A Thai work permit is a legal document allowing foreign nationals to work legally in Thailand. Governed by the Foreign Employment Act B.E. 2521 (1978), the process involves strict compliance with regulations to ensure eligibility. Employers and employees must work together to complete the application process effectively.

1. Who Requires a Work Permit?

• Foreign Nationals Employed in Thailand:
  • Required for any paid or unpaid work, including volunteer activities.
• Exemptions:
  • Diplomatic personnel, certain BOI-promoted executives, and individuals working under bilateral agreements.

2. Eligibility Criteria

2.1 Employer Requirements

1. Registered Thai Company:
   • Must have at least 2 million THB in capital per foreign employee.
2. Employment Ratio:
   • One foreign worker for every four Thai employees.

2.2 Employee Requirements

1. Valid Non-Immigrant Visa:
   • The employee must hold a Non-Immigrant “B” Visa before applying.
2. Educational and Skill Qualifications:
   • Proof of qualifications matching the job description.
3. Prohibited Occupations:
   • Foreigners are restricted from working in certain sectors deemed critical to Thai nationals, such as farming, retail, and certain trades.

3. Application Process

Step 1: Obtain a Non-Immigrant “B” Visa

• Apply at a Thai embassy or consulate abroad with supporting documents, including an invitation letter from the employer.

Step 2: Submit Work Permit Application

• Submit the application to the Department of Employment or through a One-Stop Service Center for expedited processing.

Required Documents:

• From the Employee:
  • Passport and valid visa.
  • Education certificates and work experience letters.
  • Medical certificate issued within 30 days.
• From the Employer:
  • Company registration documents and tax certificates.
  • Employment contract and job description.

Step 3: Application Review

• Authorities review the application to ensure compliance with regulations. Processing time ranges from 7 to 15 business days.

Step 4: Work Permit Collection

• Once approved, the employee collects the work permit and must keep it at their place of employment.

4. Validity and Renewal

• Initial Validity:
  • Work permits are generally issued for 1 year or the length of the employment contract, whichever is shorter.
• Renewal:
  • Renewed annually by submitting updated documents and ensuring continued compliance with eligibility criteria.

5. Responsibilities of Work Permit Holders

1. Work Scope:
   • Perform only the job specified in the work permit.
2. Work Location:
   • Must work at the location stated in the permit unless modifications are approved.
3. Permit Updates:
   • Notify authorities of any changes to job title, employer, or location.

6. Penalties for Non-Compliance

1. Working Without a Permit:
   • Fines up to 100,000 THB and potential imprisonment.
2. Employer Non-Compliance:
   • Companies employing foreigners illegally face fines and business restrictions.
3. Permit Misuse:
   • Engaging in activities outside the work permit scope can result in revocation and penalties.

7. Work Permit Exemptions

1. BOI-Promoted Companies:
   • Employees of Board of Investment (BOI)-endorsed companies often benefit from simplified application processes.
2. Short-Term Assignments:
   • Certain short-term activities may qualify for a work permit exemption under bilateral or multilateral agreements.

Conclusion

The Thai work permit application process is a vital step for legal employment in Thailand. Both employers and employees must navigate regulatory requirements carefully to avoid penalties and ensure compliance. Engaging with experienced legal professionals can streamline the process and provide peace of mind.

The Foreign Business Act (FBA), established in 1999, regulates foreign business activities in Thailand. Designed to protect Thai industries, the FBA limits foreign ownership and controls the operations of foreign companies within specific sectors. For foreign investors, the FBA sets clear restrictions on direct ownership, especially in industries deemed critical to the country’s economy, culture, or security. Compliance with the FBA is essential for foreign entities seeking long-term operations in Thailand.

1. Key Objectives of the Foreign Business Act

The FBA's primary objectives include:

• Protecting Domestic Industries: The Act restricts foreign participation in sectors where Thai businesses are critical to national identity or the economy.
• Encouraging Thai Partnerships: The FBA encourages foreign investors to collaborate with Thai entities, promoting technology and skills transfer.
• Regulating Foreign Investment: By limiting foreign ownership, the FBA allows the Thai government to regulate the scale and impact of foreign businesses.

