Thailand’s Draft Startup Promotion Act: A New Legal Framework for Innovation

The proposed law introduces a startup regime with flexible tools and incentives, while raising questions on foreign ownership and regulation.

Thailand is preparing to introduce a comprehensive legislative framework aimed at strengthening the country’s innovation ecosystem and supporting early-stage, high-potential companies. The Draft Startup Promotion Act, received approval in principle from the Cabinet in late 2024. It is designed to complement existing measures, such as the Board of Investment (BOI) promotion system, while addressing structural gaps that have historically limited the growth of technology-driven enterprises.

Purpose and Background

For many years, Thailand has sought to transition toward a more innovation-driven economy. Despite this ambition, startups have operated within a legal landscape that is often rigid, especially regarding corporate structuring, foreign ownership, and investment mechanisms. The Draft Startup Promotion Act aims to address these barriers by creating a clearer legal category for startups, introducing a certification process managed by the National Innovation Agency (NIA), and providing mechanisms that allow startups to access more flexible corporate and financing options.

Eligibility and Registration as a Startup 

Under the current draft, a company may be registered as a startup if it is focused on developing products, services, or processes that rely on innovation, technology, or intellectual property. It must have been incorporated within the past five years, remain at an early stage of development, and generate average annual revenue below a threshold of THB 300 million. During the registration period, the company must not have paid dividends except in narrow circumstances. It must also meet minimum requirements for Thai employment, and its founders must maintain a minimum level of shareholding. When these conditions are met, the company may apply for NIA certification, which must be renewed annually.

Corporate and Tax Advantages 

One of the most significant features of the draft Act is its flexibility. Certified startups will have access to corporate instruments that are either unavailable or severely restricted under ordinary Thai company law. These include preferred shares, convertible instruments, share buybacks, treasury shares, and other tools commonly used in international venture capital transactions. Such mechanisms address longstanding complaints that the traditional Thai company limited structure is too rigid to accommodate modern financing practices.

The Act also anticipates various tax incentives, although the exact details will be implemented through secondary regulations. Early indications suggest potential tax deductions or exemptions for investment in startups, benefits linked to research and development, more favorable treatment for intellectual property income, and clearer tax rules for venture capital funds. In parallel, certified startups are expected to receive operational support, including preferential treatment in public procurement, improved access to funding programs, and streamlined visa procedures for foreign specialists.

If implemented as currently drafted, the Act would offer significant advantages over a standard Thai company limited, particularly for foreign founders and investors. Traditional corporate structures often require foreigners to navigate foreign ownership restrictions under the Foreign Business Act (FBA). In many cases, this has led companies to adopt risky nominee structures or rely on complicated offshore arrangements to obtain funding. Under the new Act, certified startups will be able to employ legally recognized investment instruments, such as convertible debentures or preferred shares, that create more sophisticated and transparent ownership structures. While the Act does not explicitly override the FBA, its policy direction clearly aims to ease investment restrictions in sectors driven by innovation and intellectual property, where foreign expertise is crucial. As a result, the Act may provide a safer and more compliant alternative for foreign participation in startups, reducing the need to rely on nominee arrangements.

In addition, certification is likely to boost investor confidence. Being registered under a government-endorsed framework signals that the company meets defined standards for innovation, governance, and economic contribution. For foreign venture capital funds and strategic investors, this may create a clearer legal basis for engaging with Thai startups than currently exists.

Main Challenges and Legal Uncertainties

Despite its promising direction, the Draft Startup Promotion Act still faces several legal and practical challenges. The most significant concern relates to the relationship between the Act and the Foreign Business Act. At present, the new law does not explicitly state whether certified startups will be exempt from FBA restrictions or how the two frameworks will interact. Without clear carve-outs or exemptions, foreign ownership in restricted sectors may remain uncertain.

Another challenge is the administrative burden associated with annual certification. Because a startup must renew its status each year, companies undergoing long research and development cycles or irregular revenue patterns may find it difficult to remain eligible. Revenue restrictions, particularly the limit of THB 300 million, could also force high-growth startups out of the regime prematurely. Furthermore, the Act prohibits the payment of dividends during the startup phase, which may create strategic limitations for investors or founders seeking returns.

The benefits under the Act are also time-limited. A startup may enjoy advantages for five years, extendable to a maximum of ten. Deep-tech and hardware companies often require longer development horizons, and these restrictions could undermine the attractiveness of the regime. In addition, the Thai employment quota may pose difficulties for highly specialized or foreign-founded startups that depend on international talent. Finally, the Act’s relationship with BOI promotion remains unclear, raising questions about overlapping requirements and duplicated obligations.

Conclusion

The Draft Startup Promotion Act represents an important step toward creating a more competitive and innovation-friendly environment in Thailand. By introducing flexible corporate mechanisms, offering tax and operational incentives, and aligning Thai startup governance with international practice, the Act has the potential to significantly improve the country’s appeal as a destination for technology and venture investment. 

However, the Act will only reach its full potential if the government clarifies how it interacts with the Foreign Business Act, how foreign founders can safely participate in startups, and how long-term, innovation-driven businesses can remain eligible. With these considerations addressed, the Act could position Thailand as a more attractive and dynamic regional startup hub. Until further regulatory guidance is released, foreign investors and founders should monitor developments closely and seek legal advice before structuring startup ventures in Thailand.

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