Legal
Starting an Artificial Intelligence Business in Thailand in 2025
15/01/2025
As part of Thailand’s plans to develop its economy, a lot of focus has been placed on the digital sector. This focus, along with the incredible rise of AI has seen many businesses express interest in starting an AI business in Thailand. The Board of Investment (BOI), while not directly supporting AI businesses, does provide options for Artificial Intelligence businesses to take advantage of.
Interested AI companies should also be aware that due to the rapid rise of Artificial Intelligence (AI), Thailand has taken proactive steps to address the emerging regulatory challenges. Recognizing the need to embrace AI development but also ensure the safety of its citizens, the Thai government has introduced legislative proposals aimed at governing the use of Artificial Intelligence systems.
In this article we will explore the options available to an Artificial Intelligence business in Thailand and any legislation that they should be aware of and how it affects their business.
Key points
- An Artificial Intelligence business cannot be 100% foreign-owned in Thailand due to Foreign Business Act restrictions, requiring over 50% Thai ownership for most service activities. There are exemptions available to companies who have obtained a BOI promotion or Foreign Business Licence.
- The Board of Investment offers promotions for digital activities including software development, which may apply to some AI businesses or AI companies.
- Thailand has introduced data protection regulations like the Personal Data Protection Act and Cybersecurity Act that AI companies must comply with.
- Intellectual property protection for AI companies in Thailand is complex, with copyright covering code but uncertainty around patent eligibility for AI creations.
Can AI Companies be 100% Foreign Owned in Thailand?
Although the Foreign Business Act imposes restrictions on foreign ownership in AI development and other AI-related businesses, as these are generally classified under service activities, AI companies in Thailand still have several viable options, including:
- A Thai Limited Company with a Thai Partner
- 100% foreign ownership via a BOI promotion and a Foreign Business Certificate
- 100% foreign ownership via a Foreign Business Licence
Read more: Understanding the Foreign Business Act in Thailand
Limited Company with a Thai Partner
The Foreign Business Act restricts foreigners from undertaking about 50 types of business. AI businesses are considered service businesses which are restricted as per Clause 20 of list 3 of the Foreign Business Act .
However, a popular alternative for foreign investors who wish to operate an AI business is to create a Thai company (a company registered in Thailand with Thai shareholder(s) owning more than 50% of the share capital). A private limited company is the most common business structure for this type of business.
Such a set up would mean the restrictions of the FBA would not apply as the company is not considered foreign. However, the Thai partners must not be nominees as Thailand forbids the use of nominee shareholders.
Read more: Benefits of Setting up a Limited Company in Thailand
BOI Promotions for AI Businesses in Thailand
While the BOI doesn’t offer any promotions directly relating to AI at the moment, they do offer promotions that encompass digital activities. Business activities that are covered under digital activities include developing software, which could be suitable for some AI business activities and AI development.
Read more: BOI Promotions for Software Development Companies
BOI Incentives for AI Projects
100% Foreign Ownership: While regular Thai Limited companies are typically limited to 49.9% foreign ownership due to the Foreign Business Act, BOI-promoted companies face no such restriction, allowing complete foreign ownership.
Foreign Business Certificate
If you receive promotion from the Board of Investment (BOI) for restricted activities under the Foreign Business Act (FBA), such as those related to artificial intelligence, the Ministry of Commerce will issue a Foreign Business Certificate (FBC) based on your BOI promotion. This is a significant advantage as it means BOI promoted companies are not subject to the complex requirements associated with applying for and obtaining a Foreign Business License.
No Employee Quotas: Unlike other structures, BOI-promoted companies face no quotas when hiring foreign skilled employees. For example, Thai Limited Companies typically need a 4:1 ratio of Thai to foreign employees, but this requirement doesn’t apply to BOI-promoted businesses.
Other general business incentives:
- Permit to own land
- Streamlined visa and work permit processes
Tax Benefits
Successful applicants for a BOI promotion for software will also be eligible for the following tax benefits.
An 8 year exemption from Corporate Income Tax.
A corporate income tax exemption cap of 100 percent of the actual expenditure for the incentive is as follows:
- Expenditure on salaries for Thai information technology personnel additionally employed in comparison with Thai information technology personnel employed before the application submission date for investment promotion.
- Expenditure on the information technology development-related training course to develop Thai personnel’s skills.
- Expenditure on the operation to acquire the standard quality system certificate ISO 29110 or CMMI from Level 2 or other equivalent international standards.
Foreign Business Licence
A Foreign Business License (FBL) is a licence awarded to foreign companies or investors intending to engage in business activities restricted to Thai companies under the Foreign Business Act. The FBL allows foreign businesses to operate legally in Thailand and participate in certain industries or sectors otherwise limited to Thai citizens.
A FBL for an AI business has a higher chance of being awarded an FBL, compared to other businesses due to the high added value technologies being developed and transfer of knowledge and technology being passed onto Thailand. Both of those aspects are key considerations when deciding whether to award a FBL or not.
