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Legal Issues for Foreign Investors

1. Foreign Business Act
A. Introduction
Foreigners in Thailand derive their legal rights primarily from the domestic laws of Thailand. In general, foreigners enjoy the same basic rights as Thai nationals.

Restrictions on foreign ownership in commercial banks, insurance companies, commercial fishing, aviation businesses, commercial transportation, commodity export, mining and other enterprises exist under various laws. In addition, Thai participation will frequently be required in those activities seeking permission from the BOI.

B. The Foreign Business Act
The Foreign Business Act of 1999, which became effective on March 4, 2000, repeals and replaces the 1972 National Executive Council Announcement 281, better known as the Alien Business Law. The Act serves to define an "alien," and identifies the scope of foreign participation in business in Thailand.

An "alien" is defined as:
A natural person who is not of Thai nationality;
A juristic entity that is not registered in Thailand;
A juristic entity incorporated in Thailand with foreign shareholding accounting for one-half or more of the total number or value of shares;
A limited partnership or ordinary registered partnership whose managing partner or manager is a foreigner

C. Businesses Subject to Regulation
Businesses that initiate activities that fall under Lists 1, 2, or 3 of the Foreign Business Act (listed below) are subject to the limitations imposed by the Act. 

Activities that fall under List 1 are strictly prohibited to aliens. 

Businesses that are covered by List 2 are prohibited to aliens unless specific permission is granted by the Commerce Ministry, by and with an appropriate Cabinet resolution. Alien juristic entities allowed to engage in List 2 activities must meet the following two conditions:
At least 40 percent of all shares are held by Thai persons or non-alien juristic entities (This may be reduced to 25 percent on a case-by-case basis)
Two-fifths of the members of the Board of Directors are Thai

Activities in List 3 are prohibited to aliens unless permission is granted by the Director General of the Department of Commercial Registration, Ministry of Commerce, by and with the approval of the Foreign Business Board.

An alien can engage in businesses in Lists 2 or 3 of he is a promoted investor in accordance with either the Investment Promotion Act, the Industrial Estate Authority of Thailand Act, or other laws.

List 1 - Businesses in which alien participation is not permitted
Newspaper undertakings and radio and television station undertakings
Lowland farming, upland farming, or horticulture
Raising animals
Forestry and timber conversions from natural forests
Fishing for aquatic animals in Thai waters and Thailand's Exclusive Economic Zone
Extraction of Thai medical herbs
Trade in and auctioning of Thai ancient objects or ancient objects of national historical value
Making or casting Buddha images and making monk's bowls
Dealing in land

List 2 - Businesses concerning national security or safety with an adverse effect on art and culture, customs, or native manufacture/handicrafts, or with an impact on natural resources and the environment.
Production, disposal, sale, and overhead of:
  - Firearms, ammunition, gunpowder, and explosives
  - Components of firearms, gunpowder, and explosives
  - Armaments and military vessels, aircraft, or conveyances
  - All kinds of war equipment or their components
Domestic transport by land, water, or air, inclusive of the undertaking of domestic aviation
Dealing in antiques or objects of art and works of art, and Thai handicrafts
Production of wood carvings
Raising silkworms, producing Thai silk thread and weaving, or printing patterns on Thai silk textiles
Production of Thai musical instruments
Production of articles of gold or silver, nielloware, nickel-bronze ware, or lacquerware
Production of crockery and terra cotta ware that is Thai art or culture
Production of sugar from sugarcane
Salt farming inclusive of making salt from salty earth
Making rock salt
Mining, inclusive of stone blasting or crushing
Timber conversions to make furniture and articles of wood

List 3 - Businesses in which Thais are not ready to compete in undertakings with aliens
Rice milling and production of flour from rice and farm crops
Fishery, limited to propagation of aquatic animals
Forestry from replanted forests
Production of plywood, wood veneer, chipboard, or hardboard
Production of natural lime
Accounting service undertakings
Legal service undertakings
Architectural service undertakings
Engineering service undertakings
Construction, except construction of things that provide basic services, both to the public with respect to public utilities or communications and which require the use of special instruments, machinery, technology or expertise in construction and a minimum capital of the alien of at least 500 million baht
Brokerage or agency undertakings, except: 
  - Trading in securities or services concerning futures trading in agricultural commodities, financial instruments, or securities
  - Trading in or the procurement of goods or services needed for production by, or providing the services of, an enterprise in the same group
  - Trading, purchasing (for others) or distributing or finding domestic or overseas markets for selling goods made domestically or imports as an international trading business, with a minimum capital of the alien of at least 100 million baht
  - Other lines of business stipulated in Ministerial Regulations
Auctioning, except:
  - International bidding that is not bidding in antiques, ancient objects or objects of art that are Thai works of art, handicraft or ancient objects, or of national historical value
  - Other types of auction, as stipulated in Ministerial Regulations
Domestic trade concerning indigenous agricultural produce or products not prohibited by any present law
Retail trade in all kinds of goods with an aggregated minimum capital of less than 100 million baht or a minimum capital for each store of less than 20 million baht
Wholesale trade in all kinds of goods with a minimum capital for each store of less than 100 million baht
Advertising undertakings
Hotel undertakings, except for hotel management services
Tourism
Sale of food or beverages
Plant breeding and propagation, or plant improvement undertakings
Doing other service businesses except for service businesses prescribed in Ministerial Regulations.

