Foreign
Investment
Foreigners in Thailand derive their
legal rights primarily from the domestic laws of Thailand. In general, foreigners
enjoy the same basic rights as Thai nationals. Restrictions on
foreign ownership in commercial banks, insurance companies, commercial fishing,
aviation businesses, commercial transportation, commodity export, mining and other
enterprises exist under various laws. In addition, Thai participation will frequently
be required in those activities seeking permission from the BOI. The
Foreign Business Act The Foreign Business Act of 1999, which became
effective on March 4, 2000, repeals and replaces the 1972 National Executive Council
Announcement 281, better known as the Alien Business Law. The Act serves to define
an "alien," and identifies the scope of foreign participation in business in Thailand.
An "alien" is defined as: - A natural person
who is not of Thai nationality;
- A juristic entity that is not
registered in Thailand;
- A juristic entity incorporated in Thailand
with foreign shareholding accounting for one-half or more of the total number
or value of shares;
- A limited partnership or ordinary registered
partnership whose managing partner or manager is a foreigner
Businesses
Subject to Regulation Businesses that initiate activities
that fall under Lists 1, 2, or 3 of the Foreign Business Act (listed below) are
subject to the limitations imposed by the Act. Activities
that fall under List 1 are strictly prohibited to aliens. Businesses
that are covered by List 2 are prohibited to aliens unless specific permission
is granted by the Commerce Ministry, by and with an appropriate Cabinet resolution.
Alien juristic entities allowed to engage in List 2 activities must meet the following
two conditions: - At least 40 percent of all shares are held
by Thai persons or non-alien juristic entities (This may be reduced to 25 percent
on a case-by-case basis)
- Two-fifths of the members of the Board
of Directors are Thai
Activities in List 3 are prohibited
to aliens unless permission is granted by the Director General of the Department
of Commercial Registration, Ministry of Commerce, by and with the approval of
the Foreign Business Board. An alien can engage in businesses
in Lists 2 or 3 of he is a promoted investor in accordance with either the Investment
Promotion Act, the Industrial Estate Authority of Thailand Act, or other laws.
List 1 - Businesses in which alien participation is not permitted
- Newspaper undertakings and radio and television station
undertakings
- Lowland farming, upland farming, or horticulture
- Raising animals
- Forestry and timber conversions
from natural forests
- Fishing for aquatic animals in Thai waters
and Thailand's Exclusive Economic Zone
- Extraction of Thai medical
herbs
- Trade in and auctioning of Thai ancient objects or ancient
objects of national historical value
- Making or casting Buddha
images and making monk's bowls
- Dealing in land
List
2 - Businesses concerning national security or safety with an adverse effect on
art and culture, customs, or native manufacture/handicrafts, or with an impact
on natural resources and the environment. - Production,
disposal, sale, and overhead of:
o Firearms, ammunition,
gunpowder, and explosives
o Components of firearms, gunpowder, and explosives
o Armaments and military vessels, aircraft, or conveyances
o All kinds
of war equipment or their components - Domestic transport by
land, water, or air, inclusive of the undertaking of domestic aviation
- Dealing
in antiques or objects of art and works of art, and Thai handicrafts
- Production
of wood carvings
- Raising silkworms, producing Thai silk thread
and weaving, or printing patterns on Thai silk textiles
- Production
of Thai musical instruments
- Production of articles of gold or
silver, nielloware, nickel-bronze ware, or lacquerware
- Production
of crockery and terra cotta ware that is Thai art or culture
- Production
of sugar from sugarcane
- Salt farming inclusive of making salt
from salty earth
- Making rock salt
- Mining, inclusive
of stone blasting or crushing
- Timber conversions to make furniture
and articles of wood
List 3 - Businesses in which
Thais are not ready to compete in undertakings with aliens
- Rice milling and production of flour from rice and farm crops
- Fishery, limited to propagation of aquatic animals
- Forestry
from replanted forests
- Production of plywood, wood veneer, chipboard,
or hardboard
- Production of natural lime
- Accounting
service undertakings
- Legal service undertakings
- Architectural
service undertakings
- Engineering service undertakings
- Construction,
except construction of things that provide basic services, both to the public
with respect to public utilities or communications and which require the use of
special instruments, machinery, technology or expertise in construction and a
minimum capital of the alien of at least 500 million baht
- Brokerage
or agency undertakings, except:
o Trading in securities
or services concerning futures trading in agricultural commodities, financial
instruments, or securities
o Trading in or the procurement of goods or services
needed for production by, or providing the services of, an enterprise in the same
group
o Trading, purchasing (for others) or distributing or finding domestic
or overseas markets for selling goods made domestically or imports as an international
trading business, with a minimum capital of the alien of at least 100 million
baht
o Other lines of business stipulated in Ministerial Regulations - Auctioning,
except:
o International bidding that is not bidding in
antiques, ancient objects or objects of art that are Thai works of art, handicraft
or ancient objects, or of national historical value
o Other types of auction,
as stipulated in Ministerial Regulations - Domestic trade concerning
indigenous agricultural produce or products not prohibited by any present law
- Retail trade in all kinds of goods with an aggregated minimum
capital of less than 100 million baht or a minimum capital for each store of less
than 20 million baht
- Wholesale trade in all kinds of goods with
a minimum capital for each store of less than 100 million baht
- Advertising
undertakings
- Hotel undertakings, except for hotel management
services
- Tourism
- Sale of food or beverages
- Plant
breeding and propagation, or plant improvement undertakings
- Doing
other service businesses except for service businesses prescribed in Ministerial
Regulations.
