The Thailand Board of Investment is the government agency to support, assist and promote foreign direct investments in Thailand. Apart from this main purpose, its activities cover domestic Thai investments as well as outbound Thai investments in foreign countries.
While its main tax and non-tax incentives are well known, other benefits, especially its government guarantees and scope of protection of foreign direct investment ventures are widely unrecognized. However, it makes sense not to ignore these “small” benefits which might gain a high level of significance during the lifespan of a foreign investment in Thailand’s industries and markets.
Three main incentives: Foreign shareholding, land ownership, tax holidays
If the BOI application is successfully accomplished, the foreigner-owned Thai company is granted a Foreign Business License to carry out business activities, which are under the Foreign Business Act of Thailand restricted to companies with Thai (majority) shareholders only. In case of a Thai Company Limited (Co., Ltd.), three or more shareholders are required, but all of them could be foreign individuals or foreign corporations.
A BOI promoted company can own Thai real estate. This does not mean that the foreign investor can acquire a beach property in Samui or Phuket as a new family domicile. According to the BOI guidelines, the permission is limited to own real estate in Thailand in order to carry on the promoted activity to such an extent as the BOI deems appropriate.
Depending on the specific case, the BOI grants tax holidays on the Thai venture. Tax holidays mean that the corporate income tax rate is reduced for a certain time from 20% to 0%. Also, the withholding tax rate for a profit distribution is reduced from 10% to 0%. Finally, the personal income tax rate on dividends from BOI promoted businesses amounts 0% instead of the progressive tax rate from up to 35%.
“Other” incentives, but highly relevant for a foreign investment
From the tax perspective, the incentives result in a reduction of import duties on machinery and raw or essential materials. Benefits are double deductions from the costs of transportation, electricity and water supply, an additional 25% deduction of the cost of installation or construction of facilities and an exemption of import duty on raw or essential materials for use in production for export. All this has to be agreed on a case-to-case basis with the BOI.
Three non-tax permissions are offered – apart from land ownership: First is the the permission for foreign nationals to enter Thailand for the purpose of studying investment opportunities. Second is the permission to bring skilled workers and experts into Thailand to work in investment promoted activities and last but not least the permission to take out or remit money abroad in foreign currency.
BOI guarantees – an underestimated advantage
BOI promoted companies are protected by the Thai government against the future – to a certain extent. Under the BOI promotion, Thailand guarantees not to nationalize the business activities in the future. The land of smile will not itself undertake new activities in competition with the promoted venture.
Thailand will not monopolize the sale of products similar to the promoted people. It will not impose price controls on the products of the promoted person’s. And it will grant permission to export at all times.
Thailand will not allow any government agency, government organization or state enterprise to import any kind of the product being produced by the BOI promoted company into Thailand by granting import duty exemption.
Protection of the Thailand venture by the Board of Investment
The scope of incentives and guarantees is completed by certain measures to safeguard the foreign investment. The government promises to charge extra import fees into Thailand on products similar to those produced by the promoted activity at a rate not exceeding 50% of the price of overseas insurance and freight charges, effective for not more than one year. If this is not sufficient to protect the FDI, Thailand will increase the measure, even by banning the import of products similar to the local productions. In the case where the promoted person encounters any problem or obstacles in the course of carrying out the promoted activity, the BOI will have the power to render any appropriate assistance.
Latest developments: More incentives for SMEs
The BOI recently approved more incentives for SMEs to cover from currently 40 to more than 100 business activities and increased the ceiling of corporate income tax (CIT) exemption up to 200 percent to enhance SMEs’ competitiveness. Regarding basic tax incentives for activity-based activities, the ceiling of corporate income tax exemption is increased from normally 100 percent to 200 percent, for activities eligible to obtain CIT exemption, meaning the amount of tax exemption on capital investment will be doubled.
Additional tax incentives for merit-based activities are granted if the SMEs operate an activity that enhances competitiveness including research and development, advanced technology training. IP licensing fees, product & packaging design, investment, and expenses conditions will be significantly relaxed to enable SMEs to have a better access to enhanced incentives.
The Consulting House: Effective BOI application support
The incentives, guarantees and protection measures mentioned above obviously leave some questions open. The Consulting House is prepared to provide further information, to guide through the hurdles of a BOI application and to advise on the scope of current benefits for already existing BOI promoted companies.
The Consulting House provides BOI accounting services for BOI promoted companies and companies with BOI promoted and non-promoted activities. Comprehensive cross-border tax planning is provided to cover the tax holiday period as well as the post-holiday years.
This website may contain information regarding legal topics, legal issues, and legal developments. These materials are for informational purposes only. They do not constitute legal advice on any particular set of facts or circumstances. and are not guaranteed to be complete, comprehensive, or up-to-date. Contact the Consulting House for individual advice, support and assistance.