Introduction:
Thailand’s hotel industry has long been a key contributor to the country’s economy, attracting visitors from around the world with its wide range of accommodation, from luxurious resorts to local boutique hotels. Thailand has earned a reputation for offering world class hospitality and service.
As the tourism and hospitality industry sector continues to evolve, the Thai government, through its Board of Investment (BOI), has introduced a series of incentives and regulations aimed at stimulating foreign investment in Thailand and fostering sustainable growth in the hospitality industry.
Key Points
- Thailand’s hotel industry is a significant contributor to the country’s economy, attracting visitors from around the world with a range of accommodation options and excellent hospitality and service.
- The Thai government provides incentives through the Board of Investment (BOI) to stimulate foreign investment in the hotel sector, including 100% foreign ownership, tax exemptions, and facilitation of work permits for foreign employees.
- To be eligible for a BOI investment promotion, hotel projects must meet investment requirements based on the number of rooms, maintain majority Thai shareholding, and comply with revenue limits.
- The BOI also offers incentives to encourage investment in Thailand and promote sustainable tourism industry investments, such as developing ecotourism lodges, community-based tourism, renewable energy projects, sustainable agriculture, and waste management initiatives.
Understanding Thailand’s Hotel Industry
Thailand’s hotel sector and hospitality industry is a key driver of the country’s economy, with tourism being one of the most important sectors of the Thai economy.
In recent years, Thailand has seen a significant increase in the construction of high-end luxury resorts and boutique hotels, particularly in popular tourist destinations like Phuket, Krabi, and Koh Samui. These properties cater to travellers seeking high end experiences, offering amenities and services that rival the world’s best. The growth of this particular area has been boosted by the increasing purchasing power of both domestic and international tourists, as well as the country’s reputation as a premier vacation destination.
The Thai hotel industry and hospital sector has also witnessed the emergence of several key trends that are shaping the sector’s future. These include the growing popularity of eco-tourism and sustainable hospitality, technology-driven guest experiences, and the expanded options of accommodation including serviced apartments, vacation rentals, and glamping experiences.
These evolving trends have prompted hotel operators to adapt their strategy to meet the changing demands of modern travellers.
Hotel Ownership Restrictions
When considering whether to invest in a hotel related business, foreign investors must understand the regulations related to business activities permitted under the Foreign Business Act (FBA) and property ownership rights for foreign investors.
Land Ownership
Foreign investors looking to own land in Thailand in order to build and/or open a hotel, face several significant challenges due to the country’s property laws. In practice, Thai law generally restricts foreigners from owning land outright. This is primarily due to the Land Code Act of 1954, which aims to maintain national control over land and resources. Foreigners can only own land indirectly through specific legal structures, such as Thai majority owned companies, obtaining a BOI promotion or leasehold agreements.
Permitted Business Activities for Foreign Investors
The FBA restricts foreigners or foreign owned companies from undertaking over 50 categories of business activities in Thailand. These restricted activities include owning hotels due to “Thai enterprises not yet being ready to compete with international companies”.
In order to achieve foreign ownership, investors have 2 options available, applying for a foreign business licence or a BOI promotion.
Foreign Business Licence
A Foreign Business Licence can be applied and if granted would allow 100% foreign-owned businesses to own and run a hotel. However, the application process can be lengthy and there is no guarantee that the application will be approved.
Many foreigners prefer to create a company with Thai local partners and own less than 49 percent of the company’s shares to avoid the long registration process. Having a Thai company with Thai partners who own over 50% of the shares also removes the need for a Foreign Business License because the company is considered Thai.
However, foreigners can be majority hotel shareholders in specified areas and projects. For more information about this and whether your company would be eligible, please book a consultation with one of our legal experts here.
Eligibility Criteria for a BOI Promotion in the Hotel Sector
To be eligible for BOI investment promotion, hotel projects in Thailand must meet the following key criteria to invest in Thailand:
Investment Requirements:
Additional Criteria:
Total revenue from BOI-promoted and non-promoted activities not exceeding 500 million THB annually for the first three years.
- Minimum project investment of 500,000 THB, excluding land and working capital.
- At least 51% Thai shareholding (unless the project qualifies for a BOI promotion).
- Debt-to-equity ratio not exceeding 4:1.
BOI Incentives for Hotels
The Thai government, through the Board of Investment (BOI), has introduced a comprehensive set of incentives and regulations to attract foreign investment into the hospitality industry. These initiatives are designed to encourage the development of high-quality accommodations, foster sustainable tourism practices, and position Thailand as a premier destination for global travellers.
Obtaining BOI certification provides the following benefits for investors:
100% Foreign Ownership
While regular Thai Limited companies are typically limited to 49.9% foreign ownership due to the Foreign Business Act, BOI-promoted companies face no such restriction, allowing complete foreign ownership.
Foreign Business Certificate
BOI-promoted firms receive a Foreign Business Certificate, exempting them from the 50+ restricted business categories under the Foreign Business Act. This opens up opportunities for a wider range of business activities in Thailand.
No Employee Quotas
Unlike other structures, BOI-promoted companies face no quotas when hiring foreign skilled employees. For example, Thai Limited Companies typically need a 4:1 ratio of Thai to foreign employees, but this requirement doesn’t apply to BOI-promoted businesses. Additionally, the process of obtaining visas for foreign employees is significantly more straightforward with BOI approval.
