Changes to Thailand’s foreign business laws

Amid a crackdown on foreign nominees, Thailand has announced it will review restrictions on foreign businesses – here is what to expect in the coming twelve months. 

Thai Foreign Business Restrictions: since 1972 

Thailand has imposed restrictions on foreign business activities since 1972, when Announcement No 281 of the National Executive Committee (NEC 281) introduced restrictions on the ability of foreigners to engage in business activities specified in three annexes. NEC 281 prohibited foreigners from engaging in businesses listed in Annex A and Annex B, and required foreigners to obtain approval from the Board of Investment to engage in business or obtain approval from the Director-General to engage in business activities listed in Annex C. The three lists captured businesses across a broad range of economic sectors. 

The Foreign Business Act 1999 (FBA) replaced NEC 281, and followed NEC 281’s approach of allocating business activities across three lists, with activities in List 1 being off limits to foreigners, activities in List 2 requiring foreigners to obtain ministerial permission and cabinet approval, and activities in List 3 requiring foreigners to obtain permission from the Director-General and the approval of the Foreign Business Board. List 3 is titled “Businesses in respect of which Thai nationals are not ready to compete with foreigners”, and item 21 of List 3 casts a very broad net: “Other service businesses, with the exception of service businesses as prescribed in Ministerial Regulations”.   

The FBA increased the penalties for non-compliance by introducing up to three years’ imprisonment for offences, including the anti-avoidance provisions in section 36 of the FBA, which prevent  a Thai national aiding and abetting a foreigner to engage in a business specified in the FBA Lists without permission, or acting as a foreigner’s nominee in holding shares in a company with a view to enabling the foreigner to operate the business in circumvention of the FBA. 

Unlawful Nominee Shareholdings 

A Thai-registered company will be a foreigner under the FBA (and previously was under NEC 281) if foreign nationals hold 50% or more of the shares in the company. As the FBA does not take shareholding control into account in determining whether a company is a foreigner (and neither did NEC 281), many companies have been established since the days of NEC 281, in which foreign shareholders hold less than half the shares but wield voting control at a  shareholders’ meeting, effectively placing the company under foreign control without the company being regarded as a foreigner under the FBA.  

Before 2015, the FBA anti-avoidance provisions had not been subject to rigorous enforcement, and it was not uncommon for Thai nationals to hold a 51% shareholding stake as nominees, despite the illegality of the nominee shareholding arrangement.  Recently, however, investigations into unlawful nominee shareholdings have increased (see 2024 Thai Nominee Shareholding Investigation | Publications | Knowledge | Nishimura & Asahi) and show no immediate signs of abating. In April 2025, the Ministry of Commerce announced that it plans to inspect 46,918 business entities focusing on (i) tourism and related businesses, such as restaurants, souvenir shops, (ii) real estate and land trading businesses, (iii) e-Commerce, transportation, and warehousing businesses, (iv) hotel and resort businesses, (v) agriculture-related businesses, (v) general construction businesses. The ombudsman urged the government to accelerate laws to tighten control over foreign businesses, and amendments were proposed to the Anti-Money Laundering Act that would make a breach of the FBA anti-avoidance provisions a predicate offence under the Anti-Money Laundering Act. 

Proposed Relaxation of the FBA 

The Thai cabinet announced in April 2025 that it had agreed in principle to amend the FBA to reduce obstacles to employment, changing from “protection” to “building competitive potential”, emphasizing the consideration of the types of businesses and appropriate investment proportions, hoping to attract foreign investment and support startup businesses.  

The extent to which foreign participation could be increased as a result of the amendment is not yet clear. Since the enactment of the FBA, four Ministerial Regulations have excluded a total of 12 businesses from the operation of item 21 of List 3 of the FBA – some of these activities, such as insurance, are regulated under separate laws which impose foreign ownership restrictions, and their removal from List 3 represents a more of a removal of legislative double-handling rather than true liberalization, but the removal of others from List 3, such as intra-group loans and services, does represent meaningful progress. 

The timing of the cabinet announcement might seem unusual – why would a government announce an acceleration of foreign nominee enforcement in the same month it announces a proposed relaxation of foreign business restrictions?  The answer lies in Thailand’s aspirations to global citizenship, and points to an upcoming streamlined foreign investment regime. 

WTO & OECD 

Thailand became a member of the World Trade Organization (WTO) on 1 January 1995, and the foreign business restrictions in NEC 281 and the FBA have not been entirely in harmony with the national treatment provisions of article XVII of GATS and progressive liberalization provisions of Article XIX of GATS (The General Agreement on Trade in Services  - Annex 1B of the Marrakesh Agreement establishing the WTO): Thailand has lodged more than 50 pages of specific commitments with the WTO clarifying the restrictions and limitations of national treatment for WTO members in relation to various business activities in Thailand.  Thailand’s updated specific commitments have shown a degree of liberalization in a limited number of business activities, but on the whole, there are many hurdles to foreign investment still in place from 1999. 

In 2024, Thailand became the second country in Southeast Asia to apply for membership of the Organization for Economic Cooperation and Development (OECD).  Countries aspiring to OECD membership are expected to adhere to a number of OECD instruments and objectives, including in relation to international investment, combatting bribery of public officials, corporate governance, and the inclusive framework on base erosion and profit shifting (BEPS).  Thailand swiftly demonstrated adherence to OECD instruments by strengthening its anti-bribery laws in October 2024 (see Thailand’s New Anti-Bribery Measures for Public Procurement: Broader Application, and Recognition of Global Standards | Publications | Knowledge | Nishimura & Asahi), and introducing new tax laws in December 2024 to implement BEPS pillar 2 with effect from 1 January 2025. 

