Foreign Business Act in Thailand: Rules, Restrictions, and Opportunities

A stack of colorful shipping containers at a port, symbolizing international trade and business regulations, with a blurred yellow container in the foreground. The image represents the impact of the Foreign Business Act in Thailand on foreign trade and investment.

Understanding the Foreign Business Act, an unavoidable act for foreign businesses

The Foreign Business Act B.E. 2542 (FBA), which the Thai legislature enacted in 1999, regulates foreign involvement in Thai enterprises. It establishes guidelines for international participation in economic activities, confirming some sectors remain under Thai control. The Act plays a pivotal role in shaping the investment climate and balancing commercial openness with national priorities.

Thailand, as a rapidly modernising economy, has long attracted substantial foreign capital. However, the government introduced limits on foreign ownership in strategic sectors in response to concerns over economic sovereignty, national security, and fair competition. Through the Foreign Business Act, Thailand protects local enterprises, ensures that Thai nationals retain control over key industries, and prevents foreign dominance.

At its core, the FBA reflects Thailand’s policy of preserving economic autonomy while still welcoming foreign direct investment in sectors that contribute to national development.

The FBA classifies businesses into three types: those expressly forbidden to outsiders, those requiring exceptional permission, and those permitted with conditions. The Department of Business Development (DBD) under the Ministry of Commerce enforces the Act, and violations may result in severe penalties, like fines and incarceration.
 The main goals of this legislation are:

  • Preserving national sovereignty by restricting foreign control over industries vital to Thailand’s economy and security.
  • Maintaining economic stability by preventing foreign monopolization of key sectors.
  • Ensuring fair competition by providing a level playing field for Thai-owned businesses.
  • Regulating foreign participation through a licensing system for restricted business activities.

At Benoit & Partners, we advise foreign investors on compliance with Thailand’s Foreign Business Act. Our team provides legal guidance on restricted business activities, foreign ownership limits, licensing requirements, and enforcement by the Department of Business Development. We assist clients in structuring investments, obtaining approvals, and mitigating regulatory risks to ensure lawful and sustainable business operations in Thailand.

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Table of Contents

How the Foreign Business Act Limits the foreign participations in Thai Businesses

Key Restrictions under the FBA

The Foreign Business Act imposes strict conditions on foreign participation in Thai businesses and limits foreign access to more than fifty restricted business sectors. Under the Act, the law classifies a company as foreign if foreign individuals or foreign entities hold at least fifty percent of its shares. The law bases this classification solely on share ownership, not on actual management or control.

Foreign companies that wish to operate in restricted sectors must obtain a Foreign Business License. In practice, many foreign investors attempt to bypass these restrictions by establishing companies in which Thai nationals hold the majority of shares while foreign parties retain practical control. Investors often achieve this structure through preference shares, weighted voting rights, or contractual arrangements.

However, the Foreign Business Act expressly prohibits the use of nominee shareholders. A nominee shareholder refers to a Thai individual who holds shares on behalf of a foreign person or entity without genuine ownership or independent decision-making authority. The law treats such arrangements as violations and subjects all involved parties to severe penalties.

The Definition of a Foreign Business Under the Foreign Business Act

Determining who qualifies as a foreigner under the Foreign Business Act is essential for investors planning to enter the Thai market. Section 4 of the FBA defines a foreigner in four distinct ways. First, the law considers any natural person without Thai nationality a foreigner. Second, it classifies any company registered outside Thailand as foreign. Third, it treats a juristic person registered in Thailand as foreign when foreign nationals or foreign entities hold at least fifty percent of its shares. Fourth, the law also regards a Thai-registered company as foreign when foreigners exercise control over its management.

The Foreign Business Act restricts foreign ownership in regulated industries to no more than 49.99 percent, unless the company obtains a Foreign Business License or receives promotion from the Board of Investment. When foreign shareholders hold less than fifty percent of the shares, the law classifies the company as Thai and exempts it from the Act’s restrictions.

The three list of Restricted Business Activities under the FBA

The FBA classifies restricted sectors into three categories:

  • List 1: Includes industries that are completely prohibited for foreigners due to national security or cultural importance (e.g., media, agriculture, land trading).
  • List 2: Allows foreign companies to operate in industries affecting security, resources, or Thai tradition only with Cabinet approval, such as domestic transport and mining.
  • List 3: Encompasses industries where Thai businesses are not yet ready to compete with foreign enterprises such as legal services, accounting, and advertising.

Foreigners can engage in these activities by obtaining a Foreign Business License from the Department of Business Development.

Main prohibitions under the Foreign Business Act

The Foreign Business Act imposes strict prohibitions and penalties to deter non-compliance. One of the Act’s core prohibitions targets nominee shareholding arrangements. When a Thai national holds shares on behalf of a foreign investor without genuine ownership or real decision-making power, the arrangement violates the Act because it circumvents statutory foreign ownership restrictions. Authorities actively monitor corporate structures for indicators of nominee arrangements, particularly when Thai shareholders lack genuine financial contributions or when financial arrangements appear disproportionate to their shareholdings.

