Foreign companies that send their staff to work in Thailand, open a representative office or branch or establish a subsidiary to operate some categories of business in Thailand may need to obtain a foreign business licence under the Foreign Business Act (BE 2542). Otherwise, the company can be subject to criminal liability. The act allows foreigners to operate such prohibited businesses only if a licence has been obtained.
Who is a foreigner?
The act defines a 'foreigner' as:
- a natural person of non-Thai nationality;
- a legal person not registered in Thailand;
- a legal person registered in Thailand with:
- half or more of its shares held by a natural person of non-Thai nationality or a legal person not registered in Thailand, or with such persons providing investment to the value of half or more of its total shares; or
- a limited partnership or registered ordinary partnership with a natural person of non-Thai nationality as the managing partner or manager;
- a legal person registered in Thailand with half or more of its shares held by such persons listed above, or with such persons providing investment to the value of half or more of its shares.
Therefore, if a foreign person owns a half or more of the shares in a company or a partnership registered in Thailand, such Thai company or partnership is defined as a 'foreigner' under the act. As a foreigner, it cannot operate a restricted business in Thailand without obtaining a licence.
The act classifies restricted business activities into three categories as follows:
- businesses that are prohibited and for which no licence can be granted to a foreigner (List One);
- businesses related to national security or to Thai culture, local handicrafts, natural resources or the environment (List Two); and
- businesses in which Thai nationals are not ready to compete with foreigners (List Three).
A licence for a restricted business under the conditions of List Two or List Three will be granted if the requirements under the act and the accompanying regulations are met. Business activities not listed above are open to foreigners, except for those restricted under other laws.
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