Partner Bangkok
"The Thai Government intends to remove duplicative regulations where businesses are already subject to sector-specific supervision or services which are solely provided to their affiliates."
The Thai Government intends to remove duplicative regulations where businesses are already subject to sector-specific supervision or services which are solely provided to their affiliates. This article summarises the key changes and highlights practical considerations for foreign investors and multinational groups operating in Thailand.
Key Changes
The Ministerial Regulation removes eight categories of service businesses from List Three (21) of the FBA. As a result, foreign investors carrying on exemption activities are no longer required to obtain a Foreign Business Licence (“FBL”) from the Department of Business Development, Ministry of Commerce.
Please be advised that the above service businesses are for an FBL exemption. Foreign entities must oblige and be subject to other applicable licences, registrations and approvals required under other laws which are administered by other competent government authorities, for example the National Broadcasting and Telecommunications Commission, the Bank of Thailand, the Securities and Exchange Commission and other relevant regulators, depending on the nature of the business.
Intra-Group Services: Greater Certainty for Shared Service Structures
A key feature of the reform is the exemption for intra-group services. Under the Ministerial Regulation, foreign-owned companies may provide administrative management, human resources management and information technology management services to their affiliated entities without obtaining an FBL.
Who Qualifies as an Affiliated Entity?
For purposes of the exemption, affiliated entities include companies that meet any of the following relationship tests:
(i) more than 50% of the shareholders of one company are also shareholders holding more than 50% of the shares in the other company;
(ii) a shareholder holding at least 25% of one company also holds at least 25% of the other company;
(iii) one company holds at least 25% of the shares in the other company; or
(iv) more than half of the directors or managing partners of one company are also directors or managing partners of the other company.
"The new framework extends beyond traditional parent-subsidiary structures and may also cover sister companies with common shareholders or common management."
Practical Considerations for Foreign Investors
The new framework extends beyond traditional parent-subsidiary structures and may also cover sister companies with common shareholders or common management. This should be helpful for multinational groups with regional or matrix structures.
The common management test may be particularly useful where a group does not meet the shareholding thresholds but operates under an integrated management structure.
Key Takeaways
The implementation of these reforms reflects Thailand’s continued effort to welcome foreign investments by removing overlapping regulatory requirements. Although the reform does not liberalise of Thailand’s foreign business restrictions, it should meaningfully reduce the regulatory burden for foreign investors in regulated sectors and for multinational groups using Thailand as a regional operating hub.
Key contacts
Partner Bangkok
Associate Bangkok
