Factory Licensing in Thailand: A Guide for Investors

Understanding Thailand’s Factory Licensing Framework

Thailand’s thriving industrial sector, strategic location, and investor-friendly policies, such as those from the Board of Investment (BOI), make it a prime destination for manufacturing ventures. However, setting up a factory involves navigating a complex legal framework under the Factory Act B.E. 2535 (1992) and its amendments. This blog post breaks down the essentials of obtaining a factory license in Thailand, covering factory types, licensing requirements, the application process, compliance obligations, and key considerations for foreign investors. 

The Legal Framework 

The Factory Act B.E. 2535 (1992), amended by the Factory Act (No. 2) B.E. 2562 (2019) and Factory Act (No. 3) B.E. 2562 (2019), governs factory establishment and operations in Thailand. Administered by the Department of Industrial Works (DIW) under the Ministry of Industry, the Act defines a “factory” as any premises using machinery with 50 or more horsepower or employing 50 or more workers, as specified in ministerial regulations. 

The 2019 amendments reclassified factories based on operational nature and introduced stricter industrial zoning to balance economic growth with environmental and public health concerns.

Factory Categories

1. Category 1 Factories: Small-scale operations with minimal risk to health, safety, or the environment. These require no license or prior approval. 

2. Category 2 Factories: Medium-scale operations (typically 50–75 horsepower and 50–75 workers) with moderate impact. Operators must notify the DIW before starting operations but don’t need a license. 

3. Category 3 Factories: Large-scale or high-risk operations (generally over 75 horsepower and 75 workers) requiring a factory license before construction or operation. Classification depends on the factory’s specific activities. 

Zoning regulations, issued by the Department of Public Works and Town & Country Planning, also dictate where factories can be established. Non-compliance can lead to fines, imprisonment, or operational shutdowns. 

Licensing Requirements for Category 3 Factories 

Category 3 factories face the strictest requirements due to their scale and potential environmental impact. Here’s what you’ll need to apply for a license: 

Required Documents

• Application Form (Ror Ngor 3): Details factory operations and specifications. 

• Company Affidavit: Verifies the applicant’s legal status, issued within three months. 

• Factory Building Plan: Certified by a licensed engineer, including a location map and compliance with zoning and safety standards. 

• Machinery and Equipment List: Certified specifications and layout plan for all machinery. 

• Safety Measures Proposal: A certified plan addressing hazards, waste control, and pollution mitigation. 

• Land Ownership or Lease Agreement: Proof of legal right to use the land, with landowner consent if applicable. 

• Public Hearing Documentation: Evidence of a community hearing within 45 days, addressing environmental and safety concerns. 

Additional Requirements 

• Environmental Impact Assessment (EIA): Mandatory for factories with significant environmental risks. 

• Environmental Health Impact Assessment (EHIA): Required for high-risk projects, per the Office of Natural Resources and Environmental Policy and Planning (ONEP). 

• Fire Prevention and Suppression Measures: Detailed fire safety plans. 

• Hazard Risk Assessment Report: Analyzes operational risks. 

• Environmental and Safety Assessment (ESA): Outlines mitigation measures. 

• Zoning Compliance: Confirms the site is zoned for industrial use. 

• Feasibility Study: May be required for large or high-impact factories. 

The Application Process 

Securing a Category 3 factory license typically takes 40–90 days. Here’s the step-by-step process: 

1. Pre-Application Preparation: 

• Register a legal entity with the Department of Business Development (DBD), complying with the Foreign Business Act B.E. 2542 (1999) if foreign-owned. 

• Conduct a public hearing and submit results within 45 days. 

• Compile all certified documents. 

2. Submission: 

• In Bangkok, submit the application to the DIW’s One-Stop Service Center. 

• Outside Bangkok, submit to the relevant Provincial Industrial Office. 

3. Site Inspection: 

• Within 30 days, an inspector evaluates the factory’s structure, equipment, and pollution controls. 

4. Review and Decision: 

• The DIW or provincial office reviews the application within 50 days. If approved, the license (Ror Ngor 4) is issued upon payment of a fee based on the factory’s scale. 

Ongoing Compliance Obligations 

Once licensed, factory operators must meet continuous obligations: 

• Licensing Continuity: Pay annual fees, submit environmental and safety reports, and comply with regulations. 

• Notifications: Report machinery relocation (within 7 days), serious accidents (within 3 days), or operational cessation for over a year (within 7 days). 

• Safety and Pollution Control: Maintain systems, subject to periodic inspections. 

• Environmental Restrictions: Avoid releasing toxic substances in sensitive areas like Ayutthaya or Pathum Thani. 

• Zoning Compliance: Adhere to zoning laws and distance requirements. 

• BOI Compliance: If applicable, submit reports on financials, production, and exports. 

Non-compliance risks fines, imprisonment, or shutdowns. 

Special Considerations for Foreign Investors 

Foreign investors face additional hurdles under the Foreign Business Act B.E. 2542 (1999), which caps foreign ownership at 49% in restricted sectors unless a Foreign Business License (FBL) is obtained. 

Foreign Business License (FBL) 

• Eligibility: Requires a minimum capital of 2 million THB and proof of economic benefits, like job creation. 

• Process: Applications to the Ministry of Commerce take 3–6 months. 

• Exemptions: U.S. investors may qualify for majority ownership under the Thailand-U.S. Treaty of Amity. 

BOI Incentives 

The BOI offers benefits like 100% foreign ownership, tax exemptions, and duty reductions, especially in Special Economic Zones or promoted industries. BOI approval can streamline FBL and licensing processes. 

Industrial Estates 

Factories in Industrial Estate Authority of Thailand (IEAT) estates enjoy streamlined licensing, infrastructure support, and exemptions from certain requirements. 

Final Thoughts 

Setting up a factory in Thailand offers immense opportunities but requires careful navigation of the Factory Act B.E. 2535 (1992) and its amendments. Category 3 factories, in particular, demand rigorous compliance due to their scale and impact. Foreign investors can leverage FBLs, BOI incentives, and industrial estates to ease the process. By working with legal experts and conducting thorough due diligence, you can establish a compliant and successful manufacturing operation in Thailand’s dynamic industrial landscape. If you are planning a manufacturing investment in Thailand, contact us.