Foreign Business Act
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:
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:
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.
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.
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:
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.
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