Many American-owned enterprises have invoked the provisions of the Treaty of Amity and Economic Relations between Thailand and the United States to claim exemption from the Law. The treaty requires national treatment be granted to persons of each country by the other country. To receive protection, Americans must register under the Treaty. Although on paper the Treaty appears self-executing, the Thai Government will not recognize the American applicant until such applicant proves its American nationality.

D. Miscellaneous Issues

An alien must invest at least two or three million baht in his business, depending on the kind of business, however the minimum capital requirement will not be enforced for re-investment.

Minimum capital is defined as the capital of the alien entity in case of an alien being a juristic person incorporated in Thailand, and in case of an alien being a juristic person not incorporated in Thailand or being a natural person, in foreign currency that the alien remitted into Thailand at the time of starting to do business in Thailand. The amount of minimum capital and time frame for bringing into Thailand shall be prescribed by Ministerial Regulation.

The business attached to the Act still has three categories, i.e. List 1, List 2, and List 3, but the business categories have been substantially changed from those of the Foreign Business Act. Under this Act, the Foreign Business Board will review the business listed at least once a year, and present it to the Commerce Minister. The Commerce Minister, by the recommendation of the Foreign Business Board, is empowered to issue Ministerial Regulations. Significantly, the Ministerial Regulations of service businesses must absolutely be considered by the Foreign Business Board. Aliens also can do business with respect to the businesses described in List 2 or List 3, in accordance with other laws, such as Investment Promotion Act, Industrial Estate Authority of Thailand Act, etc., and then notify and procure a Certificate from the Director-General. 

Under the new penalty provision, the range of the fine has increased from baht 30,000 to 500,000 to baht 100,000 to 1,000,000, and increased imprisonment of no more than three years. The imprisonment measure serves to settle or decrease any contravention. If any alien who obtains an Alien Business License under the act (a) jointly does a business which belongs to another alien not permitted to do a business under this Act, or (b) does a business of which such other alien is a co-owner by expressing that such business solely belongs to itself, so as to allow such other alien to evade or violate the provisions of this Act, shall be liable to imprisonment for a term not exceeding three years or to a fine from baht 100,000 to baht 1,000,000, or both, and the cessation of such business or such joint business upon court order. 

Aliens that engage in regulated businesses by permission of the Thai Government for a definite duration, or under protection of a treaty to which Thailand is a signatory or abides by the obligations thereof, are exempt from certain requirements under the Act, including permission to engage in the prohibited or restricted businesses and Thai shareholding and directorship requirements. Such aliens must first notify and procure a Certificate from the Director-General. 

The Act has provided a transition provision. Aliens that have already been permitted to engage in the business under the Foreign Business Act are entitled to continue the business operation in accordance with the conditions and duration of that permission. Aliens that have been engaging in businesses that are specified in the business categories of the Act, but were not previously specified in the business categories of the Foreign Business Act and which intend to continue such businesses, must notify and procure a Certificate from the Director-General within one year.

Licenses

A foreigner wishing to engage in any business in Lists Two and Three must submit an application to the Minister of Commerce for the operation of the business in List Two and the Director General of the Commercial Registration Department for List Three.

The Cabinet in the case of List Two businesses and the Director General in the case of List Three businesses review and make a decision within 60 days of the application filing date.

The Cabinet may postpone making a decision for another 60 days at most. Once the Cabinet or the Director General approve the application, the Ministry of Commerce or the Director General shall issue a license to the applicant within 15 days of the approval date. If the Cabinet or the Director General do not approve the List Two license application, the Minster must give a written notification to the applicant within 30 days clearly specifying the reason for the disapproval. Likewise, the Director General in the case of List Three license applications must do the same, but within 15 days. In the latter case, the applicant may file an appeal with the Minister, who is required to respond within 30 days. His decision is final.

