Introduction: The Landscape of Foreign Investment in Thailand
The Foreign Business Act B.E. 2542 (1999) (the “FBA”) stands as the central legal instrument governing the participation of foreign nationals and foreign-owned entities in Thailand’s economy. Enacted 26 years ago to regulate foreigners and protect domestic industries, the FBA’s long-standing purpose has been to balance the promotion of foreign investment with the preservation of national interests in areas such as national security, arts, and culture to establish a structured system for managing international capital. This strategic perspective is crucial for any investor seeking to navigate the regulatory framework in Thailand.
Defining the “Foreigner” and the Scope of the FBA
Under the FBA, a person or a business is defined as “foreigner” if it falls into one of the four categories, i.e., (i) a non-Thai individual, (ii) a company incorporated outside Thailand, (iii) (a) a Thai-incorporated company of which 50% or more of the shares capital is held by person in (i) or (ii); or (b) a limited partnership or a registered ordinary partnership whose managing partner or manager is a non-Thai individual, or (iv) a Thai-incorporated company of which 50% or more of the shares capital is held by person falling under (i) or (ii) or (iii). Generally, a foreigner is restricted to operate restricted business activities under the FBA.
The FBA classifies restricted business activities into three lists, each with varying degrees of restriction for foreign participation.
List 1: Businesses Absolutely Prohibited to Foreigners
These activities are absolutely prohibited to foreigners for “special reasons” and are completely off-limits to foreign investors. They include businesses considered vital to national security or culture, such as newspaper and broadcasting media, rice farming, fishery, and land trading.
List 2: Businesses Requiring Cabinet Approval
A foreigner participation in these sectors is permitted only after obtaining special permission from the Minister of Commerce with approval from the Cabinet. These businesses are related to national safety and security, arts, culture, traditions, and natural resources. Examples include the production of firearms, domestic transportation and mining.
List 3: Businesses Requiring a Foreign Business License (the “FBL”)
This list comprises businesses in which “Thai nationals are not yet ready to compete with foreigners“. To operate in these sectors, a foreign company must apply for and obtain an FBL from the Director-General of the Department of Business Development (the “Director-General”). Examples include construction, retail trade with a total minimum capital of less than THB 100 million or a minimum capital for each branch of less than THB 20 million, wholesale trade with a capital less than THB 100 million, hotel operations, and sale of food and beverages. Notably, this list contains a broad and often vague “catch-all” language for “other service businesses“, which has been a major source of uncertainty for foreign investors.
The Approval Process for FBL
The application process for the FBL involves several distinct stages. It begins with the submission of comprehensive application and supporting documents. The authority then considers the application and the business plan before a government fee is paid for the acceptance of the application. The application is then proposed to the relevant government body, i.e. sub-committee, the Foreign Business Commission, or the Cabinet (as the case may be) for their consideration, which can take up to 60 days from the date on which the fee is paid. If approved, a final government fee of THB 20,000 to THB 500,000 (depending on type of approved business and registered capital) would be paid for the issuance of the FBL.
Alternatives for Foreigner
As the process to obtain the FBL can be complicated and time-consuming, there are alternatives that allow foreigner to operate without obtaining the FBL:
Bilateral Cooperations Pursuant to International Trade Treaties or Agreements.
Foreigner nationals from countries that have entered into international trade treaties or agreements between Thailand and its contracting countries may apply for a Foreign Business Certificate (the “FBC”), instead of the FBL, to confirm their eligibility and demonstrate the privileges granted under such treaties or agreements for the types of business specified in the respective treaties or trade agreements. Examples include the Treaty of Amity and Economic Relations between the Kingdom of Thailand and the United States of America B.E. 2511 (1968) (US Treaty), the Thailand-Australia Free Trade Agreement (TAFTA), and the Japan-Thailand Economic Partnership Agreement (JTEPA).
Businesses Promoted by the Board of Investment (the “BOI”) or Permitted to Operate Business by the Industrial Estate Authority of Thailand (“IEAT”)
If a foreign investor is granted investment promotion from the BOI or permitted by the IEAT to operate the business, the foreign investor shall be exempted from obtaining the FBL. In such cases, the foreign investors shall be required to obtain the FBC to operate the business listed in List 2 or List 3 of the FBA. The procedures for obtaining the FBC is designed to be more streamlined and generally faster than the FBL application.
Compliance and Penalties
Compliance with the FBA is not optional. Violations carry severe penalties for both foreigners and any Thai national involved as a nominee or assisted foreigners to circumvent restrictions under the FBA. Penalties can include imprisonment and court orders for business dissolution. Furthermore, authorities can impose ongoing daily fines for continued non-compliance after a court order.
A critical issue under the FBA that has received enforcement focus is the use of nominee shareholder structures. A nominee is a Thai person or entity who holds shares on behalf of a foreigner to circumvent the share ownership restrictions under the FBA without having a genuine financial interest or investment in the company. This practice has always been illegal under the FBA, which criminalizes the act of assisting a foreigner in operating a restricted business without permission.
The legal landscape surrounding nominee structures is becoming increasingly hardened. The Anti-Money Laundering Office (AMLO) has proposed an amendment to the Anti-Money Laundering Act to address the widespread use of Thai nominees by foreign nationals to unlawfully operate restricted businesses. The amendment would classify such nominee arrangements and unauthorized foreign business operations as predicate offenses, allowing authorities to seize assets from both Thai and foreign offenders. The goal is to close legal loopholes, enhance transparency, and protect Thailand’s economic integrity. The draft amendment to the Anti-Money Laundering Act completed its public hearing on April 25, 2025, and will be submitted to the House of Representatives for consideration. The days of relying on legally questionable loopholes are ending, and a new era of transparency and strict compliance is emerging.
The Future of the FBA: Proposed Amendments in 2025
A pivotal moment arrived in 2025 with the Cabinet’s approval in principle of a proposal to amend the FBA. This signals a fundamental strategic shift from a policy of “protecting” domestic industries to one of “enhancing competitiveness potential” and attracting high-quality foreign direct investment. The Government has acknowledged that the existing framework has become outdated and has hindered the country’s economic transformation, particularly in high-tech and innovation-driven sectors. Such proposed amendment of the FBA aims to promote economic development, trade and investment, and enhance the country’s competitiveness in accordance with the National Strategy and the Cabinet’s policies. As the legislative landscape changes, the true impact will depend on the final details of the new law which is to be enacted. In this period of transition, proactive engagement, including early consultation before investing, is critical to ensure that businesses are structured in full compliance with the laws.