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Legal Issues for Foreign Investors
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| 1. Foreign
Business Act |
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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:
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A natural person who is
not of Thai nationality; |
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A juristic entity that is
not registered in Thailand; |
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A juristic entity
incorporated in Thailand with foreign
shareholding accounting for one-half or more
of the total number or value of shares;
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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:
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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) |
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Two-fifths of the members
of the Board of Directors are Thai
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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
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Newspaper undertakings
and radio and television station
undertakings |
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Lowland farming, upland
farming, or horticulture |
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Raising animals
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Forestry and timber
conversions from natural forests
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Fishing for aquatic
animals in Thai waters and Thailand's
Exclusive Economic Zone |
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Extraction of Thai
medical herbs |
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Trade in and auctioning
of Thai ancient objects or ancient objects
of national historical value |
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Making or casting Buddha
images and making monk's bowls |
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Dealing in land
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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.
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Production, disposal,
sale, and overhead of: |
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- Firearms, ammunition,
gunpowder, and explosives |
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- Components of firearms,
gunpowder, and explosives |
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- Armaments and military
vessels, aircraft, or conveyances
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- All kinds of war
equipment or their components |
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Domestic transport by
land, water, or air, inclusive of the
undertaking of domestic aviation
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Dealing in antiques or
objects of art and works of art, and Thai
handicrafts |
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Production of wood
carvings |
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Raising silkworms,
producing Thai silk thread and weaving, or
printing patterns on Thai silk textiles
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Production of Thai
musical instruments |
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Production of articles of
gold or silver, nielloware, nickel-bronze
ware, or lacquerware |
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Production of crockery
and terra cotta ware that is Thai art or
culture |
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Production of sugar from
sugarcane |
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Salt farming inclusive of
making salt from salty earth |
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Making rock salt
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Mining, inclusive of
stone blasting or crushing |
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Timber conversions to
make furniture and articles of wood
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List 3 - Businesses in which Thais are not
ready to compete in undertakings with aliens
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Rice milling and
production of flour from rice and farm crops
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Fishery, limited to
propagation of aquatic animals |
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Forestry from replanted
forests |
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Production of plywood,
wood veneer, chipboard, or hardboard
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Production of natural
lime |
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Accounting service
undertakings |
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Legal service
undertakings |
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Architectural service
undertakings |
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Engineering service
undertakings |
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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
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Brokerage or agency
undertakings, except: |
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- Trading in securities
or services concerning futures trading in
agricultural commodities, financial
instruments, or securities |
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- Trading in or the
procurement of goods or services needed for
production by, or providing the services of,
an enterprise in the same group |
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- 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 |
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- Other lines of business
stipulated in Ministerial Regulations
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Auctioning, except:
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- 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 |
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- Other types of auction,
as stipulated in Ministerial Regulations
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Domestic trade concerning
indigenous agricultural produce or products
not prohibited by any present law |
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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 |
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Wholesale trade in all
kinds of goods with a minimum capital for
each store of less than 100 million baht |
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Advertising undertakings
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Hotel undertakings,
except for hotel management services |
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Tourism |
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Sale of food or beverages |
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Plant breeding and
propagation, or plant improvement
undertakings |
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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:
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Do not comply with the
conditions the Thai Government, treaties or
the Minister impose on them. |
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Do not meet the Thai
participation ratio requirements. |
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Fail to maintain the
licensee qualification. |
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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. |
| 2. Work
Permits |
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The Alien Occupation
Law, adopted in 1973, requires all aliens working in
Thailand to obtain a Work Permit prior to starting
work in the Kingdom. An updated version of the Act,
adopted in 1978, describes the procedures for
issuance and maintenance of Work Permits and lists
certain occupations from which aliens may be
excluded.
