An alternative for foreign investors to achieve 100% ownership

The FBL process can be time-consuming and requires a myriad of information and documentation. As a result, many foreigners find Thai joint-venture partners to form Thai enterprises to carry out business operations without the need to obtain an FBL.

Many times, a mandate of foreign investors is that they maintain majority ownership and control of their intended Thai operations. Some of the reasons behind this mandate include difficulty in identifying strategic joint-venture partners, and foreign accounting standards requiring at least a majority ownership level for financial consolidation. As with most rules, there are exceptions, and many foreign investors benefit from a provision in the law allowing them to conduct manufacturing businesses in Thailand through 100-per-cent foreign-owned companies without the need of an FBL. But not all foreign-owned businesses in Thailand are engaged in manufacturing, so what relief is available for foreigners wanting to operate service and trading companies, and still achieve 100-per-cent foreign ownership?

Some relief may be found with the Board of Investment (BoI), which can grant the trade and investment support offices (Tiso) incentive to help facilitate the operations of a foreign company conducting different types of services and trading in Thailand, generally without the requirement of an FBL. A foreign company granted a Tiso, though, must obtain a foreign business certificate, which is less complicated than obtaining an FBL.

Some of the types of service and trading businesses allowed under the Tiso incentive include: monitoring and/or servicing affiliates; advisory services on business operations (except for those in trading securities and foreign-currency exchange); information services on goods sourcing; engineering and technical services (except those related to architecture and civil engineering); testing and certifying standards of products, production and services; export trading; business activities related to machinery, engines, tools and equipment, such as importing for wholesaling, training, installation, maintenance and repairs; software design and development; and wholesaling products manufacturing in Thailand.

With respect to accounting, legal, advertising, architectural and civil-engineering services, appropriate governmental agency approval must be obtained prior to the Tiso application.

Under the promotion of the BoI, other incentives may also be available to foreign investors, including work permits for foreign workers, land ownership and remitting money abroad in foreign currency.

A foreign investor contemplating a Tiso business can apply for the Tiso incentive with the BOI via its Thai affiliate. The Tiso project must have new investments of at least Bt1 million, excluding the cost of land and working capital, and annual operating expenses of at least Bt10 million.

Tiso is a very attractive, but often overlooked, option for foreign investors seeking to operate service and trading businesses in Thailand, and still maintain majority ownership and control.

This information is intended as a general guide only. Tax law is complex and professional advice should be taken before acting on the information provided.

KANOKPAN JARIKASEM is assistant manager, PMG Phoomchai Tax.