Introduction :
With the recent approval of the Financial Business Hub Act by the Thai Cabinet, Thailand is moving closer to its goal of establishing itself as a global Financial Hub. The Financial Business Hub Act has been introduced as a way of attracting foreign investment in Thailand. The Thai Government also hopes to create more learning and employment opportunities for Thai nationals within Thailand’s finance sector.
In order to encourage financial corporations to relocate to Thailand, this act provides a range of highly attractive incentives, including exemptions from the Foreign Business Act, tax incentives and more.
This blog post will explore the Financial Business Hub Act and its expected effect on Thailand’s finance sector.
Points clés
- The Financial Business Hub Act targets specific financial businesses including banking, securities, digital assets, and insurance, initially focusing on an “out-out” model (raising foreign capital for foreign investment).
- Eligible businesses must incorporate in Thailand, locate in designated areas, and maintain a specific Thai-to-foreign personnel ratio.
- Key benefits include exemption from the Foreign Business Act (allowing 100% foreign ownership), tax incentives, condominium ownership rights, and immigration support for foreign workers.
- The initiative is part of Thailand’s broader “Ignite Finance” economic strategy, offering competitive advantages over established hubs like Singapore and Hong Kong through lower operational costs.
What is the Financial Business Hub Act?
The Financial Business Hub Act is a key component of Thailand’s wider economic strategy, which also includes the “Ignite Finance” initiative. This strategy is designed to help Thailand become a global financial hub.
One of the main features of the Act is the introduction of a new licensing system for specifically targeted financial-related businesses. Qualifying business operators will be able to take advantage of a variety of incentives provided by the newly established Promotion of Financial Hub Operations Committee (the “Committee”).
The committee is expected to consist of executives from the Ministry of Finance, Bank of Thailand, Securities and Exchange Commission (SEC), Office of Insurance Commission, Council of State, Anti-Money Laundering Office and Board of Investment.
The main objectives of the the Financial Business Hub Act are as follows:
Establish Thailand as a Global Financial Hub
The Act aims to develop Thailand’s financial sector by creating a regulatory framework that is in line with global standards. Creating a regulatory framework that aligns with global standards may attract businesses to Thailand because it will now be able to provide stability, transparency, and ease of compliance. Making it much less of a learning curve for companies looking to get started in Thailand.
Attract Foreign Investment in Thailand
To attract international financial businesses, the Financial Business Hub Act offers a range of tax and non-tax incentives, including exemptions from certain laws, tax incentives and reduced visa and work permit requirements for foreign professionals.
Promote the Development of the Financial Sector
The government is also looking to improve Thailand’s financial sector by providing more opportunities for Thai nationals to be able to learn and train, improve the infrastructure, and provide support for global financial firms.
The transfer of technology and knowledge is key to the success of Thailand’s Financial Business Hub Act, as it enables local businesses to innovate, adopt advanced financial technologies, and stay globally competitive. The transfer of knowledge also helps build a skilled workforce and improves efficiency in financial services.
Please note, the Financial Business Hub Act is not law yet, it still has to receive approval from various other levels of government.
What Type of Finance Businesses does the Act Target?
The Act identifies a range of financial businesses that will be eligible for benefits that will be on offer, including:
- Commercial banking businesses,
- Payment service businesses,
- Securities businesses,
- Derivatives businesses,
- Digital assets businesses,
- Insurance and reinsurance brokerage businesses, and
- Other financial-related businesses as determined by the Committee for the Supervision and Promotion of Financial Centers.
Initially the Financial Business Hub Act will focus on businesses following an “out-out” model, raising capital abroad for investment abroad. However, eventually, the program will expand to an “out-in” model, where capital is raised abroad for domestic investment.
What are the Eligibility Conditions?
Eligible financial business operators will first need to apply for approval from the Committee for the Supervision and Promotion of Financial Centers.
In order to receive approval the following conditions must be satisfied:
- Maintain a specific ratio of Thai to foreign personnel, as determined by the committee. This measure ensures that the initiative supports the domestic workforce rather than relying only on international expertise.
- Legally incorporate an entity in Thailand (e.g., a company registered in Thailand, a branch of a foreign juristic person)
- The company must be located in a designated area. The designated areas have not yet been identified but they are expected to be Bangkok and surrounding provinces such as Nonthaburi and Samut Prakan etc.
What Benefits are Available to Eligible Businesses?
Under the Financial Business Hub Act, eligible businesses will be able to take advantage of unique benefits that are not available to any other company. Examples include:
Removal of Legal Restrictions
One of the most important benefits is that eligible companies will not be subject to the Foreign Business Act, which governs foreign business activities in Thailand. This means that eligible companies will not be subject to the normal ownership restrictions faced by companies in Thailand and can be 100% foreign owned.
Target businesses in Thailand will also be exempt from industry specific Thai regulations, such as the Financial Institution Business Act, Securities and Exchange Act, and Royal Decree on Digital Asset Business.
These incentives will make starting and operating a finance business in Thailand much easier by removing some very strict restrictions.
Incitations fiscales
Eligible companies will also be able to take advantage of tax exemptions and incentives. The exact details of what these incentives will consist of hasn’t been announced yet.
Condo Ownership
Authorized businesses will be exempt from the foreign ownership quota under the Condominium Act.
Aide à l'immigration
Foreign personnel working for approved businesses will not be subject to restrictions on the number of foreign workers or their length of stay under Thai immigration law. Even if these limits are exceeded, they will still be recognized as residents under immigration regulations.
Additionally, an authorization certificate to operate a target business will serve as a work permit, removing the need for a separate permit.
Exchange Control Exemptions
Eligible businesses will be classified as nonresidents under Thailand’s exchange control laws and regulations. Furthermore, authorized foreign exchange (FX) businesses will be exempt from FX licensing requirements.
Are there any Disadvantages to the Financial Business Hub Act?
Thailand’s financial sector remains highly regulated, and a big act like this could have a significant impact. While the new exemptions and incentives are designed to attract foreign investors, specifically large financial firms, they may also create challenges for local businesses, which could struggle to compete with their international counterparts.
Can Thai Companies Qualify for Incentives Under the Financial Business Hub Act?
Yes, Thai companies operating in Thailand can qualify for incentives under the Financial Business Hub Act, provided they meet certain criteria. While the act mainly aims to attract foreign investment and establish Thailand as a regional financial hub, domestic companies may also benefit if they engage in eligible financial activities and fulfil the necessary requirements.
Why Should Foreign Finance Businesses Consider Thailand Now?
The introduction of the Financial Business Hub is going to help a lot in establishing Thailand as an ideal destination for foreign finance businesses looking to expand in Asia.
Thailand’s strong infrastructure, including world-class airports, ports, and advanced digital connectivity, ensures global business operations and international trade can easily be facilitated. Thailand boasts a skilled workforce with expertise in key industries such as finance, technology, and manufacturing, providing businesses with a strong talent pool.
Also, compared to major financial hubs like Singapore and Hong Kong, Thailand offers significantly lower operational costs, making it an attractive and cost-effective choice for companies seeking regional expansion. This is especially true when combined with the tax incentives that will be awarded to eligible businesses.
