Joint Venture in Thailand: Legal Structures, BOI Incentives, and Key Compliance Rules for Foreign Investors

Two business partners shaking hands after signing a joint venture agreement in Thailand.

Understanding joint ventures under Thai Law

Joint ventures play a central role in Thailand’s legal and investment environment, providing foreign investors with a practical means to meet local requirements and achieve strategic business goals.

Thailand has emerged as a leading destination for international investment in Southeast Asia. Due to strict legal requirements on foreign participation, joint ventures are often used to combine foreign expertise with local presence and ensure compliance.

The Foreign Business Act B.E. 2542 (1999) unambiguously restricts foreign ownership in key sectors. The Civil and Commercial Code rigorously governs company formation and management, while the Board of Investment (BOI) bestows significant promotional privileges on investors who fulfill statutory criteria.

This article outlines the key legal frameworks governing joint ventures in Thailand and explains the structure of the analysis that follows.

Table of Contents

Definition of a Joint Venture in Thailand

A joint venture in Thailand is a business arrangement between two or more parties, often including both Thai and foreign entities, formed to achieve a shared commercial goal. There are two main types: Incorporated joint ventures (IJVs), which create a separate legal entity, and Unincorporated joint ventures (UJVs), which operate solely through a contract without forming a new entity. Incorporated joint ventures, usually structured as limited companies, are preferred for cross-border investments due to their limited liability and distinct legal status. Unincorporated joint ventures , by contrast, are governed only by contract, do not have separate legal personality, and expose participants to unlimited liability. Unincorporated joint ventures are typically used for short-term projects or when parties wish to avoid forming a new company. In practice, most foreign investors choose the Incorporated joint venture model for its legal protections and operational benefits.

Joint Venture Establishment Process under Thai Law

Incorporated joint venture in Thailand

Selection of Structure : The parties (foreign and/or Thai) agree to establish a new legal entity.

Joint Venture Agreement (JVA) : Before incorporation, the partners execute a Joint Venture Agreement (JVA) specifying the purpose, capital contributions, and shareholding ratios. The Joint Venture Agreement governs how shareholders interact beyond the requirements of company law.

Company Incorporation : The parties register the joint venture in Thailand company with the Department of Business Development (DBD) under the Ministry of Commerce, reserving the company name and filing the Memorandum of Association (MOA) as required.

Capital Contribution and Shareholding : The parties typically execute a Shareholders’ Agreement (SHA) to regulate how they manage the company each day. Each partner subscribes to and pays for shares according to the agreed ratio.

Board and Management Structure : The partners appoint directors according to the Joint Venture Agreement and Articles of Association. They balance decision-making rights, requiring joint consent for some matters. The Incorporated joint venture in Thailand operates independently, maintains its own accounts, and employs staff.

Liability and Legal Standing : As an independent legal entity, the Incorporated joint ventures confines its liabilities to its assets alone. Shareholders’ exposure is strictly limited to their capital contributions,delivering critical legal and financial protections.

Unincorporated Joint Venture in Thailand

Joint Venture Agreement (JVA) : The parties form the Unincorporated joint venture (UJV) through a joint venture contract. This legally binding agreement governs their relationship.

No Separate Legal Entity : Because the parties do not form a new company, they do not register the Unincorporated joint venture with the Department of Business Development (DBD). Each party retains its legal status and acts individually or jointly as specified in the contract.

Allocation of Roles and Contributions : The contract specifies how each party contributes capital, technology, expertise, personnel, or equipment. It also outlines each party’s responsibilities for executing the joint activity.

Management and Decision-Making : The parties may establish a joint management committee to oversee the project, but ultimate authority is determined by the contract rather than corporate governance rules.

Tax and Accounting Treatment : For tax purposes, the Revenue Department may recognize a Unincorporated joint venture as a separate taxable unit, particularly in large infrastructure or construction projects.

Liability and Legal Standing : Each party assumes both individual and joint liability for obligations arising from the joint venture.

Termination and Exit : The Unincorporated joint venture ends when its purpose is fulfilled or when the contractual term expires.

Foreign Ownership Restrictions under the Foreign Business Act

The Foreign Business Act (FBA) is the central statute governing foreign participation in Thai enterprises. It defines a foreign company as one in which foreign persons or entities hold more than fifty percent of the shares. Under this framework, foreign ownership is prohibited or restricted in certain sectors considered sensitive for national interests, such as services, retail, land ownership, or professional activities.