Although the licenses have a perpetual life, they will be automatically invalid when the licensees stop doing the licensed business. The licenses must be displayed in a prominent place on the business premises.

The Minister by a recommendation of the Committee may revoke the licenses or certificates if the licensees or certificate holders:

Do not comply with the conditions the Thai Government, treaties or the Minister impose on them.
Do not meet the Thai participation ratio requirements.
Fail to maintain the licensee qualification.
Engage in other businesses or assist other foreigners in doing business with a view to violating the Foreign Business Act.

The Director General will give a warning letter to the violators ordering them to comply with the conditions within a reasonable time. If the violation persists, the Director General has the power to suspend the licenses for a reasonable period, but not exceeding 60 days. The licenses can be revoked if the violation persists after the initial suspension period ends.

The violators may file an appeal against the suspension or revocation with the Minister within 30 days of the date on which they receive the order. The appeal will not stay the enforcement of the order unless the Minister relaxes the suspension or revocation. The Minister is required to review the appeal and make a decision within 30 days. His decision is final.

2. Work Permits
The Alien Occupation Law, adopted in 1973, requires all aliens working in Thailand to obtain a Work Permit prior to starting work in the Kingdom. An updated version of the Act, adopted in 1978, describes the procedures for issuance and maintenance of Work Permits and lists certain occupations from which aliens may be excluded. 

A. Exemptions
The Act grants exemptions from the Work Permit requirement to persons occupying the following professions:
Members of the diplomatic corps
Members of consular missions 
Representatives of member countries and officials of the United Nations and its specialized agencies
Personal servants coming from abroad to work exclusively for persons listed under the above items
Persons who perform duties on missions in the Kingdom under an agreement between the government of Thailand and a foreign government or international organization 
Persons who enter the Kingdom for the performance of any duty or mission for the benefit of education, culture, arts, or sports 
Persons who are specially permitted by the Government of Thailand to enter and perform any duty or mission in the Kingdom.

B. Special Cases
While most aliens must apply for a Work Permit, and may not begin work until the Permit is issued, the Alien Employment Act does provide special treatment in the following circumstances: 

Urgent and Essential Work:
Exemption from Work Permit requirements is granted to aliens who enter the Kingdom temporarily, but in accordance with the immigration law, to perform any work of any "urgent and essential nature" for a period not exceeding 15 days. However, such aliens may engage in work only after a written notification on a prescribed form, signed by the alien and endorsed by his employer, has been submitted to and accepted by the Director-General or his designee. 

Aliens entitled to this treatment may enter Thailand with any kind of visa, including a transit visa. The term "urgent and essential work" is not explicitly defined and consequently, the issuance of this sort of exemption is a matter of administrative discretion. 

Investment Promotion
An alien seeking permission to work in the Kingdom under the Investment Promotion Law must submit his application for a Work Permit within 30 days of notification by the Board of Investment that his position has been approved. An alien in this category may engage in authorized work while the application is being processed. 

C. Procedures
The Act requires that any alien working in Thailand must obtain a Work Permit before beginning work. Section 8 of the Act stipulates that while a prospective employer may file an application on the alien's behalf in advance of his commencing work, the actual Work Permit will not be issued until the alien has entered Thailand in accordance with the immigration laws and has presented himself to receive his Work Permit. 

The Permit initially will be valid only for the period of the alien's Non-Immigrant visa permits him to remain in Thailand under the Immigration law. The Work Permit will be subject to renewal in accordance with the renewed or extended visa. For aliens who are holders of a Thai Certificate of Residence, the Work Permit can be renewed annually. The Labor Department, subject to subsequent renewal, will in principle grant an initial duration of one year for the Work Permit. A Work Permit must be renewed before its expiry date or it will automatically lapse. 

Applicants for Work Permits may not enter the Kingdom as tourists or transients. 

