BOI investment promotion for hotels

hotel business license thailand

hotel business license thailand

Hotel projects as hospitality service businesses

Foreign Business Act: The activities of hotels (except hotel management services), tourism and the sale of food and beverages are listed in Annex 3 of the Foreign Business Act as “Businesses in which Thais are not yet prepared for the competition with foreigners.” Therefore, foreigners starting a hotel business, require a Foreign Business License. This requires, above other aspects, evidence that the particular activity cannot be accomplished by a Thai national.

ASEAN privilege: Under the ASEAN Framework Agreement on Services (“AFAS”), ASEAN members may hold up to 70% of the shares in a hotel business that offers superior deluxe or a six-star plus rated hotel. ASEAN shareholders have to be nationals of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore and/or Vietnam or ASEAN companies with ASEAN directors. The AFAS seems not to be finally implemented in Thailand’s laws and regulations.

Board of Investment: However, a license waiver is applicable to a foreign-owned Thai company, if investment promotion is granted by the Thailand Board of Investment (“BOI“). The BOI promotes certain investments that help enhance national competitiveness by encouraging R&D, innovation, value creation in the services sectors, and activities that are environment-friendly, save energy or use alternative energy to drive balanced and sustainable growth. The current investment promotion scheme covers just seven sections, with “7. Service and public utilities”. Section 7.23 lists activities to support tourism, namely hotels, convention halls, and international exhibition centers. The license waiver is certified by a Foreign Investment Certificate (FBC).

Since 2015, hotel training institutes are no longer explicitly promoted. However, hotel training institutes that teach courses on hotels and have the number of students in these courses not less than 50% of the total number of students can qualify as vocational training centers under Section 7.18.1 of the regulation.

BOI investment promotion requirements

Number of keys and minimum investment: To be promoted by the Board of Investment, the hotel project has to fulfill one of three conditions: The hotel must have either 100 keys or more, and a minimum investment of not less than THB 2 million (excluding the cost of land and working capital) per key, or a minimum investment of not less than THB 500 million (excluding the cost of land and working capital) or, (as an unwritten rule) a particular location and the approval by the BOI in their sole discretion.

Minimum capital investment requirement of each project is THB 1 million only. For newly established projects, the debt-to-equity ratio must not exceed the quota three to one (3:1). Expansion projects are considered by the BOI on a case-by-case basis. For hotel projects with an investment value of over THB 750 million, (excluding the cost of land and working capital), a specific feasibility study must be submitted.

As general requirements for the promotion, the value which is added to the hotel project must not be less than 20% of the revenues. Modern processes and new equipment are generally required. Hotel projects that have investment capital of THB 10 million or more (excluding the cost of land and working capital) should obtain ISO 9000 or ISO 14000 certification or similar international standard certification within two years from the full operation startup date. Adequate and efficient guidelines and measures to protect environmental quality and to reduce environmental impact must be installed. Hotels that require an environmental impact assessment (EIA) must comply with the related environmental laws.

 

BOI transfer: The investment promotion by the BOI is deemed to attract new project developments. However, there are ways and means to get existing ventures promoted. Details are explained at “The transfer of BOI promoted companies“.

Type and scope of hotel investment promotion

Scope of promotion: Depending on the province in which the hotel business is located, the Board of Investment grants either an A4 or a B2 incentive package. Group A4 hotels receive a 3-year corporate income tax exemption, accounting for 100% of investment (excluding the cost of land and working capital), exemption of import duty on machinery, exemption of import duty on raw or essential materials used in manufacturing export products for one year, which can be extended as deemed it appropriate by the Board, and Other non-tax incentives. Group B2 hotels receive an exemption of import duty on raw or essential materials used in manufacturing export products 7 for one year which can be extended as deemed it appropriate by the Board and other non-tax incentives.

These other non-tax incentives, applicable for both A4 and B2 hotels include the permit to bring in foreign skilled workers and experts to work, the permit to own land in order to carry on the promoted activity, and the permit to take out or remit money abroad in foreign currency. Therefore, each and every BOI promoted hotel company can have 100% foreign shareholders.

Professional service offer from Bangkok

PUGNATORIUS Ltd. is the Bangkok-based specialist provider of transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property acquisitions and developments. Thailand’s hotel markets offer interesting investment opportunities for foreign hotel companies as well as high net worth individuals.

Legal hospitality: For some years, the law firm advises on various aspects of Thailand’s hospitality industry. It has particular industry know-how on the acquisition of hotel businesses and the structuring of hotel ventures through hotel management agreements and similar arrangements. The law firm advises on tax-efficient cross-border structures and on the utilization of external financing for the Thai business.

BOI assistance: The law firm  advises and assists hotel developers, owners, and buyers with respect to the following BOI tasks: Design and construction of BOI compliant hotels, BOI application for hotel businesses, Due diligence of BOI promoted hotel businesses, the acquisition of BOI promoted hotel businesses and BOI promotion for the change of use of buildings as a hotel business 

Legal and tax advice on Thailand’s hotel and hospitality ventures are one of the law firm’s areas of competence, long-standing experience, and unique market reputation. The terms for assigning PUGNATORIUS Ltd. are described at “Legal services for the hotel and hospitality sector”.


Disclaimer: This low-resolution high-level outlook constitutes neither legal advice nor an attorney-client relationship. Professional services in the hospitality industry segment are described <here>.

Comments are now closed for this article.