Thailand is one of the best places in Asia to establish a business. It is one of the founding members of the Association of South East Asian Nations, and is located strategically in the continent. You can consider it as the gateway to the rest of Asia, from which your business could expand to the other nations in the region. In addition, Thailand’s infrastructure is impressive. It has 7 international airports, national 3G and Wi-Fi access, high-tech metropolitan transportation and other developments.
Thailand is a foreigner-friendly country. Its tourism is one of the busiest in Asia. However, when it comes to business, the country is a bit strict on how foreigners can conduct or start a business in its jurisdiction. However, there are incentives to investing in the country as the Board of Investment grants exemptions, and even tax breaks for specific businesses.
The Foreign Business Act of 1999
B.E. 2542, or more known as the Foreign Business Act of 1999, is the law that governs foreign investment and businesses in Thailand. For purposes of discussion, the term “foreigner”, in the context of the law, refers not only to actual persons who do not hold Thai citizenship but also entities that are majority-owned by foreigners as well as companies that have been registered in a foreign country.
The Three Business Annexes under BE 2542
The Foreign Business Act divides business niches into three annexes – Annex 1, Annex 2 and Annex 3.
Annex 1 contains niches in which foreign companies cannot start a business in. These are niches that deal with local culture and require an understanding of Thai way of life. The niches include herbal medicine manufacture, rice farming, real estate development, fishery, livestock and the trade of antiques that are sourced in Thailand, among others. However, companies registered in countries that have specific treaties with Thailand may be exempt from this limitation.
Annex 2 contain businesses that concern national defense and security, as well as trade that have cultural and artistic impact to Thailand, and those that can affect the local environment and Thailand’s natural or ecological resources. Any foreign company that wishes to engage in trade in any of these niches would need to secure a permit from the Minister of Commerce. In incorporating the entity, 40% of the business’ shareholders must be Thai locals. The Minister of Commerce can reduce this to 25% if the firm makes an application.
Annex 3 contains businesses that the Thai government thinks will certainly lose to foreign competition. These businesses include legal, accounting, architectural and engineering services, as well as hospitality services, advertising, farming, and food and beverages. It would take a license from the Director General of the Ministry of Commerce to allow a foreign entity to operate in these businesses.
With BE 2452, it is actually easy now for foreigners to start their own business in Thailand. The law lays out the criteria and requirements very clearly for these investors. It is yet another reason why Thailand is one of the best countries in Asia for foreigners to invest in.