The OECD’s evaluation of Thailand’s readiness for OECD accession will also include an assessment of Thailand’s commitment to OECD values, based on a set of indicators which includes the OECD FDI Regulatory Restrictiveness Index (FDIRRI), in which a score of 0 represents a completely open regulatory environment for FDI and a score of 1 a completely closed one.  As at 31 December 2023, Thailand’s FDIRRI was 0.2397, placing it in a less than flattering position in the OECD FDI rankings, towards the bottom of the list, and performing worse than PRC, Krygystan, Kenya, Vietnam and India. 

The FDIRRI methodological framework assesses restrictions in 22 economic sectors and across four policy categories: (i) foreign equity limits; (ii) screening and approval of foreign investment; (iii) restrictions on key foreign personnel; and (iv) other operational restrictions, with statutory discrimination against foreign investors being the main criterion for considering that measures constitute a restriction under the FDIRRI in most situations. 

Different weightings are given to the 22 economic sectors in the FDIRRI methodology. Professional Services (0.025), Insurance (0.015) and Financial Services other than banking and insurance (0.01) are lightly weighted, with the most heavily weighted sectors being Real Estate Investment (0.1350), Wholesale Distribution (0.09), Retail Distribution (0.075), and Construction (0.075).  The most heavily weighted sector, Real Estate Investment, comprises three equally weighted subsectors (commercial buildings, residential buildings, and land) and as land ownership is unlikely to be opened to foreign ownership,  the other 21 sectors are likely to see more realistic prospects for foreign liberalization than the Real Estate Investment sector. 

Each of the 22 sectors is scored by reference to five different levels of foreign equity allowed, with the score reducing progressively from one level to the next (lower scores are better for FDIRRI): (i) no foreign equity allowed, (ii) less than 30% allowed; (iii) between 33% and 50% allowed, (iv) more than 50% but less than 67% allowed, and (v) more than 67% but less than 100% allowed. List 1 FBA activities are likely to be regarded as level (i), and activities in Lists 2 and 3 are likely to be regarded as level (ii). 

An approach of simply increasing permitted foreign equity in List 3 sectors to no more than 67% would result in only slight improvement on the FDIRRI methodology, and might not move the needle enough to get Thailand’s FDIRRI where the OECD would regard it favorably. 

Thailand can therefore be expected to identify some sectors that can be removed from foreign equity restrictions entirely, and to allow more than 50% but less than 100% foreign equity in other, more sensitive sectors.  Within various government departments, it is possible that “war game” style planning scenarios are being carried out across the 22 sectors, guided by input from relevant ministries to identify the extent to which each of the sectors can be further opened to foreign equity participation. It is too early to predict which sectors will be liberalized the most, but if Thailand’s swift implementation of BEPS is anything to go by, revisions to the FBA by early 2026 are not out of the question. 

Housekeeping in effect 

Section 16 of the FBA required a person to wait for five years to apply for a foreign business license under the FBA if they had been penalized under NEC 281 or had a license cancelled under NEC 281. The Thai government’s escalating crackdown on nominee shareholdings could be designed to exclude companies currently in breach of the FBA from participating in the early stages of Thailand’s newly liberalized regime.  

Currently, the penalties for breaching the anti-avoidance provisions of the FBA are limited to a fine of THB 1 million, and three years’ imprisonment, but if the proposed amendment to the Anti-Money Laundering Act is passed, the Anti-Money Laundering Office (AMLO) will have the power to seize assets of companies suspected of having an unlawful nominee structure. If this happens, the risk profile of a company breaching the FBA anti-avoidance provisions could be substantially greater than that of a majority foreign-owned company operating a restricted business under the current regime without the mandatory FBA permission: a majority foreign owned company operating without a required FBA approval can be compelled to cease business activity, but is not currently at risk of having its assets seized under the Anti Money Laundering Act. 

Enhanced enforcement against nominee companies can therefore be expected to provide a source of revenue not otherwise available to offset the cost of regulatory investigation and enforcement, while simultaneously removing unlawful nominee companies from the business environment in anticipation of a new liberalized foreign investment era. 

Implications for current businesses and acquirors 

To prevent asset seizure and exclusion from engaging in business under the revised FBA, companies with any degree of foreign equity and which engage in any business activity that is prohibited or requires permission under the FBA  should review their shareholding structure and capital funding structure to identify whether changes are necessary to prevent Thai nationals being regarded as aiding and abetting a foreign national to carry out that business activity. The only Companies that can afford to take a relaxed attitude to FBA anti-avoidance investigations are those with FBA approval and have conducted audits to verify that none of their business operations extend beyond the scope of their FBA approvals. 

As many companies will be reluctant to entertain that they have been established in a less than optimum way, acquirors should conduct extensive due diligence on potential targets in Thailand to identify the risk of the target contravening the FBA anti-avoidance provisions.  The FBA anti-avoidance provisions also make it unlawful for a foreigner to allow a Thai national to act as an unlawful nominee, and this leads to post-acquisition exposure for legacy nominee structures if the acquiror allows the target with a nominee structure to continue trading without removing the nominee structure.   If a company commits an FBA anti-avoidance offence, section 41 of the FBA can impose up to three years’ imprisonment and penalties of up to THB 1 million on directors of the company if they fail to take reasonable action in preventing the offence.   

Acquiring a corporate group with a nominee structure can therefore expose the acquiror and new directors to liability even if they were not involved in establishing the nominee structure, so enhanced diligence is warranted now more than ever given the ever-increasing nominee investigations. 

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