Does a BOI company exporting 100% need an FBC? It depends on contract manufacturing
Whether a BOI company needs an FBC depends on the business it carries on, not on where its goods end up. A foreign company holding a BOI certificate for 100% export manufacturing may still need a Foreign Business Certificate (FBC) if its income comes from contract manufacturing rather than from making and selling its own goods. The Foreign Business Act B.E. 2542 (1999) looks at what the company actually does, not at which country the goods are shipped to.
Published 8 October 2026
Many investors assume that a company which sells nothing in Thailand, and competes with no Thai business, has no need of an FBC. That is right only some of the time. This article sets out the test that separates the two cases, the steps the law lays down, the risk of leaving it, and a checklist for assessing your own company's business model.
What an FBC is, and which companies should care
An FBC is the certificate the Director-General of the Department of Business Development issues to a foreigner whose business is promoted by the BOI, so that it may carry on a business in List Two or List Three of the Act. The question only arises for a company that is a "foreigner" under the Act.
Section 4 defines a foreigner more widely than many expect. Besides individuals without Thai nationality and companies not registered in Thailand, it includes a company registered in Thailand in which foreigners hold half or more of the capital, and a company held in turn by such a foreign company. The Thai subsidiary of a foreign group that builds a factory in Thailand usually falls within it.
For an ordinary foreigner, a List Three business needs a licence (Foreign Business Licence, FBL) from the Director-General with the approval of the Committee under section 8, and section 17 allows up to 60 days for the decision. A BOI-promoted company has an easier route: it notifies the Director-General for a certificate (FBC) under section 12. The difficulty is therefore not a burdensome procedure. It is that many companies do not know they have to notify.
The deciding test: who owns the materials, and what the income is
The deciding factor is not where the goods go. It is two questions: who owns the raw materials, and is the money the company receives a price for goods or a fee for work? Those two questions divide businesses into two kinds that the law treats differently.
Model 1: manufacture and sell
The company buys its own materials, makes them into goods and sells them to customers abroad. The goods belong to the company until they are delivered or transferred to the buyer. Its income is the "price of goods".
This is manufacturing, which is generally not in the lists annexed to the Act. A foreigner may do it without a permit under the Act, even when producing to the customer's specification or under the customer's brand. The exception is certain products the lists name specifically: List Three, for example, includes rice milling, plywood production and lime production.
Model 2: contract manufacturing
The customer, often the parent company or a buyer abroad, supplies the materials. The Thai company uses its own labour, machinery and know-how to produce to order, then sends the finished goods back to the customer or to the customer's buyers. Its income is a "manufacturing fee", which English-language contracts often call a processing fee or tolling fee.
The Supreme Court decided facts of this kind in judgment 2755/2534 (1991). A company made soap to the employer's formula, with the employer supplying all the materials, perfume, labels and packaging. The court held that the employer looked chiefly to the result of the work, that the soap belonged to the employer from the outset, and that the money paid was remuneration rather than a price for transferring ownership of goods. The arrangement was a hire of work, not a sale.
That was a business-tax case under the former law, but its reasoning on ownership of the goods and the nature of the payment is the principle that separates hire of work from sale, and it answers the question of whether a company is selling goods or providing a service.
"OEM" can mean either
In manufacturing, "OEM" means making goods for someone else's brand, but the term says nothing about who owns the materials. An OEM factory that buys its own materials and sells the finished goods to the brand owner is Model 1. A factory to which the brand owner sends materials and which charges a manufacturing fee is Model 2. The label alone settles nothing.
| Point | Manufacture and sell | Contract manufacturing |
|---|---|---|
| Who supplies the main materials | The Thai company | The customer |
| Who owns the goods during production | The Thai company | The customer |
| The company's income | Price of goods | Manufacturing fee |
| Status under the Foreign Business Act | Manufacturing, generally not in the lists | A service, in List Three (21) |
| What a foreign BOI company must do | Generally no FBC for manufacturing | Notify for a certificate under section 12 |
Some companies sit in between: the customer supplies the key components, but the company buys other materials itself and charges for them in the price of the goods. Those cases turn on the contract, the transfer of ownership and the way invoices are issued, read together, case by case.
Why contract manufacturing falls into List Three
Contract manufacturing is in List Three because item (21) of that list is a catch-all: "other service businesses, except those prescribed by ministerial regulation". Any service that no ministerial regulation exempts falls into List Three automatically.