These objectives ensure that foreign involvement aligns with Thailand’s economic development goals, while safeguarding local industries from excessive competition.

2. Categories of Restricted Business Activities

The FBA divides restricted business activities into three categories, each with specific limitations:

a) List 1: Prohibited Activities

List 1 includes sectors where foreign participation is entirely prohibited. These sectors are considered integral to Thailand’s cultural, social, and economic stability and include:

• Media and press
• Land ownership
• Rice farming
• Traditional arts and crafts

Foreign businesses cannot operate in these sectors under any circumstances, as they are reserved exclusively for Thai nationals.

b) List 2: Restricted Activities with Special Approval

List 2 includes sectors where foreign ownership is restricted but can be permitted with approval from the Thai Cabinet and relevant ministries. These sectors often involve national interests, including:

• Domestic transportation
• Mining
• Infrastructure development
• Trade in Thai antiquities

Foreign investors in List 2 sectors must partner with a Thai entity or seek special government approval, typically requiring majority Thai ownership.

c) List 3: Restricted Activities with Ministry Approval

List 3 sectors are open to foreign investors but require permission from the Department of Business Development (DBD) under the Ministry of Commerce. Examples include:

• Construction services
• Brokerage services
• Restaurant businesses
• Advertising services

Foreign businesses can operate in List 3 sectors with a Foreign Business License (FBL) if they meet the criteria and receive approval from the Ministry of Commerce.

3. Obtaining a Foreign Business License (FBL)

Foreign investors seeking to operate in List 2 or List 3 sectors must apply for an FBL. The process involves several steps:

a) Application Preparation

Applicants must provide detailed documents, including:

• Company Registration: Details about the business, shareholders, and directors.
• Financial Statements: Proof of financial stability and sources of investment.
• Business Plan: An outline of business operations, expected economic contributions, and local employment impact.

b) Submission and Review

Applications are submitted to the DBD. For List 2 activities, Cabinet approval is required, making the process lengthier. For List 3 activities, the Ministry of Commerce conducts a review to assess the investment’s benefit to Thailand.

c) Approval Process

Approval can take between 60-90 days or longer, depending on the sector and complexity of the business activities. Upon approval, foreign companies can operate legally, provided they comply with ongoing FBA requirements.

4. Incentives and Exemptions for Foreign Companies

While the FBA imposes restrictions, certain incentives and exemptions allow greater flexibility:

• Board of Investment (BOI) Promotion: BOI-approved projects in priority industries (e.g., renewable energy, manufacturing) can receive incentives like 100% foreign ownership, tax exemptions, and relaxed regulations.
• U.S.-Thailand Treaty of Amity: Under this treaty, American companies can own up to 100% in many sectors typically restricted to foreigners, though some sectors remain off-limits.

These incentives support foreign investment in industries that align with Thailand’s economic goals while safeguarding sensitive sectors.

5. Compliance and Reporting Requirements

Foreign companies operating under the FBA must meet specific compliance obligations:

• Financial and Shareholder Reporting: Annual filings must detail financial status, ownership, and shareholder structure.
• Capital Requirements: Foreign companies must maintain minimum capital requirements, typically THB 2 million for service businesses or higher for restricted sectors.
• Employment Ratios: FBA regulations may impose Thai-to-foreign employee ratios, especially for work permit issuance, to prioritize local employment.

Failure to comply with these requirements may lead to penalties, suspension of business licenses, or even revocation of the FBL.

6. Challenges and Considerations for Foreign Investors

Operating under the FBA requires careful consideration:

• Ownership Restrictions: Foreigners must often limit ownership to 49%, requiring collaboration with Thai partners.
• Bureaucratic Processes: Navigating approvals for FBLs and BOI incentives can be time-intensive and requires thorough documentation.
• Regulatory Changes: The Thai government may periodically review the FBA, and amendments could impact foreign business operations.

Foreign companies should work closely with local legal advisors to ensure compliance and understand the nuances of Thai business regulations.

Conclusion

Thailand’s Foreign Business Act sets a structured framework for foreign businesses operating in the country, balancing investment opportunities with national interests. For foreign investors, understanding the FBA’s structure, restrictions, and licensing process is crucial for long-term success. By navigating the FBA strategically and exploring available exemptions, foreign businesses can leverage Thailand’s economic potential while adhering to its regulatory standards.

