Blog – JIN LAW

FOREIGN BUSINESS ACT IN ENGLISH

admin — Wed, 16 Sep 2020 06:51:22 +0000

We love to share good sources for your information and reference! Click here for English translation for Foreign Business Act. Recourse is from the Ministry of Commerce.

WHAT IS BOI?

admin — Thu, 28 Nov 2019 16:44:38 +0000

BOI : THE BEST TOOL FOR FOERIGN INVESTORS

BOI is a government unit established to attract both Thai and foreign investors to the country. They promote certain business by giving tax and non-tax privileges.

- - Tax Privileges : corporate income tax, custom tax, etc.
  - Non-Tax Privileges : land owner ship, immigration benefit, etc.

As mentioned above, for foreign investors, they can take an advantage from the non-tax benefits to be 100% foreign owned company without applying for FBL. The FBL and BOI applications are actually similar (in terms of details for filing) but not the same! The FBL is a license which requires you to obtain while BOI is a promotion that comes with benefits.

SOME SAMPLES OF BUSINESS ELIGIBLE FOR BOI

The business they promote is adjustable almost every year depending on the government policy. The business eligible to apply for BOI varies from time to time depending on the current policy from government, here are some samples:

E-Commerce

Trade and Investment Support Office (TISO)

Energy Service Company

Data Center

Biotechnology

Digital Technology

Production of Films

Check out BOI website for the last updated eligible business and information here.

Laws related to this topic: Investment Promotion Act B.E. 2520 (1977) with the last amendment No. 3 B.E. 2544 (2001)

FOREIGN OWNED COMAPNY AND FBL

admin — Thu, 28 Nov 2019 16:36:15 +0000

CAN FOREIGNERS 100% OWN A COMPANY IN THAILAND?

This question has been asked so many times and the answer depends on what type of business you are looking for.

As mentioned in the previous article ‘HOW TO FORM A COMPANY IN THAILAND?’, a company setup with foreign partner(s) more than 51% of the shares shall be deemed as a foreign company and must comply with Foreign Business Act (FBA). The business type will play an important part in this case. If the business type is under the list of FBA, it will require to apply for FBL. Please find the list of restricted business which requires FBL below.

LIST OF RESTRICTED BUSINESS FOR FOREIGN COMPANIES

Rice milling and flour production from rice and plants
Fisheries, specifically breeding of aquatic creatures
Forestry from re-planting
Production of plywood, veneer, chipboard or hardboard
Production of lime
Accountancy
Legal services
Architecture
Engineering
Construction, except:

- Construction of infrastructure in public utilities or communications requiring tools, technology or special expertise in such construction, except where the minimum foreign capital is 500 million baht or more
- Other construction, as prescribed in regulations

Agency or brokerage, except:

- Brokerage or agency of securities or service related to future agricultural commodities futures or financial instruments or securities
- Brokerage or agency for the purchase/sale or procurement of goods or services necessary to production or providing services to affiliated enterprises
- Brokerage or agency for the purchase or sale, distribution or procurement of markets, both domestic and overseas for the distribution of products made in Thailand, or imported from overseas in the category of international business, with minimum foreign capital of not less than 100 million baht or more
- Other brokerage or agency activities, as stipulated in ministerial regulations

Auctioneering, except:

- Auctioneering in the manner of international bidding, not being auctions of antiques, ancient objects or artifacts that are Thai works of art, Thai handicrafts or antique objects, or with Thai historical value
- Other types of auctioneering, as stipulated in ministerial regulations

Domestic trade in local agricultural products not prohibited by law
Retailing all categories of goods having of less than 100 million baht capital in total or having the minimum capital of each shop of less than 20 million baht
Wholesaling, all categories of goods having minimum capital of each shop less than 100 million baht
Advertising
Hotel operation, excluding hotel management
Tourism
Sale of food and beverages
Planting and culture of plants
Other services, except those prescribed in the ministerial regulations.

WHAT IS THE PROCESS OF FBL AND TIMEFRAME?

