Investing in Thailand: Foreign Investment Landscape and Incentives

1. Introduction

Thailand was one of the first countries to be severely affected by the COVID-19 outbreak, significantly disrupting its economic growth. Nevertheless, Thailand’s economy persevered and ranks among Asia’s top ten strongest economies, with a GDP growth of 3.2% in the fourth quarter of 2024[1]. Its strategic location, skilled workforce, and business-friendly policies have helped establish Thailand as a favored destination for foreign direct investment. The Thai government actively promotes foreign investment by offering a range of incentives across key industries. The Board of Investment of Thailand (BOI) provides one of the most beneficial promotional programs. However, despite the country’s generally welcoming approach, certain restrictions and procedural requirements must be considered before commencing the investment in Thailand, especially the restriction of foreign business operations under the Foreign Business Act B.E. 2542 (1992).

This article provides an overview of the legal framework and incentives surrounding foreign investment in Thailand, including:

Foreign Business Act B.E. 2542
Investment Promotion Act B.E. 2520 (1977) and
Other incentive schemes such as EEC, IEAT, and SEZs

2. Foreign Investment Framework under the Foreign Business Act B.E. 2542 (1992)

The Foreign Business Act B.E. 2542 (1992) (“FBA”) is the primary legislation regulating foreign ownership and business activities in Thailand. The FBA aims to reserve specific businesses for Thai nationals and establishes certain barriers to prevent foreigners from competing in sectors where Thai nationals are not yet prepared.

The FBA also defines what constitutes a “foreigner,” outlines restricted business sectors, sets minimum capital requirements, and stipulates the licensing or approval processes needed for participation in certain industries.

2.1 Definition of Foreigner

A foreigner under the FBA is prohibited from doing business in Thailand unless a certain approval or license is obtained. The word foreigner is clearly defined in Section 4 of the Act as follows:

(1) a natural person who is not a Thai national;

(2) a juristic person that is not registered in Thailand;

(3) a juristic person registered in Thailand that:
a. a foreign natural person, or a foreign juristic person, owns at least 50 percent of its shares.
b. Being a limited partnership or a registered ordinary partnership whose managing partner or manager is not a Thai national.

(4) A juristic person registered in Thailand that at least 50 percent of its shares are owned by the person under 1, 2, or 3.

Simply put, according to the FBA, a foreign natural person, a company registered outside of Thailand, or a company registered in Thailand in which foreigners hold 50 percent of its shares is deemed a foreigner.

2.2 Restricted Businesses under the FBA

Generally, certain businesses are prohibited for foreigners unless permission or a license is obtained. The FBA categorized these businesses into three categories (Lists) attached to the FBA. The list of restricted businesses is as follows:

List 1 concerns the businesses that are strictly prohibited from being conducted by foreigners, including:

(1) The Press, a radio broadcasting station, or a radio and television station business
(2) Rice farming, plantation, or crop growing
(3) Livestock farming
(4) Forestry and timber processing from a natural forest
(5) Fishery, only in respect of the catchment of aquatic animals in Thai waters and specific economic zones of Thailand
(6) Extraction of Thai medicinal herbs
(7) Trading and auction sale of antique objects of Thailand or objects of historical value of the country
(8) Making or casting Buddha Images and monk alms-bowls
(9) Land trading

Businesses in List 1 are strictly reserved for Thai nationals with no possible exemption. No permission or licenses will be granted to the businesses on this list.

List 2 includes the businesses related to national security, natural resources, art, culture, and tradition of Thailand, for example:

(1) Firearms, ammunition, gunpowder, explosives, and related businesses.
(2) Transportation businesses
(3) Trading of antiques, production of Thai musical instruments, goldware, silverware, businesses relating to Thai arts and cultures.
(4) Sugar production, salt production, mining, timber processing.

Businesses in List 2 can be conducted only with permission from the Minister of Commerce, with the approval of Thailand’s Cabinet. The consideration process is long and intensive.

List 3 includes businesses with which Thai nationals are unprepared to compete against foreigners. To conduct business on this list, permission from the Director-General of the Department of Business Development is required. Examples of businesses in List 3 include hatching and raising aquatic animals, professional services such as legal, engineering, architecture, or accounting services, construction, brokerage and agency, advertising, hotel businesses, retail with low capital, and other businesses. The businesses in List 3 are usually permitted to be conducted by obtaining a Foreign Business License, especially for List 3 item (21) Other service businesses, which is a catchall phrase including any service undertaken by a foreigner. Therefore, any service business provided by a foreigner needs to have a Foreign Business License under List 3 item (21).

2.3 Licensing and Approvals

Application Process

To obtain the Foreign Business License to conduct businesses under List 2 or List 3, the application must be prepared and submitted to the Foreign Business Management Department of the Department of Business Development.