Mergers & Acquisitions in Thailand. Thailand has emerged as a key player in Southeast Asia's mergers and acquisitions (M&A) market. This article explores the recent trends, legal framework, and common deal structures for M&A activity in Thailand.

A Shifting Landscape

Thailand's M&A landscape has undergone significant transformations in recent years. Here's a glimpse into the trends:

• Pre-COVID boom: Favorable economic conditions fueled a surge in M&A activity, particularly cross-border acquisitions. A weakened baht and low-interest rates incentivized Thai companies to seek growth and diversification overseas. The CP Group's acquisition of Tesco's Asian operations in 2020 stands as a prime example.
• COVID-induced slowdown: The pandemic brought a period of uncertainty, leading to a decline in M&A deals. However, the market has shown signs of a robust recovery.

Legal Framework

Thailand's M&A environment is governed by several key regulations:

• Trade Competition Act: This act regulates M&A activity to prevent monopolies and safeguard competition. The Trade Competition Commission oversees mergers and acquisitions that could potentially dominate a market.
• Foreign Business Laws: Foreign entities seeking to acquire Thai businesses may require approval from the Board of Investment.

Common Deal Structures

While mergers were traditionally not permitted, a 2023 amendment to the Thai Civil and Commercial Code introduced the concept of a legal "merger." Here are the common deal structures:

• Share Acquisition: This is the most prevalent structure, where a company acquires shares of another company. Tender offer regulations apply when acquiring significant stakes in publicly listed companies.
• Asset Acquisition: This involves purchasing the assets and liabilities of a specific business unit.
• Amalgamation: Two or more companies combine to form a new entity. This process can be complex and time-consuming compared to share acquisitions.

Looking Ahead

Thailand's M&A market presents exciting opportunities for domestic and foreign investors. As the economy continues to recover, we can expect to see increased M&A activity across various sectors. However, navigating the legal complexities and understanding the common deal structures are crucial for a successful M&A transaction in Thailand. Consulting with legal professionals specializing in Thai M&A is highly recommended.

Thailand Board of Investment helps foreign businesses establish their companies in Thailand and ensures that their activities and business practices will benefit the kingdom.

The process of the BOI application is quite strict in that it must comply precisely with the regulations and the requirements of the application because its focus is on providing new technology and benefits to Thailand through foreign investors.

The Board of Investment Law is a promotional policy created by the Thai government in 1954 upon the announcement of its Industrial Promotion Act.

The government began actively promoting and subsidising incentives for foreign businesses willing to open and operate in the Kingdom of Thailand.

The BOI law is still enforced today, and through it, the government guarantees to neither interfere with nor nationalise foreign businesses. It is interesting to note that the Kingdom of Thailand was the first country in this region to have such an investment law.

The objectives of BOI Thailand

The BOI has three key roles to play:

• Promoting investment opportunities in Thailand and foreign countries
• Developing and innovating technology in the country
• Increasing the economic growth of the country

The Board of Investment operates directly under the office of the Prime Minister.

What is a BOI Company?

A BOI Company is a company that is a foreign investment company that has been certified by the Thailand BOI, a government body whose aim is to encourage foreign investment in Thailand.

Your business can enjoy a range of benefits by being certified by the BOI. There are many many advantages of setting up your BOI company in Thailand. Among these are significant tax waivers, multiple work permits, reduced processing times for work permits, and the ability to own land even if your company is majority-owned by non-Thai nationals.

What are the benefits of a BOI Company?

BOI companies can enjoy specific tax and non-tax incentives. These incentives may be specifically attractive to foreign investors, without which they may be subject to stringent rules and regulations in conducting their business in Thailand.

Tax Incentives

A BOI certified company may be eligible for an exemption of Corporate Income Tax for a period of up to 8 years. They may also qualify for an exemption from or reduction of import duties for raw materials, as well as a tax decrease on the payable dividends to shareholders.

