Thailand’s economy has matured and is growing in certain sectors, albeit gradually,2 as businesses position themselves for the predicted economic growth in South-East Asia. The World Bank has forecast 2.5 per cent growth in GDP because of the positive effects from government stimulus measures and improved export growth. Mergers, acquisitions and joint ventures continue to play a significant role in inbound and outbound business expansion throughout Thailand and South-East Asia.


When companies are considering inbound acquisition opportunities in Thailand, the principal considerations investors need to be aware of are the restrictions on the business activities that can be undertaken by foreign entities.

The cornerstone piece of legislation relating to foreign investment and M&A transactions in Thailand is the Foreign Business Act 1999 (FBA). The operation of businesses in Thailand by foreign nationals is restricted by the FBA under the administration of the Ministry of Commerce. The FBA restricts (and in some cases forbids) foreign nationals from engaging in a wide range of business activities, including most service businesses. For the purpose of the FBA restrictions, a ‘foreigner’ is classified as a foreign individual, a company incorporated outside Thailand, or a company incorporated in Thailand that is majority-owned by foreign individuals or foreign companies.

The schedule of the FBA sets out three lists of business categories in which the participation of foreign nationals is either prohibited or restricted. Foreign nationals are prohibited from participating in the businesses specified in List 1, which include antiques trading, broadcasting, farming and forestry. Foreign nationals are restricted from participating in businesses specified in List 2 unless they obtain a foreign business licence (FBL) from the Thai Cabinet. List 2 includes activities related to national safety, agriculture, arts and culture, natural resources and the environment. Finally, foreign nationals are restricted from participating in the businesses specified in List 3 unless they obtain an FBL from the Director-General of the Department of Business Development with the approval of the Foreign Business Committee. List 3 comprises a total of 21 categories of restricted businesses in which Thais are not yet ready to compete with foreigners, including accountancy, engineering, construction (with certain exceptions), retailing and wholesaling (with certain exceptions), advertising, hotel operation (excluding hotel management), tour guiding, sale of food and beverages, and the catch-all category ‘other services’.

A foreigner engaging in a restricted business under the FBA can obtain a foreign business certificate (as opposed to an FBL). Generally, the administrative process for obtaining a foreign business certificate is less onerous than that for obtaining an FBL.

To obtain a foreign business certificate, a promotion certificate is required from the BOI, or the foreigner must be eligible under a number of treaties to which Thailand is a party, such as the treaty of amity between the United States and Thailand, the ASEAN Framework Agreement on Services (AFAS Treaty)3 and the ASEAN Comprehensive Investment Agreement (ACIA Treaty)4 (collectively referred to as the ASEAN Treaties), etc.

An entity wishing to enjoy protection under either of the ASEAN Treaties must be incorporated or registered in Thailand, and no less than 50 per cent of its share capital must be held by ASEAN nationals or a company incorporated under the laws of an ASEAN country. More than half of the directors of the juristic person and the authorised directors must be ASEAN nationals.

The Office of the BOI oversees various tax and non-tax incentives and privileges applicable to foreign investment in Thailand. Some of the investments include those that would otherwise be restricted to foreign nationals under the FBA. This incentive alone is attractive to many foreign investors, as it allows foreign investors to operate the foreign majority-owned business in Thailand and obviates the need to apply for an FBL.

Incentives offered by the BOI to eligible foreign investors may include exemptions from or a reduction of corporate income tax up to a maximum of eight years, exemptions from or reductions of import duties on machinery and raw or essential materials, permission to operate business as a majority foreign-owned company or the acquisition of land for use by foreign corporations.


In December 2014, the BOI announced comprehensive changes to its investment incentive programme in BOI Notification No. 2/2557 regarding policies and criteria for investment promotion. The notification revised the structure of investment promotion policies and criteria to support the BOI’s current vision on investment promotion.

i Rationale for change

In setting forth the rationale for revising Thailand’s investment promotion strategies, the BOI cited the need for Thailand to become more competitive in key industries prior to the commencement of the ASEAN Economic Community (AEC), including the direction of Thailand’s development under the National Economic and Social Development Plan, and the country’s development policies for the agricultural, industrial and services sectors, in order to enhance the country’s competitiveness and achieve sustainable development in the long run.

ii BOI incentives

The Board stipulates two types of incentives: activity-based incentives and merit-based incentives. The Board classifies two groups of incentives based on activities.

