There is prohibition in foreign investment to start a wholesale or retail business in Thailand under the Foreign Business Act of 1999. However, there are exceptions on the basis of minimum capital requirements. Moreover, the conditions of engagement of a foreign company in a retail and a wholesale business are not identical. Additionally, the issue is further complex due to the legal necessities of other minimum capital requirements. The Act does not specify the distinction between wholesale and retail. The DBD, on the other hand, addressed the issue in a July 2015 advisory opinion.
Start a Retail or Wholesale Business in Thailand: Legal Classification
According to Annex Three (14), the sale of a product that the foreign business did not produce itself through a sales agent and for which the sales agent will receive a commission falls under the category of “retail business.” This situation would be classified as a direct sale of goods to the consumer, with the use of a sales agent as one possible retail channel.
Annex Three (15)states that the sale of a product that the foreign business did not produce through a distributor falls under the category of “wholesale.”
According to the Foreign Business Act, if a foreign business hires another firm to create advertising for its products and pays service fees, the value of the products equals the service fees. The activity does not require a Foreign Business License.
Legal Framework to Start a Retail or Wholesale Business in Thailand
The export of a product outside Thailand does not fall under any of the Foreign Business Act‘s restricted categories. Additionally, a foreign business engaging in such activity does not need a Foreign Business License. However, Section 14, paragraph one, applies and stipulates the minimum capital requirement of 2 million baht for a foreign company. This is mandatory before beginning operations in Thailand.
A foreign business may have a majority foreign ownership and wish to engage in a business. If the business is “retail” or “wholesale”, it must apply for a Foreign Business License. The Director-General of the Department of Business Development issues this, with approval from the Foreign Business Committee.
However, the exception is if the minimum capital, for either retail or wholesale business is at least 100 million baht. For retail business, a minimum capital of 100 million baht allows for up to five shops. Whereas, the same capital for the wholesale business allows for up to only one.
Furthermore, allocation of this amount of capital is for either the wholesale or retail. The investor can use it only for business purposes. They cannot include this in the company’s registered capital according to the Foreign Business Act or other laws.
Minimum Capital Requirement for Retail or Wholesale Business in Thailand
Section 14 and Section 46, paragraph 1 of the Foreign Business Act, B.E. 1999, were promulgated on August 28, 2019.
Article 1:
To operate a business in Thailand, a foreign legal entity must have a minimum capital of THB 2 million, according to Section 14, paragraph 1.
Article 2:
Under Section 14, paragraph 2, foreign legal entities must have a minimum capital of 25% of their average annual estimated expenses for the first three years of operation. THB 3 million is the minimum amount required.
2.1 If the foreign legal entity’s business operation lasts less than three years, the foreign legal entity will calculate average estimated expenses for the duration of the business operation. It must be at least THB 3 million.
2.2 Paragraph 1 of the Article defines the term “estimated expenses”. It is the amount of money that the foreign legal entity will spend in Thailand each year to acquire assets and conduct business.
Article 3:
Foreign legal entities that are not registered in Thailand must bring in or remit the minimum capital required to operate a business in Thailand within three years of the date the business began (Section 14, paragraph 1). Alternatively, it can be three years after they receive the permission to conduct business in Thailand (Section 14, paragraph 2). Within three months, they must bring in at least 25% of the minimum capital. 50% of the minimum within one year, and at least 25% of the minimum capital per year thereafter.
3.1 If the foreign legal entity’s business operations have lasted less than three years, the minimum capital must be brought in or remitted within six months of the date business began (Section 14, paragraph 1), or six months of the date permission to conduct business was granted (Section 14, paragraph 2).
Article 4:
By August 29, 2029, foreign-owned businesses in Thailand that are established under treaty and trade agreement privileges must bring in or remit the required minimum capital to Thailand.
Article 5:
Within 15 days of being brought into or remitted to Thailand, foreign legal entities must submit proof of minimum capital remittance to the Department of Business Development.
Article 6:
Foreign-owned businesses established before the effective date of this regulation must bring in or remit the required minimum capital to Thailand by August 29, 2029.
The Bottomline
To start a Retail or Wholesale Business in Thailand, as a foreigner, you must have a complete knowledge of the following:
- Company Registration Process in Thailand for Foreigners
- Accounting Principles and Taxation Regulations in Thailand
- Manpower Procurement Policies
- Import/Export Policies
- Local trade policies
Do you think that you can master all these fortnightly? It is never possible for foreign investors to do so. We understand this shortcoming and anticipate this issue by providing custom business and legal solutions to foreign investors.
The retail and wholesale industry in Thailand is growing immensely. As a foreign investor, if you wish to start a retail or wholesale business in Thailand, contact us for legal and registration assistance. You can email us your requirements at [email protected] for a quick round of free consultation.
