Thailand continues to be one of the most attractive destinations for foreign investment in Southeast Asia. With its strategic location, skilled workforce, well-developed infrastructure, and comparatively low start-up costs, Thailand offers significant opportunities for international investors.
However, foreign investors must carefully understand and comply with Thailand’s legal framework—particularly the restrictions imposed under the Foreign Business Act B.E. 2542 (1999) (“FBA”).
This comprehensive summary prepared by the Bangkok corporate lawyers at Herrera and Partners H&P, provides an overview of the principal legal pathways through which foreign businesses may lawfully operate in Thailand, including the Foreign Business License (FBL), applicable international treaties, BOI investment promotion, and other business structures that allow 100% foreign ownership.
Definition of a “Foreigner” under Thai Law
Under the Foreign Business Act, a “foreigner” refers to any individual or juristic person in which 50% or more of the shares are held by non-Thai nationals. As a general rule, foreign companies are restricted from engaging in certain business activities unless specific exemptions or permissions apply.
Restricted businesses are categorized into three lists:
- List 1 – Businesses strictly prohibited to foreigners, such as media, agriculture, and land trading
- List 2 – Businesses permitted only with special approval from the Cabinet, typically involving national security, culture, or natural resources
- List 3 – Businesses permitted to foreigners subject to obtaining a Foreign Business License (FBL), such as certain service businesses where Thai nationals are deemed capable of competition
Businesses falling outside these three lists may generally be operated by foreigners in Thailand without an FBL, although other sector-specific licenses may still be required.
Circumstances Where Foreigners May Own Businesses under List 3
Even for businesses classified under List 3 of the FBA, foreigners may legally own and operate businesses through the following mechanisms:
- Obtaining a Foreign Business License (FBL)
- Operating under applicable international treaties
- Receiving investment promotion from the Board of Investment (BOI)
- Engaging in businesses not governed by the Foreign Business Act B.E. 2542
- Foreign Business License (FBL)
For businesses classified under List 3, foreign investors may apply for a Foreign Business License from the Ministry of Commerce. Approval is granted at the discretion of the authorities and is assessed based on factors such as:
- Business necessity and uniqueness
- Economic contribution to Thailand
- Technology or knowledge transfer
- Benefits to local employment and industry
The FBL application process is often time-consuming and requires extensive documentation, a well-prepared business rationale, and clear evidence that the business offers distinctive value to the Thai economy.
- International Treaties and Economic Agreements
Thailand has entered into several international treaties that grant special rights to foreign investors from specific countries. On this regard the legal experts at H&P who advice foreign clients on how to do business in Thailand, would like to summarize the three main international agreements.
2.1 US–Thailand Treaty of Amity and Economic Relations
The Treaty of Amity and Economic Relations between the Kingdom of Thailand and the United States of America grants qualified U.S. citizens and U.S.-owned companies national treatment, allowing them to operate most businesses in Thailand on the same basis as Thai companies.
Key benefits include:
- Exemption from most restrictions under the Foreign Business Act
- The ability to hold a majority or 100% foreign ownership in many service and trading businesses
However, the Treaty does not apply to certain businesses, including:
- Communications
- Transportation
- Fiduciary services
- Banking involving depository functions
- Exploitation of land or natural resources
- Domestic trade in indigenous agricultural products
2.2 Thailand–Australia Free Trade Agreement (TAFTA)
Effective since 1 January 2005, TAFTA covers 18 service sectors. Businesses under this agreement are divided into two categories:
- Businesses requiring a Foreign Business Certificate, where Australian investors may hold more than 50% shareholding
- Businesses not requiring a certificate, provided the company qualifies as a Thai juristic person
Certain businesses allow up to 100% Australian ownership, although in most cases the permitted foreign shareholding ranges from 60% to 100%.
2.3 Japan–Thailand Economic Partnership Agreement (JTEPA)
Effective since 1 November 2007, JTEPA covers 15 service sectors and similarly divides businesses into two categories:
- Businesses requiring certification where Japanese investors may hold more than 50% shareholding
- Businesses not requiring certification where foreign ownership remains below 50%
Some business activities allow 100% Japanese ownership, with permitted ownership levels generally ranging from 50% to 100%.
- Investment Promotion by the Board of Investment (BOI)
The Thailand Board of Investment (BOI) promotes investment in industries aligned with national economic development policies, including technology, manufacturing, innovation, digital services, and targeted industries.
BOI-promoted companies may enjoy the following privileges:
- Permission for 100% foreign ownership, even in restricted businesses
- Corporate income tax exemptions or reductions
- Import duty exemptions on machinery and raw materials
- Permission to own land for business operations
- Relaxed requirements for foreign employees, visas, and work permits
BOI promotion is not automatic; applicants must meet specific eligibility criteria and submit a qualifying business plan. This structure is particularly suitable for large-scale projects, manufacturing operations, and high value-added service businesses.
- Businesses Not Governed by the Foreign Business Act
Unlike the three structures described above, certain businesses are not subject to the Foreign Business Act and may be established and operated in Thailand as if they were Thai-owned companies, while still allowing 100% foreign ownership.
Examples include:
- Retail or wholesale businesses with registered capital exceeding THB 100 million
- Certain manufacturing businesses producing goods for general sale (not made-to-order)
- Other businesses explicitly excluded from the scope of the Foreign Business Act B.E. 2542
Conclusion
Selecting the appropriate legal structure is a critical factor for foreign investors in Thailand. Whether through obtaining a Foreign Business License, relying on treaty protections, securing BOI investment promotion, or operating under business categories outside the scope of the Foreign Business Act, each option carries distinct advantages and limitations.
Foreign investors are strongly advised to seek professional legal and regulatory advice to ensure that business establishment and operations in Thailand are compliant, efficient, and aligned with long-term business objectives.
How Can H&P Help you in Thailand?
At our law firm in Thailand Herrera and Partners (H&P), we are proud of providing comprehensive high quality legal advisory services to foreign investors doing business in Thailand. If you are considering establishing a business in Thailand but are uncertain which legal pathway best suits your needs, our corporate team can guide you toward the most beneficial and compliant structure.
We offer end-to-end support throughout the entire process. With our in-depth expertise and hands-on approach, we ensure that our clients maximize available benefits while remaining fully compliant with applicable laws and regulations.
If you would like to learn more about doing business in Thailand or wish to explore how our firm specialized in foreign investment in Thailand can assist you, please contact our Bangkok law office at info@herrera-partners.com
