Thailand to exempt services provided to affiliates from foreign business restrictions

published on June 12, 2019 | reading time approx. 3 minutes

On 14 May 2019 Thailand’s Cabinet approved the exemption of three categories of service business from foreign business license requirements. Previously the Thai Ministry of Commerce (MOC) had reviewed the businesses listed in the third schedule to the Foreign Business Act B.E. 2542 (1999) (FBA).

Generally, foreign direct investment in Thailand is governed by the FBA, which defines a foreigner as

a person who is not a Thai national,
a juristic person registered under foreign laws or
a juristic person registered under Thai law with 50 percent or more foreign shareholding.

Foreigners doing business in Thailand must comply with FBA requirements. Under the third schedule to the law, foreigners are permitted to engage in listed businesses if they have obtained a license from the Director-General of the Department of Business Development, through the approval of the Foreign Business Committee.

The aim of the MOC review was to exclude certain services provided to affiliated/group companies from the FBA's scope of application in the light that that these service business activities, when provided solely to affiliates and group companies, have little impact on Thai businesses and their ability to compete with foreigners.

The following service activities provided to affiliated/group companies will be excluded from Schedule Three (21) of the FBA:

Lending money to affiliated and group companies in Thailand;
renting out office space including public utilities to affiliated and group companies; and
providing consultation and recommendation to affiliated/group companies in the fields of

management,
marketing,
human resources and
information technology.

The relaxation shall enhance efficiency and service standards by reducing operation costs and facilitating inter-company services among group companies. It should be noted, however, that lending money to affiliated/group companies located outside of Thailand and provision of guarantee are not specifically mentioned among the excluded activities. Hence, foreign majority-owned companies wishing to operate these businesses will still need to obtain a foreign business license according to the FBA.

Upon issuance of the respective ministerial regulation by the MOC, a foreign business license to operate the aforementioned back office activities will no longer be required.