Open a business in Koh Samui: the legal framework every foreign investor must understand before starting a business

Key legal considerations before opening a business in Koh Samui 

Opening a business in Koh Samui requires more than identifying a market opportunity or securing premises. For foreign investors, a project’s success and sustainability depend on legal feasibility, regulatory compliance, and structural integrity under Thai law. Many projects fail not due to economic weakness but because investors overlook legal constraints at the planning stage.

Before selecting a location, leasing premises, or hiring staff, foreign investors must first determine whether their intended activity is legally permissible. They must also understand under which conditions it can be carried out and which regulatory framework applies. Investors often underestimate this legal analysis, but it is crucial. Thai authorities focus on substance over form, examining actual operations, management controls, funding mechanisms, and day-to-day decision-making, not just registration documents.

Even a company validly incorporated under Thai law can be deemed illegal if its structure violates the Foreign Business Act, sector-specific regulations, or immigration rules. In Koh Samui, enforcement has become stricter, especially in sectors such as tourism, hospitality, real estate services, wellness, and consulting.

Key preliminary legal questions before launching a business 

Before any operational step is taken, a foreign investor must address a series of core legal questions:

• Is the intended business activity restricted or prohibited under the Foreign Business Act B.E. 2542 (1999)?
• Can the activity be lawfully conducted through a Thai company with foreign participation, and under what ownership limits?
• Does the activity require a specific professional, sectoral, or local license?
• Are foreign directors legally allowed to manage the business on-site?
• Which visa and work permit structure is compatible with the actual role of the foreign investor?
• Does the business model expose the investor to nominee or control-related risks?

Failure to resolve these issues at the outset often results in forced restructurings, suspension of operations, license withdrawal, or criminal exposure, particularly in Koh Samui, where inspections are frequent and coordinated across agencies.

How can a foreigner legally create a business in Koh Samui? 

The most commonly used legal vehicle for operating a business in Koh Samui is the Thai private limited company, governed by the Thai Civil and Commercial Code (CCC). This structure is well understood by Thai authorities, banks, landlords, suppliers, and employees, and it provides limited liability protection for shareholders.

To be validly incorporated, a Thai private limited company must have at least two shareholders, at least one director, registered capital that matches the nature and scale of the activity, a registered office address in Thailand, and company objectives that accurately describe the intended operations.

Although the incorporation process is mostly procedural, registering a company does not automatically grant the right to operate a business. The legality of actual operations depends on strict compliance with other applicable legal frameworks, especially the Foreign Business Act and sector-specific licensing regulations. Any inconsistency between the company’s registered structure and its real activities may render the business unlawful, even if the company has been properly incorporated.

Foreign ownership limits under the Foreign Business Act 

The Foreign Business Act B.E. 2542 (1999) is the cornerstone of Thai law governing foreign participation in business activities. Under the Act, a company is considered “foreign” when foreigners hold 50% or more of the shares, or when they exercise control directly or indirectly through voting rights, preferential shares, shareholder agreements, or any other contractual or structural arrangements that confer effective control over the company.

The Act divides restricted activities into three lists:

List 1 – Absolutely prohibited activities

These include activities related to national culture, agriculture, forestry, land trading, and media. Foreign participation is strictly prohibited.

List 2 – Activities affecting national security or strategic interests

These require Cabinet approval, which is rarely granted in practice.

List 3 – Activities reserved for Thai nationals

List 3 is the most relevant for Koh Samui. It includes many service-based activities commonly carried out on the island, such as:

• Consulting and advisory services
• Property management and real estate services
• Tourism-related services
• Certain retail and service businesses

Operating a List 3 activity with majority foreign ownership requires a Foreign Business License (FBL), issued at the discretion of the Ministry of Commerce. In practice, FBLs are rarely granted unless the project demonstrates exceptional economic benefit, technology transfer, or alignment with public policy objectives.

Thai shareholders, nominee risks, and enforcement in Koh Samui 

In practice, foreign investors often rely on Thai shareholders to comply with ownership limits. However, Thai law strictly prohibits nominee arrangements where Thai shareholders hold shares on behalf of foreigners without genuine economic participation or risk.

When authorities assess the existence of a nominee structure, they focus on factual elements rather than formal documentation. These include the source of funds used to subscribe to the share capital, shareholder loan arrangements, allocation of voting rights or veto powers, dividend distribution patterns, and, most importantly, who exercises actual decision-making authority and day-to-day operational control.

Under the Foreign Business Act and the Thai Criminal Code, nominee arrangements expose both foreign investors and Thai participants to serious criminal sanctions, including fines, imprisonment, forced dissolution of the company, and asset seizure. In Koh Samui, enforcement actions against nominee structures have increased significantly, especially in sectors like hospitality, villa rental management, tourism services, and real estate-related businesses, which are closely monitored by local authorities.

What licenses and permits are required to operate a business in Koh Samui? 

Licensing as a core compliance requirement

Licensing is one of the most common areas of non-compliance. Many businesses operate illegally, not because of ownership issues, but because they lack the correct operating license, even though the company itself is validly incorporated.

Hospitality and accommodation licenses

Operating a hotel, resort, or short-term accommodation generally requires a Hotel License under the Hotel Act B.E. 2547 (2004). A common misconception is that small villas are exempt from this requirement or that having fewer rooms exempts them from licensing obligations. In practice, authorities interpret these exemptions very narrowly, and many villa rental operations in Koh Samui are therefore operating unlawfully and are exposed to enforcement action.

Food and beverage licenses

Wellness, spa, and medical services

Spas, massage businesses, clinics, and wellness centres are subject to specific regulations under Thai health and professional laws. Licensing requirements depend on the nature of the services offered, the qualifications of the personnel, and the compliance of the premises with health and safety standards.

Tourism-related licenses

Tour operators and travel agencies must obtain a Tourism Business License from the Tourism Authority of Thailand (TAT). Inspections in Koh Samui are frequent and coordinated with immigration and labour authorities.