International Procurement Offices have consistently ranked high on the promotional categories list of the Board of Investment Thailand. The BOI wants to develop Thailand’s supply chains and promote Thailand as a top global hub for industrial component sourcing and distribution through this category. BOI Promotions in Thailand for eligible activities facilitate this intent of the kingdom.
It also intends to improve the technical skills of the Thai labor force by utilizing experts from other countries, as well as to introduce technological innovation and industry best practices to Thailand.
The International Headquarters and International Trading Centers categories initially took the place of this promotional category, but the BOI reintroduced it on November 4, 2020, in an effort to promote foreign investment and commerce in the face of the COVID-19 epidemic. However, it was not finally included in the list of eligible activities. But now the Board of Investment in Thailand declares that IPOs are eligible for BOI Promotions.
Therefore, if you are a foreign investor and want to start your business in Thailand, an IPO can be a good form of business institution. But would your venture support the IPO form of business structure? Read to know more!
- What is an International Procurement Office?
- What is the International Procurement Office in Thailand?
- Classification of an IPO in Thailand
- How Should an International Procurement Office Function for BOI Promotions in Thailand?
- New BOI Announcements for IPOs in Thailand
- What are the Board of Investment Privileges for IPOs in Thailand?
- Permitted Activities for an International Procurement Office in Thailand
What is an International Procurement Office?
International Procurement is the process that allows businesses from all over the world to submit bids for contracts for goods and services. The idea has become more well-known as shipping and transportation expenses have fallen as a result of an abundance of inexpensive, easily accessible fuel. Large firms now enjoy lower labor and material costs while maintaining the same level of quality and output. This is because of globalization.
International procurement offers three main advantages: lower costs, increased consumer base, and encouragement of the global economy. In a free market, as more goods and services are imported from other nations, their economies become richer. As a result, more money can be spent, enabling both consumers and businesses to buy goods and services.
What is the International Procurement Office in Thailand?
In the previous section, you read about the International Procurement Office in a general sense. If you are planning to set up an International Procurement Office in Thailand, you must know how the Board of Investment of Thailand takes an IPO to be. This section will guide you throughout the BOI Conception.
Classification of an IPO according to BOI Thailand
Board of Investment, Thailand identifies an organization to be an IPO when it carries out the following activities in Thailand –
- The organization procures raw materials, parts, and components used in manufacturing industries and does not deal with finished products. For example, it can deal in blots, nuts, and spare parts for the automobile industry, but cannot sell cars or automobiles.
- It must own or rent a warehouse and manage inventory with an IT-based system exclusive for warehouse management. The process flow must follow the In-In, In-Out, Out-In, Out-In-Out sequence. It cannot go with an Out-Out sequence.
- It must have appropriate activities of merchandise procurement and management like trained and qualified staff for Quality Inspection and Packaging or repackaging of goods.
- The organization must have several procurement resources, at least including a domestic resource.
- It can only engage in domestic wholesale and export of goods. By no means, the firm should carry on direct selling to end-users.
- The organization must have at least 10 million paid-up capital before the issuance of the BOI Certificate.
So, if you qualify for the above conditions, you will be eligible for BOI Promotions as an International Procurement Office in Thailand.
How Should an International Procurement Office in Thailand Function?
A Thai-incorporated business that exclusively purchases and distributes raw materials, parts, and components for manufacture must be an International Procurement Office. They should effectively serve as a middleman between Thai and foreign suppliers and manufacturers.
However, the BOI distinguishes between sourcing agencies and international procurement offices. An International Procurement Office must carry out tasks beyond those of an agent in order to be eligible for BOI advancement, including purchasing, reselling, and storing raw materials, parts, and components.
The BOI also makes it clear that an International Procurement Office may only acquire raw materials or components required to manufacture completed goods under its conditions for a promotion. They must include components made in Thailand as part of their procurement offerings rather than buying full goods.
The role of an International Procurement Office is illustrated below:
New BOI Announcements for IPOs in Thailand
The “IPO” (international procurement office) will once more be an acceptable activity. The IPO’s duties include sourcing components, semi-finished items, and raw materials from both Thailand and beyond.
Along with other non-tax advantages, a company operating in the promoted activity under the IPO will primarily benefit from import duty exemptions on machinery and raw materials used in export manufacturing.
Please note that the applicant must own or lease warehouse space as one of the most crucial requirements of the IPO in the past (s). Therefore, to meet this requirement in the past, the majority of trading enterprises had to buy or rent the warehouse from logistic providers, which could not be very convenient. Recent International Commerce Center (IBC) technology, however, enables a trading organization to conduct wholesale business without the need for a warehouse (although there are other specific restrictions in addition to the IPO). On the basis of the available data, this point isn’t yet clear. As soon as the official BOI notification is out, we’ll let you know.
What are the Board of Investment Privileges for IPOs in Thailand?
A business is eligible for B1 privileges if it engages in activities that fall under the purview of purchasing and selling raw materials, parts, and components to and from manufacturers or distributors in Thailand and overseas, under the Announcement of the Board of Investment No. Sor. 1/2564. Several non-tax benefits are also included in these privileges, such as exemptions from import duties.
Tax Incentives
- Exemption of import duties on machinery
- Import tax exemption on raw materials used in the production of goods for export.
Non-Tax Incentives
- 100% Foreign Ownership
- Permission to own land
- Permission to bring skilled workers and professionals to work in Thailand
- Easy process in the issuance of Visa and Work Permit
Permitted Activities for an International Procurement Office in Thailand
- Now you are well aware of the fact that it is easier to get a BOI Promotion for an IPO than other business structures. Therefore, let us rewind you well with the activities that your IPO in Thailand can perform.
- Coordinating the procurement of raw materials, parts, and components between suppliers, manufacturers, and distributors.
- Overseeing the logistics of acquiring and delivering the manufacturing components. Inspecting the quality of raw materials, parts, and components to be sold to manufacturers.
- Packaging or repackaging of raw materials, parts, and components.
- Storing or turning over an inventory of raw materials, parts, or components.
- Developing innovative IT systems used in warehouse/inventory management and goods fulfillment.
Therefore, now as you know all about the IPO business category in Thailand, you can align your business idea with this type of formation. Ideation is completely your task, but when it comes to implementation, you will need legal help. There is nothing better than a local Thai Law firm with more than a decade of experience in forming IPOs to take up your case. Starting from Company Registration in Thailand to regular Accounting and Taxation tasks, Konrad Legal leads the league in Bangkok. Write to us at [email protected].