Parties in a joint venture in Thailand often use it to access restricted sectors by partnering with Thai shareholders. However, Section 36 of the Foreign Business Act expressly prohibits nominee structures. Thai authorities, particularly the Department of Business Development (DBD) and the Ministry of Commerce, actively monitor shareholding structures to ensure genuine, not merely apparent, shared control.

In some cases, foreign investors may apply for a Foreign Business Licence (FBL) to operate beyond the usual 49% ownership limit. Alternatively, if the joint venture qualifies for Board of Investment promotion, the company may receive explicit authorisation to hold up to 100% foreign ownership in approved sectors.

Act BOI Incentives for joint venture in Thailand

The Board of Investment (BOI) serves as Thailand’s main investment promotion agency. It encourages foreign capital, technology transfer, and employment through a range of fiscal and non-fiscal incentives. A BOI-promoted joint venture may benefit from several advantages, including temporary exemption from corporate income tax for up to eight years, import duty reductions on machinery, the ability to own land for promoted activities, and facilitated visa and work permit procedures for foreign experts.

To be eligible, the joint venture in Thailand must operate within a sector that the government has designated as a priority industry—such as digital technology, advanced manufacturing, research and development, renewable energy, or logistics. The joint venture submits a detailed investment plan outlining capital, expected employment, and contribution to the Thai economy. Once approved, the company receives a BOI Certificate, specifying the scope of activities, duration of benefits, and compliance conditions.

BOI promotion may significantly alter the ownership structure of a joint venture in Thailand, enabling foreign shareholders to hold a controlling interest in sectors otherwise restricted by the Foreign Business Act.

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Key clauses to insert in the Shareholders Agreements

  1. Purpose and Scope of the Joint Venture

Define the business objectives, scope of operations, and main activities of the joint venture in Thailand.

  1. Capital Structure and Shareholding
  • The authorized and issued capital of the company.
  • The shareholding ratio of each partner (Thai and foreign).
  • The method and timing of capital contributions (cash, assets, or technology).
  • Restrictions under the Foreign Business Act if applicable.
  1. Governance and Board Composition

Regulate the board of directors’ structure, including:

  • The number of directors and the appointment rights of each shareholder.
  • Quorum and voting requirements at board meetings.
  • Reserved matters that require unanimous or special approval (e.g., major expenditures, share issuance, amendments to Articles, borrowing, or new business lines).
  1. Voting Rights and Decision-Making

Specify the voting thresholds for shareholder meetings (ordinary vs. special resolutions). Clarify which decisions require majority, supermajority, or unanimous consent. These provisions protect minority shareholders and promote balanced control within the joint venture in Thailand.

  1. Management and Operations
  • Appointment and powers of the Managing Director or General Manager.
  • Financial and operational authority limits.
  • Approval process for budgets, contracts, and hiring key personnel.
  1. Profit Distribution and Dividends

Specify the formula and timing for profit distribution, typically in proportion to shareholding. Include rules on dividend retention, reinvestment, and accounting standards (Thai GAAP).

  1. Funding and Additional Capital

Regulate how the company will raise future funds:

  • Conditions for capital increases or shareholder loans.
  • Whether shareholders must contribute pro rata to maintain their percentage.
  • Consequences for non-contributing shareholders (e.g., dilution).
  1. Transfer of Shares and Pre-emption Rights

Include strict transfer restrictions:

  • Prohibition on share transfers without prior approval.
  • Right of first refusal (ROFR) or pre-emption rights for existing shareholders.
  • Tag-along and drag-along rights to ensure fair exit opportunities.
  1. Confidentiality and Non-Compete

Impose obligations on shareholders to:

  • Keep company information confidential.
  • Refrain from engaging in competing businesses during and after the joint venture period.
  1. Deadlock Resolution

Provide a mechanism to resolve deadlocks in management or voting, such as:

  • Escalation to senior executives.
  • Mediation or arbitration.
  • Buy-sell (“shotgun”) provisions if the dispute remains unresolved.
  1. Dispute Resolution and Governing Law

State the governing law (commonly Thai law) and the dispute resolution method (e.g., arbitration under TAI or SIAC, or Thai courts). Specify jurisdiction and language for legal proceedings.

