Understanding Thailand’s Foreign Business Act: Restricted Sectors and Workarounds

Thailand’s Foreign Business Act (FBA), enacted in 1999, is one of the most important pieces of legislation governing foreign investment in the country. It determines which sectors are open to foreign ownership and under what conditions.

For investors entering Thailand’s market — whether through establishing a new company or acquiring shares in an existing one — understanding the FBA’s structure, restrictions, and legal exemptions is essential to forming a compliant and effective market strategy.

Sector classifications under the Foreign Business Act

The FBA classifies business activities into three main categories based on the degree of restriction imposed on foreign ownership.

Activities listed under List 1 are entirely closed to foreigners, including media, rice farming, forestry, and land trading. These are sectors considered fundamental to national interests and security and are non-negotiable in terms of ownership liberalization.

List 2 covers activities that relate to national safety, culture, and the environment. Foreign participation in these sectors is not strictly prohibited, but it requires special permission from the Thai Cabinet, making the process considerably more complex and time-consuming. Activities in this category include domestic transportation and certain types of manufacturing that are deemed sensitive.

List 3 includes businesses where Thai nationals are not yet considered ready to compete. These range from service industries, such as accounting and legal services, to retail and hospitality. Foreigners can enter these sectors only by securing a Foreign Business License (FBL), which is subject to approval by the Ministry of Commerce and often requires demonstrating the benefits the business will bring to the Thai economy.

Ownership limitations and enforcement mechanisms

In sectors covered by the FBA, foreign shareholding is generally capped at 49 percent unless an exemption applies. A company with foreign ownership exceeding this threshold must either qualify for an exemption or restructure its shareholding to comply with the law. The FBA defines a foreign company not only by shareholding but also by control. Therefore, arrangements that allow foreigners to retain de facto control while staying within the equity limits, commonly known as nominee structures, are explicitly illegal and subject to criminal penalties, including fines and imprisonment.

To operate legally, companies must also meet minimum capital thresholds. For most foreign-owned businesses, the required paid-up capital is at least 2 million baht, but this amount can increase depending on the nature of the business and the number of foreign work permits requested. These thresholds ensure that foreign investors are financially committed to their operations in Thailand.

Legal pathways to operate in restricted sectors

Despite the limitations imposed by the FBA, several legitimate pathways exist for foreign investors to participate in restricted sectors. One of the most common approaches is to form a Thai-majority company, wherein Thai nationals hold at least 51 percent of the shares. While this structure complies with the FBA, the foreign investor can still retain control over decision-making through mechanisms such as dual-class shares, reserved matters in the articles of association, and board composition agreements. However, these arrangements must be carefully crafted to avoid violating anti-nominee provisions.

Another pathway is to apply for a Foreign Business License. This license enables foreign-majority ownership in activities listed under List 2 or List 3, provided that the company can justify its contribution to Thailand’s economy, such as through technology transfer, employment, or innovation. While the approval process is not uniform and may involve discretion from regulatory authorities, it is a viable route for businesses that bring strategic value.

Promotion by the Thailand Board of Investment (BOI) offers an even more favorable route. Companies that qualify for BOI promotion are often granted full foreign ownership, along with additional incentives such as tax holidays, import duty exemptions, and expedited visa and work permit processing. BOI promotion is typically granted to businesses involved in priority sectors like manufacturing, digital technology, green energy, and advanced logistics.

International treaties also provide carve-outs to the FBA’s restrictions. The U.S.–Thailand Treaty of Amity, for example, allows American citizens and companies to hold 100 percent ownership in most sectors, with some exceptions such as land, communications, and natural resource exploitation. Similar benefits are granted under bilateral agreements with ASEAN countries and Japan, although the scope is narrower and applies only to specific services under defined frameworks.

Direction of reform and expected developments

Thailand has signaled its intent to ease some of the restrictions under the FBA, especially in response to investor concerns over bureaucratic complexity and competitiveness. In April 2025, the Cabinet approved a proposal to revise the law by liberalizing select List 3 sectors, raising foreign ownership limits in others, and simplifying the Foreign Business License process. The proposed reforms are expected to be implemented in stages through 2026, with a focus on promoting innovation, digital services, and high-value manufacturing.

In parallel, the government is also tightening enforcement against illegal nominee arrangements to preserve the integrity of the reform process. Foreign investors are advised to follow these developments closely, as they may open new opportunities in sectors previously closed or heavily restricted.

Choosing the right entry structure

Selecting the appropriate legal structure depends on the investor’s sector, level of desired control, risk tolerance, and long-term strategy. For companies willing to work with local partners, a Thai-majority structure can be set up quickly and avoids FBL compliance. For those seeking full control, an FBL or BOI promotion may be more suitable, though both routes require more preparation and are subject to government scrutiny. U.S., ASEAN, and Japanese investors may explore treaty-based options that grant preferential treatment in certain sectors.

Regardless of the route chosen, it is critical to avoid informal arrangements that attempt to circumvent the FBA. Violations carry reputational, operational, and legal risks that can jeopardize business continuity.

Navigating compliance

The FBA remains central to Thailand’s investment framework. While restrictive, it offers several pathways for foreign investors to operate legally and competitively, especially when paired with sound legal and tax planning.

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