BOI and the Foreign Business Act

Foreign-owned companies that are registered in Thailand are eligible for promotion under the Board of Investment (BOI) Thailand. Furthermore, once BOI promotion has been granted, the promoted company may apply for a “Foreign Business Certificate” under Section 12, which allows majority foreign ownership specifically for companies promoted under the BOI. Nevertheless, the Foreign Business Certificate only allows the company to engage in the specific promoted business. If the company wishes to engage in an additional business that is restricted under the Foreign Business Act, but which is not promoted under the BOI, then the foreign company must find another exemption in the law in order to engage in the business lawfully. One example is the retail business which is restricted to foreigners investing less than 100 million baht, but which is not promoted under the BOI.

If a foreign company wishes to engage in the retail business without a Foreign Business License and already has a registered capital of 12 million baht, does it have to invest an additional 100 million baht so that the total capitalization is 112 million baht or can it invest an additional 88 million baht, so that the total capitalization is 100 million baht?

The facts are that the foreign company is registered in Thailand with majority foreign ownership. The company is promoted under the BOI for engaging in the business of engineering services, not including architecture or civil engineering. The company is also engages in business activities related to machinery and equipment. For example, the company engages in importing for the purposes of wholesale, as well as services related to training, installation, maintenance, repair, and calibration. The company wishes to expand its business activities into retail.

The answer here is that as long as the actual amount of money that is invested to operate business in Thailand is at least 100 million baht, the foreign company can engage in the retail business alongside its promoted business activities under the BOI.

The principles of foreign business restrictions in Thailand are generally straightforward. Nevertheless, there are several different laws in Thailand that restrict foreign business and they interact with one another in complicated ways. As illustrated above, a company may be allowed majority foreign-ownership (by way of a Foreign Business Certificate) for engaging in certain promoted business under the BOI, while still requiring either a Foreign Business License or a different legal exemption for operating a separate restricted business. As it can be seen, retaining competent legal counsel is important for foreign investors in Thailand.

 

Category: Company Law, Thailand BOI