John P. Formichella

Naytiwut Jamallsawat

According to Thailand Foreign Business Act B.E. 2542 (FBA), there are 3 types of business activities that govern foreign participation in Thai commerce:

List 1: Business Not Permitted to Foreigners

List 2: Business Permitted to Foreigners under Conditions

List 3: Business Not Yet Permitted to Foreigners

Lists 1, 2, or 3 of the Foreign Business Act in Thailand essentially cover nearly all economic sectors with a few exceptions.

However, a recent Ministerial Regulation, issued on 13 June 2019, will open up certain types of services from foreign operators to its affiliates, which means that a Foreign Business License will not be required for a registered Thai company having majority foreign ownership.

Service businesses providing services to affiliates that do not require a Foreign Business License are as follows:

  1. Providing Domestic Loan Services
  2. Leasing Office Space with Utilities
  3. Consulting Services in the following:
  4. Administration
  5. Marketing
  6. Human Resources, or,
  7. Information Technology

Juristic persons with the following characteristics are regarded as “affiliates”:

  1. juristic persons that have shareholder(s)/partner(s) who constitute more than half of the total number of shareholder(s)/partner(s) of each company transacting business together;
  2. juristic persons that have shareholder(s)/partner(s) who own 25% or more of the share capital of one juristic person (Company A) and also own 25% or more of the share capital of another juristic person (Company B) with which Company B is transacting business with Company A;
  3. a juristic person that owns 25% or more of the share capital of another juristic person (again, assuming the juristic persons are engaging in a transaction with each other); or
  4. juristic persons that have the same director(s)/partner(s) (who constitute a majority) with managerial authority. This would imply such persons have authorized director status under a Company Affidavit (for each company interacting in a transaction).

The regulation is relatively new and it remains to be seen as to how it will be administered by the relevant authority but it is to be expected that some creative structuring will result.

This article is for information purposes only and should not be relied upon as legal advice. For more information, please contact John P. Formichella at john@brslawyers.com

Posted by John P. Formichella

John P. Formichella is a US trained attorney and a leading expert in the Tech-Media-Telecoms (TMT) sector in East and Southeast Asia. He has 23 years’ sophisticated technology transaction experience (5 in Taiwan, 18 in Thailand), covering technology development and licensing projects, data privacy issues, infrastructure and business process outsourcings, systems integrations, ERP implementations, cloud computing and web hosting arrangements, data center and co-location agreements, and telecommunications procurements. John represents some of the largest software and telecommunications companies in the US, Europe and Japan with regard to their affairs in Thailand. His jurisdiction experience covers Thailand, Taiwan, India, Vietnam, Hong Kong and Laos, and his practice areas include corporate, regulatory compliance, labour & employment and energy. John has practiced with the firm for the past 14 years. Prior to joining BRS, he was an attorney at Minter Ellison practicing out of the firm’s Bangkok offices in its Corporate practice group. Prior to joining Minter Ellison, he was Vice President/General Counsel of Wherever.net Holding Corporation (a NASDAQ-listed telecoms company based in Hong Kong). Prior to joining Wherever.net, he was an associate for East West International Law Offices in Taipei, Taiwan from 1996 to 1999. John graduated from the State University of New York (University of Buffalo) earning Bachelor of Arts and Master of Arts (Economics) degrees, and a Juris Doctorate. He also studied at the Chulalongkorn University Faculty of Law in Bangkok. John is admitted to practice law in Washington, D.C. and is a member of the District of Columbia Bar Association. He has served as Chairman of the Information & Communications Technology Committee at the American Chamber of Commerce in Thailand since January 2013. He is also the exclusive member for TMT and Corporate Law in Thailand of IR GLOBAL, which is ranked by Chambers & Partners in its global-wide list of “Leading Law Firm Networks” and listed by The Legal 500. He has been ranked in Chambers & Partners’ Asia-Pacific client guide since 2014 and in The Legal 500 Asia-Pacific client guide since 2013. He is also recognized as an expert in Telecommunications Law by Who’s Who Legal. John’s publications include the Comparative Law Yearbook of International Business (Vol. 40A), a Special Issue examining recent developments in regulatory compliance and their impact on business operations in select jurisdictions, to which John contributed a chapter on Thailand, and Getting the Deal Through: Telecoms & Media (2017-19), a key legal industry publication that provides a comprehensive overview of the regulatory environment of the telecoms & media sectors in the world’s major jurisdictions. John was pleased to contribute as jurisdiction author for Thailand.

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