Further tax incentives may include deductions on the company’s transportation, electricity and water usage, and the installation costs of the project’s infrastructure. Summarised below:

• Corporate income tax exceptions
• Reductions of import duties on machinery and raw material
• Tariff exemptions
• Double exemptions on the costs of water supply, electricity and transportation
• 25% exemption on the cost of construction of facilities

Non-Tax incentives

Non-Tax privileges allow a BOI promoted company to hire foreign skilled workers and experts instead of the non-BOI policy of hiring four Thai employees for every one foreign employee.

The BOI also provides an express procedure through its One-Stop visa process for both non-immigrant visas and work permits. These non-tax incentives also allow 100% foreign ownership of the BOI company and the option for the foreign company to own land in the Kingdom.

• Exemptions on ownership of companies by foreign investors
• Exemptions from standard visa rules
• Permission to bring skilled foreign workers and experts to work
• Permission to own a land
• Permission to remit foreign currency abroad

How do I apply for a BOI company in Thailand?

Should you wish to register your company for BOI, the following steps will be necessary to complete. These steps have been summarised, but you will access all the details once you begin the process.

1. Do a feasibility study.

• You will need a legal entity to study your BOI project idea and present it before government officials who will provide relevant insight on the project and whether or not it will be successful.
• This allows for any changes to be made before submitting your application.

2. The BOI application

• After receiving your revised BOI plan and strategy, lawyers will prepare your application form with the required documents (based on your business) attached.
• The application forms and attached documents will be submitted to the relevant government officials. They will monitor the progress of and assist us in meeting each requirement at every stage of the application.

3. Approval by the Board

• Once your application has been submitted to and received by the BOI, you will receive a written notice after seven working days as to whether your application has been approved or not.
• The board will inform you of the specific benefits assigned concerning your BOI project if your application is successful.
• After this, you will be required to submit a separate application form to issue your company’s BOI promotion certification. Once you have received the approval receipt from BOI Thailand, you will be required to complete and submit all necessary details within thirty working days.

Registering a BOI Thailand Company

After a successful BOI application, and if you wish to receive your BOI promotion certification, you must set up the Thai company within six months after being approved. At this time, you must submit the following documents:

• Your BOI promotion certification application form
• The company registration certificate
• The memorandum of association
• List of shareholders
• Certification includes the registered capital, the authorised directors' names and addresses, and the registered physical company address.
• An investment certificate from the Bank of Thailand or receipts of funds transfers from foreign countries.
• A technology transfer agreement
• A franchise agreement
• A JV contract
• A form that includes all your human resource requirements

How do I know if my company is BOI eligible?

To apply for your BOI promotion certification, you need to ensure that your company meets the following criteria:

1. Your company possesses a capital investment of a minimum of 1,000,000 Thai Baht
2. Your company has a minimum of 3 registered shareholders
3. Your company must be registered in Thailand
4. Your company must be in one of the eligible industries (listed below)

Eligible BOI company industries

1. Agriculture & Agricultural products
2. Mining, Ceramics & Basic metals
3. Light industry
4. Metal products, Machinery & Transport equipment
5. Electronic industry & Electrical appliances
6. Chemicals, Paper & Plastics
7. Services & Public utilities
8. Technology & Innovation development

As a foreigner to Thailand, whether you currently own a company and would like to set up a subsidiary, or whether you would like to start a new company - you will need to be aware of all the Thai subsidiary laws. You will also need to decide which business structures best suit your company and commit the necessary time and money for the whole incorporation process.

The first thing you’ll need to know in setting up a company in Thailand is that there are several specific business factors. The Foreign Business Act has placed several restrictions on foreigners and has defined several industries requiring individual permissions.

There are seven business types available for new companies or those looking to incorporate. These types of business structures are partnerships, limited companies, joint ventures, representative offices, branch offices, and international headquarters.

We will give more detail on the four main types below. Each business type has advantages and disadvantages unique to them. However, most businesses are opened as limited companies.

Thailand business structure types

A Partnership

The Kingdom of Thailand has three general types of partnerships: Unregistered Ordinary Partnerships, Registered Ordinary Partnerships, and Limited Partnerships.

Limited Companies

There are two types of limited companies in Thailand, namely Private Limited or Closely Held Companies, and Public companies. The first type of company is governed by the Civil and Commercial Code, while the Public Company Act governs the Public companies.