The Foreign Business License application process can be lengthy and complex and in practice it is very difficult to obtain. It is advisable to seek professional guidance and consult with experts familiar with the intricacies of the process.
Read more: Foreign Business License in Thailand – Ultimate Guide
Intellectual Property Considerations
For a company in Thailand looking to start an AI business, there are several intellectual property (IP) considerations for AI technologies. Below are the main points:
Legal Status of AI
AI is recognized as property under the Civil and Commercial Code. This means creators of AI algorithms have ownership rights.
Copyright Protection
AI is classified as a computer program under Thailand’s Copyright Act, which provides protection for the code and structure of AI systems. This protection is automatic upon creation, although it is recommended to register the copyright for stronger enforcement rights. Please note, copyright will only cover the code and structure.
Patent Protection
Currently, it is not clear whether the Patent Act will apply to AI creations. The Patent Act does not typically apply computer programs or algorithms. Therefore, companies must establish whether their AI technology meets the criteria for patentability, which includes demonstrating novelty and technical contributions to the physical world.
Trade Secrets
AI companies should consider protecting sensitive AI-related technologies as trade secrets. This involves creating confidentiality measures, such as non-disclosure agreements (NDAs) and access controls, to safeguard proprietary algorithms and datasets.
Data Protection Considerations
Thailand has introduced several regulations and laws to ensure data security and privacy. The main pieces of legislation that would apply to AI related businesses would be the following:
Personal Data Protection Act (PDPA)
Thailand’s Personal Data Protection Act (PDPA), came into effect on June 1, 2022 aligns closely with the European Union’s General Data Protection Regulation (GDPR). The PDPA has introduced a range of data protection standards and compliance requirements for both public and private sectors in Thailand.
For an AI business, the PDPA requires the adoption of strict data protection measures, e.g. the requirement to obtain explicit consent from data subjects, make sure data security measures are in place, and report any data breaches promptly.
This mandatory requirement to ensure the requirements of the PDPA are satisfied has a direct impact on how an AI business operates. For example, ensuring any data storage, processing, and management practices relating to their AI models follow the PDPA.
The Computer Crime Act
The Computer Crime Act, offers protection against cybercrimes, unauthorized access to data, and data breaches. The Computer Crime Act has established a set of penalties for various actions, including hacking, unauthorised access to computer systems, and the distribution of malware.
The Computer Crime Act is a significant piece of legislation for AI businesses as such businesses must ensure adequate security standards and legal responsibilities are established in order to protect user data from unauthorized access and any potential cyber threats.
Cybersecurity Act
The Cybersecurity Act was introduced to address cybersecurity threats and incidents. The Cybersecurity Act required organisations, including AI projects, to implement cybersecurity measures and report any incidents that could have an effect on the national security for Thailand. The Cybersecurity Act makes sure that AI businesses in Thailand follow high-security standards and protect sensitive data.
Other Important Considerations
Thailand also has some strong laws relating to defamation which are considered as some of the toughest in the world. This is an important consideration as some AI content may target people and fall under those laws. So AI companies need to be very careful when it comes to complying with the relevant defamation laws.
What is the Current Regulatory Landscape for AI in Thailand?
Thailand’s existing laws have struggled to keep pace with the rapid evolution of AI. The lack of specific regulations has made it difficult to address issues such as the legal status of AI, the use of copyrighted data and personal information in AI-generated content, and the enforcement of rights for stakeholders within the AI ecosystem. This regulatory uncertainty has caused the Thai government to take action and explore approaches adopted by other jurisdictions.
Currently, two draft legislations have been introduced in Thailand:
(i) The Draft Royal Decree on Business Operations that Use Artificial Intelligence System (“Draft Decree”)
(ii) The Draft Act on the Promotion and Support of AI Innovations in Thailand (“Draft Act”)
What is The Draft Royal Decree on Business Operations that Use Artificial Intelligence Systems?
The first legislative proposal, the Draft Royal Decree on Business Operations that Use Artificial Intelligence System (the Draft AI Royal Decree), was introduced by the Office of the National Digital Economy and Society Commission (ONDE) in late 2022.
How Does the Decree Define AI?
The draft royal decree defines an AI system as, ‘a machine-based system that can make predictions, recommendations, or decisions that affect real or virtual environments pursuant to the objectives set by humans’. The decree states that artificial intelligence systems are designed to operate at varying levels of autonomy, including:
- machine learning AI;
- logic-based and knowledge-based AI;
- statistical AI;
- Bayesian estimation AI; and
- search and optimization AI.
Risk-based Categorization of AI Systems
The Draft AI Royal Decree categorises AI systems into three distinct groups based on the level of risk they pose:
- Prohibited AI Systems: These systems, such as those that exploit vulnerabilities or target individuals with disabilities or children, would be forbidden from being deployed, except in limited cases.
