Employee Welfare under the Foreign Business Act

Many foreign companies (i.e. majority of shareholders are non-Thai) provide certain benefits to their employees which, if provided as a business operation would be prohibited under the Foreign Business Act unless the company had a Foreign Business License.

Keywords: Mazars, Thailand, Legal, DBD, FBL, FBA

14 February 2013

However, the Department of Business Development’s rulings on the activities that a company can provide as ‘employee welfare’ has been inconsistent and contradictory. This leads to uncertainty for companies that wish to comply with the rules and regulations in Thailand.

Example 1

The Department of Business Development (‘DBD’) ruled in January 2011, that a foreign company that provided a bus to pick up and drop off its employees was prohibited to do so without a Foreign Business License (‘FBL’). Note that the company did not derive income from its employees from providing this ‘welfare’. The DBD considered that operating the bus fell under the Foreign Business Act’s List 2 activities (domestic transportation) thus requiring an FBL to be obtained from the Minister of the Ministry of Commerce by approval of the Cabinet.

Example 2

On September 2012, the DBD issued another ruling letter to a company that loans money to its employee with an annual 3% interest. In certain cases the company waives the interest.

The DBD ruled that the employee loans are the employee’s welfare and the practice was clearly stated in the company’s employee regulations and not the business activity of the company. Therefore, the company could issue employee loans as welfare without obtaining the FBL. Employee loans will earn the company interest income, a restricted business activity for foreign companies under the FBA for which an FBL is required.

For more information, please visit the Department of Business Development.