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Establishing a Bisiness in Thailand Visas and Migration
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ESTABLISHING A BUSINESS IN THAILAND

As in most countries, there are three kinds of business organizations in Thailand: Sole proprietorships, partnerships, and limited companies. The most popular form of business organization among foreign investors is the private limited company.

Private limited companies require a minimum of seven promoters and Must file a memorandum of association, convene a statutory meeting, register the company, and obtain a company income tax identity card. They must also follow accounting procedures specified in the Civil and Commercial code, the Revenue Code and the Accounts Act. A balance sheet must be prepared once a year and filed with the Department of Revenue and Commercial Registration. In addition, companies are required to withhold income tax from the salary of all regular employees.

The Ministry of Industry administers The Factory Act, which governs Factory construction and operation, as well as safety and pollution-control requirements. In some cases, factories do not require licenses, in other instances the requirement is simply to notify officials in advance of start-up, and in some cases licenses are required prior to commencing operations. Licenses are valid for five years, and are renewable. Thailand recognizes three kinds of intellectual property rights, patents, Trade marks, and copyrights.

The Patent Act protects both inventions and product designs and pharmaceuticals. The Copyright Act protects literary, artistic works, and performance rights, by making it unlawful to reproduce or publish such works without the owner's permission. The Trademark Act governs registration of, and provides protection for, trademarks.

The Alien Occupation Law requires all foreigners working in Thailand to obtain a Work Permit prior to starting work in the Kingdom, except when they are applying under the Investment Promotion Law, in which case they have 30 days to apply.

Non-Immigrant visas provide the holder with eligibility to apply fora work permit, and allow the holder to work while the work permit application is being considered.

Foreign Business Act

A. Introduction

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.

B. 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

C. 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:
            - Trading in securities or services concerning futures trading in agricultural commodities, financial instruments, or securities
            - Trading in or the procurement of goods or services needed for production by, or providing the services of, an enterprise in the same group
            - 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
            - Other lines of business stipulated in Ministerial Regulations

      • Auctioning, except:
            - 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
            - 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.

D. 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.