Thailand, known as the Land of Smiles, offers numerous opportunities for foreigners looking to establish a business in Thailand. With its strategic location in Southeast Asia, growing economy, and business-friendly policies, Thailand has become an attractive destination for international entrepreneurs. However, navigating the legal landscape can be challenging for those unfamiliar with local regulations. This comprehensive guide explores what foreigners can and cannot do when starting a business in Thailand for foreigners.
Legal Structures Available for Business in Thailand for Foreigners
When establishing a business in Thailand, foreigners have several legal structures to choose from, each with different ownership requirements and limitations:
Limited Company
The most common structure for a business in Thailand for foreigners is the limited company. Under the Foreign Business Act (FBA), foreigners can own up to 49% of a Thai limited company without special permissions. To own more than 49%, foreigners must either:
- Apply for a Foreign Business License (FBL)
- Obtain investment promotion from the Board of Investment (BOI)
- Register under the Treaty of Amity (for US citizens only)
Representative Office
A representative office allows foreign companies to establish a presence in Thailand without directly engaging in profit-making activities. This structure is ideal for market research, quality control, or sourcing goods and services for the parent company. Representative offices cannot generate revenue or issue invoices in Thailand.
Regional Office
Similar to a representative office, a regional office can coordinate and supervise branches and affiliates in Thailand and other countries in the region. While they cannot generate direct revenue in Thailand, they can provide services to affiliated companies.
Branch Office
A foreign company can establish a branch office in Thailand, which is considered an extension of the parent company. Branch offices can engage in business activities but require a Foreign Business License for most operations.
Restricted Business Activities for Foreigners
Not all business sectors are open to foreign investment in Thailand. The Foreign Business Act categorizes restricted businesses into three lists:
List 1: Businesses Strictly Prohibited to Foreigners
- Newspaper publishing, radio broadcasting, television station operation
- Rice farming, orchards, or crop growing
- Animal farming
- Forestry and timber processing from natural forests
- Fishing in Thai territorial waters
- Thai herb extraction
- Trading and auctioning of Thai antiques
- Manufacturing or casting Buddha images and alms bowls
- Land trading
List 2: Businesses Related to National Security or Cultural Impact
These require Cabinet approval and 40% Thai ownership:
- Domestic transportation
- Mining
- Production of firearms and ammunition
- Production of explosives
- Domestic aviation business
List 3: Businesses in Which Thais Are Not Ready to Compete
These require a Foreign Business License:
- Rice milling
- Wholesale and retail (with some exceptions)
- Advertising
- Hotel operations (except management)
- Tour guiding
- Selling food and beverages
- Legal, accounting, and architectural services
The Thailand Board of Investment (BOI) Promotion
For entrepreneurs seeking to operate a business in Thailand for foreigners with majority foreign ownership, the Board of Investment offers an attractive path. BOI-promoted companies can receive:
- Permission for 100% foreign ownership in certain restricted businesses
- Land ownership rights
- Work permit and visa facilitation
- Import duty exemptions on machinery and raw materials
- Corporate income tax exemptions (up to 8 years)
- Repatriation of money in foreign currency
The BOI particularly promotes businesses in:
- Agriculture and agricultural products
- Mining, ceramics, and basic metals
- Light industry
- Metal products, machinery, and transport equipment
- Electronics and electrical appliances
- Chemicals, paper, and plastics
- Services and public utilities
- Technology and innovation development
Practical Steps to Start a Business in Thailand for Foreigners
Starting a business in Thailand involves several procedural steps:
1. Business Registration
- Reserve a company name with the Department of Business Development
- File a Memorandum of Association
- Hold a statutory meeting
- Register the company (typically takes 1-2 weeks)
2. Tax Registration
- Register for corporate income tax
- Register for Value Added Tax (VAT) if annual revenue exceeds 1.8 million baht
- Register for specific business tax (if applicable)
3. Work Permits and Visas
Foreign business owners and employees need:
- Non-immigrant B visa (business visa)
- Work permit for each foreign employee
- For BOI-promoted companies, these processes are streamlined
4. Additional Requirements
- Social security registration
- Accounting setup following Thai standards
- Annual financial statement filing
- Factory licenses (if applicable)
- Specific industry licenses (if applicable)
Working with Thai Partners
Many foreigners establish a business in Thailand by partnering with Thai nationals. While this simplifies the legal process, it’s essential to:
- Conduct thorough due diligence on potential partners
- Create clear shareholder agreements
- Consider using preferred shares to maintain control
- Establish proper corporate governance
- Understand that nominee shareholders (Thai nationals holding shares on behalf of foreigners without real involvement) are illegal
Starting a business in Thailand for foreigners requires careful planning and understanding of local regulations. While restrictions exist, various legal pathways allow foreigners to establish successful businesses in this dynamic Southeast Asian economy. By choosing the right business structure, understanding sector-specific regulations, and possibly securing BOI promotion, foreign entrepreneurs can navigate Thailand’s business landscape successfully.