In order to apply for FBL, you have to submit your business details such as; business model, potential suppliers and clients, budget, employment, technology transfer, etc. This is for sure a load of details and paperwork. You will also be required to have a certain amount of the capital depending on your estimated budget but not less than 3 million bath. The FBL application will be considered by DBD or Minister of Commerce and it usually takes not less than 2-3 months. The main consideration focus on the benefit the country should have from having the business established in the country and the competition with Thai business in the same industry.

IS THERE ANY EXCEPTION FROM FBL?

The answer is Yes! The government by the Board of Investment (BOI) usually has a policy to promote some business every year. One of the incentives the BOI give to you is to waive you from applying for FBL. This means if your business is in the restricted type under FBA but fortunately it is also in the business category which is promoted by BOI, you can choose to apply for BOI’s promotion instead and you will not be required to obtain FBL.

The FBL and BOI applications are actually similar (in terms of details for filing) but not the same! The FBL is a license which is a must to obtain while BOI is a promotion that comes with benefits.

Laws related to this topic: Foreign Business Act B.E. 2542 (1999)

HOW TO FORM A COMPANY IN THAILAND?

admin — Thu, 28 Nov 2019 08:03:34 +0000

FORMS OF BUSINESS UNDER THE CIVIL CODE OF THAILAND

The Civil Code of Thailand is the main law establishing the forms of business allowed in Thailand:

- Ordinary Partnership : The ordinary partnership requires at least 2 partners where all partners is fully liable for all debts of the business.

- Limited Partnership : Requiring at least 2 partners just like the ordinary partnership, some of the partners of the limited partnership is limitedly liable for the debts of the business depending on how much of the shares he is holding.

- Limited Company : The Civil Code of Thailand requires at least 3 initial founders/shareholders to form and register a limited company (commonly referred as “Co., Ltd.”) with Department of Business Development (DBD). It is the only popular type of business formation when you have up to 3 partners and want to have a separate legal entity form an owner and you want to limit your liability according to your portion of the shares you are holding.

There is no mention about a solo owned business in the Civil Code of Thailand. A solo owned business is not recognized as a legal entity, but it runs everything under and on behalf of the name of person who solely owns such business. You don’t need to register a solo owned business, however, DBD has issued some regulations which a solo owner must follow for the purpose of personal income tax tracking.

In this article, we will focus only on the limited company as it has been the main formation for both Thai and foreign business. The company registration process is a load of paperwork but quite simple. However, it is complicated when it comes to a foreign shareholder and that is when another law gets involved.

Apart from the Civil Code, a company having a foreigner holding more than 50% of the shares shall be deemed as a “foreign company” and must comply with Foreign Business Act. This means, under FBA, there are some types of business that is completely prohibited (‘prohibited business’) for a foreign company, while some types of business are allowed upon certain conditions (‘restricted business’) and such restricted business must apply for ‘foreign business license’ (FBL) with DBD before they can start their business legally.

This is to say; the business types which are out of the scope of the FBA, can be freely and wholly owned by foreigners. You will be surprised to know that manufacturing business for example, is not listed under FBA, which mean you can be a 100% foreign owned company for your manufacturing business in Thailand without applying for FBL. And yes FBL process is not an easy path to do.

But if you are not a manufacturer and you want to know whether you should set up your foreign company and apply for FBL or maybe you should look to have more than 50% of Thai partners in order to register it as a Thai company and making things easy, let’s take a look in the below summary comparing Thai vs Foreign owned company:

COMPANY SETUP WITH THAI PARTNERS MORE THAN 51% OF THE SHARES

This way, the company will be deemed as a Thai company and of course can operate any types of business (weather it is in the scope of the FBA not). There is no restriction on business types and FBL is not required. However, yet, for certain specific business, a specific license may be required such as; hotel, school, building, drugs and cosmetics, etc. Those business are a controlled business and subject to its specific law which applies to both Thai and foreign companies. But not everyone would like to have Thai partners, so let’s see another option below.

COMPANY SETUP WITH FOREIGN PARTNERS MORE THAN 51% OF THE SHARES

This way, the company will be deemed as a foreign company and the business type will play an important part in this case. If the business type is in scope of FBA, it will require to apply for FBL. Please find the list of restricted business which requires FBL here.

Laws related to this topic: Civil Cod of Thailand, Foreign Business Act B.E. 2542 (1999)