The Commerce Ministry has been investigating 200 companies suspected of acting as nominees for foreign businesses in a move to curb the so-called "grey business" sector, focusing on restaurants and tourism-related enterprises in four notorious areas of Bangkok.
According to Keerati Rushchano, permanent secretary for commerce, the practice of using Thai citizens unconnected with the business to allow a company to operate in Thailand is once again on the rise since the easing of the Covid-19 outbreak and, most recently, the reopening of China's borders, resulting in a flood of Chinese tourists into Thailand.
The University of the Thai Chamber of Commerce (UTCC) estimates 7-8 million Chinese tourists will arrive in 2023 bringing the total number of foreign tourists predicted to arrive this year to 26-27 million.
Jitakorn Wongkhatekorn, deputy director-general of the Business Development Department, said his department is in the process of investigating 200 companies suspected of acting as nominees for foreign businesses – mostly in four areas in Bangkok: Huai Khwang, Yaowarat, Samphanthawong, and Ratchadaphisek where the restaurants, hotels, massage, spa and car rental businesses are located.
Mr Jitakorn said the department has also asked for financial information about the suspected companies and their business registration documents to see whether they have violated the Foreign Business Act.
Thai citizens who act as nominees for foreign businesses are liable to a jail term of up to three years and/or a fine ranging from 100,000 to 1 million baht.
They may also face a daily fine of 10,000-50,000 baht until the violation stops.
According to Mr Jitakorn, the department has also worked closely with the Department of Special Investigation (DSI) to follow the money trails on the suspected firms.
Mr Keerati said he has also ordered provincial commerce offices nationwide to closely monitor new business registrations by careful examination of the application, especially concerning the viability of their business model and whether the amount of registered capital is appropriate.
“The focus will not only be about new business registrations in major tourist provinces such as Chiang Mai and Phuket, but also the secondary provinces nationwide that may have illegal nominee practices,” said Mr Keerati. Restaurants and other tourism-related businesses – such as massage, spa, tour bus rental, hotel and other accommodation businesses – are the high-risk groups for nominee practices.
Thailand’s Foreign Business Act currently limits foreign shareholding to 49% of a company and specifies three types of business where foreign participation may be prohibited or restricted.
List 1 denotes “businesses not permitted for foreigners to operate due to special reasons”. Foreign companies are completely barred from engaging in these activities.
List 2 specifies “businesses related to national safety or security, or affecting arts and culture, traditional and folk handicraft, or natural resources and environment”. Foreign companies may only engage in these activities upon cabinet approval.
FInally, List 3 designates “businesses in which Thai nationals are not yet ready to compete with foreigners”. Foreign companies must apply for and obtain a foreign business licence before taking part in these activities.