Legal
Thailand Targets Nominee Shareholding Structures: DBD Proposes New Registration Rules
TL;DR: Thailand is increasing enforcement against nominee shareholder structures used to bypass foreign ownership restrictions. These arrangements are illegal under the Foreign Business Act and carry serious penalties. Foreign investors should review their company structure and consider compliant alternatives such as BOI promotion or a Foreign Business License.
Thailand’s Department of Business Development (DBD) is continuing its crackdown on the use of nominee shareholders as a way to bypass the Foreign Business Act. The DBD recently identified more than 75,000 companies operating in sectors restricted under Thai law where foreign investors hold less than 50 percent of the shares.
While many of these structures may be legitimate, the authorities are concerned that some may involve Thai nationals acting as nominee shareholders to hide effective foreign ownership or control.
Nominee shareholding is strictly prohibited under the Foreign Business Act B.E. 2542 (1999), and both the foreign investor and the Thai nominee may face criminal penalties if caught.
To address these concerns, the DBD has proposed new procedures to review certain changes in companies and partnerships where foreign investors are involved.
Key Points
- The Department of Business Development (DBD) has identified over 75,000 companies in restricted sectors where foreign investors hold less than 50% ownership, raising concerns that some structures may involve illegal nominee shareholders used to bypass the Foreign Business Act (FBA).
- Nominee shareholding is illegal in Thailand
- The DBD has proposed new verification procedures for certain company changes involving foreign participation. Thai directors or partners may need to appear in person and confirm they are genuine shareholders, not nominees.
- Routine corporate amendments such as appointing foreign directors or changing signatory authority may face additional scrutiny.
- 100% foreign ownership may be possible through options such as BOI promotion, a Foreign Business License, IEAT/EEC incentives, or the Treaty of Amity.
What are Nominee Shareholders?
A nominee shareholder is a Thai person or company that is registered as a shareholder in a company but does not actually have any real financial stake or interest in the company. Essentially, the nominee shareholder holds the shares on behalf of a foreigner who is the actual owner.
Foreign investors often consider using nominee shareholders in Thailand to circumvent restrictions under the Foreign Business Act (FBA), which limits foreign ownership in many business sectors to less than 50%. By using a Thai nominee shareholder, a foreign investor can create the appearance of local majority ownership while still maintaining full control over the business through hidden agreements or side contracts.
The use of nominee shareholders by foreigners is strictly prohibited under Thailand’s Foreign Business Act (FBA) as it allows foreigners to avoid the restrictions on foreign ownership and control of businesses.
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A nominee shareholder can be described as follows:
- Registered as a shareholder but does not invest any money or have the means to pay for the shares
- Has no beneficial interest in the company and no real control
- Merely facilitates the registration of the company as a Thai company to avoid foreign business restrictions
- Holds shares on behalf of a foreigner who is the actual owner, making the company majority foreign-owned in reality
The FBA imposes significant penalties, including fines and imprisonment, for both the nominee shareholder and the foreign investor.
Foreign investors should also be careful when using preference share structures that give foreign shareholders extra voting or dividend rights. Thai authorities often consider the use of preference shares as a sign of a nominee structure. In the event of an investigation, authorities may question why a Thai shareholder holds a majority stake while receiving fewer dividends or having little control over the company.
What is Considered A Foreign Owned Business in Thailand?
The FBA restricts foreigners and foreign-owned companies from operating in more than 50 categories of business activities in Thailand. But how does the FBA define a “foreigner” or a “foreign-owned company”?
Section 4 of the FBA states the following:
- 1) A natural person who is not of Thai nationality or;
- A juristic person not registered in Thailand or;
- A juristic person registered in Thailand, being of the following descriptions:
- Being a juristic person at least one-half of capital shares of which are held by persons under (1) and (2) or a juristic person in which over 50% of the total capital investment has been placed by the persons under (1) or (2); and
- Being a limited partnership or a registered ordinary partnership, the managing partner or the manager, of which is the person under (1).