Group A consists of activities that will receive corporate income tax incentives, machinery and raw materials import duty incentives, and other non-tax incentives. The corporate income tax exemption available for Group A ranges from three to eight years depending on the activities. The maximum corporate income tax exemption is eight years without being subject to a corporate income tax exemption cap.

Group B consists of activities that will receive only machinery and raw materials import duty incentives and other non-tax incentives.

Merit-based incentives are additional to the activity-based incentives and will include three elements:

  • a Competitiveness enhancement: for example, research and development, donations to technology and human resource development funds, educational institutions, specialised training centres, research institutes or governmental agencies in the science and technology field in Thailand, IP acquisition, licensing fees for commercialising technology developed in Thailand, advanced technology training, development of local suppliers, and product and packaging design. An additional one to three years of corporate income tax incentives will be granted if the qualified investment or expenditure is not less than the specific ratio (from 1 to 3 per cent) of the project’s combined total revenue for the first three years, or not less than the specific amount of expenses (whichever is less).
  • b Decentralisation: three additional years of corporate income tax exemption and other tax privileges will be granted to projects located in 20 provinces with low per capita income.
  • c Industrial area development: Projects located within industrial estates or promoted industrial zones will be granted one year of corporate income tax exemption.

The total period of corporate income tax exemption for each project will, in no event, exceed eight years in total.

To promote production efficiency and develop competitiveness, the BOI will grant an exemption from import duty on the following machinery throughout the period of investment promotion: machinery used for research and development; machinery used for pollution prevention or treatment; and machinery used for manufacture in the electronic products and parts businesses for improving or replacing existing machinery or for increasing production capacity.


M&A deal flow, both inbound and outbound, remained relatively steady in 2015–2016. The following are some of the most significant transactions that took place during the past year.

  • a Berli Jucker PCL, at the forefront of the trading and manufacturing fields in Thailand, acquired a controlling stake (58.55 per cent) of Big C Supercenter PCL valued at €3.15 billion.
  • b TCC Holding Co, Ltd acquired METRO Cash & Carry Vietnam Ltd, the biggest foreign-owned player in Vietnam’s modern grocery market and a leading player in Vietnam’s modern grocery market with 19 cash and carry stores across 14 cities, valued at €655 million.
  • c Taobao China Holding Limited, a member of the Alibaba Group operating an online shopping website, acquired a controlling stake in the Lazada Group, a leading e-commerce platform in South-East Asia. The transaction consisted of an investment of approximately US$500 million in the newly issued equity capital of the Lazada Group and the acquisition of shares from certain shareholders of the Lazada Group for a total investment by Alibaba of approximately US$1 billion.
  • d Jardine Cycle & Carriage Ltd, a member of the Jardine Matheson Group, acquired 57.27 million ordinary shares representing approximately 24.9 per cent of the issued share capital of Siam City Cement Public Company Ltd, Thailand’s second-largest cement manufacturer, from Holcim subsidiary Thai Roc-Cem Ltd for US$615 million.
  • e Tipco Asphalt PCL (TASCO), Thailand’s leading asphalt maker acquired shares valued at 1.9 billion baht in five subsidiaries (in Singapore, Vietnam, Indonesia and Thailand) of France’s Colas Group, the world’s largest road construction company and a major supplier of blended bituminous products for road surfacing. The acquisition will enable TASCO to boost sales in Indonesia and Vietnam by approximately 200,000 tonnes in 2016.
  • f Vintage Engineering PCL (VTE) acquired 12 per cent shares in Green Earth Power (Thailand) Co, Ltd (GEP). The acquisition was transacted through the combination of the subscription of new ordinary shares in GEP, for which VTE paid the subscription price in cash; and the purchase of existing shares in GEP from its major shareholder, for which VTE issued its new shares to that major shareholder of GEP (a share swap). GEP is a privately owned holding company that invests in the development and operation of solar power projects throughout ASEAN and Japan. VTE is an engineering firm that provides services for full-scale engineering systems for a wide variety of residential, hotel, hospital, shopping mall and factory buildings.
  • g Golden Land Property Development Company Limited sold over 685 million newly issued ordinary shares of Golden Land to Frasers Property Holding (Thailand) Co, Ltd, a subsidiary of Frasers Centrepoint Limited, one of the world’s leading property development companies incorporated in Singapore. The deal was worth 4.97 billion baht. Golden Land is a listed company in the Stock Exchange of Thailand. This was the first deal conducted under the new Securities and Exchange Commission rules governing the offering of shares to private placement.


