legal
Do I need a Thai partner to set up a business in thailand?
03/04/2023
Thailand is a popular destination for foreign investors, entrepreneurs, and companies who wish to set up a business in Thailand. However, foreign entrepreneurs often ask whether a Thai partner is mandatory when starting a business in Thailand. The answer isn’t simple; legally, you do not need a Thai partner. However, some business activities require your company to have majority Thai ownership unless a Foreign Business Licence or BOI promotion can be obtained.
This blog post will explore this question and provide helpful information.
Key points
- Foreign investors can set up a business in Thailand without a Thai partner.
- Foreign ownership in certain industries may be restricted, and a Thai partner may be required to hold the majority share.
- The FBA specifies which industries are open to foreign investment and the conditions under which foreign businesses can operate in Thailand. (Source)
- Prohibited businesses are considered harmful to national security or public morals, and foreign businesses are prohibited from engaging in these activities in Thailand.
- Restricted businesses require special permission from the Thai government, and foreign investment is limited to a certain percentage in these industries.
- The Foreign Business License (FBL) allows foreign businesses to engage in restricted business activities under the Foreign Business Act.
- The Board of Investment (BOI) allows 100% foreign ownership for promoted companies.
- Foreigners can have control of a Thai Limited company through preference share structures.
No Thai partner to set up a business in thailand
Contrary to popular belief, a Thai partner is optional when starting a business in Thailand. Foreign investors can own 100% of a company in some industries. The Foreign Business Act of 1999 (FBA) regulates foreign investment in Thailand, allowing foreigners to own businesses in certain industries without a Thai partner.
However, there are some restrictions on foreign ownership in certain industries, and these restrictions vary depending on the industry. For example, in the case of banking, insurance, and telecommunications, foreign ownership is limited to a certain percentage, and a Thai partner may be required to hold the majority share.
Who would be a Foreign Shareholder in Thailand?
Section 4 of the FBA defines a foreign shareholder as:
- A natural person who is not of Thai nationality;
- A juristic person not registered in Thailand;
- 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 investment has been placed by the persons under (1) or (2) in the amount at least equivalent to one half of the total capital thereof; and
- Being a limited partnership or a registered ordinary partnership, the managing partner or the manager is the person under (1).
- A juristic person 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 Foreign Business Act?
The Foreign Business Act (FBA) is a law in Thailand that regulates foreign investment and business activities in the country. The FBA was first introduced in 1999 and has since undergone several amendments to reflect changing economic conditions and government policies.
The purpose of the FBA is to protect and promote the interests of Thai businesses and to regulate foreign investment in Thailand. The law specifies which industries are open to foreign investment and the conditions under which foreign businesses can operate in Thailand.
Under the FBA, foreign businesses are divided into three categories: prohibited businesses, restricted businesses, and businesses that are not restricted. Prohibited businesses are considered harmful to national security or public morals, such as gambling, weapons production, and trading in narcotics. Foreign businesses are prohibited from engaging in these activities in Thailand.
Restricted businesses are important to the Thai economy and require special permission from the Thai government. These include industries such as telecommunications, banking, insurance, and education. In these industries, foreign investment is limited to a certain percentage, and a Thai partner may be required to hold the majority share.
Businesses that are not restricted are those that do not fall into prohibited or restricted categories. These businesses can be fully owned and operated by foreign investors in Thailand.
For more information about the Foreign Business Act, please click here.
Is there any way for a 100% owned company to undertake restricted activities under the FBA?
The Foreign Business License (FBL) is a permit issued by the Department of Business Development under the Ministry of Commerce in Thailand, which allows foreign businesses to engage in restricted business activities under the Foreign Business Act.
The FBL is required for foreign companies and individuals who wish to engage in certain business activities restricted or prohibited under the Foreign Business Act. The list of restricted business activities is set out in Annex 3 of the FBA and includes activities such as banking, insurance, tourism, and telecommunications.
To obtain an FBL, the foreign business must apply to the Department of Business Development, along with supporting documents such as the company’s registration certificate, articles of association, and proof of shareholding. The application process can take several months, and the Department of Business Development may request additional information or clarification.
Once the FBL is issued, it’s valid for a period of one year and must be renewed annually. The FBL may also be subject to certain conditions and restrictions, such as the maximum percentage of foreign ownership allowed in the business.
100% Foreign ownership under a BOI company
The BOI is an agency established by the Thai government to promote foreign investment and aims to attract high-quality investment and promote economic growth in Thailand.
There are several advantages to applying for a BOI promotion, including 100% foreign ownership, the ability to hire foreign employees without having to satisfy the Thai-to-foreigner quota normal Thai limited companies are subject to, and streamlined procedures for obtaining permits and licenses.
