As global supply chains reshape and cross-border capital flows accelerate, Southeast Asia — with its strong growth potential, abundant resources, and sizeable consumer market — has become a key destination for international investment. Thailand, as a top ASEAN’ economy, offers geography, an established manufacturing base, and an open trade environment, its foreign investment framework (centered on the Foreign Business Act) continues to evolve, presenting both opportunity and complexity. For foreign enterprises looking to enter or deepen their presence in the Thai market, understanding the investment rules, navigating foreign business restrictions, and building a compliant operating structure are essential to managing risk and sustaining long-term growth. With this in mind, we are launching the “Thailand Market Entry Guide” series. This first installment focuses on selecting the right operating vehicle and introduces Thailand’s key foreign investment framework — hopefully providing useful initial guidance for foreign enterprises on their Thailand investment journey.

Thailand Entry Playbook (Part I)

Choose the Right Vehicle and Stay on the Right Side of Foreign Business Restrictions

This article is the first in our ongoing newsletter series on doing business in Thailand. In this Part I of the Thailand Entry Playbook, we discuss the legal ‘gates’ that most often shape an initial market entry: (i) choosing the right onshore vehicle and (ii) staying compliant with Thailand’s foreign business restrictions and available legal pathways to foreign ownership.[1]

1. Choosing the right entry vehicle

In practice, the ‘right’ entry vehicle depends entirely on the activities to be carried on in Thailand. Common options include a representative office, a branch, a Thai private limited company (subsidiary or JV entity) and a contract-based market entry via a local distribution/agent without an onshore operating vehicle.

While there are exceptions, a Thai private limited company is overwhelmingly the most common operating platform for foreign investors in Thailand for a few practical reasons.

• (A)  Incorporation is relatively straightforward, and the liability shield is familiar. A Thai company is a separate legal person and is the most straightforward counterparty for leases, suppliers, and local employment arrangements.
• (B) BOI promotion (where relevant) is only granted to a Thailand-incorporated entity for a specific promoted project: starting with a Thai company avoids subsequent restructuring and preserves access to BOI privileges (including foreign ownership and visa/work-permit facilitation where granted). More on BOI below.
• (C) A more practical point is ‘ease of doing business.’ Thai banks, landlords and counterparties are accustomed to dealing with a local operating company. Even where a branch is legally viable, a Thailand-incorporated entity tends to be simpler to operate, finance and scale locally.

Tax often drives the holding architecture. At a high level, Thailand can levy withholding tax on Thai-sourced income to foreign companies, and capital gains on a share sale can be treated as Thai-sourced depending on the facts. In practice, investors often plan exits through an intermediate holding jurisdiction with a favorable tax treaty (Singapore is common) and structure the exit early. Under the Thailand–Singapore tax treaty, for example, gains from the sale of shares (other than land-rich entities or cases where the shares form part of the business property of a Thai permanent establishment of the seller) are generally taxable only in the seller’s residence state — one reason Singapore/Hong Kong holding companies are frequently seen in foreign group structures.[2]

No introduction to investing in Thailand is complete without discussing Thailand’s foreign business restrictions. In broad strokes, foreign enterprises doing business in Thailand are constrained by (i) the Foreign Business Act B.E. 2542 (1999) (FBA) as the general law on the matter or (ii) sector-specific statutes for regulated industries (e.g., financial services and telecommunications). ‘Foreign’ status for these purposes is determined largely by ownership — not place of incorporation alone — which means incorporating an entity in Thailand will not necessarily confer Thai status. Foreign landholding is a separate (but often related) gate discussed below. As this is an introductory piece, we focus on the FBA; sector-specific regimes will be for another time.

1.2 The FBA

Conceptually, the FBA is a ‘negative list’ regime: a foreigner may generally do business in Thailand unless the relevant activity is restricted (being on the FBA lists). The practical challenge, however, is that the FBA lists are activity-based and drafted broadly — particularly List 3, which captures many service-type businesses and includes a catch-all category for ‘other service businesses.’ This is where the FBA becomes a primary regulatory consideration in structuring Thai operations. The analysis is highly fact- and activity-driven, and in practice turns not only on statutory definitions but also on how regulators characterize the underlying business model.

Two practical consequences follow:

• (A)  Classification is fact-sensitive. Label matters less than substance — what the Thailand entity actually does (and how the business contracts, invoices and performs).
• (B) Services creep is common. Modern business models often bundle services around a permitted core activity. A structure that is compliant for manufacturing-for-sale (as distinct from contract manufacturing, which can itself raise List 3 issues), for example, can still trigger FBA List 3 issues if the Thailand entity also provides installation, maintenance, platform operation or management services.

