Key Takeaways
- Thailand’s Foreign Business Act (FBA), enacted in 1999, had its reform framework approved in principle by the Cabinet in April 2025
- The reform is closely linked to Thailand’s OECD accession process — part of a policy shift from protectionism toward national competitiveness
- FBA liberalization and a crackdown on nominee shareholders are proceeding in tandem — two sides of the same coin
Introduction — Why FBA Reform Matters to You
For Japanese companies considering a move into Thailand, the Foreign Business Act (FBA) has long been one of the central regulatory hurdles. Questions like “Does our business fall under a restricted category?” and “How do we structure Thai shareholding?” arise almost immediately in any market entry planning process.
That same FBA — unchanged in its fundamental architecture since it was enacted in 1999 — is now facing its most significant reform in over 25 years. In April 2025, the Thai government obtained in-principle Cabinet approval for an FBA reform framework. While the specific provisions remain undrafted, the direction of reform has real implications for how Japanese companies design their Thailand strategies.
For a detailed explanation of the FBA’s foundational framework — the definition of “foreign person,” the Annex 1–3 restricted business lists, and the FBL licensing process — please refer to our earlier article: Thai Limited Companies and the Foreign Business Act [Series Part 3]. This article focuses specifically on the reform background, the key policy changes under consideration, and what they mean in practice.
1. Why Is This Reform Happening Now?
The OECD Accession Connection
The most significant driver behind the FBA reform is Thailand’s OECD accession process. OECD membership assessments include evaluation of the FDI Regulatory Restrictiveness Index (FDIRRI), and Thailand’s foreign investment restrictions under the current FBA place it at the higher end of the scale relative to existing OECD members. This has generated sustained pressure to liberalize.
Thailand also moved swiftly to implement BEPS Pillar 2 (the global minimum 15% corporate tax rate) effective January 2025 — the FBA reform is broadly seen as a continuation of that international normalization trajectory. For Japanese companies familiar with the gradual liberalization of Japan’s Foreign Exchange and Foreign Trade Act, the direction of travel will feel familiar.
From Protectionism to Competitiveness
Thailand’s government has made attracting foreign investment in startups, high-technology industries, and digital services a national priority. The consensus that the FBA — designed for the business environment of the late 1990s — no longer fits the realities of modern commerce has been building for years. The reform is positioned as part of a broader shift: from protecting domestic industries to actively building Thailand’s position in the global economy.
2. The Current FBA at a Glance
To understand what is changing, it helps to recall what the current law requires. (For a full explanation, see Series Part 3.)
- Definition of “foreign person”: Any company in which foreign capital accounts for 51% or more of shares is treated as a “foreign person” subject to FBA restrictions
- Restricted business lists (Annexes 1–3): Annex 1 — outright prohibition; Annex 2 — Cabinet approval required (FBL); Annex 3 — Foreign Business Committee approval (FBL)
- Available entry routes: Obtain an FBL, obtain BOI investment promotion (which provides an FBA exemption for promoted activities), or structure a joint venture with a Thai majority shareholder
3. Key Points of the 2025 Reform Framework
The reform remains at the “in-principle Cabinet approval” stage — no draft legislation has yet been finalized. The following reflects the direction of policy as publicly communicated by the Ministry of Commerce and related agencies.
① Revision of the Restricted Business Lists (Annexes)
A review of Annexes 2 and 3 is under consideration, with the possibility of opening selected categories to full foreign ownership (100%). Graduated liberalization — allowing foreign ownership above 50% but below 100% under certain conditions — is also reportedly being discussed. Which specific sectors would be affected remains undecided, though digital services, logistics, and healthcare are frequently cited as candidates.
② Revisiting the Definition of “Foreign Person”
The current 51% threshold — under which any company with more than half its capital in foreign hands is treated as a foreign entity — is under review. There is discussion of introducing more flexible criteria based on sector and investment amount, analogous to Japan’s Foreign Exchange Act, where different thresholds and prior notification requirements apply depending on the industry.
③ Special Provisions for Startups and High-Tech Companies
A special regime for startups and high-technology companies is being considered in connection with the Draft Start-up Promotion Act currently in legislative deliberation. Related reforms to investment instruments — including convertible note structures — are also being discussed, with the clear goal of attracting venture capital and innovation-driven investment.
④ Streamlining Administrative Procedures
Simplification and digitization of the FBL application process (linked to the Ministry of Commerce’s DBD Biz Registration system) is on the agenda. The current process can take several months from application to approval — any reduction in this timeline would be a meaningful benefit for companies operating under time pressure.