Ministerial regulations have exempted services from item (21) from time to time. The 2013 regulation exempted securities, derivatives and trustee business. The second, of 2016, added commercial banking and insurance. The latest set, which the Ministry of Commerce explained in September 2026, covers businesses such as telecommunications, treasury centres, administrative, human-resources and IT services for group companies, guarantees of group companies' debts, and petroleum drilling. None of them exempts contract manufacturing, even contract manufacturing for a parent company in the same group.
What a BOI company must do: notify for a certificate under section 12
The company presents its BOI promotion certificate to the Director-General of the Department of Business Development and asks for a certificate. Once the promotion certificate has been checked, the law requires the Director-General to issue the certificate promptly, and within 30 days of the notification.
With the certificate, section 12 exempts the company from the Act, except sections 21, 22, 39, 40 and 42, for as long as the business is promoted. The exemption is therefore tied to the promotion. If the promotion ends or is revoked, the company must consider again whether it needs a licence by the ordinary route.
In practice, notify for the certificate as soon as the promotion certificate is issued, and check that the activity stated in it matches what the company really does. If it says manufacturing but the company earns mainly manufacturing fees, have an adviser check the fit before filing.
The risk of not obtaining an FBC
The main risk is that the company may be treated as carrying on a List Three business without permission under section 8. Section 37 punishes that with imprisonment of up to three years, a fine of 100,000 to 1,000,000 baht, or both, and the court orders the business to stop. Failure to comply with the order adds a fine of 10,000 to 50,000 baht a day for as long as it continues.
Section 8 is expressed to be subject to section 12, so the legal position of a BOI company that has not notified is arguable. But it is not an argument a business should stake itself on: the section 12 procedure is simple and the law sets a clear time limit, so notifying properly at the outset costs far less than fighting about it later.
A checklist for your business model
Answer every question below. If the answer to question 1 is "yes" and any of questions 2 to 5 points towards contract manufacturing, the company should look at the FBC question now.
- Do foreigners together hold half or more of the capital, counting holdings through other companies?
- Who buys and owns the main raw materials?
- Is the contract with the customer a sale or a contract-manufacturing agreement, and who owns the goods during production?
- Do the invoices charge a price for goods or a manufacturing fee?
- Does the company earn both kinds of income, and in what proportion?
- What activity does the promotion certificate state, and has the company notified for a certificate under section 12?
Summary
Exporting 100% does not by itself take a foreign company outside the Foreign Business Act. What the law looks at is whether the company makes and sells its own goods, or manufactures from someone else's materials for a fee. If it is the latter, a BOI company must notify for a certificate under section 12.
If you are not sure which model your company follows, the corporate team at YACT Association can review the contracts and the income structure and make the section 12 notification. Ask about FBCs and Foreign Business Licences, or read about BOI promotion.
This article is general information, not legal advice on a specific case.
The judgments this rests on
Supreme Court judgment 2755/2534
A contractor made soap to the employer's formula with its own labour and tools, the employer supplying all the materials. The soap belonged to the employer from the outset and the money paid was remuneration, so the arrangement was a hire of work, not a sale.
Questions this raises
Does a company that is majority Thai-owned need an FBC?
No, if Thais genuinely hold more than half and there is no indirect foreign holding that brings it within section 4, the company is not a foreigner under the Act. The holding must be real: holding shares for a foreigner to avoid the law is an offence under section 36, for the nominee and for the foreigner who agrees.
We make to the customer's design and brand but buy the materials ourselves. Do we need an FBC?
Generally not. The company makes its own goods and sells them; the customer's design or brand does not turn a sale of goods into a service. Check, though, that the contract does not pass ownership of the goods to the customer during production.
We export in our own name and apply 0% VAT. Does that make it a sale of goods?
Not necessarily. Revenue Department ruling Kor Kor 0706/2575 treated a contract manufacturer that filed export entries in its own name as selling goods by export for VAT, yet in the same ruling required it to recognise income as hire of work. Each law has its own test, so the tax classification does not decide the position under the Foreign Business Act.
How long does an FBC take for a BOI company?
Section 12 requires the Director-General to issue the certificate within 30 days of being notified of the promotion certificate. The documents to file follow the Director-General's rules.
Is an FBC valid forever?
No. The section 12 exemption lasts as long as the business is promoted. If the promotion ends, or the company expands into activities the certificate does not cover, the licence question has to be looked at again.
The legislation
- Foreign Business Act B.E. 2542 (1999), sections 4, 8, 12, 17, 36 and 37, and List Three (21)
- Ministerial regulations prescribing service businesses exempted from List Three, B.E. 2556 (2013) as amended, up to No. 5 B.E. 2569 (2026)
