CHAPTER II

Review of Related Literature

Business Permit in the Philippines

One of the major requirements of the Philippine government to fully register a

company in the Philippines is to obtain a business permit. The municipality/city or

local government unit (LGU) having jurisdiction on a company or individual’s

principal place of business issues the permit/license in order to complete the

registration process and enable the company/individual to start its business in the

Philippines.

An LGU’s requirements in obtaining a business permit may vary. Usually, the LGU

requires the following steps be completed before the issuance of a business permit:

For newly set-up companies:

 Securities and Exchange Commission (SEC) Registration

 Bureau of Internal Revenue (BIR) Registration

 SSS, PHILHEALTH, and PAG-IBIG (HDMF) Registration

 Mayor’s Permit

 Barangay Clearance

 Building Permit

 Occupancy Permit (Building and Unit)

 Sanitary Permit

 Locational Clearance
 Fire Clearance

For renewal of business permit:

 Previous Mayor’s Permit and receipt

 Previous Barangay Clearance and receipt

 Previous Sanitary Permit

Business Permits must be renewed every year before the 21st of January as long as the

company exists, whether the company is dormant or operational.

Foreign Literature

The Foreign Business Act (FBA) came into force in 1999. One would think this Act

regulates business activities conducted by foreigners but this, however, is not the case.

The FBA mainly aims at defining the term “foreigner” – or “farang” as Thai people

regularly refer to foreigners that way – and sets out what activities cannot be

conducted by foreigners. The process of receiving the permission from the Minister of

Commerce (with the approval of the Cabinet) or the Director-General (with the

approval of the Committee) is – as are most administrative procedures in Thailand –

not self-evident. The FBA foresees oppressive penalties (fines up to 1M THB and

even imprisonment) for any foreigner committing an infringement upon the act.

Having a reliable partner that keeps an eye on the continuous fulfillment of the

conditions is thus an absolute must.

 FBA’S DEFINITION OF FOREIGNER

A foreigner under the FBA is a natural person that does not have Thai nationality or a

juristic person that is not registered in Thailand. However, also a juristic person that is

registered in Thailand but of whom more than half of the capital shares are held by

non-Thai natural and/or juristic persons is considered foreign. The same goes for a

limited partnership or registered ordinary partnership having a foreign individual as

the managing partner or manager. Foreigners as defined here above cannot conduct

any business in Thailand without prior approval from the relevant authority. Two

types of “special” foreigners may operate (certain) businesses upon obtaining a

License from the Director-General:

1. Foreigners born in Thailand but not granted Thai nationality

2. A person who becomes a foreigner as a consequence of his nationality being revoked

under the law governing nationality or other laws

In any case, all foreigners deported (or pending deportation) or staying in Thailand

without permission under the law governing immigrants or other laws, shall be

prohibited from operating any business in Thailand without any exceptions.

The minimum capital used at the commencement of a business operation cannot be

less than that prescribed by ministerial regulations and can in any case not be less than

2M THB. Ministerial regulations may also prescribe the time for the minimum capital

to be brought or remitted into Thailand. These requirements do not have to be fulfilled

in case the money or property is derived from business operation that has previously

been in operation in Thailand (section 14 of the FBA). The Minister with the advice of
 t

he Committee is empowered to issue the ministerial regulations prescribing other

conditions for the foreign licensees to comply with. These requirements can, for

example, relate to the ratio of the capital and loans to be used in the permitted

business, the number of foreign directors who must have a domicile in the Kingdom or

the number and period for keeping the minimum capital in the country. The foreign

business license can be suspended or revoked if the conditions would appear not or no

longer to be fulfilled (section 18 of the FBA).

The following conditions also govern the allocation of the license:

1. Having reached the age of 20

2. Having a residency or being permitted to temporarily enter into Thailand under the

immigration law

3. Not being (quasi-)incompetent

4. Not being a bankrupt

5. Never having been punished by a court judgment or fined for an offence under this

Act or Announcement No. 281 of the National Executive Council No dated November

24

6. Never having been imprisoned for fraudulent acts, debtor cheating, embezzlement,

offences connected with trade under the Criminal Code or for offences relating to

fraudulent loans to the public or for offences under the immigration law

7. Never having a revoked license issued under this Act or under Notification No. 281 of

the National Executive Commercial dated November 24, 1972

The 5th, 6th and 7th condition are subjected to a period of five years up until the date

of the application. In case of the juristic person being the license applicant, the foreign

directors, managers or the persons responsible for the operation of the juristic person

shall also have the qualifications and shall not have the prohibited characteristics as

stated here above (section 16 of the FBA).

If you are a foreigner who has been approved a foreign business license or foreign
business certificate according to Thailand Foreign Business Act B.E. 2542, you need
to pay attention to the following issues which are your duties/responsibilities:

1. Foreign Business License / Certificate

2. Conditions accompanying the approval of foreign business operation

3. Bringing the minimum capital into Thailand to start the business operation

4. Changes in the registered information

5. Compliance when the competent officials send letters to ask questions or summon

documents or evidence

6. Preparing of accounts and filing of financial statements.