  1. Term, Termination, and Exit
  • The duration of the joint venture.
  • Events triggering termination (e.g., insolvency, breach, mutual consent).
  • Procedures for share buyout or liquidation upon termination.
  1. Representations, Warranties, and Covenants

Each party warrants that it has:

  • The legal capacity and authority to enter into the agreement.
  • Provided accurate information and fulfilled compliance requirements (FBA, BOI, DBD filings, etc.).

Registration, Compliance, and Reporting Obligations

The incorporation of a joint venture company in Thailand requires registration with the Department of Business Development (DBD). Companies are also required to file their corporate income tax returns with the Revenue Department, comply with Value added tax registration obligations where applicable, and adhere to the Labor Protection Act regarding employee relations. 

For BOI-promoted joint ventures, periodic progress reports and compliance filings are mandatory to maintain promotional privileges. Failure to meet these requirements may result in administrative sanctions, financial penalties, or revocation of BOI benefits.

Taxation Rules Applicable to Joint Ventures

In Thailand, the tax obligations of a joint venture depend fundamentally on whether it is structured as an Incorporated joint venture (IJV) or an Unincorporated joint venture (UJV). 

An incorporated joint venture, established as a separate legal entity—typically a private limited company under the Civil and Commercial Code—is treated as a juristic person for tax purposes and is therefore subject to corporate income tax (CIT) at the standard rate of 20% on its net profits. Such a company must register with the Revenue Department, maintain proper accounting records in accordance with Thai GAAP, file annual tax returns (PND 50), and comply with withholding tax, Value added tax, and specific business tax obligations, as applicable to its business activities. Dividends distributed to shareholders are subject to withholding tax (commonly 10%) and may benefit from exemptions or credits under double taxation treaties. 

Conversely, an unincorporated joint venture, though lacking separate legal personality, is often treated by the Revenue Department as a “taxable unit” when it engages in business operations such as construction, engineering, or large-scale projects. In such cases, the Unincorporated joint venture must obtain a tax identification number, register for Value added tax if applicable, and file its own corporate income tax returns, while each venturer remains liable for its proportionate share of income and expenses. Where the Unincorporated joint venture is not recognized as a taxable unit, taxation is assessed directly at the partner level, with each party declaring its share of profits or losses in its own tax filings. Thus, while both structures may give rise to equivalent economic taxation, the incorporated model centralizes compliance within the entity, whereas the unincorporated model imposes shared or individual tax responsibility depending on the Revenue Department’s classification of the arrangement.

Risks, Liabilities, and Common Legal Pitfalls

Although joint ventures in Thailand offer significant advantages, they also present legal risks. The use of nominee shareholders to bypass foreign ownership restrictions remains a concern. Imbalanced voting rights can also leave foreign partners without effective control. Failure to comply with the company’s registered objectives may result in the BOI withdrawing its approval. Comprehensive due diligence, transparent structuring, and ongoing legal supervision are necessary to mitigate these risks.

The Role of Legal Counsel in Structuring a Joint Venture

Legal counsel is integral at every stage of a joint venture in Thailand. In the preliminary phase, legal professionals conduct due diligence on the Thai partner to assess reputation, financial stability, and compliance history.

After the company becomes operational, legal advisers ensure ongoing compliance with accounting, labor, and tax regulations and monitor adherence to Board of Investment (BOI) conditions.

Conclusion

Establishing a joint venture in Thailand offers foreign investors an effective means to enter the Thai market. This structure enables the sharing of expertise, access to local networks, and the opportunity to benefit from fiscal incentives under the Board of Investment (BOI) framework. Achieving success requires strict legal compliance, comprehensive contractual documentation, and transparent governance.

Foreign investors should approach joint ventures as structured partnerships based on trust, clarity, and adherence to Thai law. A compliant joint venture provides legal protection, long-term stability, and credibility within Thailand’s economic environment.

FAQ

A contractual joint venture is purely an agreement without legal personality, while an equity joint venture is a registered company offering limited liability to shareholders.

Yes. If the company is BOI-promoted or holds a Foreign Business Licence, 100% foreign ownership may be authorised in certain sectors.

Corporate income tax is levied at 20% on profits, and dividends paid abroad are subject to a 10% withholding tax, unless reduced by a DTA.

The key documents are the Joint Venture Agreement, the Shareholders’ Agreement, and the company registration filings with the  Department of Business Development.

It is not mandatory, but highly recommended. Legal counsel ensures full compliance with Thai corporate and foreign business regulations and prevents invalid or risky structures.