The main legislation that governs and imposes restrictions on the foreign investment in Thailand is the Foreign Business Act B.E. 2542 (1999) (“FBA”). The FBA provides lists of business activities that are reserved for Thai nationals and thus, limit the ability of the foreign nationals to engage in the reserved business activities. These reserved business activities are categorized into 3 categories:

• List 1 consists of business activities in which foreign nationals are strictly prohibited from engaging for special reasons.
• List 2 consists of business activities related to the national safety or security, or having an impact on arts, culture, traditions, customs and folklore handicrafts, or natural resources and the environment. Any foreign national wishing to engage in a business activity reserved under List 2 must apply for a Foreign Business License (“FBL”), which requires consideration and approval from the Cabinet. Even if approval is granted, holders of an FBL for List 2 business will still be subject to a condition that at least 40% of its total shares must be held by Thai nationals or legal entities not regarded as foreign under the FBA, and at least two-fifth of the directors must be Thai nationals.
• List 3 consists of the business activities in which Thai nationals are not yet ready to compete. Foreign nationals wishing to engage in the business activities reserved under this List 3 are required to apply for an FBL, which requires a permission from the Director-General of the Department of Business Development (“DBD”) at the Ministry of Commerce (“MOC”) with the approval of the Foreign Business Committee. In the case that the approval is granted, 100% of the total shares of a holder of an FBL for List 3 business can be held by foreign nationals.

Qualifying foreign nationals may operate a business activity under List 2 or List 3 of the FBA without applying for an FBL if:

• They have been granted investment promotion from the Board of Investment (“BOI”);
• They have obtained permission from the Industrial Estate Authority of Thailand to operate an industrial or commercial business in an industrial estate; or
• They qualify for privileges under a bilateral or multilateral treaty on trade and investment between Thailand and another country, such as the Thailand-U.S. Treaty of Amity and Economic Relations, the ASEAN Comprehensive Investment Agreement, ASEAN Trade in Goods Agreement, and others.

After a qualifying foreigner has obtained approval from either of the aforementioned authorities, the foreigner must notify the Director-General of the DBD, who will issue a Foreign Business Certificate (“FBC”). The FBC application process is an administrative rather than an approval procedure.

Thailand’s regime focuses on both economic protectionalism and national security.

Pursuant to the FBA, a foreign party is defined as:

1. A natural person who is not a Thai national;
2. A legal entity not registered in Thailand; or
3. A legal entity registered in Thailand with at least 50% of its shares held by persons under (i) or (ii), or a legal entity that is a limited partnership or a registered ordinary partnership with a managing partner or manager who is not a Thai national; or
4. A legal entity registered in Thailand with at least 50% of its shares held by persons under (i), (ii), or (iii).

These apply to and cover investments from all countries.

As described in the response to Question 1 above, the reserved businesses under the FBA are separated into 3 Lists:

• List 1 consists of 9 categories of business activities and includes newspapers, radio & TV broadcasting, rice farming, plantation, forestry, land trading, and others.
• List 2 consists of 13 categories of business activities and includes production, distribution, and maintenance of firearms; domestic transportation, whether by land, water, or air; and others.
• List 3 consists of 21 categories of business activities and includes construction, advertising, wholesale business, retail business, service business, and others.

Apart from the FBA, there are several other business-sector-specific statutes that impose Foreign Investment Restrictions, such as the Private School Act, Financial Institution Business Act, Telecommunication Business Act, etc.   

The thresholds are prescribed in the definition of foreign parties described in Question 3 above—that is, holding of 50% or more of total shares by either non-Thai nationals or non-Thai entities would cause a business operator to be subject to Foreign Investment Restrictions under the FBA. Neither voting rights nor economic rights are thresholds to consider whether the business operator is foreign. In addition, other business-sector-specific statutes may impose a lower threshold for foreign shareholding or an additional threshold on the nationality of the directors.

Yes. Foreign nationals may not operate any of the reserved business activities under the FBA unless they have been granted an FBL or received an FBC unless otherwise exempted under the FBA. Operation of a reserved business without a license or certificate is subject to criminal penalty.

Yes. If a business is reserved under either the FBA or a business-sector-specific statute, approval from the relevant authority is required prior to closing. For example, If a foreign investor would like to acquire a Thai-owned company that engages in a reserved business under List 3 of the FBA, an application for an FBL or FBC, as appropriate, must be submitted to the Foreign Business Administration Division of the DBD for consideration and approval before the acquisition of shares.

There was no impact of COVID-19 on the foreign investment regime in Thailand.  

In past years, the Foreign Investment Restrictions have been relaxed moderately by the DBD in two ways. One is that the DBD has carved out certain business activities from the governance of the FBA; for example, prescribed services rendered to affiliates can now be carried out without a FBL. The other is that the Foreign Business Committee has taken a more liberal approach when considering FBL applications, and it has announced several FBL-preapproved models for specific reserved business activities, which has resulted in more predictable outcomes for FBL applications and an increase in the number of FBLs issued. Consequently, more business activities under List 3 of the FBA have been gradually opened to foreign investment, but business activities under List 2 of the FBA remain strictly reserved, as no FBL has yet been issued for any of them.

The blocking of illegal foreign investment in reserved businesses has not been efficient due to limited capacity and inactive law enforcement.    

The BOI has also been very active in stimulating foreign direct investment in its promoted sectors and business activities and attracting new foreign investors by offering both tax and non-tax incentives to eligible investors—particularly those with advanced technologies that are considered to be beneficial to the development of Thailand. In addition, Thailand’s government has made an effort to negotiate and conclude additional bilateral or multilateral treaties on trade and investment with more countries, which would open up certain businesses and sectors to foreign investment from the contracting countries.

Please refer to the response to Question 9 above. So far, only FBLs for certain business activities under List 3 have been approved by the Foreign Business Committee. The committee considers the reasons and necessity, and makes its decision on a case-by-case basis. Generally, the discretion of the committee is very subjective, and its key considerations for approval are whether the proposed business is a special type or involves advanced technology or special skills, and whether it will compete with any Thai-owned businesses or whether those Thai-owned businesses are deemed to be ready to compete with foreign operators. Based on data disclosed by the DBD and other sources, several business activities under List 3 appear to be highly restricted by the committee.

No, we do not expect that there will be any regulatory developments over the next 6 months.