However, most business activities in Thailand are restricted under the Foreign Business Act, so foreign investors must confirm their eligibility for BOI promotion before proceeding. Some business activities may need to meet the BOI’s requirements, making them ineligible for promotion. In such cases, a foreign business license may be an alternative. Despite this, many foreign investors still prefer to partner with a local company in Thailand.
Can a foreigner have control of a majority Thai-owned company?
Foreigners can have control of a Thai Limited company while still adhering to the ownership requirements of the FBA. This is due to the Thai interpretation of the law being about ownership and not controlling a company. Under the FBA, Foreigners can have majority voting rights and control in a Thai limited company through preference shares and weighted voting rights.
It is important to note that using nominee shares in Thailand is expressly prohibited by the Foreign Business Act. A nominee shareholder is a person (Thai National) who has shares in a company but has no legal rights or ability to control nor manage the company.
How can Belaws help?
You can talk directly to one of our experts for more information about owning a company as a foreigner in Thailand.
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 requirements to start a business in Thailand?
There are no mandatory requirements for a foreigner to start a business in Thailand, but certain industries have restrictions on foreign ownership, and a Thai partner may be required to hold the majority share. Foreigners can start a business in Thailand under the Foreign Business Act or by obtaining a Foreign Business License.
Can a foreigner be a sole proprietor in Thailand?
Yes, a foreigner can be a sole proprietor in Thailand, but it is subject to certain industry-specific restrictions under the Foreign Business Act.
Can foreigners own 100% of a business in Thailand?
Yes, foreigners can own 100% of a business in Thailand in some industries, but certain industries have restrictions on foreign ownership and require a Thai partner to hold the majority share.
Can anyone open a business in Thailand?
Yes, anyone can open a business in Thailand, subject to the regulations under the Foreign Business Act.
How much is Thai tax for business?
The corporate tax rate for Thai companies is 20%, and the personal income tax rate varies depending on the income level.
How to register a company in Thailand as a foreigner?
Foreigners can register a company in Thailand by following the registration procedures specified by the Department of Business Development under the Ministry of Commerce. The registration process includes obtaining a corporate tax ID, registering for VAT, and applying for any required permits or licenses. It is recommended to seek the assistance of a local legal advisor to ensure compliance with all relevant laws and regulations.
What is the Foreign Business Act, and how does it regulate foreign investment and business activities in Thailand?
The Foreign Business Act (FBA) is a law in Thailand that regulates foreign investment and business activities in the country. The FBA specifies which industries are open to foreign investment and the conditions under which foreign businesses can operate in Thailand.
What are the three categories of foreign businesses under the Foreign Business Act, and what are the restrictions for each category?
The three categories of foreign businesses under the FBA are prohibited businesses, restricted businesses, and businesses that are not restricted. Prohibited businesses are considered harmful to national security or public morals and are prohibited from engaging in these activities in Thailand. Restricted businesses require special permission from the Thai government, and foreign investment is limited to a certain percentage in these industries. Businesses that are not restricted can be fully owned and operated by foreign investors in Thailand.
What is a Foreign Business License, and how can foreign companies and individuals obtain it in Thailand?
The Foreign Business License (FBL) is a permit issued by the Department of Business Development under the Ministry of Commerce in Thailand, which allows foreign businesses to engage in restricted business activities under the Foreign Business Act. To obtain an FBL, foreign companies and individuals must apply to the Department of Business Development, along with supporting documents such as the company’s registration certificate, articles of association, and proof of shareholding.
What is the Board of Investment (BOI), and what are the advantages of applying for a BOI promotion in Thailand?
The Board of Investment (BOI) is an agency established by the Thai government to promote foreign investment and attract high-quality investment to promote economic growth in Thailand. The advantages of applying for a BOI promotion include 100% foreign ownership, the ability to hire foreign employees without having to satisfy the Thai-to-foreigner quota, and streamlined procedures for obtaining permits and licenses.
Can foreigners have control of a majority Thai-owned company in Thailand, and what are the legal ways to do so?
Foreigners can have control of a Thai Limited company while still adhering to the ownership requirements of the FBA. Under the FBA, foreigners can have majority voting rights and control in a Thai limited company through preference shares and weighted voting rights.
Are there any restrictions on using nominee shares in Thailand, and why are they prohibited under the Foreign Business Act?
Using nominee shares in Thailand is expressly prohibited by the Foreign Business Act. A nominee shareholder is a person (Thai National) who has shares in a company but has no legal rights or ability to control nor manage the company. The prohibition is in place to prevent foreigners from using Thai nationals to bypass the ownership requirements of the FBA.
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