⑤ Intensified Enforcement Against Nominee Shareholders
Running in parallel with FBA liberalization is a sharply increased focus on nominee shareholders. In April 2025, the Ministry of Commerce announced an investigation targeting 46,918 companies suspected of using nominee arrangements. The sectors targeted include tourism, real estate, e-commerce, and construction — a broad sweep across industries commonly associated with FBA workarounds.
4. Practical Implications for Japanese Companies
① For Companies Planning to Enter Thailand: Should You Wait for Reform?
“Let’s wait and see how the reform turns out” is an understandable instinct, but it carries its own risks. The timeline for reform — from draft legislation to parliamentary passage to enforcement — remains genuinely unclear. Waiting too long may mean missing business opportunities.
A practical approach worth considering: anchor your entry strategy around BOI investment promotion (which enables full foreign ownership regardless of FBA reform outcomes), while designing a flexible shareholding structure that can adapt if reform opens new possibilities. If a joint venture is the right initial structure, build in provisions for future shareholding adjustment — and make sure your Shareholders’ Agreement (SHA) reflects that optionality from day one.
② For Companies Already in a JV: Review Your SHA
If your current JV structure places majority shareholding with the Thai partner specifically to navigate FBA restrictions, reform could eventually allow you to rebalance that ownership. The critical question is whether your Shareholders’ Agreement already contains provisions governing shareholding changes.
For a detailed guide to SHA structure and design, see Joint Ventures and Shareholders’ Agreements: Designing Your Thailand Presence [Series Part 5]. FBA reform is a good trigger to revisit your existing SHA and confirm whether it gives you the flexibility you may need.
③ For Companies Already Operating as Wholly Foreign-Owned Subsidiaries
If your subsidiary is already operating with full foreign ownership under BOI promotion or an FBL, the direct impact of FBA reform is likely to be limited. However, if reform eliminates FBL requirements for additional business categories, it may lower the barrier to expanding your scope of activities. Categories currently requiring a separate FBL may become freely accessible — worth reviewing against your future business plans.
[Column] Liberalization and Enforcement Are Moving Together — A Word on Nominee Risk
One aspect of FBA reform that sometimes gets lost in coverage is that the expansion of legitimate foreign investment pathways and the crackdown on illegitimate ones are advancing simultaneously.
The implicit message from Thai authorities is clear: as legal routes become more accessible, there is no remaining justification for using informal workarounds. The DBD’s nominee investigation program has escalated markedly since 2024, and the April 2025 announcement of a 46,918-company review is a highly visible signal of that intent.
For companies currently relying on nominee arrangements, the risks — to the company, its beneficial owners, and the nominees themselves — are real and growing. The appropriate remediation path (restructuring shareholding to reflect genuine ownership, obtaining an FBL, switching to BOI promotion, etc.) depends on the specifics of each situation. Early consultation with professionals who understand both Thai and Japanese law is worth serious consideration.
5. Timeline and Outlook
The Ministry of Commerce is currently in the stakeholder consultation phase, gathering input from related agencies and industry groups. The content and parliamentary submission timeline for a formal draft bill remain uncertain. That said, given the OECD accession schedule, submission of draft legislation during 2026 appears to be within the range of realistic scenarios.
The specific provisions that emerge from the consultation process may differ significantly from what has been discussed publicly so far. We will continue to monitor developments and publish updates as the situation evolves.
Summary — Three Things to Do Now
The specifics of FBA reform will not be clear for some time. But there are steps you can take now to ensure you are ready to move quickly when they are.
① Confirm whether your business activities fall under FBA-restricted categories
Map your current and planned activities against Annexes 1–3. If your sector is one where liberalization is under discussion, this analysis may directly affect your forward planning.
② Review shareholding-change provisions in your Shareholders’ Agreement
If you are in a JV, check whether your current SHA gives you the flexibility to adjust shareholding if the reform opens the door to higher foreign ownership. If not, it may be worth addressing that now.
③ If you are using nominee arrangements, begin the remediation process early
Enforcement is intensifying. The longer corrective action is delayed, the higher the risk. Taking steps now — before regulatory pressure arrives — is the more prudent course.
For all three of these areas, support from professionals with expertise in both Japanese and Thai law can add significant value. Our firm works in collaboration with JTJB International Lawyers’ Thai-qualified attorneys to provide guidance across both legal frameworks.
If you would like to understand how FBA reform may affect your Thailand strategy — whether you are planning a first entry or reviewing an existing structure — please feel free to reach out. We provide advice that draws on both Japanese and Thai legal perspectives.
This article is for general informational purposes about Thailand’s legal system and does not constitute legal advice under Thai law. For specific matters, please consult a Thai-qualified legal professional. Our firm works in collaboration with JTJB International Lawyers’ Thai-qualified attorneys.