The Government Agency responsible for facilitating Investments in Thailand is the Board of Investment of Thailand (the “BOI”). Thailand’s BOI was established in 1966 and has been the main agency of the Investment Promotion in Thailand ever since. The main purpose of the BOI is to facilitate the investment atmosphere in the country by providing incentives (tax and non-tax) for the specific investment categories eligible for promotion.
The BOI issues the eligibility criteria for the investment categories each year in the Investment Promotion Guide (the “Guide”). As per the 2022 version of the Guide, there are 4 investment categories promoted by the BOI. They are:
1. Bio-based and Medical Industries
2. Advanced Manufacturing Industries
3. Basic and Supporting Industries
4. High Value Services
Specific eligibility criteria and requirements are provided for each investment activities falling under these four categories. Generally, those requirements include: minimum capital requirements for specific expenditures such as salary payments of Thai employees, use of specific technologies, conducting research & developments, etc. There are also general minimum eligibility requirements that apply to all projects such as: minimum value-added requirements, usage of modern production processes, usage of new machineries, specific international standard certification requirements, environmental protection plan, minimum capital requirement, specific debt-to-equity ratio, and feasibility study requirement for high valued projects. Since such requirements can be complicated and lengthy, it is advisable for the potential investors to do proper assessment to carefully determine which kind of activity their project is eligible to apply.
The investment projects eligible to apply the Investment Promotion Certificate can enjoy special incentives. There are two types of incentives provided to the promoted investment activities: Tax incentives and non-tax incentives. Tax incentives include 1) Exemption of corporate income tax; 2) Exemption of import duties on machinery; 3) Exemption of import duties on raw materials used in Research and Development; and 4) Exemption of import duties on raw materials used in production for export. Non-tax incentives are mostly concerned with other permits such as the permit to own land, permit to bring skilled workers and experts into Thailand, entry permit to study investment opportunities in Thailand, and permit to take out or remit money abroad in foreign currency. The incentives are also divided into different groups based on the type of investment activities. These groups are named respectively as A1-A4 and B1, B2. The main difference of incentives for Group A projects is the length of income tax exemption applicable and whether there is a cap for exemption. The income tax exemption cap is calculated based on the type of investment activity and their respective criteria. On the other hand, the Group B projects cannot enjoy some of the available incentives.
In addition to the general incentives, some investment projects can apply for additional merit-based incentives for competitiveness enhancement, decentralization, and industrial business development. For the competitiveness enhancement merit, the investment projects which include the following activities are eligible to apply: 1) Research and Development in Technology and Innovation; 2) Donations to Technology and Human Resources Development Funds, educational institutes, specialized training centers, research institutes or governmental agencies in the science and technology field in Thailand; 3) IP acquisition/licensing fees for commercializing technology developed in Thailand; 4) Advanced technology training; 5) Development of local suppliers; and 6) Product & Packaging Design. Decentralization merit incentives are for the projects in 20 provinces with lowest per capita income and merit on industrial area development projects are for projects located within industrial estates or promoted industrial zones. If application is approved, they can enjoy additional tax exemptions on income tax, double deductions from the costs of transportation, electricity and water supply; and additional 25% deduction of the cost of installation or construction of facilities.
Due to availability of different incentives, the application for Investment Promotion Certificate is a competitive and difficult process if not properly conducted with the help of professionals. As such, the potential investors should consider hiring experienced law firms to ensure quick and successful applications.