A. Exemptions
The Act grants exemptions from the Work Permit
requirement to persons occupying the following
professions:
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Members of the diplomatic
corps |
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Members of consular
missions |
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Representatives of member
countries and officials of the United
Nations and its specialized agencies |
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Personal servants coming
from abroad to work exclusively for persons
listed under the above items |
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Persons who perform
duties on missions in the Kingdom under an
agreement between the government of Thailand
and a foreign government or international
organization |
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Persons who enter the
Kingdom for the performance of any duty or
mission for the benefit of education,
culture, arts, or sports |
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Persons who are specially
permitted by the Government of Thailand to
enter and perform any duty or mission in the
Kingdom. |
B. Special Cases
While most aliens must apply for a Work Permit, and
may not begin work until the Permit is issued, the
Alien Employment Act does provide special treatment
in the following circumstances:
Urgent and Essential Work:
Exemption from Work Permit requirements is granted
to aliens who enter the Kingdom temporarily, but in
accordance with the immigration law, to perform any
work of any "urgent and essential nature" for a
period not exceeding 15 days. However, such aliens
may engage in work only after a written notification
on a prescribed form, signed by the alien and
endorsed by his employer, has been submitted to and
accepted by the Director-General or his designee.
Aliens entitled to this treatment may enter Thailand
with any kind of visa, including a transit visa. The
term "urgent and essential work" is not explicitly
defined and consequently, the issuance of this sort
of exemption is a matter of administrative
discretion.
Investment Promotion
An alien seeking permission to work in the Kingdom
under the Investment Promotion Law must submit his
application for a Work Permit within 30 days of
notification by the Board of Investment that his
position has been approved. An alien in this
category may engage in authorized work while the
application is being processed.
C. Procedures
The Act requires that any alien working in Thailand
must obtain a Work Permit before beginning work.
Section 8 of the Act stipulates that while a
prospective employer may file an application on the
alien's behalf in advance of his commencing work,
the actual Work Permit will not be issued until the
alien has entered Thailand in accordance with the
immigration laws and has presented himself to
receive his Work Permit.
The Permit initially will be valid only for the
period of the alien's Non-Immigrant visa permits him
to remain in Thailand under the Immigration law. The
Work Permit will be subject to renewal in accordance
with the renewed or extended visa. For aliens who
are holders of a Thai Certificate of Residence, the
Work Permit can be renewed annually. The Labor
Department, subject to subsequent renewal, will in
principle grant an initial duration of one year for
the Work Permit. A Work Permit must be renewed
before its expiry date or it will automatically
lapse.
Applicants for Work Permits may not enter the
Kingdom as tourists or transients.
D. Required Documentation
The following documents must be attached to a Work
Permit application:
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For non-permanent
residents: A valid passport containing a
Non- Immigrant visa (except for WP 3
applications) |
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For permanent residents:
A valid passport, residence permit and alien
book (except for WP 3 applications) |
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Evidence of applicant's
educational qualifications and letter(s) of
recommendation from the former employer,
describing in detail the applicant's past
position, duties, performance, and place and
length of employment. If the documents are
in a language other than English, a Thai
translation certified as correct by a Thai
Embassy (if abroad) or Ministry of Foreign
Affairs (if in Thailand) must be attached |
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A recent medical
certificate from a first-class licensed
physician in Thailand stating that the
applicant is not of unsound mind and not
suffering from leprosy, acute tuberculosis,
elephantiasis, narcotic addiction or
habitual alcoholism (except for WP 7
applications). |
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Three 5x6 cm. full-faced,
bareheaded, black and white or color
photographs, taken no more than six months
prior to the filing of the application
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If the application is to
be filed by another person, a valid power of
attorney in the prescribed form must be
attached with a 10 baht duty stamp
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On the application form,
the "job description" entry must be
completed with a detailed statement as to
what job is expected to be performed, how it
is related to other people, and what
materials will be used in the work
(additional paper to be used if necessary)
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If the job applied for is
subject to a license under a particular law,
in addition to the Alien Occupation Law, a
photocopy of such license, (e.g. teacher's
license, physician's license, press card
from the Public Relations Department,
certificate of missionary status from the
Office of Religious Affairs, etc.) shall be
attached |
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If the applicant is
married to a Thai national, the original and
photocopies of the following must be
presented: |
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Marriage certificate,
spouse's identity card, birth certificates
of children, household registration, as well
as a photocopy of every page of the
applicant's passport |
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If the job being applied
for is not in Bangkok, the application
should be filed at the relevant province's
Department of Employment, or in the absence
of such an office, at the province's city
hall |
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Additional evidence as
requested. It may be necessary to translate
any or all documents into Thai. |
E. Permitted Activities
Thai law prohibits employers from allowing aliens to
perform any function other than that described in
the alien's Work Permit. Employers must report
changes in employment, transfers and termination of
all aliens in their organization within 15 days of
any such action. In cases of dismissal, aliens must
return their Work Permit to labor authorities in
Bangkok at the Alien Occupation division or, if they
are in a provincial area, to the province's
Department of Employment. Failure to do so will
result in a fine of up to 1,000 baht.
