If you are doing business in Thailand, your business may be eligible for various types of Tax Incentives. You should also know about the tax incentives in Thailand, even if you are thinking of Business Registration in Thailand. This article intends to summarize the tax incentives in Thailand on the basis of location of your business in Thailand.
Thailand was the first Asian government to enact investment promotion legislation (tax and non-tax incentives) to entice foreign investors to invest in the country. The original Investment Promotion Act of 1954, and it has multiple updates and amendments since first implementation. The Board of Investment (“BOI”), a policy-making body, set up under the investment promotion regulations. The main purpose of BOI is to promote domestic and foreign investments. Such investments are significant and valuable to the country’s economic and social growth. The BOI establishes investment priorities, discovers investment possibilities, provides investor services, and determines which investments are eligible for elevated status and benefits.
The benefits provided by the BOI are not unlimited. The BOI retains the right to impose criteria on investors. They can be the amount and source of capital, nationality and number of shareholders, staff development, and product distribution. Therefore, a business must meet all these criteria in order to qualify for privileges.
BOI formulates and monitors the list of activities that are eligible for promotion. The list contains manufacturing and agricultural industries, as well as resource exploration, mining, and service sectors, among other things. The BOI does not discriminate between foreign and Thai investors when providing advantages. The BOI may put limits on foreign investors who want to form joint ventures with Thai investors in specific circumstances.
Location-wise Tax Incentives in Thailand
Currently, the BOI prioritizes encouraging investors to put their projects in upcountry areas. This is a part of its efforts to urbanize the country. Investors can avail tax incentives to relocate to rural areas in order to achieve this goal. The BOI determines the amount of incentives given based on the level of development of specific locations. This divides Thailand into three zones:
Zone 1: Highly Developed Areas
Locations: Bangkok, Samut Prakarn, Samut Sakhon, Pathum Thani, Nonthaburi, and Nakhon Pathom
Qualified projects in this zone receives the following Tax Incentives:
- Import duties on machines that are subject to a tariff of more than or equal to 10% are reduced by 50%.
- Corporate income tax exemption for projects located within their industrial estate zones for three years, provided that such a project with a capital investment of Baht 10 million or more (excluding cost of land and working capital) obtains ISO 9000 or similar international standard certification within two years of its start-up date, otherwise the corporate income tax exemption will be reduced by one year.
- For one year, import duties on raw or necessary materials used in export products are waived.
Zone 2: Rapidly Developing Areas
Locations: Samut Songkram, Ratchaburi, Kanchanaburi, Suphanburi, Ang Thong, Ayutthya, Saraburi, Nakhon Nayok, Chachaoengsao, Phuket, Rayong, and Cholburi
Qualified projects in this zone receives the following Tax Incentives:
- Import duties on machines that are subject to a tariff of more than or equal to 10% are reduced by 50%.
- If a project with a capital investment of Baht 10 million or more (excluding cost of land and working capital) receives ISO 9000 or similar international standard certification within two years of its start-up date, the corporate income tax exemption will be decreased by one year.
- For a period of five years, import duties on raw or essential materials used in export products are exempt.
Zone 3: Semi-Developed Areas
Locations: The remaining 58 Provinces throughout Thailand
Qualified projects in this zone receives the following Tax Incentives:
- Machinery is exempt from import duties.
- Projects with capital investment of Baht 10 million or more, excluding cost of land and working capital, receives ISO 9000 or similar international standard certification. This is within two years of its start-up date and there is exemption in the corporate income tax for one year.
- For a period of five years, import duties on raw or essential materials used in export products are exempt.
- For ten years from the first sale, there will be a deduction of 25% of the project’s infrastructure installation or construction cost. One can make this from net profit by choosing the fiscal year as per preference. In addition to standard depreciation, the deduction is available.
The Bottomline
These were the tax incentive regulation which predominantly helps businesses in Thailand in their continuity. Owing to the great initiatives of the BOI and Royal Thai Government, these incentives help businesses flourishing in the kingdom.
But to avail the benefits, you need support of excellent accounting and taxation professionals. It will never be possible for you to stay updated on the frequently changing regulations of tax incentives in Thailand. On this ground we can help you further. Book your free consultation session by communicating with us. You can also email us your intent to communicate with Konrad Legal at [email protected].
