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Why is Thailand’s Factory Act essential for international investors?
In Thailand, the industrial sector plays a central role in the country’s economic growth and attractiveness for foreign direct investment. The Factory Act in Thailand, or Factory Act B.E. 2535 (1992), is the main legal basis for establishing, operating and controlling industrial activities in Thailand. This law was enacted to replace previous regulations from 1969, 1975 and 1979. The main objective of this text is to balance industrial development with environmental protection, public safety and social order.
It is therefore important for any foreign investor wishing to set up or acquire a factory in Thailand to be familiar with the legislation in force, as this will enable them to obtain a licence, comply with the law and be informed of the penalties incurred in the event of non-compliance.
It is important for foreigners to check whether it is possible to set up a factory with the Board of Investment (BOI) in order to benefit from various advantages.
At Benoit & Partners, we advise foreign investors on compliance with Thailand’s Factory Act. Our team assists with factory licensing, regulatory approvals, environmental and safety requirements, and operational compliance under Thai industrial law. We also advise on Board of Investment (BOI) eligibility and incentives, helping clients establish or acquire factories in Thailand while minimizing legal risks and ensuring full regulatory compliance.
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Table of Contents
What is a factory according to the Thailand Factory Act?
What is the legal definition of a factory?
Thai law explicitly prohibits the use of nominee shareholders to conceal foreign ownership. Section 36 of the Foreign Business Act imposes strict penalties on both foreign investors and Thai individuals or entities who hold shares on their behalf. These provisions uphold transparency and prevent investors from deliberately evading the legal restrictions imposed by the Act.
What activities are covered by the Thailand Factory Act?
The law covers all industrial activities, including the packaging, processing, storage, and destruction of goods. State-controlled enterprises benefit from a limited exception. For reasons of national security, Section 4 partially exempts them, but they must still comply with comparable regulatory standards.
What are the different categories of factories covered by the Thailand Factory Act?
How does the law classify factories?
According to Section 7 of the Factory Act in Thailand, the law classifies factories into three categories.
Category 1 factories present a low level of risk. Operators may begin operations immediately after setting up the factory without filing any notification or requesting prior authorization. Nevertheless, operators must comply with all applicable technical, safety, and environmental standards.
Category 2 factories require operators to notify the competent authority before commencing operations. Although this requirement remains less demanding than applying for a licence, it enables authorities to maintain an official register of factories and to conduct basic oversight of their activities.
Category 3 factories involve activities that pose significant risks to public safety, public health, or the environment. Operators must obtain a licence before starting operations. Authorities grant this licence only after applying specific regulatory requirements and conducting a detailed assessment of the proposed industrial project.
Authorities determine the applicable category by assessing factors such as the level of risk involved, the potential environmental impact, and the degree of administrative control required.
What obligations arise from each category?
Category 1 factories may begin operations without prior notification or authorisation, which makes them the simplest facilities to operate. Operators must nevertheless comply strictly with the technical, environmental, and safety standards set out in ministerial regulations and Section 10 of the Factory Act in Thailand. The law imposes no administrative formalities at this stage, which allows operators to commission these low-impact factories quickly.
Category 2 factories fall under a higher level of regulatory control. Under Article 11, the operator must notify the competent authority of the factory’s opening before commencing operations. A designated official registers the notification and issues an acknowledgement of receipt. If the submission contains missing documents or errors, the operator must correct them within seven days. The operator must also notify the authority of any transfer of ownership or closure of the factory.
Category 3 factories are subject to the strictest regulatory regime. Article 12 requires the operator to obtain a licence before starting operations. The licensing authority conducts a detailed review of the application based on the criteria set out in Articles 8 and 32. These criteria include environmental impact, facility safety, machinery compliance, and adherence to local regulatory standards.
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What rules apply to the installation and operation of a factory?
What are the steps for obtaining a Category 3 licence?
To set up a Category 3 factory, you must submit an application to the competent authority, the ‘license grantor’. The application must contain all the information required by Article 8, including environmental, technical and safety requirements. If some information is still missing, the competent authority may still issue a provisional certificate.
What happens after the licence is obtained?
As soon as the licence is issued, the operator must notify the administration of the actual start of operations, 15 days before they begin (Article 13).
In addition, they are required to notify the administration of any testing periods for the machinery, including the planned date and duration.
In accordance with Article 14 of the Factory Act in Thailand, the licence remains valid for five years from the date the factory commences operations. It may be renewed provided that all regulatory criteria are met.