For business activities categorized under List 2 of the Foreign Business Act, the Department of Business Development (DBD) will prepare an opinion for the Minister of Commerce. The Minister will then submit the application to the Cabinet for consideration. Once approved by the Cabinet, the DBD will notify the applicant of the decision and issue the Foreign Business License within 15 days from the date of approval.

For business activities listed under List 3, the DBD will compile and submit the application to the Subcommittee on Foreign Business Licensing and the Foreign Business Committee for review. If the committees approve the application, the DBD will notify the applicant and issue the license within 15 days of approval.

General Timeframe for Review

The review and approval process for List 2 and List 3 applications generally takes up to 60 days. The applicant may only commence business operations after the license has been granted.

Rejection and Appeals

If the license is denied, the DBD will inform the applicant of the decision within 15 days. The applicant may appeal the decision to the Minister of Commerce within 30 days of receiving the notice. There is no standard form for the appeal, but it must be submitted in writing to the DBD. The appeal process generally takes 30 days, and business operations may only begin once approval is obtained.

Government Fees

List 2 Businesses: The license fee is calculated at THB 10 per THB 1,000 of registered capital, with a minimum fee of THB 40,000 and a maximum of THB 500,000.
List 3 Businesses: The license fee is calculated at THB 5 per THB 1,000 of registered capital, with a minimum fee of THB 20,000 and a maximum of THB 250,000.

The authority shall consider the application and inform the applicant of the result within 60 days. During the consideration process, the officer may request additional documents or information. The foreigner can operate the business only after the approval is obtained.

2.4 Minimum Capital Requirement and Other Conditions

Minimum Capital

An FBL license holder is required to bring capital into Thailand, at a minimum of more than 25% of the 3-year average estimated expenses. For example, if the 3-year average estimated expenses are 50 million Baht, the minimum registered capital has to be 12.5 million Baht.

Please note that the foreigner who obtained permission from the Board of Investment Promotion (BOI) is not subject to the minimum capital requirement.

Other Conditions

In addition to the minimum capital requirement, the FBL license holder must comply with conditions such as maintaining capital during their business operations in Thailand. Additionally, they cannot borrow more than seven times their capital for business purposes, and at least one director must reside in Thailand.

3. Investment Promotion under the Investment Promotion Act B.E. 2520 (1977)

3.1 Role of the Board of Investment (BOI)

The BOI is Thailand’s principal government agency responsible for promoting investment across targeted industries. Governed by the Investment Promotion Act B.E. 2520 (1977) and operating under the Office of the Prime Minister, the BOI provides tax and non-tax incentives to qualified domestic and foreign investors. Its overarching goal is to support Thailand’s economic development strategy, particularly the “Thailand 4.0” initiative, which emphasizes innovation, digital transformation, and sustainability.

Key industries prioritized by the BOI include:

Advanced manufacturing and automation
Digital technology and software development
Electric vehicles (EVs) and hybrid automotive production
Green energy and environmental technologies
Healthcare, biotechnology, and medical devices
Smart logistics and infrastructure

Investors engaged in these sectors may be eligible for enhanced benefits, particularly when operating within designated zones such as the Eastern Economic Corridor (EEC).

3.2 Tax and Non-Tax Incentives

The BOI offers a range of incentives to attract and support investment:

Tax Incentives:

Corporate Income Tax (CIT) Exemptions: Depending on the promoted activity and location, companies can receive CIT exemptions for up to 13 years.
Exemptions or Reductions on Import Duties: Import duties on machinery and raw materials used in production may be exempted or reduced.
Double Deductions: Companies can benefit from double deductions on transportation, electricity, and water supply costs for ten years from the date revenue is first derived from the promoted activity.
Additional Deductions: In addition to normal depreciation, an extra deduction of 25% of the project’s infrastructure installation or construction costs is allowed.

Non-Tax Incentives:

100% Foreign Ownership: BOI-promoted companies may be permitted to have 100% foreign ownership, depending on the business activity.
Land Ownership Rights: Foreign entities with BOI promotion may be granted the right to own land for carrying out promoted activities, subject to specific conditions and approvals.
Facilitated Visa and Work Permit Processes: BOI-promoted companies benefit from streamlined processes for obtaining visas and work permits for foreign skilled workers and experts. This includes exemptions from certain quotas and expedited procedures.
Right to Remit Funds Abroad: Companies can remit funds abroad in foreign currency, facilitating the repatriation of profits and other financial transactions.

3.3 Application and Approval Process

Application Process for BOI Promotion

Foreign investors seeking BOI promotion must follow a structured application process:

1. Online Application Submission:

2. Project Proposal Preparation:

Provide a comprehensive project proposal detailing:・Business activities and objectives.
・Investment capital (excluding land and working capital).
・Financial projections.
・Employment plans for Thai and foreign staff.
・Environmental impact assessments, if applicable.