Many American-owned enterprises have
invoked the provisions of the Treaty of Amity and Economic Relations between Thailand
and the United States to claim exemption from the Law. The treaty requires national
treatment be granted to persons of each country by the other country. To receive
protection, Americans must register under the Treaty. Although on paper the Treaty
appears self-executing, the Thai Government will not recognize the American applicant
until such applicant proves its American nationality. Miscellaneous
Issues An alien must invest at least two or three million baht
in his business, depending on the kind of business, however the minimum capital
requirement will not be enforced for re-investment. Minimum capital
is defined as the capital of the alien entity in case of an alien being a juristic
person incorporated in Thailand, and in case of an alien being a juristic person
not incorporated in Thailand or being a natural person, in foreign currency that
the alien remitted into Thailand at the time of starting to do business in Thailand.
The amount of minimum capital and time frame for bringing into Thailand shall
be prescribed by Ministerial Regulation. The business attached
to the Act still has three categories, i.e. List 1, List 2, and List 3, but the
business categories have been substantially changed from those of the Foreign
Business Act. Under this Act, the Foreign Business Board will review the business
listed at least once a year, and present it to the Commerce Minister. The Commerce
Minister, by the recommendation of the Foreign Business Board, is empowered to
issue Ministerial Regulations. Significantly, the Ministerial Regulations of service
businesses must absolutely be considered by the Foreign Business Board. Aliens
also can do business with respect to the businesses described in List 2 or List
3, in accordance with other laws, such as Investment Promotion Act, Industrial
Estate Authority of Thailand Act, etc., and then notify and procure a Certificate
from the Director-General. Under the new penalty provision,
the range of the fine has increased from baht 30,000 to 500,000 to baht 100,000
to 1,000,000, and increased imprisonment of no more than three years. The imprisonment
measure serves to settle or decrease any contravention. If any alien who obtains
an Alien Business License under the act (a) jointly does a business which belongs
to another alien not permitted to do a business under this Act, or (b) does a
business of which such other alien is a co-owner by expressing that such business
solely belongs to itself, so as to allow such other alien to evade or violate
the provisions of this Act, shall be liable to imprisonment for a term not exceeding
three years or to a fine from baht 100,000 to baht 1,000,000, or both, and the
cessation of such business or such joint business upon court order. Aliens
that engage in regulated businesses by permission of the Thai Government for a
definite duration, or under protection of a treaty to which Thailand is a signatory
or abides by the obligations thereof, are exempt from certain requirements under
the Act, including permission to engage in the prohibited or restricted businesses
and Thai shareholding and directorship requirements. Such aliens must first notify
and procure a Certificate from the Director-General. The
Act has provided a transition provision. Aliens that have already been permitted
to engage in the business under the Foreign Business Act are entitled to continue
the business operation in accordance with the conditions and duration of that
permission. Aliens that have been engaging in businesses that are specified in
the business categories of the Act, but were not previously specified in the business
categories of the Foreign Business Act and which intend to continue such businesses,
must notify and procure a Certificate from the Director-General within one year.
Licenses A foreigner wishing to engage in any
business in Lists Two and Three must submit an application to the Minister of
Commerce for the operation of the business in List Two and the Director General
of the Commercial Registration Department for List Three. The
Cabinet in the case of List Two businesses and the Director General in the case
of List Three businesses review and make a decision within 60 days of the application
filing date. The Cabinet may postpone making a decision for another
60 days at most. Once the Cabinet or the Director General approve the application,
the Ministry of Commerce or the Director General shall issue a license to the
applicant within 15 days of the approval date. If the Cabinet or the Director
General do not approve the List Two license application, the Minster must give
a written notification to the applicant within 30 days clearly specifying the
reason for the disapproval. Likewise, the Director General in the case of List
Three license applications must do the same, but within 15 days. In the latter
case, the applicant may file an appeal with the Minister, who is required to respond
within 30 days. His decision is final. Although the licenses have
a perpetual life, they will be automatically invalid when the licensees stop doing
the licensed business. The licenses must be displayed in a prominent place on
the business premises. The Minister by a recommendation of the
Committee may revoke the licenses or certificates if the licensees or certificate
holders: - Do not comply with the conditions the Thai Government,
treaties or the Minister impose on them.
- Do not meet the Thai
participation ratio requirements.
