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A 2019 overview on Tax and Non Tax incentives under Thailand Board of Investment BOI H&P BOI attorneys in Bangkok

H&P lawyers have prepared a review of the key aspects of the Board of Investment Regulation and the promotion of projects. Due to the previous experience of our lawyers and partners working with Thailand Board of Investment officers in aviation, automotive, logistics or digital services projects, we would like to summarize the updated information under BOI for 2019.

The BOI annually announces the investment promotion criteria and sectors that are entitled to receive such incentives. The Incentives of BOI provide benefits in both aspects: Tax and Non-Tax which can reduce the cost on business projects. Besides, these promotions can also exempt importing duties on machinery and raw materials at the very first stages of business development., in term of Non-tax incentives, the BOI grants support on bringing in foreign experts and employees into the country on the purpose of enhancing business potential in the country. One of the most significant promotions is the BOI allows foreigner to fully own a company in numerous sectors.

Under the Investment Promotion Act, BOI set the General List of Activities Eligible for Promotion. Both, domestic and foreign investors have to summit well-prepared information of their activities. On this regard we see the role of lawyers with expertise on BOI essential for the success of the application as there is a lot of work to be done in terms of preparation of the documentation and the meeting with the BOI officer.

Additionally, in some activities are set the specific conditions. The investor shall study before applying for BOI promotion. The General List of Activities Eligible for Promotion by Business Category are separated into 8 sections as follows

Section 1: Agriculture and Agricultural Products
Section 2: Mineral, Ceramics and Basic Metals
Section 3: Light Industry
Section 4: Metal Products, Machinery and Transport Equipment
Section 5: Electronics and Electrical Appliances Industry
Section 6: Chemicals, Paper and Plastics
Section 7: Service and Public Utilities
Section 8: Technology and Innovation Development

The categorization of businesses into sections is in order to exercise the benefits of activities-based incentives under Investment Promotion Act and gain Incentives under a project proposal promoted under the Competitiveness Enhancement for Targeted Industries Act B.E. 2560. The incentive section can identify the different levels of benefits in both tax and non-tax incentives which initially were classified by Activities Based.

Basic Incentives on Activities Based Incentives are as follows:

A1: Knowledge-based activities focusing on R&D and design to enhance the country’s competitiveness.
A2: Infrastructure activities for the country’s development activities using advanced technology to create value-added, with no or very few exiting in Thailand.
A3: High technology activities for which are which are important to the development of the country, with a few investments already existing in Thailand.
A4: Activities with lower technology than A1-A3 but which add value to domestic resources and strengthen the supply chain.
B1 and B2: Supporting industries that does not use high technology but is still important to the value chain.
Technology based Incentives: on Section 8 and A1

There are not only basic Incentives as BOI also provide Additional Incentives on the purpose of attracting and enhancing investment widespread in high potential national activities or industries which are called Merit for Competitiveness Enhancement. There are 2 types of merit one is Merit on Decentralization another is Merit for Industrial Area Developments. Each of Merit provide the investor with different incentives level on top of basic incentives, however, it also requires additional conditions as well.

Besides this, there are other issue: the criteria for project approval. In each business sector there are different criteria to be considered. However, here below there are some criteria of project approval:

1)Development of competitiveness in the agricultural, industrial and services sectors: The project must not be less than 20% value added of revenues, except for some projects addressed in BOI conditions, all of which must have value added of at least 10% of revenues, Modern production processes must be used, New machinery must be used and if there are use of used machinery some specific criteria is considered. In term of sea and air transport activities and molds and dies, used machinery over 10 years old, counting from the manufacturing year to the importing year, may be allowed to be used in the project as deemed appropriate, counted as investment capital for the calculation of the cap on corporate income tax exemptions and granted machinery import duty exemption.

2)Environmental protection: Adequate and efficient guidelines and measures to protect environmental quality and to reduce environmental impact must be installed. The Board will give special consideration to the location and pollution treatment of a project with potential environmental impact.

3)Minimum capital investment and project feasibility: The minimum capital investment requirement of each project is 1 million baht (excluding cost of land and working capital) unless specified otherwise on the list of activities eligible for investment promotion.

For foreigners who are looking for 100% share ownership under Investment Promotion Act there are also a set of criteria in projects application for investment promotion. As pointed out in the Foreign Business Act, the business projects shall not be activities under List One annexed to the FBA, Projects in activities under List Two and List Three annexed to FBA, there are no equity restrictions for foreign investors except as otherwise specified in other laws, and the BOI may set foreign shareholding limits for certain activities eligible for investment promotion as deemed appropriate.

On 2019 the Board of Investment also announced Special Measures for the year of 2019. The objective of this measure is to stimulate targeted industries which are Smart Electronics, Agriculture and Biotechnology, Digital, Aviation and Logistics, Affluent, Medical and Wellness Tourism Biofuels and Biochemicals, Next-Generation Automotive, Automation and Robotics, Food for the Future, and Medical Hub. In order to acquire the benefits of this special measure all these industries are able to locate in any area except Bangkok.

The rights and Privileges of this, are 50% reduction of Corporate Income Tax for 3 years from the end of corporate income tax exemption period for eligible activity under and A1, A2 A3. The criteria of obtaining are:

1. Applications must be submitted from November 19, 2018 to December 30, 2019.
2. Must be under eligible activity A1, A2 and A3, except for those that do not have permanent locations, e.g. air transport services, maritime transport services, etc. Projects must be entitled for corporate income tax exemption of not more than 8 years.
3. Must have minimum investment capital (excluding cost of land and working capital) of at least 1,000 million baht.
4. Must follow all BOI’s stipulated timeline.
5. Must apply for additional incentives under this measure when reporting for the full project operation (which must not exceed 43 months) and before the end of corporate income tax exemption privileges both in terms of tax exemption period and amount.

There is no doubt Thailand is on the way to become a very supportive country for foreign investment, nevertheless the complexity of the regulation and proceedings to get Tax and Non-Tax Incentives, creates a business scenario where the contact and liaison with experts and lawyers is essential to obtain the highest benefit of Investing in Thailand.

If you require more information and legal assistance on Thailand Board of Investment projects, please contact our Bangkok lawyers at [email protected]

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