The government instituted several schemes to promote Thailand as a regional hub for trading, financial services and investment, such as the tax schemes for international headquarters (IHQ) and international trading centres (ITC). IHQ and ITC activities have been included in the new investment promotion strategies.

An IHQ is a company established in Thailand to carry on managerial services, technical or supporting services or financial management of its associated enterprises or branches in Thailand or in overseas countries. An ITC is a company established in Thailand to engage in the business of buying and selling goods, raw materials and parts, as well as providing services related to international trade to foreign juristic entities.

In May 2015, the Revenue Department announced Royal Decree Nos. 586 and 587 to provide tax incentives for a certain period of time for IHQ and ITC businesses, respectively. The main incentives are summarised as follows.

  • a A 15 per cent personal income tax rate applies on the income of expatriates who work for IHQs and ITCs.
  • b A reduction of corporate income tax rate from 20 to 10 per cent applies for IHQs on net profits derived from the provision of a qualifying managerial service, technical support or financial management services, and on royalty income received from Thai affiliates.
  • c A corporate income tax exemption for 15 accounting periods applies for IHQs on income derived from a qualifying managerial service, technical support or financial management services provided to, and royalty, dividend income received from, affiliates incorporated under foreign law, as well as on gains derived from the transfer of shares in such companies.
  • d A corporate income tax exemption for 15 accounting periods applies for IHQs and ITCS on income derived from the overseas procurement of goods and sales, provided the goods are not imported into Thailand, and on international trade-related services with overseas companies (e.g., procurement of goods, warehousing and transportation of goods, and insurance).
  • e A corporate income tax exemption applies on qualified dividends distributed and interest paid by an IHQ to a foreign company, as well as an exemption from the specific business tax on any income derived by an IHQ from loans granted to affiliates.

IHQs and ITCs must meet a number of requirements to receive the above incentives. For example, the company must have paid-up capital of not less than 10 million baht and annual operating expenses paid to recipients in Thailand of at least 15 million baht, provide services to affiliates incorporated under foreign law and obtain an approval from the Director-General of the Revenue Department.

IHQs and ITCs are now replacing regional operating headquarters and international procurement offices that are no longer listed as BOI eligible activities. Since IHQs and ITCs are eligible for relaxed criteria (e.g., no minimum number of service recipients in foreign countries is required) without reducing tax privileges, IHQs and ITCs are currently attractive to various investors in Thailand.


In Thailand, the most common form of financing for an acquisition depends on whether the loan is a leveraged loan or a simple acquisition loan. Basically, banks require the assets that have been acquired to serve as the security for the loan itself. The security that is required in the case of a share acquisition is a share pledge and, in the case of an asset acquisition, the mortgage of the asset or real property, for example, hotel, building or land. As always, the secured assets will also be subject to a negative pledge. Financial covenants will be required from the borrower to ensure that he or she is able to service the debt. In leveraged finance, the financial covenant will be applied to the target that has been acquired, as the loan is given on the financial strengths and creditworthiness of the target, and the dividend from the target will be a source of repayment. Private equity (PE) plays a significant role for both the acquirers and the sellers.


