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FBA and BOI in Thailand

Board of Investment in ThailandFBA (FOREIGN BUSINESS ACT)

According to the Foreign Business Act of 1999 (the “FBA”), there are three types of business activities:

List 1: Business Not Permitted to Foreigners (Publishing and broadcasting, agriculture, forestry, fishing and trading in real property, etc.)

List 2: Business Permitted to Foreigners under Conditions (National security, art, culture, local custom, natural resources and environment, etc.)

List 3: Business Not Yet Permitted to Foreigners (Wholesale/retail, hotel business, broker/agent, restaurants, and all service businesses, etc.)

Activities that fall under List 1 are strictly prohibited to aliens.

List 2 are prohibited to aliens unless permission is granted by the Cabinet.

Businesses that are covered by List 3 are prohibited to aliens unless permission is granted by the Director-General of the Commercial Registration Department (“CRD”).

Based on the above definition, if majority of the shares of a limited company are held by Thais, it is regarded as a Thai company and thus not subject to this Act. This means that aliens are generally allowed to participate up to 49% in a company engaged in restricted businesses. Beyond that, the approval requirement must be complied with. Strictly speaking, any company with majority of foreign shareholders is required to apply for the Foreign Business License (FBL). The minimum capital requirement for foreigners is two million baht in general, and three million baht for those under List 2 or List 3.

 
BOI (BOARD OF INVESTMENT)

BOI or Board of Investment in Thailand is a form of business entity wherein it is foreign majority-owned company without having to apply for foreign business license. BOI certificate suffices because BOI overrides the FBL. In the event that the company is foreign majority owned, it necessary to further gain the Foreign majority own certificate from the Department of Business Development. BOI promotes investment in strategic industries. BOI seeks to provide investment incentives for foreign and local entrepreneurs who are interested to capitalize in the agency’s promoted activities. Investment promotion policies were tailored fit to decentralize Thailand’s industrial centers.

Projects may apply for incentives and privileges if they meet the following criteria:

  • the location of the promoted activities;
  • whether these are priorities or not. Investors get the following advantages if they choose the BOI structure:
    • Reduce the risks associated with investment
    • Reduce initial investment costs and to improve the rate of return on investment
    • Support services at all times