- High-risk AI Systems: AI systems used in critical infrastructure, credit scoring, medical devices, and autonomous vehicles would be subject to stricter regulations, including mandatory registration and compliance with specific obligations.
- Limited-risk AI Systems: AI systems with a lower risk profile, such as chatbots, impersonation tools, and deep fakes, would be required to adhere to transparency obligations and provide clear communications to relevant parties.
The decree also expressly bans AI systems that:
- employs subliminal techniques that exerts undue influence on human behaviour (below the threshold of conscious awareness);
- utilize social scoring;
- Provides access to sensitive personal information such as age or disabilities; or
- Employs real-time remote biometric identification in public areas.
Regulatory Oversight and Penalties
The Draft AI Royal Decree empowers regulators to impose administrative orders, including fines, service suspensions, and compensation requirements, as well as potential criminal liability under the Electronic Transactions Act (ETA), if businesses operate without proper registration or violate the established regulations.
What is the Draft Act on the Promotion and Support of AI Innovations in Thailand?
In contrast to the Draft AI Royal Decree, the Draft Act on the Promotion and Support of AI Innovations in Thailand (Draft AI Act) was introduced by the Electronic Transactions Development Agency (ETDA) in early 2023. This legislative proposal aims to support the growth of the AI ecosystem in Thailand, while also incorporating safeguards for consumers.
Key Regulatory Mechanisms
The Draft AI Act proposes several key mechanisms to achieve its objectives:
- AI Business Registration: AI operators who register with the ETDA will be eligible for various benefits, such as access to the AI Clinic.
- AI Sandbox: This controlled environment will allow AI operators to test their systems and seek regulatory guidance.
- Standard Contract Terms: The draft act mandates the disclosure of minimum contract terms to the public, promoting transparency and preventing unfair discriminatory clauses.
- Risk Assessment: Regulators may prescribe criteria and methods for conducting risk assessments of AI systems based on ethical principles, serving as guidance for AI stakeholders.
- Offshore AI Operators: The act may extend its reach to offshore AI operators providing services to Thai users, imposing additional obligations on these entities.
Enforcement and Penalties
The ETDA will be empowered to issue corrective orders to AI service providers who fail to meet the prescribed quality of service standards.
How can Belaws help?
For more information about starting an AI business 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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Consultations can be hosted via WhatsApp or Video Conferencing software for your convenience. A consultation with one of our legal experts is undoubtedly the best way to get all the information you need and answer any questions you may have about your new business or project.
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Frequently asked questions
What are the benefits of setting up a factory in Thailand?
Setting up a factory in Thailand offers advantages such as a strategic location, a skilled workforce, and supportive government policies, including tax incentives and import duty exemptions through the Board of Investment (BOI) and Industrial Estate Authority of Thailand (IEAT) promotions.
Can foreign investors own 100% of a factory in Thailand?
Yes, foreign investors can own 100% of a factory in Thailand if they qualify for BOI or IEAT promotions, which provide various benefits including full ownership and tax incentives.
What types of factories are recognized in Thailand?
Factories in Thailand are categorized into three types based on size and power usage:
- Category 1: Operates without prior notice, typically with lower horsepower.
- Category 2: Requires notification to authorities before starting operations.
- Category 3: Must obtain a license before commencing operations.
What are the licensing requirements for opening a factory?
Factory owners must apply for a factory license from the Ministry of Industry, which ensures compliance with safety and environmental standards. The licensing process includes an assessment of the factory’s potential impact on the environment.
What incentives does the BOI offer to approved companies?
Companies approved for BOI promotion can benefit from 100% foreign ownership, corporate income tax exemptions, import duty exemptions on machinery and raw materials, and streamlined visa processes for foreign employees.
What is the Eastern Economic Corridor (EEC) in Thailand?
The EEC is a special economic zone aimed at promoting high-tech industries under the “Thailand 4.0” economic model, offering incentives such as corporate tax exemptions and eligibility for EEC visas for foreign employees.
What environmental compliance measures must factories adhere to?
Factories must implement waste management plans, control emissions, conduct Environmental Impact Assessments (EIAs) when necessary, and comply with regulations set by the Ministry of Industry and other environmental authorities.
What safety regulations are mandated by the Factory Act?
The Factory Act requires safety training for employees, regular equipment inspections, emergency preparedness plans, and reporting of workplace accidents to ensure safe operations.
Where can factories be located in Thailand?
Factories can be established in industrial estates designed for industrial use, purple-zoned land outside industrial estates, or non-industrial zoned land (green zone), each with varying regulatory requirements and advantages.
What should investors consider before opening a factory in Thailand?
Investors should conduct thorough research on local regulations, potential locations, available incentives from government agencies like BOI and IEAT, and compliance requirements under the Factory Act to ensure successful operations.
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