Rather than relying on nominees, foreign investors should structure their investments through lawful mechanisms such as preference shares with enhanced voting rights or joint ventures with genuine Thai partners. These structures permit foreign participation while maintaining compliance with Thai law.

The Foreign Business Act also establishes a formal appeals procedure under Section 20. A foreign entity whose license application is denied may submit an appeal to the Ministry of Commerce. Once the Minister issues a decision, the ruling binds the parties and the parties cannot challenge it further.

The Act imposes severe penalties for violations, as Sections 34 to 38 set out. Authorities may impose imprisonment of up to three years for operating without permission, fines ranging from 100,000 to 1,000,000 baht, daily fines of up to 50,000 baht for continuing violations, and court-ordered closure of the business.

In addition, Section 36 specifically criminalizes nominee shareholding arrangements. The law penalizes both the foreign investor and the Thai nominee and authorizes sanctions that include business closure, deportation, fines of up to one million baht per day, and imprisonment of up to three years.

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The Foreign Business License

Foreign companies can function in prohibited sectors with a Foreign Business License, allowing flexibility in working around the FBA’s restrictions.
Gaining a Foreign Business License from the Department of Business Development under the Ministry of Commerce represents a pivotal step for foreign entities hoping to operate in restricted sectors covered by the Foreign Business Act. Issuance demands meeting several criteria and submitting specific documents:

  • Eligibility Check: the process starts with validating eligibility by checking if a planned venture falls under List 2 or List 3 of the Foreign Business Act
  • Application Submission: Applicants submit applications to the Department of Business Development (DBD) under the Ministry of Commerce. It must include a comprehensive business strategy outlining the nature and extent of operations, monetary statements and evidence of registered capital, with a lowest threshold of THB 3 million. Additionally, details demonstrating benefits to Thailand through means such as knowledge sharing, job generation, or contributions to domestic markets have to be included.
  • Approval Process: the list 2 activities require Cabinet approval. The review process involves consultations with relevant ministries to evaluate whether the proposed business aligns with national security and economic objectives. However, the list 3 activities require approval from the Foreign Business Committee (FBC). The FBC evaluates the potential economic impact and ensures the business’s adherence to local laws.
  • Capital requirement: The minimum registered capital for most ventures is THB 3 million, though higher floors may apply for certain industries. Large-scale initiatives frequently have capital demands surpassing THB 100 million.
  • Timeline Considerations: Authorities typically review submissions for two to four months, although intricate schemes may prolong examination. Candidates must stand prepared to furnish supplementary filings if necessary.

Conclusion

Thailand offers significant opportunities for foreign investors, but it enforces strict regulatory controls through the Foreign Business Act. Although the Act restricts many business activities, foreign companies can still operate lawfully by obtaining a Foreign Business License or by structuring their corporate presence in full compliance with Thai law. Foreign businesses must understand the Act’s key mechanisms, including ownership thresholds, restricted sectors, and licensing requirements, to navigate the Thai regulatory environment effectively. Working with legal professionals who specialise in Thai corporate law helps investors structure compliant operations, streamline approval procedures, and reduce the legal risks associated with non-compliance.

If you need further information, you may schedule an appointment with one of our lawyers.

The Foreign Business Act B.E. 2542 (1999) regulates foreign participation in Thai businesses. Its purpose is to balance foreign investment with the protection of national sovereignty, economic stability, and fair competition, while ensuring Thai nationals retain control over key industries.

Under the FBA, a business is considered foreign if:

  • It is owned by a non-Thai individual,

  • It is registered outside Thailand,

  • At least 50% of its shares are held by foreign individuals or entities, or

  • It is a Thai-registered company controlled by foreigners in management.

In restricted sectors, foreign ownership is generally limited to 49.99% unless the company obtains a Foreign Business License (FBL) or receives promotion from the Board of Investment (BOI). Companies with foreign ownership below 50% are typically treated as Thai entities.

The FBA categorizes restricted activities into three lists:

  • List 1: Completely prohibited to foreigners (e.g. media, agriculture, land trading).

  • List 2: Allowed only with Cabinet approval (e.g. domestic transport, mining).

  • List 3: Businesses where Thai companies are not yet competitive (e.g. legal, accounting, advertising), permitted with a Foreign Business License.

A Foreign Business License allows foreign companies to legally operate in restricted sectors under List 2 or List 3. It is issued by the Department of Business Development (DBD) under the Ministry of Commerce and is subject to strict conditions and ongoing compliance obligations.

The application process includes:

  • Verifying eligibility under List 2 or List 3,

  • Submitting a detailed business plan, financial statements, and proof of minimum registered capital (usually THB 3 million),

  • Demonstrating benefits to Thailand such as job creation or knowledge transfer,

  • Undergoing approval by the Cabinet (List 2) or the Foreign Business Committee (List 3).

No. Nominee shareholding—where Thai nationals hold shares on behalf of foreigners without genuine ownership—is strictly prohibited. Authorities actively investigate such arrangements, and violations result in severe criminal penalties for both foreign investors and Thai nominees.