Types of Foreign Business Authorization
A common source of confusion for foreign entrepreneurs in Thailand is the difference between a Foreign Business License and a Foreign Business Certificate. Both documents are a form of authorization for foreigners to engage in any business that are restricted under the Foreign Business Act of 1999, but which to apply is completely different situations. Generally speaking, the Foreign Business License is an authorization whereby a foreigner is granted permission to operate a restricted business on the basis that the proposed business will grant benefits to the Thai society and economy. On the other hand, the Foreign Business Certificate is an “automatic” authorization whereby a foreigner is granted permission to operate a restricted business on the basis of either an international treaty or after having received promotion from the Board of Investment of Thailand (BOI). A few other salient points about the two forms of foreign business authorization as follows:
- Both forms of authorization are subject to the same minimum capitalization requirements under the Foreign Business Act. This requirement is a minimum of two million baht per each unrestricted business activity and three million baht per each restricted business activity. However, there are differences if the Foreign Business Certificate is issued on the basis of BOI promotion, whereby more specific minimum capitalization requirements may apply (such as a 500 million baht minimum investment for the hotel business). Furthermore, businesses registered under a treaty, such as the Thai-U.S. Amity Treaty may be subject to specific rules regarding transfer of the minimum capital from overseas.
- According to Section 13 of the Foreign Business Act, neither a Foreign Business License or a Foreign Business Certificate may be granted where a more specific law regulates foreign investment in certain industries. For example, the Tourism Business and Tour Guide Act of 2008 prohibits foreign investment in the tourism business.
- The most preferable type of authorization that may be obtained is the Foreign Business Certificate issued on the basis of an international treaty according to Section 11 of the Foreign Business Act. This category allows a foreigner to be granted a Foreign Business Certificate simply based on the grounds that the foreigner is a national of a party to a treaty to which Thailand is bound. At this time, Thailand is a party to several treaties granting foreigners the right to operate in restricted businesses, but only the Thai-U.S. Amity Treaty is being actively enforced by the Department of Business Development.
Operating business in Thailand as a majority foreign-owned venture is quite a complicated matter subject to a myriad of complex rules and regulations. It is advised that foreign entrepreneurs consult with competent legal counsel before investing in Thailand.
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