- A juristic person registered in Thailand with at least one-half of the capital shares of which are held by persons under (1), (2) or (3) or a juristic person in which investment has been placed by the persons under (1), (2) or (3) in the amount at least equivalent to one half of the total capital thereof.
What is the New Draft Order Proposed by the Department of Business Development?
The Department of Business Development has introduced a draft registration order that would introduce additional procedures when partnerships or companies amend their company structure after incorporation to include foreign participants or foreign authorized directors.
The proposed measure focuses on companies where such business structures could potentially be used to bypass foreign ownership restrictions under the Foreign Business Act.
The draft rules would introduce mandatory in-person verification procedures for certain corporate amendments. These procedures would complement existing registration safeguards, such as financial verification requirements that may already apply during the incorporation of companies with foreign involvement.
The aim is to confirm that Thai participants listed in company records genuinely participate in the business and are not acting on behalf of foreign investors.
Proposed Rules for Registered Partnerships
Under the draft proposal, additional verification procedures may apply when a registered partnership modifies its partner structure where:
- A partnership originally consisted entirely of Thai partners, or
- The partnership previously had foreign partners holding 50 percent or more of the partnership capital, and
- A proposed amendment results in foreign partners collectively holding less than 50 percent of the capital.
In these circumstances, the registrar may require all existing partners and incoming Thai partners to appear in person and present valid identification, such as a national ID card or other official photographic identification. They may also be asked to sign formal declarations confirming that they are genuine partners and not acting as nominees for foreign investors.
Proposed Rules for Limited Companies
The draft proposal also addresses changes involving authorized directors of limited companies. The new requirements may apply when:
- All current authorized directors are Thai nationals, and
- A proposed amendment would result in a foreigner becoming an authorized director or co-signatory with authority to bind the company
Where such changes occur, the registrar may require existing directors and incoming Thai directors to appear in person at the registration office. They must present valid identification documents and may also be required to sign formal declarations confirming that they are participating in the company in their own capacity and not acting on behalf of foreign investors.
Are There Any Exceptions Available?
The draft order also recognises that there may be situations where being able to complete the in-person procedures is difficult or impractical, for example directors being located abroad.
In these cases, the registration may still be processed if the applicant can demonstrate reasonable grounds explaining why the standard procedure cannot be followed.
Approval would need to be granted by designated senior officials within the Department of Business Development. These officials may include directors responsible for business registration divisions or other relevant administrative units.
This exception allows the authorities to maintain flexibility while still being able to monitor any changes involving foreign participation.
The proposed order is currently subject to a public consultation process. The consultation period began on 29 February 2026 and is scheduled to conclude on 13 March 2026. During this period, stakeholders can submit feedback on the draft proposal.
Following the consultation phase, the DBD will review comments and may revise the draft before issuing a final version.
If the order proceeds without any major changes, the draft order could be implemented in early April 2026, although this depends on the formal approval process.
How will this Affect Businesses in Thailand?
The proposed measures could affect companies and partnerships in Thailand where foreign investors are involved but hold less than 50 percent of the shares. Companies operating in sectors restricted under the Foreign Business Act may therefore experience greater scrutiny when modifying their corporate structures.
If introduced, additional verification may apply when companies make certain corporate changes. For example, appointing a foreign director with signatory authority, changing the list of authorized directors, or introducing a foreign partner into a previously Thai-only partnership may require Thai directors or partners to appear in person and confirm that they are genuine participants in the business.
As a result, even simple amendments such as restructuring the board of directors, updating signatory authority for banking purposes, or adding foreign management personnel may involve additional verification during the registration process.
Why This Development is Important
In recent years, Thai authorities have increased enforcement efforts against nominee shareholding arrangements. Government agencies have improved cooperation and data sharing to identify companies where the registered shareholding structure may not properly reflect the individuals who control or benefit from the business.
