Hire of Immovable Property for Commerce and Industry

Foreign investors seeking to lease land in Thailand for business purposes may find themselves limited by the 30 year lease limit posed by the Civil and Commercial Code. Indeed, the 30 year limit is rather short in comparison to lease limits in other jurisdictions; such as Vietnam, which allows residential lease terms from 50 to 70 years, and the Philippines, where residential leases can be up to 75 years. Although a Land Department regulation¹ does allow for the registration of two consecutive leases over the same property; in practice, Land Officials typically do not allow for the registration of two consecutive 30 year leases, thus preventing the registration of a secure 60 year leasehold. However, with regards to land to be leased for business purposes, the Hire of Immovable Property for Commerce and Industry Act of B.E. 2542 (1999) provides for renewable 50 year leases of land for such purposes. Ministerial Regulations detail the types of commerce and industry which are covered by the Act.

Chapter 2 of the Ministerial Regulation of B.E. 2543 (2000) Issued Pursuant to the Hire of Immovable Property for Commerce and Industry Act of B.E. 2542 (1999) specifies that commercial and industrial activities covered by the Act must meet one of the following specifications:

1.  A commercial activity with an investment of 20,000,000 THB, or
2.  An industrial activity which is eligible for promotion pursuant to laws related to investment promotion, or
3.  A commercial or industrial activity which is useful to the economy or society of the country according to Thai Cabinet resolutions.

Furthermore, in regards to the commercial or industrial activities of foreigners, they cannot be of the type restricted from foreigners by the Foreign Business Act of B.E. 2542 (1999).

Ministerial Regulation No. 2 of B.E. 2543 (2000) Issued Pursuant to the Hire of Immovable Property for Commerce and Industry Act of B.E. 2542 (1999) also specifies that if a parcel of land the size of 100 rai or more is leased, then the commercial or business activity must comply with one of the following requirements:

1. It is a type of business which increases the value of exports or encourages the employment of domestic labor, or
2. It is a type of business which does not yet exist in Thailand or which is still not yet sufficiently developed, or
3. It is a type of business which involves a cutting-edge manufacturing process or which develops technology, or
4. It is a type of business which is most useful to the economy or society of the country according to Thai Cabinet resolutions.

Finally, Ministerial Regulation No. 2 states that where a foreign person or foreign juristic person (as defined in Section 97 of the Land Code) is the lessee, the foreign person or juristic person must invest no less than 100,000,000 THB. This amount does not include the cost of leasing the land itself. Furthermore, this amount of money must either be (1) brought into the country from overseas in the form of foreign currency, (2) withdrawn from the Thai Baht account of a non-resident, or (3) withdrawn from a foreign currency deposit account. No less than the entire amount of the investment must be brought into the country in the aforementioned manner.

¹Land Department Regulation re: Registration of Land and Other Immovable Property Leases B.E. 2551 (2008)

 

Tags: BOI Promotion, business in thailand, doing business in thailand, FBA, Foreign Business Act, lessee, lessor, Properties in Thailand, Thailand BOI, thailand property, thailand property lease

Category: Business in Thailand, Company Law, Land, Property, Thailand BOI