Tourism is one of the most important sectors driving the Thai economy, which has the ability to continuously generate high income for Thailand. As a matter of fact, the number of foreign tourists visiting Thailand continue gradually growing year by year. Therefore, the investment in Hotel business in Thailand is quite attractive for foreign investors but the legal structuring and licensing is a key factor for the success or failure of the business.
Thailand Board of Investment launched its promotion policy and 7 years road map during 2015-2021 granting the privilege and incentives on Hotel Business for the investors which is in compliance with the regulation and conditions set forth by BOI. The juristic person will be entitled to Corporate Income Tax Exemption for 3 years, exemption on import duties on machinery and raw material, as well as non-tax incentives. The preliminary conditions to be complied in order to be granted the aforesaid incentives (A4) areL
1) The investor shall contribute the investment amount not less than 500 million baht
2) The hotel should have at least 100 rooms.
3) The project of hotel should be located in 20 targeted provinces in Thailand. In the event that the project was not located in targeted provinces, the incentives shall be falling in group B2 which grant the investor for exemption on import duties on raw materials and non-tax incentives.
However, BOI also prescribed the conditions for Thai SMEs granting other incentives under A4:
1) The Hotel should have at least 20 rooms
2) The investment amount should not less than 2 Million Baht per room
3) The project of business should be located in 20 targeted provinces in Thailand.
We advise the investors considering to rent or buy existing premises to start a Hotel, Resort or Hostel business to deeply understand the law and regulation in Thailand as the required conditions of the existing premises and buildings are significant. The existing premises or building should be in compliance with the Building Control Act in Thailand.
Furthermore, an agreement between an ‘owner’ of the premises, and the investors, cannot really be just a simple commercial agreement. The terms and condition of the lease agreement should be reviewed by a Thai lawyer or solicitor especially long terms lease agreements which binding the parties exceeding 3 years. The long-term of lease agreements should be registered with Land Department to be effective in full period of the lease agreement. The Government fee for registration of a lease agreement will be charged in the rate of 1% (excluding stamp duty) over the total lease price for the entire period. The lease agreement will be noted on the backside of the original title deed.
According to Thai Law, a Hotel is classified into 4 different types of hotel:
1) Hotel business with maximum 50 rooms
2) Hotel & restaurant business
3) Hotel, restaurant, and seminar rooms
4) Hotel, restaurant, seminar rooms, and entertainment business.
The hotel license fee is 10,000 THB, 20,000 THB, 30,000 THB and 40,000 THB according to type of hotel respectively. Once the hotel license is granted, the renewal is required every 5 years.
The Hotel License application process involve several government agencies not only local but also at a provincial level. The required licenses apart from the hotel license one should be considered to the actual type of hotel and its business model referring to the sale of food, liquor, entertainment and more. Moreover, the Environment Impact Assessment is required for a hotel with more than 80 rooms or depending on its size or location. If the hotel has a restaurant with an area of less than 200 square meters, the owner must notify to local authorities for Certificate of Notification as stated in the Public Health Act.
Finally, our advice is to engage professionals and obtain legal advice if you are considering to invest in Hospitality in Thailand. Operating a hotel business without hotel license shall be subjected to fine and prison, hereby we recommend to avoid any legal risks and understand the regulation for this sector in Thailand.
If you need professional legal advice on Hotel Licenses and Thai Hospitality Law, you can contact our lawyers at [email protected]