Introduction to Korean investment in Thailand

South Korea ranks among the top 10 foreign investors in Thailand, with the Board of Investment of Thailand (BOI) promoting USD1.1 billion in investment projects from 2021 to 2023. The primary sectors attracting South Korean investors include electrical appliances and electronics, high-value services, and the machinery and vehicle industries. The BOI also offers incentives for emerging industries such as EVs, semiconductors, medical and biotechnology, and digital technology.

FI restrictions, incentives

Foreign investors in Thailand face some legal restrictions and challenges. The Foreign Business Act (FBA) defines foreign companies as those with 50% or more foreign ownership of share capital, rather than control, including any entities incorporated outside of Thailand.

These companies’ ability to engage in investment in Thailand is limited if they do not hold a foreign business licence (FBL) or a foreign business certificate (FBC). Certain business activities are completely prohibited for foreign companies, such as agriculture and land trading, while others require discretionary approval from the Ministry of Commerce, such as trading and services. A foreign company can obtain an FBC if it receives investment privileges from the BOI or other agencies.

In addition, other specific laws impose restrictions on foreign investment in certain businesses such as financial institutions (including virtual banks), insurance, hospitals, and the manufacturing and importing of medical devices.

Land ownership is also strictly prohibited for foreigners, defined as foreign nationals, entities incorporated under foreign laws, including Thai entities with foreign ownership exceeding 49% of the registered capital, or having a majority of shareholders being foreigners.

Exemptions from foreign investment and land ownership restrictions are available under the Investment Promotion Act (1977), the Industrial Estate Authority of Thailand Act (1979), and the Eastern Economic Corridor Act (2018). A summary of available incentives is outlined in the accompanying chart.

Common business forms

The most common business form for operation in Thailand is a limited company. A limited company is a distinct juristic person, having its own assets and liabilities. The liability of the shareholders in a company is limited to the amount of unpaid share capital. The structures commonly used for investment in Thailand are:

• Wholly-owned company. Foreigners may own all shares in a limited company, which would result in the company being considered as a “foreigner” under the FBA and subject to an FBL or FBC requirement to operate restricted business activities.
• Joint venture company. Foreign investors may choose to partner with Thai operators and hold minority shares. Corporate statutory documents and a joint venture agreement can specify terms to protect minority shareholders’ rights, for example voting and quorum requirements for important matters. It is also important to note that “nominee arrangements” are strictly restricted and subject to severe penalties.

In terms of business acquisitions, several methods are available including share acquisition, asset acquisition, amalgamation and merger.

For certain business sectors including those in oil, gas and banking, it is common to establish a Thai branch office, which holds the same legal entity as its foreign parent company. In this case, an FBL or FBC must be obtained for operations of restricted businesses in Thailand.

Other points

The following points should also be considered when investing in Thailand.

• Work permits and visas. Work permits and visas must be obtained for expatriates before employment begins. To obtain a work permit and visa for an expatriate, the company must have a minimum paid-up capital of THB2 million (USD58,000) and hire four Thai employees.
• Foreign exchange control. Outward remittances require permission from the Bank of Thailand (BOT). However, the person remitting the money is not required to obtain approval directly from the BOT if the purpose of the remittance falls into the permitted purposes prescribed under the exchange control rule, for example dividends, loans, interest or fee payments. In such cases, the person remitting the money must obtain approval from an authorised BOT agent (a commercial bank) by submitting the supporting documents to the agent prior to the fund transfer.
• Tax. The current corporate income tax rate is 20%. There is a Double Tax Bilateral Treaty between Thailand and South Korea that can prevent or reduce double taxation in some cases.