Issues to Consider when a Private Company Applies for a Foreign Business License under List 3 of the Foreign Business Act (1999)
If an investor is considering having a private company in Thailand sell goods and services as listed under List 3 of the Foreign Business Act (FBA) and they desire for the Company to be majority foreign owned, then unless they obtain legal permission to do so through such legal means as the granting of BOI promotion privileges or protection under the Thai-US Treaty of Amity then they shall need to have the company apply for and obtain a Foreign Business License (FBL) from the Ministry of Commerce (MOC) in order to be permitted to carry out such activities. This article details the main parts which make up a FBL application as well as key challenges faced when applying for a FBL.
Information required to be submitted with FBL application.
1. A three (3) year Income and Expenses Plan for each Business Activity (under List 3 of the FBA) to be applied for under the FBL application. This plan will be used to determine the minimum amount of fully paid up registered capital which the applying company will need to have should the FBL be granted. Each approved activity requires a minimum of 3 million THB (calculated according to 25% of the average of the estimated three years of income & expenses plan) in fully paid-up capital but it can be more based on the information provided in the income and expenses plan. The content of this plan must also be consistent with the details in the other plans such as the technology transfer plan and staffing plan etc. The income & expenses plan must be set out in a prescribed form issued by the MOC and the figures provided in it must be realistic and able to be substantiated.
2. Technology Transfer Plan which details how the applicant will transfer technology to Thailand. This can be achieved in several ways such as conducting training seminars/workshops inside or outside Thailand on your Company’s foreign technology for your Company’s Thai staff. Generally speaking, to be granted an FBL, the applicant company must have high-technology goods or services under the applied for Activity. Hence this could pose a challenge to an applicant Company if it wishes to apply for a List 3 activity relating to goods or services which do not involve high technology.
3. An Employment Plan detailing the Thai and foreign staff to be employed by the applying company (under the applied for Business Activity) including their educational qualifications, nationality, salary and position.
4. Capital Structure – Details of the capital structure of the applying Company.
5. In case the applicant is a company which is already existing in Thailand and has another business, then the latest three years of financial statements must also be submitted to the MOC, it will review the audited financial statement and will recheck them with the estimated three years Income and Expenses Plan of the new business.
Challenges faced when submitting an FBL application:
Competing with Thai Businesses: When considering an application, the MOC will examine whether the granting of the FBL will adversely/ negatively impact on existing Thai businesses; thus if there are already Thai competitors in the Kingdom who are doing the same type of business activity then the MOC and the considering committees may not consider that it would be advantageous to allow the applying company to be granted a FBL.
Explaining benefit to Thailand: As part of the FBL application it is also necessary to explain the benefit that its granting for each applied for Business Activity will bring to Thailand, some examples include:
- Bringing products, services and technology to Thailand that are not currently available or otherwise providing them at a more reasonable price to Thai consumers;
- The applied for Activity will bring more foreign currency as current capital into Thailand;
- The activity will upgrade the quality of products/services (under the applied for Activity) to international standards for consumers in Thailand to take advantage of;
- The applied business Activity will employ many Thai employees;
- The applied for business activity will support the Thai economy in various ways, such as making it more competitive, etc.
The benefits to Thailand shall depend on the facts each case and the applied for List 3 business activity. The application shall also need to clarify the reason and necessity for requesting approval for a FBL for each applied for business activity.
Ongoing Compliance: If a FBL is granted then there is ongoing compliance for the company as the MOC will require the submission of an annual Technology Transfer Report showing that the company has transferred technology to Thailand in line with its Technology Transfer Plan (which forms part of the FBL application). This Report will need to contain evidence to prove that the plan was followed such as pictures of training of Thai staff taking place, training materials used at such training event, tickets showing Thai staff traveling overseas to undergo training etc.
Timing: The consideration period for an FBL application is sixty (60) days as specified under the FBA, however when taking into account timing for the application preparation and liaising with MOC officers before the FBL application can be formally submitted and the application fee paid, the whole process can take approximately 6 months (or possibly longer depending on various factors such as what other information the Registrar at the MOC may request from the applicant).
Should you require any legal support relating to applying for a Foreign Business License then please contact us at
Dharmniti Law Office Co., Ltd.
2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330.
Tel: (66) 2680 9777
Fax: (66) 2680 9711
Email: email@example.com or firstname.lastname@example.org