The Labour Protection Act (as amended (LPA)) aims to protect employees by allowing them to maintain employment privileges following a merger. The LPA provides that, in a merger, all rights and duties of the employees will be assumed by the new employer.

However, this could be an issue if an employee does not want to work for the new employer. When the existing employer ceases to operate and wages are no longer paid to the employee, the contract with the employee will terminate. The existing employer will be responsible for severance pay and any other termination payment to the employee, such as payment in lieu of advance notice, etc.


Tax law developments in Thailand during the first half of 2016 include the following.

i Reduction in the corporate income tax rate for small and medium-sized enterprises

The Cabinet has approved a reduction in the corporate income tax rate from 15 to 10 per cent for companies or juristic partnerships that have paid-up capital not exceeding 5 million baht at the end of the last accounting period, and income from sales and services in the accounting period not exceeding 30 million baht. This measure applies to accounting periods starting on or after 1 January 2015 up until 31 December 2016. The tax rate after 31 December 2016 shall be reverted from 15 to 20 per cent, as summarised below.

Net profit

Tax rate

For accounting periods starting from 1 January 2015 to 31 December 2016

≤ 300,000 baht


Over 300,000 baht

10 per cent

For accounting periods starting from 1 January 2017 onward

≤ 300,000 baht


> 300,000 – 3,000,000 baht

15 per cent

Over 3,000,000 baht

20 per cent

ii Permanent reduction in corporate income tax rate

For accounting periods commencing on or after 1 January 2016 onwards, the corporate income tax rate was reduced from 30 per cent to 20 per cent, in accordance with the Act Amending the Revenue Code (No. 42).

iii Tax incentives for real estate investment trust (REIT) investment

Royal Decree No. 599 was issued to promote investment in REITs by offering the following incentives:

  • a exemptions shall be granted for personal income tax and corporate income tax to unitholders of property funds on income from the conversion of property fund units into a trust certificate that represents such units, on the condition that the conversion arises from the conversion of a property fund into a REIT; and
  • b exemptions shall be granted to property funds with regard to VAT, specific business tax and stamp duty, based respectively on the amount of the tax base or income, or on the execution of an instrument, or any transfer or creation of rights over assets arising from the conversion of property funds into a REIT.

The tax exemptions shall apply from 25 February 2016 to 31 December 2016.

iv Tax exemptions for venture capital (VC) and PE

The main features of Royal Decree No. 597, which provides tax exemptions for VC and PE trusts,5 are as follows:

  • a For those VC firms that qualify, corporate income tax exemptions are available for 10 consecutive accounting periods on dividends received from a targeted business6 (a non-listed company in which investment is made) and capital gains derived from the transfer of shares of a targeted business. In relation to the exemption from corporate income tax on capital gains, the targeted business must derive not less than 80 per cent of its total income from a government-supported business7 in the accounting period prior to the period in which the VC firms receive the capital gains revenue from the transfer of shares in the targeted business.
  • b Subject to specific qualifications, dividends distributed from the tax-exempt income of VC firms and capital gains from a transfer of VC firms’ shares are exempted from personal income tax and corporate income tax.
  • c For personal income tax and corporate income tax exemptions granted on dividends distributed from a PE trust, such dividends must be paid out of the income the PE trust derives from its investment in the targeted business of the PE trust (but only the income generated from government-supported business). Personal and corporate income tax exemptions are also granted on capital gains from the transfer of trust units in a PE trust investing in a targeted business.
  • d VC firms and PE trusts must satisfy certain conditions to qualify for the corporate income tax exemptions on dividend income and capital gains. For example, they must have paid-up capital of at least 20 million baht on the last day of each accounting period; hold shares in the target business or hold shares in the target business and other business in Thailand that does not conduct a government-supported businesses; and be registered as a VC firm or PE trust with the Office of the Securities and Exchange Commission by 31 December 2016.


Merger control in Thailand is governed by the Trade Competition Act (1999) (TCA). Section 26 of the TCA prohibits mergers of businesses that may result in a monopoly or unfair competition, as prescribed by the Trade Competition Commission (TCC), unless permission is obtained from the TCC. To date, however, no implementing legislation for Section 26 of the TCA has been enacted.

