In brief
The Department of Business Development (DBD), under the Ministry of Commerce, issued a clarification limiting the scope of activities eligible for a Foreign Business Certificate (FBC) under the Industrial Estate Authority of Thailand (IEAT) framework.
As a result, certain activities previously considered eligible for an FBC when conducted by foreign-majority-owned companies in IEAT areas, such as contract manufacturing and service activities (e.g., repair and maintenance), will no longer qualify for an FBC and will instead require a Foreign Business License (FBL).
In more detail
In the past, foreign-majority-owned companies operating in qualified IEAT areas may obtain an FBC as one of the privileges available under the IEAT framework for its service activities, such as contract manufacturing, repair and maintenance. However, under the DBD's latest clarification, an FBC issued pursuant to the IEAT framework covers only limited industrial activities and certain export-related activities.
Eligible activities are limited to:
- Manufacturing activities that are specifically restricted under the Foreign Business Act, such as the manufacture of carved wooden products, plywood, veneer board, chipboard and hardboard
- Certain export-related activities, such as warehousing services for export products and international transportation management services
According to the clarification, contract manufacturing and other service activities conducted within IEAT areas, such as repair and maintenance services, are no longer regarded as eligible activities for an FBC under the IEAT framework. This marks a significant shift from the DBD's established practice and prior interpretations regarding the scope of activities conducted in IEAT areas that may qualify for an FBC. Nevertheless, based on our understanding, this change should not affect foreign-majority-owned companies that have previously obtained an FBC under the IEAT framework prior to the issuance of this clarification by the DBD.
Accordingly, foreign investors with existing or planned operations in IEAT areas should reassess their compliance with Thailand's foreign business laws in light of this policy development.
Depending on the nature of the business, alternative options may need to be explored, including applying for an FBL or obtaining an FBC under the Board of Investment promotion framework.
How we can help
We can assist in assessing the impact of this development on your business and advise on available compliance options under Thailand's foreign business law regime. For further information or assistance, please contact our team at Baker McKenzie.
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Pichayapa Aroonrat, Associate, has contributed to this legal update.