For foreign investors, this development highlights the importance of properly structuring their business in Thailand. Companies relying on informal arrangements or nominee shareholders may face increasing scrutiny, especially when making corporate amendments or changes to management authority.
Taking the time to structure a company correctly can help foreign investors avoid regulatory issues due to the increased crackdowns on nominee shareholders. Our experts can review your business model and advise on suitable ownership structures, including whether 100% foreign ownership may be available through Board of Investment promotion or a Foreign Business Licence.
Can a Company With Nominee Shareholders be Restructured?
If your Thai company was originally structured using nominee shareholders, you may now face significant legal and financial risks. Thai authorities have increased enforcement against nominee arrangements that do not comply with the Foreign Business Act, particularly where the Thai shareholder has not made a genuine financial investment or does not receive a real economic benefit from the company.
To reduce their risk, companies should consider restructuring their shareholding arrangements to reflect genuine ownership. One option is to introduce a legitimate Thai partner who actively participates in the business. When introducing a new Thai shareholder, it is important that they make a real financial investment, that any share transfers are properly documented with traceable payments, and that the shareholder receives a fair share of dividends or other financial returns. The structure must reflect genuine commercial participation rather than a purely formal arrangement.
Restructuring a company requires careful planning to protect both the business and its shareholders. With the right legal guidance, foreign investors can restructure their company while continuing to operate their business with confidence.
If you have concerns about your current shareholding structure or are considering restructuring your company, our team can review your situation and advise on practical options for your business.
What are Some Alternate Options to using Nominee Shareholders?
Although many business activities in Thailand are restricted for foreign ownership, foreign investors still have several legitimate options available. Instead of relying on nominee shareholders, businesses can structure their operations through legal frameworks that allow foreign ownership.
Foreign Business License (FBL)
A Foreign Business License (FBL) is a licence awarded to foreign companies or investors who wish to engage in business activities typically restricted to Thai companies under the Foreign Business Act. The FBL allows foreign owned businesses to operate legally in Thailand and participate in certain industries or sectors otherwise limited to Thai citizens.
However, it is important to be aware that in practice it is very difficult to obtain a FBL and in practice, very few FBLs are awarded.
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BOI Promotion
Thailand’s Board of Investment (BOI) is a government agency responsible for promoting foreign investment in sectors that support Thailand’s economic development. Businesses that qualify for BOI promotion may benefit from a range of benefits that are not available to standard Thai companies.
These incentives can include 100 percent foreign ownership, allowing foreign investors to operate businesses in sectors that would otherwise be restricted under the Foreign Business Act. BOI-promoted companies may also benefit from reduced work permit requirements, including exemptions from the usual foreign employee quotas.
Certain projects may also receive corporate income tax incentives, the availability and duration of these tax benefits depend on the specific promotion category and are not available for all projects.
Read more:
Why a BOI Promotion in Thailand Can Help Your Business
Thailand Tax Incentives for Foreign Investors from the BOI
Discover the Qualifying Business Activities for a BOI Promotion in Thailand
IEAT & EEC
The Industrial Estate Authority of Thailand (IEAT) and the Eastern Economic Corridor (EEC) both provide the possibility for foreign ownership and tax incentives. However, their scope is much more limited than that of the BOI.
IEAT
The Industrial Estate Authority of Thailand (IEAT) is a government organisation that oversees, plans and promotes industrial estates throughout the country. The IEAT provides a range of services and benefits, including:
- 100% foreign ownership
- Helping identify suitable locations based on a company’s needs.
- Streamlining the process of acquiring land (purchase or lease) within the estates.
- Streamlining the process of acquiring visas and work permits.
- Assistance opening a bank account
- Offering tax and non-tax incentives for businesses operating within the estates.
EEC
The Eastern Economic Corridor initiative covers three provinces along the Eastern Seaboard, Rayong, Chonburi, and Chachoengsao. The EEC plans to make these provinces a hub for innovation and industry and promote the following goals:
- Become a centre for high-tech industries and services.
- Improve connections throughout the region by land, sea, and air.