1.3 Compliance pathways when an activity is FBA-restricted

If an intended activity is restricted under the FBA, the next step is to map the realistic compliance routes. Common pathways include:

• (A) Statutory carve-outs/thresholds built into the FBA itself — most notably certain wholesale/retail models, where the activity can fall outside List 3 if minimum capital thresholds are met (and product-specific restrictions do not apply).
• (B) A Foreign Business License (FBL) — a discretionary permission route for certain List 3 businesses. In practice, timing and predictability can be challenging, and an FBL only provides permission for foreign ownership (not incentives).
• (C) BOI promotion or promotion granted by the Board of Investment of Thailand (BOI) — project-based incentives that may include tax and non-tax privileges and (depending on the promoted activity) foreign ownership privileges that effectively manage the FBA constraint for the promoted project.BOI approval tends to be relatively transparent, with clearer application processes and timelines than the FBL route. That said, certain types of BOI-promoted businesses no longer come with FBA exemption privileges, so this should be verified for the specific activity.[3]
• (D) Industrial Estate Authority of Thailand (IEAT) privileges — available for qualifying projects located in IEAT-sanctioned industrial estates, which can permit foreign ownership in businesses and land.
• (E) The U.S.–Thailand Treaty of Amity — applicable only to qualifying U.S. investors. In practice, U.S. companies often also apply for BOI promotion where available to layer privileges.

1.4 Territorial reach: when offshore activity is typically outside the FBA

As a general rule based on practice and interpretation, Thailand’s foreign business restrictions focus on business carried on in Thailand. Purely offshore operations with no business ‘footprint’ that are not carried on in Thailand (for example, an overseas entity licensing IP from abroad without onshore personnel or service delivery) are generally understood to fall outside the FBA’s jurisdictional reach. The more the model involves personnel, decision-making, contracting or service performance in Thailand, the more likely the FBA analysis is triggered.

2. Land is a separate gate: Land Code concepts are not the FBA

Where the business model requires landholding (freehold rather than leasehold), a separate gate is the foreign landholding restriction under the Land Code. This regime is distinct from the FBA: permission to operate under the FBA does not automatically translate into a right to own land. In practice, land rights are often workable through BOI promotion and/or IEAT mechanisms — each of which is purpose-specific.

In practice, there are two headline pathways that foreign investors typically explore for land-related needs, which happen to be similar to those for the FBA:

• (A) BOI promotion, where a promoted project may be granted land-related rights/privileges (subject to conditions).
• (B) IEAT landholding privileges, where qualifying foreign companies may be permitted to own plots of land in IEAT-sanctioned industrial estates.

Irrespective of the pathway, a common theme is purpose-specificity: the foreign ownership and land-related privileges under BOI/IEAT are tied to a defined project and scope of activity. They are not a blanket permission for a foreign-owned company to operate any business or hold any land in Thailand.

3. Operating licenses and supporting permits: the overlooked aspect

For completeness, foreign ownership analysis is only one part of the legal gating. Many businesses also require operating licenses under sector- or activity-specific laws (for example, the Factory License, import/export registrations, environmental and waste-disposal compliance, and other regulatory touchpoints). Some of these licensing requirements have built-in foreign restrictions (or mandatory local participation).

4. Practical examples and how the framework plays out

4.1 Manufacturing: permitted core, sensitive add-ons

Manufacturing-for-sale is a classic example of a permitted core activity: it is not listed on the FBA lists and manufacturing (as such) is generally not restricted under the FBA; however, associated trading or service components must be analyzed separately. Issues often arise around the ‘add-ons’ and the platform around the factory ­— small tweaks to the business model can change the FBA math.

• Services creep: contract manufacturing ‘as a service’ (e.g., manufacturing to order for a parent company or third parties generally), installation/maintenance, managed services and certain support functions can fall within List 3 service categories and require careful structuring to ensure FBA compliance.
• Land/site: factory projects often need secure site control. Foreign landholding constraints often push investors toward BOI promotion, IEAT locations and/or robust lease-based alternatives.
• Foreign manpower: for standard (non-BOI) structures, practical work-permit expectations (capitalization and Thai-employee headcount) can become a constraint for technical-heavy operations. Investors often address this through BOI promotion and, where appropriate, locating in industrial estates — both of which can relax immigration/work permit quota constraints.

The takeaway is that “manufacturing” is rarely just manufacturing. The legal perimeter should expressly state whether the Thailand entity will also provide services or support functions.

4.2 Trading: capital thresholds and category-specific restrictions

Trading sits at the intersection of the FBA’s List 3 and statutory carve-outs. Certain wholesale/retail models can fall outside List 3 provided minimum (paid-up) capital thresholds are met (often analyzed across each shop/outlet) and the product category does not trigger a separate restriction.

A frequently overlooked nuance is that the sale of food and beverages is separately listed as a restricted activity under List 3 (or another FBA List altogether). In other words, ‘retail’ in the colloquial sense is not always ‘retail’ for FBA purposes. This is a common trap for foreign consumer brands that assume a general trading carve-out will coverconsumer-facingF&B distribution.

4.3 IP licensing: service classification, but jurisdiction matters

IP licensing is typically treated as a service-type activity, which can raise List 3 sensitivity if the licensing business is carried on in Thailand by a foreign-owned entity. Where the licensing is genuinely offshore and the licensor is not carrying on business in Thailand, it is generally understood to sit outside the FBA. The key is to avoid building a Thailand-based service-delivery footprint that recharacterizes the arrangement.

4.4 Stacking

In real life, these pathways are not mutually exclusive. PRC and other foreign investors often stack exemptions and privileges where permitted or required. This is where upfront and proper legal structuring tends to pay for itself.

In our next article, we will complete this meaty topic of introduction to FDI in Thailand and explore the BOI and IEAT pathways and privileges and certain location-based incentives in more depth.