Permission to Own Land for Hotel Operations
BOI promoted companies are eligible to own land in order to build their hotel, a perk that is not available to other foreign owned companies. However, it is important to note that any land ownership rights only apply to hotels and not to residential components (such as condos), nor mixed use projects where there is the intention to sell managed villas.
Facilitation of Work Permit and Visa Applications for Foreign Employees
Foreign employees can apply for and obtain their visas and work permits at the One Stop Service Center in Bangkok. This greatly speeds up the entire process as applicants can pick up their work permit and visa in a couple of hours.
Tax Incentives
- Corporate Income Tax (CIT) exemption for up to 8 years, depending on the project’s location.
- Exemption from import duties on machinery*.
- Exemption from import duties on raw materials for production for export.
The specific incentives and benefits available to a hotel project depend on its location within Thailand. Projects situated in certain provinces, such as Krabi, Bangkok, and Phuket, may be eligible for additional benefits or face certain limitations compared to projects in other regions.
To learn more about BOI incentives and whether your project qualifies for specific incentives, please book a consultation with our team of experts here.
*Please note, projects located in the following provinces are not eligible for import duty on machinery exemption:
- Krabi,
- Bangkok,
- Kanchanaburi,
- Khon Kaen,
- Chachoengsao,
- Chon Buri,
- Chiang Mai,
- Nakhon Pathom,
- Nakhon Ratchasima,
- Nonthaburi,
- Pathum Thani,
- Prachuab Khiri Khan,
- Phra Nakhon Si Ayuthaya,
- Phang-nga,
- Phetchanuri,
- Phuket,
- Rayong,
- Songkla,
- Samut Prakan,
- Samut Sakhon,
- Saraburi and
- Surat Thani
Sustainable Tourism Investments for Foreign Investors
Thailand’s tourism industry and hospitality sector is one of the most important sectors of its economy, but it’s also looking to embrace the shift towards more sustainable experiences and attract people to invest in Thailand for these areas. The government is actively seeking foreign investors to partner with on projects that promote these kinds of projects.
Here are some examples of sustainable tourism industry investments in Thailand that are attractive to foreign investors:
Ecotourism Lodges
There’s a growing demand for unique travel experiences that are low-impact on the environment. Ecotourism lodges are a great investment opportunity, due to the large number of natural locations like national parks, rainforests, and islands available in Thailand. These lodges can be designed to blend into the surroundings, use local materials and employ local people.
Community-Based Tourism
This form of tourism focuses on giving visitors an authentic experience of Thai culture and traditions, while also benefiting local communities. Foreign investors can provide funding and expertise to help local communities develop CBT projects, such as homestay programs, cultural shows, and tours of traditional villages.
Renewable Energy for Tourism Businesses
Many hotels, resorts, and other tourism businesses are looking for ways to reduce their environmental impact. Potential projects for foreign investors include the installation of solar panels, wind turbines, or other renewable energy sources.
Sustainable Agriculture and Food Production
Tourists are increasingly interested in eating fresh, local food within the hospitality sector. Sustainable agriculture projects that provide local food to restaurants and hotels, including organic farming, hydroponics, or aquaponics could be of interest to investors.
Waste Management and Recycling
The tourism industry generates a lot of waste. Foreign investors can help by financing projects that improve waste management and recycling in tourist destinations. This could include composting facilities, waste-to-energy plants, or programs to reduce single-use plastics.
The Thai Board of Investment (BOI) offers a number of incentives for foreign investors who are interested in sustainable tourism projects. These incentives can include tax breaks, reduced land costs, and expedited permitting processes.
To learn more about BOI incentives relating to sustainable tourism and whether your project qualifies for any, please book a consultation with our BOI expert here.
Hotel Licence Requirements in Thailand
Another important consideration for hotel businesses is the licensing requirements for operating the business. Depending on the number of rooms and capacity of the hotel, different licences may be required.
The Hotel Act and Licensing Requirements
The Hotel Act is the primary legislation governing the hospitality industry in Thailand. This Act defines the criteria for what constitutes a “hotel” and outlines the licensing requirements for hotel establishments. Key provisions of the Hotel Act include:
Hotel Definition: The Act defines a “hotel” as an accommodation establishment operated for business purposes to provide temporary lodging services to travellers or other individuals in exchange for compensation. A hotel licence will be required if the hotel has more than four rooms or can accommodate more than 20 guests.
Exemptions: Certain accommodations, such as those with up to 8 rooms and 30 guests, are exempt from the Hotel Act and do not require a hotel licence. However, such a hotel must obtain a non-hotel licence from the relevant authority.
Other relevant business licences
Depending on the services offered by the hotel, other business licences may be required including:
- Restaurant Business Licence
- Entertainment Licence
- Liquor and Tobacco Licence
To learn more about these licences and whether they are applicable to your business, please book a consultation with our experts.
Our Thoughts
The Thai hotel industry is a lucrative market with Thailand and provides many attractive opportunities for foreign investors. The BOI’s incentives, coupled with the government’s efforts to attract investment, have created a favourable environment for those looking to establish or expand their hotel operations in Thailand.
However, the legal and regulatory landscape is a big challenge to foreign investors that requires an understanding of the relevant laws, licensing requirements, and ownership structures. Our experts are available to provide guidance on how to best structure your project.
