Foreign Business Licenses and Certain Foreign Entities
Foreign business licenses are no longer required for certain non-trading foreign entities in Thailand, allowing for easier establishment of representative and regional offices.
A major goal of the Thai government is to raise Thailand’s rankings in the World Bank’s ease of doing business report (“Doing Business 2018”). While Thailand’s ranking did go from 48 to 26 in the most recent report, there are still many improvements being planned and implemented to further raise the Kingdom’s attractiveness for foreign investment.
While trying to encourage foreign investment into Thailand, the Thai government, as is the practice in many other countries, has legislation in place to protect local businesses. The idea is to give advantage where local industry may not yet be able to compete on equal terms with their foreign counterparts.
Foreign Business Licenses and “Other Business Services”
Among the regulations controlling foreign businesses in Thailand, the Foreign Business Act contains a list of certain business activities that requires a foreign business license. On this list includes a catchall phrase: “other business services”. Until recently, any majority-foreign-owned entity in Thailand conducting “business services” needed a foreign business license, including representative and regional offices.
Clarification on Foreign Business License Requirements
However, foreign entities registered in Thailand as representative or regional offices by law cannot derive income from their activities in the country. They can only provide ancillary support to or investigate investment opportunities for their overseas headquarters. So, technically, they are not competing with Thai entities. This requirement created additional obstacles in time and red tape for foreign investors seeking to develop business in Thailand before establishing revenue-generating operations here.
In June 2017, the Ministry of Commerce issued a Ministerial Notification (link to Thai document) that clarified which business activities did not require a foreign business license. This includes the activities of foreign representative and regional offices. With this, opening a representative or regional office in Thailand is now easier and takes less time than before.
Representative Offices / Regional Offices Have Limited Functions
Nevertheless, these entities must still be registered and are restricted to non-revenue generating activities including marketing, sourcing, customer service and liaising for their overseas headquarters and operations. Any direct sales to or financial transactions with or regarding local Thai business is strictly prohibited.
If you are interested in investing in Thailand and wish to discuss your options, please contact GPS Legal & Consulting:
4/F Srisothorn Place
47 Sukhumvit Soi 23
Wattana, Bangkok 10110
+66 (2) 258 4275