- Attract foreign businesses with special benefits and incentives.
- Develop “smart cities” with advanced infrastructure.
Companies who are eligible to launch a business within the EEC can get advantages like 100% foreign ownership, tax breaks, reduced requirements for obtaining visas and work permit, and the chance to own land outright (which is usually restricted for foreign businesses in Thailand).
Treaty of Amity
U.S. citizens can operate 100% foreign-owned businesses under the Treaty of Amity. The Thai-U.S. Treaty of Amity and Economic Relations, commonly referred to as the Treaty of Amity, is a special economic bond between the United States and Thailand. This treaty allows U.S. citizens and businesses incorporated in the U.S., or those majority-owned by U.S. citizens, to enjoy certain privileges when operating in Thailand.
The treaty grants national treatment, enabling American companies to engage in business activities on similar terms as Thai companies and exempting them from most restrictions on foreign investment imposed by the Foreign Business Act of 1999.
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Representative Office
Representative Offices offer the significant advantages of 100% foreign ownership, however, they are limited in scope in the activities that they can perform. One of the major drawbacks of a Representative Office is that they cannot generate any revenue, and the head office in another country is required to fully fund their expenses. The Representative Office in
Thailand cannot engage in profit-making activities, such as:
- negotiating sales,
- Issuing invoices,
- receiving payment for services or;
- signing business agreements.
Here are some of the functions that a Representative Office can undertake on behalf of its head office:
- Sourcing local goods or services in Thailand
- Inspecting and regulating the quality and quantity of items purchased by the head office in Thailand
- Disseminating information regarding the head office’s new products and services
- Reporting on local company development and activities to the corporate office
- Guiding distributors and consumers on a variety of topics related to items distributed by the head office
- Signing contracts that are necessary for the company’s activities, such as a lease
- Exporting products that are ordered by the company’s headquarters or related companies.
Read more:
Maximizing Your Business in Thailand: Exploring the Benefits of a Representative Office
Please note that this article is for information purposes only and does not constitute legal advice.
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FAQ
How do I calculate import duty in Thailand?
Import duty in Thailand is calculated based on your product’s CIF value (Cost + Insurance + Freight). The duty rate varies from 0% to 80% depending on what you’re importing. For example, if you’re bringing in electronics worth 10,000 Baht with a 10% duty rate, you’d pay 1,000 Baht in import duty.
How can I check what import duty rate applies to my products in Thailand?
Thailand uses the Harmonized System (HS Code) to classify imports, specifically following the ASEAN Harmonized Tariff Nomenclature (AHTN 2022). You’ll need to find your product’s HS code to determine the exact duty rate. The rates are outlined in the Customs Tariff Decree of 2017.
What items are exempt from import duty in Thailand?
If you’re a BOI (Board of Investment) company or registered in Special Economic Zones (SEZs), you may qualify for import tax exemptions on machinery and certain raw materials. Additionally, goods imported under Free Trade Agreements may have reduced or zero duty rates if they meet the Rules of Origin requirements.
Does Thailand have import tariffs?
Yes, Thailand applies import tariffs ranging from 0% to 80% depending on the product category. The country uses either a specific duty (fixed amount) or an ad valorem duty (percentage of value), whichever is higher.
Do I need to pay import charges when bringing goods into Thailand?
Yes, you’ll need to pay multiple charges including import duties (0-80%), 7% VAT on all goods, and potentially excise taxes if you’re importing luxury items, alcohol, tobacco, or petroleum products. There’s also a 10% local tax on top of excise tax for certain items.
What is the VAT tax rate on imported items in Thailand?
The standard VAT rate in Thailand is 7%, applied to all imported goods regardless of value. This changed in July 2024 – previously, items under 1,500 Baht were exempt, but now everything is taxed.
Is there a duty-free allowance for imports into Thailand?
There’s no general duty-free threshold mentioned for commercial imports. As of July 2024, all imported goods are subject to 7% VAT regardless of their value, which eliminated the previous exemption for low-value goods under 1,500 Baht.
