News & Update

With many foreign nationals falling in love with Thailand’s natural charm and beauty, the government of Thailand encourages foreign direct investment by maintaining an open and market-oriented economy as a means of promoting economic development, employment and technology transfer. Thailand’s agriculture-based economy has transformed into an industry and manufacturing-based economy which is largely influenced by significant contribution of foreign investment.

Through the Board of Investment or BOI, the government arm of Thailand spearheading the campaign to encourage foreign investment in Thailand, the government promotes foreign investment. The BOI lists seven categories of economic activities, covering hundreds of types of businesses that are eligible for investment incentives.

Potential foreign investors who meet any or all the following criteria are eligible for BOI incentives:

• If foreign investor significantly strengthens Thailand’s balance of payments position, especially through production for export.
• If foreign investor is able to support the development of the country’s resources
• If foreign investor contributes to the increase in employment rate due to jobs generated by the investment
• If foreign investor is able to establish investment operations in provinces outside the Bangkok metropolitan area
• If foreign investor is able to contribute to the energy conservation or replace imported energy supplies
• If foreign investor is able to establish or develop industries that form the base for further technological supplies
• If foreign investment activities are considered important and necessary by the government

The Board of Investment (BOI) offers promotions to investors categorized as either tax incentives, or non-tax privileges.

• For businesses whose activities fall under the BOI’s priority industries, or who operate in Export Processing Zones (EPZ), corporate income tax and import tariff incentives are offered
• All BOI-Promoted projects are offered non-tax privileges including guarantees, protection, permissions and services.
• Incentives are offered to foreign and domestic businesses that operate within the designated estate area or Thailand’s Network of Industrial Estates

Other Tax Benefits Offered to Foreign Direct Investment

Thailand Law states that a company that chooses to register under Thai law shall enjoy various tax benefit schemes such as:

• Income tax holiday from 3 to 8 years for business with Investment Promotion Privileges.
• Reduction or exemption of import duties on raw material and imported machinery for business with Investment Promotion Privileges or industries setting up in Export Processing Zone and Free Trade Zone.
• Double deduction for the cost of transportation, electricity and water supply for industries with Investment Promotion Privileges.
• 200% deduction for the cost of hiring qualified researchers doing research and development project.
• 150% deduction for the cost of employee’s training in order to improve human capital.
• Small and medium size company can choose to deduct special initial allowance on the date of acquisition for computer (40%), plant (25%) and machinery (40%).

As part of Thailand government’s effort to encourage foreign investment in the country, some types of companies are given entitlement to a corporate tax rate (mandatory 30% rate) reduction as follows:

• For regional operating headquarters company, 10% corporate income tax on net profits, interest and royalties for ROH.
• For SME companies, reduced company tax rates for small and medium enterprises (SMEs) are as follows:
  • 15% on net profits up to 1 million baht
  • 25% on net profits of 1 to 3 million baht
  • 30% on net profits above 3 million baht
• Listed companies, Reduced tax rates for companies listed on the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI) are as follows:
  • 25% for companies listed on the SET from Sept 6, 2001 to Dec 31, 2005.
  • 20% for companies listed on the MAI from Sept 6, 2001.
  • The reduced rate will be applicable for 5 consecutive accounting periods only.

• Venture capital companies investing in SME’s:
  • Corporate tax exemptions are granted
  • Dividends received from SMEs and gains arising from the transfer of shares in SMEs are granted exemption from corporate tax.

Tax breaks are bonuses for any business. It is in tax breaks that businesses get to enjoy more of their net profit in which some businesses would share to their employees in the form of bonuses and sometimes, stocks. If tax breaks are enjoyed by local businesses in Thailand, this is what also magnets foreign investors in the country.

With Thailand’s current economic condition, more and more foreign investors are attracted to set up a business not only in the metropolis, but in the provinces as well. Hence, decreasing the unemployment rate inside and outside Thailand’s metro; another good sign that a country is going forward economic progress.

To get a better view of Thailand’s tax break law, tax advisory services are made available for foreign investors who wish to set up business and avail tax holiday in the country. There are available tax planning services in Phuket, Bangkok, Ayutthaya and in other provinces a foreign investor can seek counsel to before setting up any business in Thailand.