Capitalization for Foreign Business in Thailand
The Foreign Business Act of 1999 restricts and regulations foreign business activity in Thailand in order to protect Thai businesses and one of the ways it does so is through specifying rules regarding the capitalization of foreign businesses in Thailand. Notably, although retail is restricted under (14) of Annex 3 of the Foreign Business Act, that section also states that foreigners may operate retail businesses without having to apply for a Foreign Business License if the registered capital of the business is 100 million baht. However, a legal issue arises, where the foreign retail business also wishes to operate a service business as well, which is restricted according to (21) of Annex 3 of the Foreign Business Act. This situation is especially likely to occur if the foreign business wishes to also provide related services to customers shopping in their retail shop. The legal issue is whether the foreign retail business can use the 100 million baht capital to also operate the service business.
First of all, the Foreign Business Act defines the word “minimum capital” in Sections 4 and 14. In summary, the definition is that it refers to the actual amount of money remitted to Thailand by the foreign business in order to begin business operations. Furthermore, the precise definition varies depending on the type of business organization. For example, if the foreign business is a registered as a limited company in Thailand, then the word refers to its “registered capital.”
Furthermore, the actual amount of minimum capital required is divided into two further categories:
- Minimum capitalization in which the specific amount is defined according to Section 14 of the Foreign Business Act; and
- Minimum capitalization in which a specific amount is already defined for a particular business according to the categories listed in the Annexes to the Act.
The minimum capitalization of 100 million baht in order to operate a retail business is defined according to the Annexes to the Act, whereas the minimum capital required to operate a service business is defined according to Section 14. The requirements of each legal provision are separate and must be met separately. Therefore, a foreign retail business cannot use its 100 million baht registered capital meant to operate the retail business in order to satisfy its requirements to operate the service business.
Foreign business restrictions in Thailand are complex. Foreigners interested in doing business in Thailand are advised to consult with competent Thailand Lawyer.
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