In this article, we will focus only on the limited company as it has been the main formation for both Thai and foreign business. The limited company registration process is a load of paperwork and is even more complicated when it comes to a foreign shareholder and that is when the Foreign Business Act (FBA) gets involved.
Apart from the Civil Code, a limited company having a foreigner holding more than 50% of the shares shall be deemed as a “foreign company” and must comply with FBA. This means, under FBA, there are some types of business that is completely prohibited (“prohibited business”) for a foreign company, while some types of business are allowed upon certain conditions (“restricted business”) and such restricted business is required to apply for “foreign business license” (FBL) with Department of Business Development (DBD) before they can start their business legally.
This is to say; the business types which are out of the scope of the FBA, can be freely and wholly owned by foreigners without FBL. You will be surprised to know that manufacturing business for example, is not listed under FBA, which mean you can be a 100% foreign owned company for your manufacturing business in Thailand without applying for FBL. And yes FBL process is not an easy path to do, so it is good to know that you can avoid it for some options.
But if you are not a manufacturer and you want to know whether you should set up your foreign company and apply for FBL or maybe you should look for more Thai partners and have more than 50% of Thai partners in order to register it as a Thai company and making things easy, let’s take a look in the below summary for comparison of Thai vs Foreign owned company:
Company Setup With Thai Partner(s) More Than 51% of The Shares
This way, the company will be deemed as a Thai company and of course can operate any types of business (regardless of the business types listed in FBA). There is no restriction on business types and FBL is not required or course. However, yet, for certain specific business, a specific license may be required such as; hotel, school, sale of drugs and cosmetics, etc. Those business are a controlled business and subject to its specific law which applies to both Thai and foreign companies.
Company Setup With Foreign Partner(s) More Than 51% of The Shares
This way, the company will be deemed as a foreign company and the business type will play an important part in this case. If the business type is in the list of FBA’s restricted business, it will require to apply for FBL. Please see below for the list of restricted business.
List of Restricted Business Required a FBL for Foreign Companies
1. Rice milling and flour production from rice and plants
2. Fisheries, specifically breeding of aquatic creatures
3. Forestry from re-planting
4. Production of plywood, veneer, chipboard or hardboard
5. Production of lime
6. Accountancy
7. Legal services
8. Architecture
9. Engineering
10. Construction, except:
- Construction of infrastructure in public utilities or communications requiring tools, technology or special expertise in such construction, except where the minimum foreign capital is 500 million baht or more
- Other construction, as prescribed in regulations
11. Agency or brokerage, except:
- Brokerage or agency of securities or service related to future agricultural commodities futures or financial instruments or securities
- Brokerage or agency for the purchase/sale or procurement of goods or services necessary to production or providing services to affiliated enterprises
- Brokerage or agency for the purchase or sale, distribution or procurement of markets, both domestic and overseas for the distribution of products made in Thailand, or imported from overseas in the category of international business, with minimum foreign capital of not less than 100 million baht or more
- Other brokerage or agency activities, as stipulated in ministerial regulations
12. Auctioneering, except:
- Auctioneering in the manner of international bidding, not being auctions of antiques, ancient objects or artifacts that are Thai works of art, Thai handicrafts or antique objects, or with Thai historical value
- Other types of auctioneering, as stipulated in ministerial regulations
13. Domestic trade in local agricultural products not prohibited by law
14. Retailing all categories of goods having of less than 100 million baht capital in total or having the minimum capital of each shop of less than 20 million baht
15. Wholesaling, all categories of goods having minimum capital of each shop less than 100 million baht
16. Advertising
17. Hotel operation, excluding hotel management
18. Tourism
19. Sale of food and beverages
20. Planting and culture of plants
21. Other services, except those prescribed in the ministerial regulations.
What is the process of FBL and how long does it take?
In order to apply for FBL, you have to submit your business details such as; business model, potential suppliers and clients, budget plan, employment plan, technology transfer, etc. This is for sure a load of details and paperwork. You will also be required to have a certain amount of the capital depending on your estimated budget but not less than minimum of 3 million bath. The FBL application will be considered by DBD or Minister of Commerce and it usually takes not less than 3 months. The main consideration focus on the benefit the country should have from having the business established in the country and the competition with Thai business in the same industry. You will have more advantage to have an expert to help you along the process. Contact us for your consulting!