This renewal application must be submitted before the licence expires and, if it is submitted within 60 days of the expiry date, industrial activity may continue, but the operator will be required to pay a penalty of 20% of the renewal fees.
Submitting an application after this deadline requires the operator to submit a new licence application.
How does factory supervision work under the Thailand Factory Act?
What are the powers of the administrative authority?
Section 35 of the Act grants designated officials sufficiently broad powers of inspection, including access to premises, seizure of documents and questioning. In the event of non-compliance, they may order corrections (Section 37) or suspend operations (Section 39). In the most serious cases, the Ministry may even order the permanent closure of the factory.
What are the rights of operators in the event of a dispute?
Section 41 provides that any order of suspension or closure may be challenged before the Minister within 30 days.
It should be noted, however, that the appeal does not have suspensive effect, unless the Minister decides otherwise.
What are the obligations in the event of changes or transfer of the factory?
Can a factory be moved or enlarged?
It is possible to expand or relocate a factory, but only with prior authorisation. Article 18 requires an application for extension for any significant modification to the structure or power of the machinery.
If the operator wishes to make minor increases, they must still notify the authorities within seven days (Article 19).
What should be done in the event of the sale or death of the operator?
In the event of a sale, the operator has seven days to notify the transfer of the factory (Article 21).
In the event of death, the heirs have 90 days to request the transfer of the licence (Article 22).
What penalties are provided for under the Factory Act in Thailand?
Which offences are punishable by criminal penalties?
An operator may be subject to criminal penalties if they do not have a licence (Section 50), if they have expanded without authorisation (Section 52) or if they have refused to comply with a suspension order (Section 55). In such cases, the operator faces a penalty of up to two years’ imprisonment and a fine of THB 200,000.
In addition, Articles 48 to 54 provide for other offences punishable by fines, such as failure to notify or report accidents.
Who is criminally liable?
According to Section 63 of the Factory Act in Thailand, company directors are held criminally liable in the same way as the legal entity.
Conclusion
The Factory Act in Thailand is an essential legal basis for any industrial company operating in Thailand. This law and its text ensure entrepreneurial freedom while channelling it through a strict administrative framework. It is therefore essential for all foreign investors in Thailand to fully understand the obligations set out in Articles 7 to 63, to plan all administrative procedures in advance and to adopt an optimal compliance strategy. To avoid any complications, consulting a law firm with a permanent presence in Thailand will enable you to secure the formalities, operations and implementation of your industry in the country.
If you need further information, you may schedule an appointment with one of our lawyers.
FAQ
The Factory Act is the core legal framework governing the establishment, operation, expansion, and supervision of factories in Thailand. For foreign investors, it determines:
Whether a licence is required
Which authority supervises the factory
What environmental, safety, and technical standards apply
What penalties apply for non-compliance
Understanding the Act helps investors avoid delays, fines, criminal liability, and operational shutdowns.
A factory is any place that:
Uses machinery with total power of at least 5 horsepower, or
Employs 7 or more workers
It covers manufacturing, assembly, repair, testing, storage, and even vehicles adapted for industrial use.
The Act applies to most industrial activities, including:
Manufacturing and processing
Packaging and storage
Testing and repair
Destruction of goods
State-owned enterprises are partially exempt but must still comply with similar safety and environmental standards.
Factories are classified into three categories based on risk, environmental impact, and level of administrative control.
Category 1 factories:
Pose low risk
Do not require notification or a licence
Can operate immediately after setup
However, they must fully comply with technical, safety, and environmental regulations.
Category 2 factories:
Require prior notification to the authorities before starting operations
Do not require a licence
Must report ownership changes or closure
Authorities may request corrections if documentation is incomplete.
Category 3 factories:
Pose significant risks to public health, safety, or the environment
Require a licence before operation
Are subject to strict supervision
These factories undergo detailed review of environmental, safety, and technical compliance.
The operator must:
Submit an application to the licence grantor
Provide technical, environmental, and safety documentation
Meet criteria under Articles 8 and 32
A provisional certificate may be issued if minor information is missing.
Once licensed, the operator must:
Notify authorities 15 days before starting operations
Inform authorities of machinery testing periods
Operate in compliance with licence conditions
Licences are valid for 5 years from the start of operations.
Renewal must be filed before expiry
Late filing (within 60 days) allows continued operation but triggers a 20% surcharge
Applications after 60 days require a new licence