Any alien who engages in work without a Work Permit,
or in violation of the conditions of his work as
stipulated in his Permit, may be punished by a term
of imprisonment not exceeding three months or a fine
of up to 5,000 baht, or both. Aliens engaged in work
prohibited to them by Royal Decree (see below) shall
be liable to imprisonment for a term not exceeding
five years or to a fine ranging from 2,000 to
100,000 baht, or both.
An employer who permits an alien to work in his
organization without a Work Permit or to act in
violation of the nature of the work specified in the
Permit may be punished with imprisonment not
exceeding three years or fined up to 60,000 baht or
both.
Permit holders must obtain prior permission to
change their occupation and/or place of work. Change
of employer location or the residential address of
the permit holder must be properly endorsed in the
Work Permit by the labor authorities. The Alien
Employment Act does not prevent an alien from
engaging in work in more than one field or for more
than one employer.
F. Restricted Occupations
A Royal Decree in 1973 listed 39 occupations and
professions that were then prohibited to aliens.
This list has been amended on several occasions by
subsequent Royal Decrees, the latest one in 1979.
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Labor |
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Work in agriculture,
animal breeding, forestry, fishery or
general farm supervision |
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Masonry, carpentry, or
other construction work |
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Wood carving |
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Driving motor vehicles or
non-motorized carriers, except for piloting
international aircraft |
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Shop attendant
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Auctioneering |
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Supervising, auditing or
giving services in accounting, except
occasional international auditing
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Gem cutting and
polishing |
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Hair cutting, hair
dressing and beautician work |
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Hand weaving
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Mat weaving or making of
wares from reed, rattan, kenaf, straw or
bamboo pulp |
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Manufacture of manual
fibrous paper |
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Manufacture of
lacquerware |
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Thai musical instrument
production |
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Manufacture of nielloware
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Goldsmith, silversmith
and other precious metal work |
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Manufacture of bronzeware |
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Thai doll making
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Manufacture of mattresses
and padded blankets |
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Alms bowl making |
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Manual silk product
making |
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Buddha image making |
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Manufacture of knives |
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Paper and cloth umbrella
fabrication |
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Shoemaking |
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Hat making |
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Brokerage or agency work,
except in international business |
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Dressmaking |
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Pottery or ceramics
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Manual cigarette rolling
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Legal or litigation
service |
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Clerical or secretarial
work |
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Manual silk reeling and
weaving |
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Thai character
type-setting |
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Hawking business
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Tourist guide or tour
organizing agency |
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Architectural work
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Civil engineering work
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Following the amendment of the Alien Working Act
No.2 B.E. 2544, the Department of Employment has
increased its work permit fee structure. This has
been announced in the Royal Gazette on 17 September
2002 and will be enforced with effect from 18
September 2002.
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New
fee |
Old
fee |
| Period of work permit at
grant |
Baht |
Baht |
| Up to 3 months |
750 |
300 |
| 3 months to 6 months |
1,500 |
500 |
| 6 months to 12 months |
3,000 |
1,000 |
| 12 months to 15 months |
3,750 |
1,300 |
| 15 months to 18 months |
4,500 |
1,500 |
| 18 months to 24 months |
6,000 |
2,000 |
| Work permit replacement |
150 |
500 |
| Permission to engage in
other work |
150 |
500 |
| Permission to change
locality or place of work |
150 |
500 |
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