Thailand’s foreign business act: Liberalization continues?

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Foreign investors may find doing business in Thailand easier if proposed ministerial regulations come into effect. Two exciting points to note regarding exemptions from the foreign business licence requirement are:

thailands-foreign-business-act-liberalization-continues• Earlier this year, ministerial regulations liberalized commercial banking from the requirement to obtain a foreign business licence. Following on from those regulations, commercial banks and asset management companies – which currently offer certain services relating to, or necessary for, operating commercial banking business and asset management business – may enjoy further exemptions from the requirement to obtain a foreign business licence.

• Representative offices and business operators that are contracted to provide services to government agencies or state-owned enterprises no longer require a foreign business licence. This is the first time the Ministry of Commerce (MOC) has attempted to liberalize these businesses.

Approved by cabinet on 12 July 2016, the draft regulations seek to liberalize by way of exempting the following two groups of businesses from schedule 3 of the Foreign Business Act, thereby removing the requirement to obtain a foreign business licence:

Group 1. Businesses covered by specific laws and requested by specific authorities: the connected businesses of commercial banking.

Group 2. Businesses with limited scope and with no effect on local operators: representative offices, regional offices, business operators who are contracted to provide services to government agencies or state-owned enterprises.

The draft regulations follow the liberalization trend of the past couple of years. Earlier this year, the MOC issued ministerial regulations to exempt certain businesses under the Foreign Business Act, e.g., commercial banking, life and non-life insurance, due to these businesses already being regulated by their own specific laws.

For Group 2 businesses, we expect that the MOC will have to provide further clarification on what happens to existing businesses, and if there will be any notifications or registration requirements for persons intending to conduct Group 2 businesses in the future.

Next steps

The draft regulations will be sent to the Council of State for review, and then returned to Cabinet for approval before being officially issued as ministerial regulations by the MOC. We will monitor the progress and keep you informed of any updates.

GROUP OF BUSINESS

SCOPE OF BUSINESS ACTIVITY

1. Group of businesses under specific laws and requested by authorities

1. The following are 12 services relating to or necessary for operating commercial banking business:

1.1. Providing Shariah banking services

1.2. Appointment of banking agents

1.3. Providing escrow account services and escrow agent services

1.4. Operating private repurchase (private repo) transactions

1.5. Acting as agents in accepting insurance applications and collecting insurance premiums or fees of export guarantee and loan guarantee to clients

1.6. Providing services to financial businesses within the same business group, other financial institutions and companies within their business group, Bank of Thailand or government entities (insourcing)

1.7. Renting of immovable properties

1.8. Purchase or acceptance of transfer of debtors under certain financing transactions

1.9. Providing cash management services for general clients

1.10. Providing document preparation services relating to clients’ businesses

1.11. Acting as agents in receiving payments or accepting applications

1.12. Hire-purchase and leasing

2. Asset management businesses under the law on asset management company

2. Group of businesses with limited scope and with no effect on local operators

1. Representative office

2. Regional office

3. Business operators who are contracted to provide services to government agencies

4. Business operators who are contracted to provide services to state-owned enterprises