The TCA empowers the TCC to enforce the merger control provisions. In addition, the TCC is responsible for prescribing notifications to enforce the provisions of the TCA, including issuing notifications concerning the specific process by which a certain merger will be examined and approved. In this regard, the TCC is empowered to set a minimum threshold of market share, total sales, amount of capital, number of shares or quantity of assets that will be subject to prohibition under this Section. This is part of the pre-merger notification requirement.

Since 1999, no notifications have been approved by the TCC under Section 26 of the TCA, and accordingly, the restrictions on mergers under that Section are not currently in force. On 6 June 2013, the TCC approved certain pre-merger notification requirements in respect of the following:

  • a the merger of businesses that have an aggregate market share in any market for any goods or services before or after the merger of 30 per cent or more, and that had a total sales (turnover) or income in the preceding year of 2 billion baht or more; and
  • b the acquisition of shares with voting rights accounting for at least 25 per cent of the total amount of shares of a public company, or 50 per cent of a limited company, and an acquisition resulting in the business of a company or both companies having an aggregate market share of 30 per cent or more in any market of any goods or services before or after the acquisition, and a total sales volume (turnover) or income in the previous year of at least 2 billion baht.

Although this approval by the TCC represents some progress towards the long-awaited issuance of notifications enabling merger controls to finally come into force, the process is far from complete, and accordingly, the provisions of Section 26 are still not in force.

In February and March 2016, the Cabinet passed resolutions approving, in principle, a new draft of the Trade and Competition Act (New Act). Although the general principles regarding abuse of dominant position, mergers, collusive conduct and unfair trade practices remain the same, the New Act aims to overhaul the TCA by transforming the TCC into an independent agency. Of particular relevance to mergers is the fact that the New Act plans to criminalise overseas mergers that result in monopolies or unfair competition in Thailand. Further, the New Act also plans to increase the penalty to a fine of an amount not exceeding 20 per cent of the offender’s income during the year of the offence, but will remove the imprisonment penalty for mergers.

In July 2016, the Council of State completed its examination of the New Act, and the New Act is currently pending introduction to the National Legislative Assembly. In the meantime, it is in the process of being circulated to the relevant authorities for further acknowledgement of the draft. There is no clear timeline on when the New Act will come into effect.


M&A activity in Thailand continues at a steady rate as domestic and foreign businesses expand in the region. In 2015–2016, a number of long-awaited large-scale infrastructure projects, economic stimulus measures, energy prices and the development of the AEC created opportunities in various industry sectors, including energy, construction, insurance, real estate and infrastructure funds. Although it is perhaps too early to predict what will happen for the remainder of 2016, observers remain cautiously optimistic that there will be continued economic growth in both the public and private sectors of Thailand and the Member States of the AEC.


1 Pakdee Paknara is a partner and Pattraporn Poovasathien is a senior associate at Weerawong, Chinnavat & Peangpanor Ltd.

2 Thailand Economic Outlook 2015, Dr Songtham Pintho, Bank of Thailand.

3 The AFAS Treaty governs service activities in various business sectors and subsectors liberalised under the AFAS Treaty, including business activities such as air transport, IT services, accounting, auditing, legal, architecture, engineering, research and development, computer-related advertising, etc.

4 The ACIA Treaty governs specific businesses in five sectors, i.e., manufacturing, agriculture, fishery, forestry, mining and quarrying, as well as the services incidental to them.

5 A PE trust is a trust that has been established to operate a PE business under the law governing trusts for transactions in the capital market.

6 A target business is a non-listed entity established under Thai law that engages in a government-supported business (defined below).

7 A government-supported business is a business in the following industries that apply key technology as the basis of its manufacturing processes, or provide services in accordance with the criteria prescribed and approved by the National Science and Technology Development Agency. Examples of target industries are the food and agricultural industries; and the energy conservation, alternative and clean energy industries.