Cannabis Business in Thailand: Key Legal Points

Table of Contents

Brief History of Cannabis Legalization in Thailand

Cannabis, known as “ganja” in Thailand, has been used in traditional medicine for centuries. However, in 1934, its use was criminalized following global trends at the time. The Marijuana Act was passed, prohibiting its use and distribution. This act was later incorporated into the 1974 Narcotics Act, where cannabis was classified as a Category V narcotic.

A social movement for the liberalization of cannabis use in Thailand gained momentum in recent years and received political support. In February 2019, a new Narcotics Act was passed, legalizing cannabis use for medical purposes. This was a significant step towards more liberal regulation of cannabis.

On June 9, 2022, Thailand became the first country in Asia to decriminalize cannabis. Cannabis was removed from the list of prohibited Category V narcotics, with only cannabis extracts containing more than 0.2% tetrahydrocannabinol (THC) remaining illegal.

Attempts at Recriminalization and Current Status

In the first half of 2024, there were significant efforts to recriminalize cannabis in Thailand. On May 8, 2024, Prime Minister Srettha Thavisin announced plans to reclassify marijuana as a narcotic by the end of the year. The Ministry of Public Health even published a draft regulation to reclassify cannabis as a Category 5 narcotic, effective January 1, 2025.

However, by the end of July 2024, the situation changed. According to recent reports, the authorities abandoned plans for recriminalization and returned to the original idea of developing legislation to regulate cannabis. This shift highlights the ongoing debates and uncertainty in the country’s cannabis policy.

On September 3, 2024, Anutin Charnvirakul, leader of the Bhumjaithai Party, expressed confidence that the new government would support the cannabis policy and that the cannabis law would be passed.

International Commitments

Thailand is a party to the 1961 Single Convention on Narcotic Drugs (amended in 1972), a multilateral treaty adopted by the United Nations. This convention regulates the circulation of several substances, including cannabis, allowing exceptions only for medical and scientific use.

Cannabis Business Boom

The decriminalization of cannabis in June 2022 catalyzed the rapid growth of the cannabis business in Thailand. Key areas of interest include:

Cannabis cultivation
Wholesale sales
Export
Retail sales
Production of food and cosmetics
Medical applications
Use in the hospitality, wellness, and spa industries

Since the decriminalization, it is estimated that some 20,000 cannabis dispensaries have opened in Thailand, making cannabis highly accessible to both locals and tourists. In practice, cannabis is widely used for recreational purposes, despite the initial legalization being intended solely for medical use. This widespread use has been facilitated by a legal vacuum, as decriminalization was not accompanied by comprehensive laws regulating cannabis use.

According to the University of the Thai Chamber of Commerce, the cannabis market in Thailand is projected to reach USD 1.2 billion by 2025.

In response to growing concerns about the widespread availability of cannabis and its potential negative impact on society, Thai authorities introduced new regulations. These measures aim to limit cannabis distribution among the most vulnerable groups, including banning its use in public places and sales to individuals under 20 years old, pregnant women, and nursing mothers. These steps were taken to bring some order to the burgeoning cannabis market while the country develops more comprehensive regulation.

Foreigners and the Cannabis Business

Foreign entrepreneurs and investors are showing significant interest in the cannabis business opportunities in Thailand. However, due to restrictions set by the Foreign Business Act and specific regulations governing the cannabis sector, foreign participation is only possible through minority stakes in Thai companies, and it requires registration and/or obtaining licenses. The type of required licenses depends on the specific business activities.

Key requirements for obtaining cannabis-related licenses include:

Foreign ownership in a company must not exceed 49%.
Additionally, at least two-thirds of all shareholders must be Thai nationals, which can include both individuals and legal entities. For instance, in a company with three shareholders, two must be Thai, collectively holding at least 51% of the shares, while the foreign shareholder can own up to 49%. Practically, this could be structured as: a foreigner owning 49%, one Thai shareholder owning 49%, and another Thai shareholder owning 2%. However, not all provinces strictly enforce this requirement regarding the number of shareholders.
At least two-thirds of the company’s directors must be Thai citizens.
The director authorized to represent the company must be a Thai citizen.

For optimal business structure, a two-tier model known as a “Thai holding” is recommended. This structure involves creating a holding company that owns shares in an operating company in Thailand.

Read Also:

Strategies for Minority Control in a Thai Company

Awaiting the Cannabis Law

The legal foundation for businesses in the cannabis sector in Thailand remains uncertain. Market participants are eagerly awaiting the adoption of a comprehensive cannabis and hemp law, which would establish clear regulations and support the further development of the industry. However, the adoption of this law has been delayed multiple times, and recent efforts to recriminalize cannabis have temporarily stalled the legislative process.

There is now renewed anticipation that work on the bill will resume.