3. Document Submission

4. Application Review and Interview

5. Evaluation and Approval:

The BOI evaluates the project based on:・Alignment with national economic policies.・Contribution to technology transfer or skill development.・Environmental compliance.・Financial soundness of the applicant.
If approved, the BOI issues a Promotion Certificate specifying the granted incentives.

Timelines: Approximately 40–90 days, depending on project complexity and document completeness.

Conditions and Obligations for Promoted Entities

BOI-promoted entities must adhere to specific conditions to maintain their promotional status:

Compliance with Approved Project:・Operate in line with the approved project description and comply with all regulatory requirements.
Minimum Capital Requirement:　・Invest a minimum of 1 million THB, excluding land and working capital, unless specified otherwise in the promoted business category list.
Debt-to-Equity Ratio:
・For new projects, maintain a debt-to-equity ratio not exceeding 3:1.
・For expansion projects, the ratio may be adjusted based on the project’s financial structure.
Project Feasibility Study:
・Submit a detailed feasibility study for projects with investment capital exceeding 2 billion THB.
Reporting Obligations:
・Submit regular progress reports to the BOI.
・Provide audited financial statements annually.
Employment Conditions:
・Maintain qualified personnel for knowledge-based service businesses to ensure technology transfer.
・Employ an appropriate number of Thai employees in line with the project’s nature and scale.

4. Other Incentive Schemes

In addition to the standard incentives offered by the BOI, Thailand provides specialized schemes to promote investment in strategic regions and sectors. These schemes offer enhanced benefits to attract both domestic and foreign investors.

4.1. The Eastern Special Development Zone Act B.E. 2561 (2018)

The Eastern Special Development Zone Act B.E. 2561 (2018) established the Eastern Economic Corridor (EEC). The EEC is a special economic zone that encompasses the eastern coastal provinces of Thailand, including Chachoengsao, Chonburi, and Rayong. The EEC Act aims to promote investment in targeted industries and infrastructure development, with the goal of operating as a hub for high-tech industries and innovation, aligning with Thailand’s “Thailand 4.0” economic model.

Key Incentives and Benefits:

Extended Corporate Income Tax (CIT) Exemptions: Investors in targeted industries may receive CIT exemptions for up to 15 years.
Enhanced Infrastructure: Access to superior infrastructure, including deep-sea ports, high-speed rail links, and U-Tapao International Airport.
Streamlined Regulatory Processes: One-stop services for business registration, licensing, and work permits.
Sector-Specific Zones: Designated zones for industries such as digital technology, healthcare, smart logistics, and environmental technologies.

4.2. Industrial Estate Authority of Thailand Act B.E. 2522 (1979)

The Industrial Estate Authority of Thailand Act B.E. 2522 (1979) establishes the Industrial Estate Authority of Thailand (IEAT) as a state enterprise under the Ministry of Industry. The IEAT develops and manages industrial estates across Thailand, offering investors ready-to-use industrial land and facilities, aiming to attract foreign investment.

Key Incentives and Benefits:

Tax Incentives: Exemptions or reductions on import duties for machinery and raw materials, and VAT exemptions in certain zones.
Land Ownership Rights: Permission for 100% foreign ownership of land within industrial estates.
Infrastructure Support: Provision of essential utilities, waste management, and transportation networks.
One-Stop Services: Assistance with permits, licenses, and other regulatory requirements.

4.3. Special Economic Zones (SEZs)

Thailand has established SEZs in border provinces, Tak, Mukdahan, Sakaeo, Trat, Songkhla, Nong Khai, Narathiwat, Chiang Rai, Nakhon Phanom, and Kanchanaburi, to stimulate economic development in less-developed areas.

Key Incentives and Benefits:

Reduced Corporate Income Tax: A flat CIT rate of 10% for up to 10 years for businesses operating within SEZs.
Import Duty Exemptions: Exemptions on import duties for raw materials and machinery used in production.
Facilitated Customs Procedures: Streamlined customs processes to ease cross-border trade.
Access to Foreign Labor: Permission to employ foreign unskilled labor under certain conditions.

5. Conclusion

Thailand remains an attractive destination for foreign investors, offering a strategic location, government support, and competitive incentives. While the Foreign Business Act imposes certain restrictions on foreign ownership and activities, it also provides structured procedures for obtaining the necessary licenses. At the same time, investment promotion measures from the BOI and other schemes such as the EEC, IEAT, and SEZs offer meaningful tax and non-tax benefits. With a proper understanding of the legal framework and compliance with the relevant requirements, foreign investors can establish and operate their businesses effectively in Thailand.

[1] https://www.nesdc.go.th/ewt_dl_link.php?nid=16143