Foreign Business Act

Thailand’s Foreign Business Act (FBA) is the single most important statute to understand if you — or a client, partner or investor — plan to do business in Thailand with non-Thai ownership or control. It sets out where foreigners may and may not own or run businesses, creates licensing pathways and exceptions, and is now the subject of much closer enforcement (especially on nominee/shareholding arrangements). Below I explain how the FBA works in practice, the three “lists” of restricted activities, common legal workarounds (and their costs), enforcement risks and recent enforcement trends, and end with a practical compliance checklist for sponsors, counsel and deal teams.

Quick overview — purpose and scope

The FBA’s policy objective is to protect national security, public order and important sectors of the economy while still allowing productive foreign investment where Thailand benefits. The Act does this by classifying business activities into three Annex lists (List 1, List 2 and List 3) with progressively lighter restrictions; businesses not on any list are generally open to foreigners. The Department of Business Development (DBD), Ministry of Commerce, and other ministries administer licensing, while the Cabinet and Minister can amend lists by Royal Decree.

The three lists — what each means in practice

• List 1 — activities absolutely prohibited (no foreign control). These are sectors considered core to national interest (for example certain mass media and land trading historically). Foreign participation is effectively barred unless a specific law or treaty provides otherwise.

• List 2 — activities affecting national security, culture, natural resources, etc. Foreigners may be allowed to operate subject to permission from the Minister of Commerce (and often Cabinet); the government treats these as sensitive but sometimes negotiable with conditions.

• List 3 — activities where Thai nationals “are not ready to compete.” Foreigners can operate if they obtain a Foreign Business License (FBL) from the DBD, or satisfy capital/qualification thresholds set in the list (for example high minimum capital for trading activities), or obtain BOI promotion. In practice List 3 contains commercial services, distribution, and some professional service lines.

Understanding which list an activity sits in is the essential first step: it determines whether you need a permit, can lawfully take majority ownership, or must use alternative routes.

Who counts as a “foreigner” and what triggers the law

The FBA applies not only to natural persons who are non-Thai nationals, but also to companies and juristic persons that are foreign-controlled in substance — not just on paper. Recent enforcement and case law emphasise substance over form (who funds, controls and benefits from the enterprise), so mere paper shareholdings in Thai names (nominee arrangements) are highly risky. The law also treats entities effectively controlled by foreigners as subject to FBA licencing even if Thai nationals hold legal title.

Common legal routes to operate despite restrictions

If a business is in List 2/3 the main lawful pathways are:

1. Foreign Business License (FBL) — discretionary permission from the Minister of Commerce (DBD processes the application; Cabinet approval may be required for sensitive industries). FBLs carry conditions and are fact-sensitive.

2. Board of Investment (BOI) promotion / Foreign Business Certificate — BOI promotion frequently permits 100% foreign ownership for promoted industries and gives tax and non-tax incentives. This is a routine commercial route for manufacturing, certain services and tech projects.

3. Treaties & special laws — e.g., the U.S.–Thailand Treaty of Amity confers special rights to U.S. nationals/companies in many sectors (with notable exclusions). Other sectoral laws may create specific exceptions. Treaty reliance must be checked carefully in each case.

4. Capital thresholds & licensing carve-outs — for some List 3 activities the FBA sets a capital test (very high minimum registered capital) that, if met, allows 100% foreign ownership without an FBL. This is used, for example, in wholesale/retail carve-outs and requires robust capitalization and documentary proof.

Each route has trade-offs (time, political risk, job-creation conditions, local content/Thai director requirements). Structuring should combine legal and commercial analysis early.

The nominee problem — what to avoid

Using Thai nationals as “nominee” shareholders or directors to mask foreign control is expressly prohibited in practice and is now a main enforcement target. Authorities (DBD, DSI, police and prosecutors) have stepped up investigations, and courts and administrators will disregard sham arrangements by looking to the economic reality (funding, management control, benefit streams). Penalties can include criminal charges, fines, revocation of licences and dissolution of the company. Recent high-profile crackdowns make clear that nominee devices are no longer a tolerable risk.

Enforcement trends & recent policy movement (2024–2025)

• More active enforcement: Thai regulators have increased audits and criminal probes into nominee schemes and unauthorized foreign business operations — enforcement teams are coordinating across ministries. Expect deeper documentary and beneficial-owner scrutiny in company registrations and on license renewals.

• Regulatory review & possible liberalization: At the same time the government has signaled a review of FBA restrictions with a view to modernizing some list entries and clarifying capital thresholds — but any change that eases restrictions will be measured and sector-by-sector. Until changes become law, do not assume liberalization.

Practical structuring and compliance advice

1. Map the activity first. Before incorporation, run a formal FBA mapping: which List (if any) applies, what permits or capital tests, and which ministry needs to sign off. Don’t rely on generalizations.

2. Prefer BOI promotion where possible. For projects that qualify, BOI is a predictable route that also gives tax and work-permit advantages. Model the timelines and conditionality.

3. Avoid nominees — and document real control. If third-party Thai shareholders exist, document funding flows, decision-making, and implement corporate governance that reflects the real economic arrangements. Expect authorities to pierce veils on signal facts (finance, board decisions, profit flows).

4. Use corporate governance and transparency. Record board minutes, shareholder loans, bank traces and service contracts that prove the entity’s lawful structure; consider a formal shareholders’ agreement that reflects commercial economics and is lodged with legal advisers.

5. Plan for labour and tax consequences. FBA compliance affects work permits, VAT, customs and tax reporting. Cross-discipline planning reduces surprises late in a project.

Penalties and risks — what’s at stake

Operating a reserved activity without the required license, or using a nominee scheme, can lead to: criminal prosecution (imprisonment and fines), administrative revocation of business registrations and licences, forced divestment, and reputational damage that imperils customers, banks and partners. Recent cases show even long-standing businesses are not immune to retrospective enforcement. Treat FBA issues as high-impact legal risk.

Actionable checklist (for sponsors, corporate counsel and investors)

• Confirm whether your proposed activity sits on List 1/2/3 (get specialist counsel to review the exact activity wording).

• If List 2/3, select the best route (FBL vs BOI vs capital test vs treaty) and run a timeline and conditionality analysis.

• Perform beneficial-owner due diligence and document the commercial reality: bank evidence of funding, director role letters, service contracts, and shareholder agreements.

• Avoid nominee language in company documents; if Thai shareholders are present, ensure they are genuine economic stakeholders with documented consideration and real rights.

• Build a compliance pack (minutes, resolutions, bank traces, employment contracts) ready for agency review — this shortens approvals and demonstrates good faith.

Bottom line

The FBA remains a foundational, sometimes restrictive — but navigable — part of Thailand’s investment landscape. The two current imperatives for foreign investors are: (1) plan structure carefully (BOI, FBL, capital-test, treaty), and (2) avoid any nominee or façade arrangements — regulators are actively policing substance. With proper mapping, documentation and early regulatory engagement, most legitimate investments can proceed lawfully and successfully in Thailand.