Foreign businesses providing loans to affiliates and subsidiaries

Under the Foreign Business Act, foreign businesses are generally restricted from providing loans unless they have first obtained a foreign business license (“FBL”).

Keywords: Mazars, Thailand, Foreigner, Land, Legal, loan

4 September 2023

However, the Ministry of Commerce has set out certain regulations under which foreign businesses are not required to obtain an FBL to provide loans to affiliates and subsidiaries in Thailand. Ministerial Regulation No. 4 (2019) states that a foreign business must hold shares in, or have management control of, affiliates or subsidiaries to which it provides loans.

If the foreign business does not meet these conditions, then it can provide loans to affiliates or subsidiaries in one of the following ways:

Options	Scope of business and activities	Key qualification/ requirements	Incentives
Apply for a BOI certificate to conduct business as an International Business Center (“IBC”)	Providing loans in foreign currency to affiliates or subsidiaries in foreign countries. Providing loans in Thai baht to affiliates or subsidiaries in Thailand. Providing loans in Thai baht to affiliates or subsidiaries in Vietnam and countries bordering Thailand for trading or investing in Thailand or those countries only.	The foreign business’s scope of business must already include one or more additional IBC business activities, except for acting as a treasury centre and conducting international trade activities. The foreign business must have registered capital of at least THB 10 million.	Non-tax incentives, such as: work permit and visa applications; and land ownership.
Apply for a BOI certificate to conduct business as a Trade and Investment Support Office (“TISO”)	Same as an IBC	The foreign business’s scope of business must already include one or more additional TISO business activities. The foreign business must have annual selling and operating expenses of at least THB 10 million.	Same as an IBC
Apply for an FBL	No limitations	The foreign business provides loans to its affiliates or subsidiaries, but the conditions set out in Ministerial Regulation No. 4 are not met. The foreign business must have minimum capital of THB 3 million or 25% of an average three years’ estimated expenses, whichever is greater.	None