Foreign Business Act in Thailand
The Foreign Business Act of 1999 limits the industries that foreign owned businesses can operate in. Foreign businesses are defined as juristic entities incorporated overseas, Thai companies with 50% or more foreign ownership, and partnerships managed by foreigners. Most U.S. owned businesses are not subject to the Foreign Business Act if registered under the U.S. Thailand Amity Treaty.
The Foreign business act establishes three lists of businesses. List 1 industries are completely off limits to foreign businesses. List 2 and 3 industries are open to foreigners with special approval. Foreign businesses who wish to engage in list 2 or list 3 activities should apply for Bureau of Investment promotion. Foreign owned but BOI promoted businesses are automatically granted a business licence.
List of Industries Completely Prohibited to Foreign Owned Businesses
- Newspapers, television, and radio
- Rice farming
- Animal farming
- Forestry (except tree farming)
- Fishing (except fish farming)
- Trading in Thai antiques
- Manufacturing Buddha images and alms bowls
- Land ownership and trading
Industries Not Exempted by US - Thailand Treaty of Amity
The US - Thailand Amity Treaty exempts registered US owned businesses from the regulations imposed by the Foreign Business Act. US businesses operating in the following industries, which are not covered by the Amity Treaty, are subject to the Foreign Business Act.
- Land Ownership
- Inland Transport
- Inland Communication
- Natural Resource Exploitation
- Commercial Banking
- Services Involving a Fiduciary Duty
Thailand's 3 Investment Zones
The BOI has divided Thailand into three zones. Zone 1 includes areas with the best infrastructure and highest level of development. Zone 3 areas are the least developed, and zone 2 is somewhere in the middle.Zone 1
Generally, business in zone 1 receive a 50% import duty reduction on machinery when the duty is 10% or greater. Businesses also receive a one year import duty exemption for raw materials used in export products. Finally, businesses enjoy a 3 year corporate income tax holiday.
Zone 1 includes Bangkok, Samut Prakan, Samut Sakhon, Pathum Thani, Nonthaburi, and Nakhon Pathom. More information about Industrial Estates in Zone 1 is available at https://www.boi.go.th/index.php?page=where_to_invest.Zone 2
Zone 2 businesses also receive a 50% import duty reduction on machinery when the duty is 10% or greater. Businesses receive a one year import duty exemption for raw materials used in export products. Zone 2 businesses enjoy a 3 year corporate income tax holiday extendable to seven years if a 10 million THB investment is made.
Zone 2 includes Samsut Songkhram, Ratchaburi, Kanchanaburi, Suphanburi, Ang Thong, Ayutthaya, Saraburi, Nakhon Nayok, Chachoengsao, Chon Buri, Rayong, and Phuket. More information about Industrial Estates in Zone 2 is available at https://www.boi.go.th/index.php?page=where_to_invest.Zone 3
The remaining provinces make up zone 3, the zone with the greatest investment incentives. All import duties on equipment are eliminated. The corporate income tax holiday lasts for 7 years, or 8 years if the investment is 10 million THB or greater. Some projects in zone 3 are eligible for additional incentives, including deductions for infrastructure improvements and tax holiday extensions. More information about Industrial Estates in Zone 2 is available at https://www.boi.go.th/index.php?page=where_to_invest.