industry
- Metal products, machinery, and transport equipment
- Electronics and electrical appliances industry
- Chemicals, paper, and plastics
- Services and public utilities
- Technology and innovation development
To learn more about BOI companies in Thailand, please click here.
Treaty of Amity Companies
As mentioned above, typically, a 100% foreign-owned company cannot operate in Thailand unless:
- the Ministry of Commerce has granted a Foreign Business License (FBL) or;
- an investment promotion from the BOI and a Foreign Business Certificate from the Ministry of Commerce has been obtained.
However, if one of the shareholders in the company is a US citizen and this shareholder holds the majority of the shares, this company will be considered a US-majority-owned company. US-majority-owned companies are eligible to apply for protection under the Treaty of Amity. A Treaty of Amity company can operate as a 100% foreign-owned company in Thailand without applying for an FBL or a BOI promotion.
However, several restrictions must be considered. The Treaty of Amity prohibits American investors from operating in the following reserved activities:
- Fiduciary functions
- Banking involving depository functions
- Land Ownership, Exploitation of land or other natural resources
- Domestic trade in indigenous agricultural products
The following requirements also apply:
- American citizens must hold a minimum of 51% of shares
- A minimum of 50% of directors must be American citizen(s)
What happens if a company is not eligible for 100% foreign ownership?
Should a company not be eligible for any of the above options, one final solution would be to establish a Thai company with majority ownership (over 50% of the shares) held by Thai individuals. Companies such as these are not subject to the restrictions of the FBA and can undertake any kind of business activity.
Under the existing regulations of the FBA, foreigners are permitted to possess majority voting rights and control a Thai limited company by utilising preference shares and weighted voting rights, provided that the Thai shareholders are not nominees.
How can Belaws help?
For more information about 100% foreign ownership for companies in Thailand, why not talk to one of our experts now?
Please note that this article is for information purposes only and does not constitute legal advice.
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Frequently asked questions
Can foreigners own 100% of a business in Thailand?
Yes, foreigners can own 100% of a business in Thailand under certain circumstances. Foreigners who own more than 49% of the shares in a company must obtain a Foreign Business License (FBL) to undertake restricted activities as per the Foreign Business Act. However, there are three potential options for 100% foreign ownership: obtaining a Foreign Business License, getting Board of Investment (BOI) promotion, or registering through the Treaty of Amity (for US citizens only).
Can foreigners own a company in Thailand?
Yes, foreigners can own a company in Thailand. However, the extent of foreign ownership depends on the type of business and the restrictions imposed by the Foreign Business Act. Foreigners can own a company in Thailand with less than 50% ownership without the need for special permission. To own more than 49% of the shares and engage in restricted activities, foreigners must obtain a Foreign Business License, qualify for BOI promotion, or meet the requirements under the Treaty of Amity.
What is the foreign ownership limit in Thailand?
The foreign ownership limit in Thailand varies depending on the business activities and the regulations of the Foreign Business Act. Generally, foreigners can own less than 50% of a company without any special permission. However, for activities restricted by the Foreign Business Act, such as certain service industries, foreigners must obtain a Foreign Business License, qualify for BOI promotion, or meet the requirements under the Treaty of Amity to achieve 100% foreign ownership.
Can a foreigner be a sole proprietor in Thailand?
The concept of a sole proprietorship in Thailand is different from that in some other countries. In Thailand, a sole proprietorship is registered as a “sole proprietorship business” or “personal business” under Thai law, and it is primarily intended for Thai nationals. The regulations regarding sole proprietorships and foreign ownership in Thailand can be complex. It is generally recommended for foreigners to establish a company with majority ownership held by Thai individuals or explore other options such as obtaining a Foreign Business License, BOI promotion, or registering through the Treaty of Amity for 100% foreign ownership.
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