In April, several competing draft bills were introduced:

Ministry of Public Health’s Draft Bill: On January 7, 2024, then-Minister of Public Health, Dr. Cholnan Srikaew, presented a draft bill to the Cabinet. This bill, which was also opened for public discussion, proposes strict limitations on the use of cannabis, allowing it only for medical and scientific purposes and prohibiting recreational use. However, the final version of this draft has not yet been presented to the Cabinet.
Alternative Draft Bills: At least four alternative proposals have been suggested, including more liberal versions. Notably, one of these proposals comes from the Bhumjaithai Party, led by Anutin Charnvirakul, the Deputy Prime Minister and Minister of Interior. Anutin is known for being a key advocate for cannabis decriminalization in Thailand and served as the Minister of Public Health in the previous government.

As of the end of July 2024, none of these draft bills have been approved by the Cabinet. Once approved, the draft law will need to be sent to the parliament for further consideration.

Current Regulations and Requirements

In the absence of a specific cannabis law in Thailand, the regulation of the cannabis sector is governed by other existing laws. These include:

Cannabis Extracts: Extracts containing more than 0.2% THC are regulated under narcotics laws.
Non-Narcotic Parts of Cannabis: For parts of the cannabis plant not classified as narcotics, laws regulating traditional Thai medicine, plant circulation, food products, cosmetics, and other areas apply.

The Thai Food and Drug Administration (Thai FDA), under the Ministry of Health, plays a crucial role in regulating this sector.

Key Regulations:

Ministry of Health Notification (November 11, 2022):
- Classification of Cannabis Buds: Cannabis buds are classified as a controlled “herb,” requiring sellers to obtain a license from the Ministry of Health for their sale. Licenses are not required for selling other parts of the plant.Restrictions on Sales: The sale of cannabis buds is prohibited to individuals under 20 years old, pregnant women, and nursing mothers.Major Prohibitions:
  - The use of cannabis at the point of sale.Selling cannabis buds through vending machines, electronic channels, or computer networks.Advertising cannabis buds through any channels.
These regulations present significant challenges for the development of e-commerce in the cannabis sector, though there are instances where these rules are bypassed.
Department of Traditional Medicine Notification (January 19, 2023):
- Tracking System: A mandatory system was introduced to track the circulation of cannabis buds. Sellers are required to report their sales and purchases.
- Buyer Identification: Buyers must present identification documents when purchasing cannabis buds.

Cannabis Cultivation

The need for a permit to cultivate cannabis in Thailand is a subject of some debate. The main question revolves around whether registration through the Plookganja website or app is sufficient, or if an official license is required for commercial cultivation.

According to prevailing opinions among Thai legal experts, following the decriminalization in 2022, a license for cultivation is not required.

The Thai government recommends registering marijuana cultivation through the ‘Plookganja’ (grow cannabis) website or app. The registration form includes a section where the purpose of cultivation must be specified, including whether it is for commercial use.

Plookganja Use Statistics

The long-term viability of using the Plookganja app for commercial cannabis cultivation is uncertain. While Plookganja offers a streamlined registration process, obtaining a commercial license is expected to provide greater security and protection for businesses involved in cannabis. The forthcoming cannabis and hemp law is anticipated to clarify these uncertainties. According to representatives from the Department of Thai Traditional and Alternative Medicine (DTAM), licenses will be required for cannabis cultivation and the production of dried cannabis buds.

Quality Standards

In the cultivation and production sectors, the implementation of GMP (Good Manufacturing Practice) and GACP (Good Agricultural and Collection Practices) standards is anticipated. These standards are especially important for potential export opportunities.

Information about the Thai standard GACP for cannabis, Thailand Cannabis Good Agricultural and Collection Practices (Thailand Cannabis GACP), can be found on the website of the Department of Thai Traditional and Alternative Medicine.

Opening a Cannabis Dispensary in Thailand

To sell cannabis buds, it is necessary to obtain a sales license. The license is issued by the Ministry of Health and its local branches, and each dispensary requires a separate license. It’s important to comply with the previously mentioned requirements, such as restrictions on sales to individuals under 20, pregnant women, and nursing mothers, as well as prohibitions on advertising and the use of cannabis at the point of sale. Additionally, dispensaries must adhere to track and trace obligations, which involve maintaining a system to monitor the sale and distribution of cannabis products, ensuring that all transactions are recorded and reported as required by the authorities.

Conclusion

The cannabis industry in Thailand is at a critical point. It presents growth potential and has attracted interest from both local and foreign investors. However, regulatory uncertainty and potential legislative changes pose risks for businesses.

Entrepreneurs should closely monitor the situation and be prepared for legal changes. It is essential to comply with current regulations and be ready to adjust to new rules as they are implemented.

While the government has decided against fully recriminalizing cannabis, stricter regulations are anticipated. There will likely be more stringent rules for cannabis use, including limitations on recreational use. Authorities are focusing on regulation rather than prohibition, aiming to balance economic opportunities with public health concerns.

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Photo by Matthew Brodeur on Unsplash

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