Do foreigners pay different import taxes than Thai nationals?
Import taxes aren’t different for foreigners versus Thai nationals. Everyone pays the same import duties (0-80%), 7% VAT, and applicable excise taxes. However, to import
Can I reduce my import taxes through Thailand’s trade agreements?
Yes, Thailand has signed numerous Free Trade Agreements with countries like Japan, India, Australia, and ASEAN nations, which can significantly reduce or eliminate duties on qualifying goods. You’ll need proper documentation like a Certificate of Origin to claim these benefits.
Why does Thailand charge import taxes?
Import taxes serve multiple purposes in Thailand – they protect local industries, ensure safety standards, generate government revenue, and help balance international trade relationships. The system is regulated under the Customs Act and Customs Tariff Decree.
What’s the formula for calculating Thailand import taxes?
Here’s a simple example: If you import goods worth 10,000 Baht (CIF value) with a 10% import duty, you’d calculate: Import Duty = 1,000 Baht, VAT Base = 11,000 Baht (CIF + Duty), VAT = 770 Baht (7% of VAT base), Total Tax = 1,770 Baht. For luxury items with excise taxes, the calculation becomes more complex.
Do I need to pay VAT on small-value imports to Thailand?
Yes, as of July 2024, you must pay 7% VAT on all imported goods regardless of value. The previous exemption for goods under 1,500 Baht no longer applies.
Who benefits from Thailand’s import tax system?
Import taxes benefit the Thai government through revenue collection and help protect local industries by making imported goods more expensive. However, businesses can benefit from reduced taxes through Free Trade Agreements and special programs like BOI company status or SEZ registration.
How is VAT calculated on imported goods in Thailand?
Thailand applies 7% VAT to the total value including the CIF value plus import duties and any other applicable charges. So VAT is calculated on top of the import duty, not just the product value.
What’s the difference between import duty and VAT in Thailand?
They’re separate charges. Import duty is calculated first based on your product’s CIF value (ranging from 0-80%). Then VAT (7%) is calculated on the total of the CIF value plus import duty plus any other charges. You pay both.
How do I know if I’m required to pay import tax in Thailand?
If you’re importing goods into Thailand commercially, you’ll definitely need to pay import taxes. You must register with Thai Customs, obtain a paperless license valid for 3 years, and use the e-Customs system. All commercial imports are subject to duties and VAT.
Which products qualify for reduced import duties in Thailand?
BOI companies and businesses registered in Special Economic Zones may get exemptions on machinery and certain raw materials. Additionally, goods qualifying under Free Trade Agreements with countries like Japan, India, Australia, or ASEAN nations may have reduced or zero duties if you have the proper Certificate of Origin.
What documents do I need to verify my import duty rate in Thailand?
You’ll need to identify your product’s HS Code under the ASEAN Harmonized Tariff Nomenclature (AHTN 2022). The specific duty rate depends on your product classification and can range from 0% to 80%. Thailand Customs maintains the official tariff schedules.
How do I calculate both import duty and VAT for Thailand imports?
Here’s the formula: First calculate Import Duty (CIF value × duty rate). Then calculate VAT base (CIF value + Import Duty + any fees). Finally, VAT = VAT base × 7%. For luxury goods, you’ll also need to add excise tax and a 10% interior tax before calculating VAT.
Are there any products I can import to Thailand without paying duty?
Items eligible for exemption include machinery and certain raw materials for BOI companies and SEZ-registered businesses. Products imported under Free Trade Agreements may also qualify for reduced or zero duties. You’ll need proper documentation like a Certificate of Origin to claim these benefits.
Can foreigners own 100% of a business in Thailand?
Yes, foreigners can own 100% of a business in Thailand, depending on the type of business and its structure. Activities such as export and manufacturing can be fully foreign-owned without restrictions, while other sectors may require a Foreign Business License (FBL) or Board of Investment (BOI) promotion.
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