D. Required Documentation 
The following documents must be attached to a Work Permit application: 
For non-permanent residents: A valid passport containing a Non- Immigrant visa (except for WP 3 applications) 
For permanent residents: A valid passport, residence permit and alien book (except for WP 3 applications)
Evidence of applicant's educational qualifications and letter(s) of recommendation from the former employer, describing in detail the applicant's past position, duties, performance, and place and length of employment. If the documents are in a language other than English, a Thai translation certified as correct by a Thai Embassy (if abroad) or Ministry of Foreign Affairs (if in Thailand) must be attached 
A recent medical certificate from a first-class licensed physician in Thailand stating that the applicant is not of unsound mind and not suffering from leprosy, acute tuberculosis, elephantiasis, narcotic addiction or habitual alcoholism (except for WP 7 applications). 
Three 5x6 cm. full-faced, bareheaded, black and white or color photographs, taken no more than six months prior to the filing of the application 
If the application is to be filed by another person, a valid power of attorney in the prescribed form must be attached with a 10 baht duty stamp 
On the application form, the "job description" entry must be completed with a detailed statement as to what job is expected to be performed, how it is related to other people, and what materials will be used in the work (additional paper to be used if necessary) 
If the job applied for is subject to a license under a particular law, in addition to the Alien Occupation Law, a photocopy of such license, (e.g. teacher's license, physician's license, press card from the Public Relations Department, certificate of missionary status from the Office of Religious Affairs, etc.) shall be attached 
If the applicant is married to a Thai national, the original and photocopies of the following must be presented: 
Marriage certificate, spouse's identity card, birth certificates of children, household registration, as well as a photocopy of every page of the applicant's passport 
If the job being applied for is not in Bangkok, the application should be filed at the relevant province's Department of Employment, or in the absence of such an office, at the province's city hall
Additional evidence as requested. It may be necessary to translate any or all documents into Thai.

E. Permitted Activities

Thai law prohibits employers from allowing aliens to perform any function other than that described in the alien's Work Permit. Employers must report changes in employment, transfers and termination of all aliens in their organization within 15 days of any such action. In cases of dismissal, aliens must return their Work Permit to labor authorities in Bangkok at the Alien Occupation division or, if they are in a provincial area, to the province's Department of Employment. Failure to do so will result in a fine of up to 1,000 baht. 

Any alien who engages in work without a Work Permit, or in violation of the conditions of his work as stipulated in his Permit, may be punished by a term of imprisonment not exceeding three months or a fine of up to 5,000 baht, or both. Aliens engaged in work prohibited to them by Royal Decree (see below) shall be liable to imprisonment for a term not exceeding five years or to a fine ranging from 2,000 to 100,000 baht, or both. 

An employer who permits an alien to work in his organization without a Work Permit or to act in violation of the nature of the work specified in the Permit may be punished with imprisonment not exceeding three years or fined up to 60,000 baht or both. 

Permit holders must obtain prior permission to change their occupation and/or place of work. Change of employer location or the residential address of the permit holder must be properly endorsed in the Work Permit by the labor authorities. The Alien Employment Act does not prevent an alien from engaging in work in more than one field or for more than one employer. 

F. Restricted Occupations
A Royal Decree in 1973 listed 39 occupations and professions that were then prohibited to aliens. This list has been amended on several occasions by subsequent Royal Decrees, the latest one in 1979.
Labor 
Work in agriculture, animal breeding, forestry, fishery or general farm supervision 
Masonry, carpentry, or other construction work 
Wood carving 
Driving motor vehicles or non-motorized carriers, except for piloting international aircraft
Shop attendant 
Auctioneering 
Supervising, auditing or giving services in accounting, except occasional international auditing 
Gem cutting and polishing 
Hair cutting, hair dressing and beautician work
Hand weaving 
Mat weaving or making of wares from reed, rattan, kenaf, straw or bamboo pulp 
Manufacture of manual fibrous paper
Manufacture of lacquerware 
Thai musical instrument production 
Manufacture of nielloware 
Goldsmith, silversmith and other precious metal work 
Manufacture of bronzeware 
Thai doll making 
Manufacture of mattresses and padded blankets
Alms bowl making 
Manual silk product making 
Buddha image making 
Manufacture of knives
Paper and cloth umbrella fabrication 
Shoemaking
Hat making 
Brokerage or agency work, except in international business 
Dressmaking 
Pottery or ceramics 
Manual cigarette rolling 
Legal or litigation service 
Clerical or secretarial work 
Manual silk reeling and weaving
Thai character type-setting 
Hawking business 
Tourist guide or tour organizing agency 
Architectural work 
Civil engineering work 

Following the amendment of the Alien Working Act No.2 B.E. 2544, the Department of Employment has increased its work permit fee structure. This has been announced in the Royal Gazette on 17 September 2002 and will be enforced with effect from 18 September 2002.

  New fee Old fee
Period of work permit at grant Baht Baht
Up to 3 months  750 300
3 months to 6 months  1,500 500
6 months to 12 months 3,000 1,000
12 months to 15 months 3,750 1,300
15 months to 18 months 4,500 1,500
18 months to 24 months 6,000 2,000
Work permit replacement  150 500
Permission to engage in other work 150 500
Permission to change locality or place of work 150 500

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