Thailand’s Foreign Business Act (B.E. 2542), which was introduced back in 1999, stated that foreigners could own less than fifty percent of a Thailand-registered company. But, some businesses may exceed or be exempted from this restriction if they obtain a Foreign Business License.
Nevertheless, foreign entrepreneurs and investors have a few legal ways to obtain a 100 percent ownership when they register a Thai company. While some of these methods are time-consuming, and their result is unpredictable, they should be the initial strategy for all serious companies intending to create foreign ownership. Here are three legal ways to obtain full foreign ownership of a Thai company.
Getting a Foreign Business License
The Foreign Business License can be loosely described as the work permit for businesses. Currently, the Foreign Business Act categorizes businesses in Thailand into three types: under List 1, 2, and 3. Foreigners can only enter businesses categorized under List 3. However, some businesses in the non-restricted categories, including certain manufacturing companies, are exempted from these rules.
The business category limitation allows the Thailand government to control the influx of foreign companies into the country, thereby protecting Thai locals and their interests. Generally, foreigners in the country prefer to engage in four main businesses, including trading, services, export, and manufacturing. Although foreigners can get 100 percent ownership on most trading, manufacturing, and export since the Foreign Business Act does not restrict them, their opportunities in services are extremely limited. Service businesses are considered to be a business where the locals are not ready to take on just yet, and the only method to own a foreign company fully is via BOI promotion.
Foreign companies interested in getting business opportunities in one of the available categories need to apply for the Foreign Business License before commencing any activities. Afterward, they need to wait for the Foreign Business Committee’s verdict. This ordeal can be quite lengthy, and rejections are common.
Nonetheless, the chances of a company getting the license will increase exponentially if its business is unique and does not compete with other businesses in Thailand or involves dealing with members of affiliated companies. Failure to obtain a Foreign Business License before starting a business in Thailand may lead to a fine ranging from THB 100,000 to THB 1,000,000 and up to three years imprisonment.
Board of Investment promotion
The second way to obtain full foreign business ownership is to have the business promoted by the Board of Investment or BOI. Thailand BOI is the Thai government’s division that promotes business startups and projects in sectors deemed profitable for the country’s economic outlook. Ultimately, BOI aims to increase the country’s competitiveness within the Southeast Asia region, bringing it on par with nations like Singapore and Hong Kong.
Business activities eligible to apply for BOI promotion include those involved in:
- Agriculture and its products
- Ceramics, minerals and basic metals
- Light sector
- Metal products, transport equipment, and machinery
- Electrical and electronic appliances sector
- Plastic, paper, and chemicals
- Public utilities and services
Businesses interested in BOI promotion need to meet the qualifying criteria and provide an investment project proposal. A BOI-promoted company can enjoy numerous benefits, including obtaining up to 100 percent foreign company ownership, tax holidays, import tax relief or reductions, and deductions on water, electricity, and transportation expenses. The company can also own land for industrial projects and go through an easier process when getting Work Permits for foreign workers.
Register via the Treaty of Amity for the Americans
Another legal method to get full foreign ownership of a Thai company is company registration via the Treaty of Amity. This method, however, only applies to U.S. citizens. This treaty is a special agreement between Thailand and the U.S., which permits American entrepreneurs or companies to maintain a majority or full ownership of shareholding or a company in Thailand.
Businesses seeking protection under this agreement are treated pretty much similar to their Thai counterparts in many ways. They are exempt from many investment restrictions imposed by the Foreign Business Act. Still, businesses operating under U.S. Treaty or BOI need to carry a Foreign Business License. Nevertheless, their participation in these program overrides the normal procedure, and they are granted the license automatically.
Getting help from professional company registration in Thailand
Foreign investors and entrepreneurs can seek help from a professional company registration services provider in Thailand for an easier, streamlined, and legally-compliant Thailand company registration process. When selecting a services company, consider factors like the agency’s credibility, trustworthiness, industry expertise, contract’s flexibility, and pricing model.