Private Limited Companies

Private Limited Companies in Thailand have some basic characteristics similar to foreign corporations. Private Limited Companies are formed through a process leading to the registration of a Memorandum of Association (Articles of Incorporation) and also Articles of Association (By-Laws). These are the constitutive documents of the company.

Private Limited Companies need a minimum of 3 shareholders at all times and are allowed to be entirely foreign-owned. It is worth noting that in those activities reserved for Thai nationals, a foreigner’s participation is generally only allowed up to a maximum of 49%.

Public Limited Companies

Public Limited Companies that are registered in Thailand (subject to their compliance with the prospectus, approval, and other requirements) may offer shares, debentures, and warrants to the public and may also apply to have their securities listed on the SET (Stock Exchange of Thailand).

Public Limited Companies need to have a minimum of fifteen promoters to form and register the Memorandum of Association. These shareholders must have held their shares for a minimum of 2 years before these can be transferred.

The Board of Directors of Public Limited Companies must be made up of a minimum of 5 members, of which at least half of them are Thai nationals.

A Joint Venture

A Joint Venture business can generally be described as a group of people (natural and/or juristic) that enter into an agreement to carry out business together. This type of business has not yet been recognised as a legal entity under the Civil and Commercial Code.

It is important to note that any income derived from the Joint Venture is subject to corporate taxation under the Revenue Code, as it classifies it as a single entity.

A Representative Office

A Representative Office is only permitted to engage in non-profit activities. In order to form such a company, at least one of the following purposes would need to be sought, for the purposes of “non-trading” activities:

• The company sources goods or services in Thailand for their overseas headquarters
• The company checks the quality and quantity of the product/s order by the overseas headquarters
• The company advises their head office on the sale of goods to agents and consumers
• The company supplies information on products from headquarters sold to Thai customers
• The company reports all economic movement in Thailand to their headquarters

Forming a company in Thailand

Step 1: Corporate name reservation

The name of the company you wish to register in Thailand may not be the same nor similar to that of existing companies. There are also specific names that are not permitted. Therefore, to be approved, the name reservation guidelines of the Department of Business Development of the Ministry of Commerce must be observed.

Should your chosen company name be approved, it is valid for a period of thirty days.

Step 2: Filing the Memorandum of Association

A Memorandum of Association bearing the successfully reserved company name must be filed with the Department of Business Development within the thirty-day validity period.

The memorandum must also include the province where the company will be located, the company’s business objectives, the capital to be registered, and the names and information of all the promoters.

A compulsory requirement is that the capital information includes the number of shares and par value. At the company formation step, the authorised capital (even if only partly paid) must all be issued.

Even though there are no minimum capital requirements, it is advisable that the capital amount should be reasonable enough and adequate for the intended company operations.

Step 3: Hold a Statutory Meeting

Once you have defined the share structure, a statutory meeting must be held; during which the following must take place:

• The Articles of Incorporation and Bylaws are approved
• The Board of Directors is elected
• An Auditor is appointed
• A minimum of 25% of the par value of each subscribed share must be paid.

Register a Thai company

Step 1: Registration

Once you have successfully formed your company, you will need to register it at the Department of Business Development. This is typically done between 1-3 days, case dependent. The registration timeline varies depending on several factors, namely:

• The types of business activity the company will conduct
• The cooperation of the promoters in complying with the required documentation
• The availability of the directors to sign the company documents

Step 2: Tax Registration

All companies liable for income tax must obtain a Tax I.D Card from the Revenue Department. If the company’s gross income in the same fiscal year is 1.8 million Baht) or more, the business is generally required to be in the Thai VAT system.

Specifically, Section 1206 of the Civil and Commercial Code provides rules that the accounts should be maintained as follows:

The company is obliged to timeously file financial statements and VAT reports with the Revenue Department.

Conclusion

Because of the presence of sufficient infrastructure and an efficient government-backed workforce, Thailand's economic growth and progress are continuous.

Suppose you would like to start your own company in the Kingdom of Thailand. In that case, you should acquire legal assistance to deal with the complex legalities of establishing a corporate entity under Thai law.