- Fail to maintain the licensee
qualification.
- Engage in other businesses or assist other foreigners
in doing business with a view to violating the Foreign Business Act.
The
Director General will give a warning letter to the violators ordering them to
comply with the conditions within a reasonable time. If the violation persists,
the Director General has the power to suspend the licenses for a reasonable period,
but not exceeding 60 days. The licenses can be revoked if the violation persists
after the initial suspension period ends.
The violators may file
an appeal against the suspension or revocation with the Minister within 30 days
of the date on which they receive the order. The appeal will not stay the enforcement
of the order unless the Minister relaxes the suspension or revocation. The Minister
is required to review the appeal and make a decision within 30 days. His decision
is final.
Bangkok
International Banking Facility
The Ministry of Finance and the Bank
of Thailand have established rules and conditions
for commercial banks to establish international banking
facilities in Thailand. The annual fee for participants
is 500,000 baht.
A commercial
bank that receives a license will be able to undertake international banking facilities
(IBF) business for: - Offshore Lending
Accepting deposits or borrowing from abroad in foreign currencies from
foreign natural or juristic persons who have no establishment in or business with
Thailand. An exception is made for receiving money from foreign banks that have
a branch or representative office in Thailand, from foreign branches of Thai commercial
banks, and from the Ministry of Finance, the Bank of Thailand, or the Exchange
Equalization Funds. These foreign currencies may be lent abroad, to other IBF
businesses, and to the Ministry of Finance, the Bank of Thailand and the Exchange
Equalization Funds. Acceptance of deposits or borrowing
of offshore baht funds from offshore banks, foreign branches of Thai commercial
banks and other IBF. These funds may be lent to foreign banks, foreign branches
of Thai commercial banks, or other IBF businesses. - Local
Lending
Acceptance of deposits, or borrowing from abroad in foreign
currencies from foreign natural or juristic persons who have no establishment
in or business with Thailand, foreign branches of Thai commercial banks, and other
IBFs to lend foreign currencies in Thailand. However, each withdrawal and disbursement
must be of an amount not less than US$2,000,000 except in one of the following
two cases, where the minimum disbursement is US$500,000: - An
exporter who has income from export in excess of 50 percent of all income during
the last accounting period
- An exporter who has goods and
services that are sold to an exporter who meets the above-specified condition
- Other Related Business
Cross-currency transactions with overseas customers, other IBF businesses, the
Bank of Thailand, the Ministry of Finance, the Foreign Equalization Funds, banks
licensed under the foreign exchange control laws, or local customers to whom such
IBF businesses have lent foreign currencies Giving
acceptance or guarantee against any debts in foreign currencies when either:
- The bank is licensed under the foreign exchange
control laws; or
- The parties involved reside outside of Thailand.
All matters dealing with letters of credit in cases where the buyer and the seller
of goods involved with the letter of credit purchasing agreement both reside abroad
and the goods involved in the agreement have not been either exported out of or
imported into Thailand.
Procuring, or managing the loan syndication
procurement of, foreign currency loans from foreign sources to those requiring
loans in foreign currencies.
- Other
Unrelated Business
Commercial banks licensed to undertake IBF businesses
may also: - Provide news, financial and general
economic information
- Prepare or analyze investment projects
- Advise in the purchase, merger or amalgamation of businesses
- Give financial advice; and
- Arrange or
underwrite debt instruments issued for sale abroad. If the debt instruments are
issued from Thailand, this must be undertaken in conjunction with the IBF business
of a commercial bank registered in Thailand.
However,
these activities must be separated from the accounts of the IBF business - as
if the commercial bank were a separate juristic person.
Conditions for Participating in BIBF
The Bank of Thailand stipulates
that the IBF must be separate from other banking business - as if it were a separate
juristic person. In addition, the IBF business in offshore lending must be separate
from the IBF business in local lending, and the IBF business in local lending
cannot transfer or raise funds to the IBF for offshore accounts. Customers of
IBF are required to provide their actual names, addresses, and information for
correspondence, and the names on the accounts must be the actual names of customers.
Tax Privileges for participating
in BIBF
| | Corporate Tax
(% of
net income) | Business Tax
(% of
revenue) | Withholding
Tax |
Profit Remittance Tax | Stamp
Duties | | BIBF | | | | | |
Out-Out
Out-In | 10%
10% | | 10%* | 10% | No
No | | Other IBF | 10%** | | N/A | 10% | No |
| Others | 30% | 3.3%
or 10% VAT | N/A | 10% | No |
Commercial
Banks | 30% | 3.3%
or 10% VAT | 10% or 15% | 10% | Yes |
*
Withholding tax paid on interest for O-I lent to State Enterprises is exempted
** Tax on fee of O-O loan syndication exempted if:
- At least three BIBF's participate
in the same syndication
- Most of the
operations are carried out in Thailand
- If
there is only one arranger, a BIBF is the arranger, or if there is more than one
arranger, at least half the arrangers are BIBF's
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