Foreign Ownership of Industrial Land in Thailand
Although the Thai Land Code generally prohibits foreigners from owning land, one notable exception applies to land located within an industrial estate under the Industrial Estate Authority of Thailand Act of B.E. 2522 (1979), as amended. Under Section 44 of the aforementioned Act, foreign entrepreneurs are allowed to own industrial estate land to conduct business, as the Industrial Estate Authority of Thailand (IEAT) may deem appropriate, even in excess of the land area limitations prescribed by the Land Code.
The general rules that are applicable are specified in the Announcement of the Board of Directors of the Industrial Estate Authority of Thailand Re: The Standards, Procedures and Conditions for Permitting Ownership of Land in an Industrial Estate (the “IEAT Announcement”) issued on June 30, 2008 and then later amended on November 22, 2010. However, an important prerequisite is that the foreign investor should have already obtained a license from the IEAT to use the land for business operations. The application to obtain such a license is called Form IEAT 01/1.¹ The form requires the following information:
- The specific land plot that the applicant is interested in purchasing and from whom (i.e. the IEAT or a private entity);
- Basic information regarding the applicant’s corporation is required, such as registered capital and ratio of Thai-to-foreign ownership. The applicant may apply even if it is still in the process of incorporating;
- The precise dates as to when the factory will begin construction and when it will begin operations;
- Estimate of public utility usage during the initial stages of operations and during full-time operations, such as electricity, telephone, water supply, raw water, wastewater treatment, garbage disposal, industrial waste disposal, and any other public utility usages;
- Raw materials required in the manufacturing process, an outline of the manufacturing process, and the production capacity of the factory, including how much of the product will be distributed in Thailand, how much of it will be distributed abroad.
The application to obtain the land use license may be processed at an IEAT One-Stop-Service Center. Thereafter, the foreign investor may proceed with the application to actually own the land (see how to buy property in Thailand).
In order to own the land, the applicant is required to submit Form IEAT 15 S,² a copy of the aforementioned license to use the land for business operations, a copy of the title deed, and other relevant documents. Form IEAT 15 S requires the applicant to provide basic information regarding its business, such as the number of Thai investors, foreign investors, management staff, and Thai laborers. The applicant must also provide information regarding land area allocation, which is addressed below. Thereafter:
- If the IEAT approves the application, it will issue a notification to the applicant and will also send an ownership permission document to the Land Department.
- The following documents must then be submitted to the Land Department: (1) corporate registration, (2) list of shareholders, (3) commercial registration, (4) memorandum of association and objectives, (5) corporate by-laws, (6) report of corporate meeting (authorizing purchase of land) and (7) the ownership permission document from the IEAT.
- The Land Department will then proceed to update the Title Deed to add the name of the new owner.
Furthermore, Section 4 of the IEAT Announcement subjects the landowner to the condition that the land area must be allocated as follows:
- There must be a land area allocated for the factory or commercial building that is appropriate for the type of the business that is to be conducted on the land.
- There must be a land area allocated for safety and environmental protection systems in consideration of the effects of the business operations; for example, a waste-water treatment system or an accident prevention system.
- There must be a land area left vacant according to the landscape architecture of the land.
- There must be a land area allocated to any buildings or open-air areas that are necessary for the conduct of business operations, such as an area to store merchandise, a parking lot, a cafeteria, or a security booth.
- There must be a land area left vacant in anticipation of future business expansion.
Generally, land within an industrial estate cannot be owned for residential purposes.
However, the IEAT Announcement makes clear that land within an industrial estate may be owned to provide housing to the company’s employees and their family members, subject to the specific conditions specified in Section 5 of the IEAT Announcement. In order to own land in an industrial estate for such purposes, a separate application form IEAT 15.1 S³ must be submitted.
Finally, Section 44 of the Industrial Estate Act states that a foreign investor must sell the land within 3 years of the termination or assignment of business operations. If the foreign investor does not do so, the land will be sold by the Director-General of the Land Department in accordance with the Land Code.
¹ Form Kor Nor Aor 01/1
² Form Kor Nor Aor 15 Sor
³ Form Kor Nor Aor 15.1 Sor
Category: Business in Thailand, Land, Property
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