Business Incentives

Overview:  The Investment Promotion Act of 1977 (the "Promotion Act") is intended to foster foreign and domestic capital and technology investment in Thailand. The Promotion Act is administered by the Board of Investment (the "BOI"), whose function is the administration of the Promotion Act and the promotion of domestic and foreign investments which qualify under the Act. The BOI seeks to promote those business investments and activities that are considered important and useful to the social and economic development of Thailand. The Board broadly defines priority areas for investment, identifies investment opportunities for investors, provides services to investors, and decides which investments qualify for special status and privileges under the Promotion Act and BOI regulations.

The BOI maintains a list of activities eligible for promotion and considers additional activities when it receives promising proposals. The BOI places special, but by no means exclusive, emphasis on industries that are labor intensive, agricultural, or export-oriented. There is no requirement that a business eligible for promotion apply for such prmotion, but it is generally in the business's interest to apply for BOI promotion.

Two governmental entities have been empowered to grant business incentives. Privileges regarding general investment, based on the location of the enterprise, are granted by the Board of Investment of Thailand (BOI). Currently, three regional areas are zoned and different investment privileges are contained therein. The Thai government also attempts encourage more investment outside of Bangkok by providing greater incentives to projects located in rural zones.  

The Industrial Estate Authority of Thailand (IEAT) is the other governmental body that grants business incentives to foreign companies. Enterprises which have been developed by IEAT or are a joint venture between private entities and the IEAT are granted investment privileges if they are located in an industrial estate.

The Investment Service Center will assist promoted companies with applications for factory and other licenses necessary to operate the promoted business. They will also assist with land, work permit and immigration matters.  

The BOI periodically publishes a list of activities currently being promoted. Each category has minimum capital requirements and most have minimum Thai shareholding requirement and other conditions:

BOARD OF INVESTMENT

The BOI was established by the Investment Promotion Act of 1977 for the purpose of administering a program of incentives for people establishing or expanding business enterprises , foreign or Thai owned, deemed desirable by the Thailand government. Where suitable, approved projects are granted special privileges by the BOI provided they are in accordance with the guidelines listed below.

Foreign Ownership: Foreign investors often seek to own all, or at least a majority interest, in their manufacturing subsidiaries to be established abroad. Where such a subsidiary in Thailand seeks BOI privileges, the BOI will allow it to be majority or 100% foreign owned but only if the promoted company exports a substantial amount of its production. If the promoted company wishes to sell to the local market, the BOI usually requires majority Thai ownership of said company.

Privileges and Promotional Certificate: Investors who wish to seek promotional privileges must file an application in duplicate.  If the application is approved the applicant will be notified and provided with an application form for a Promotional Certificate. Usually, a six-month period is specified within which the qualifying conditions must be met. An applicant must, within this six-month period, demonstrate good faith by forming a legal business organization, and by submitting copies of company documents and a preliminary list of capital, equipment and materials. The Promotional Certificate will list all the special privileges granted to the promoted company. 

Incentives Available:

Promoted entities are entitled to the following privileges:

1.	The Thai government will not commence a new enterprise in competition with a promoted enterprise.
2.	The Thai Govenment will not nationalize a promoted enterprise.
3.	Unless required by special national circumstances, the Thai Government will not monopolize the sale of a type of item produced by a promoted enterprise, or impose price controls on the enterprise's products.
4.	Government entities are restricted from importing, on a duty- free basis, products of a quality equal to or lower than the quality of the products of a promoted enterprise.
5.	A promoted enterprise may own land that is needed for its operations.
6.	A promoted enterprise may freely remit foreign currency so long as it either offsets the return of its capital investment or consists of profits or payments of interest or principal on foreign loans, royalties, license fees or other similar obligations. In such cases, the loans, licenses and other related agreements must be approved by the BOI. This privilege may be suspended whenever economic circumstances dictate.
7.	A promoted enterprise may export its products, except when such exportation threatens Thailand's security and economic interests.
8.	The entry of alien experts, technicians, staff and their dependents is permitted, but subject to restrictions that the BOI may impose.
9.	A promoted enterprise may be exempted from or granted reductions in import duties and business taxes on machinery, provided comparable machinery is not available locally. For up to one year at a time, a similar exemption may apply for raw materials. A BOI promoted local seller is also eligible for exemptions or reductions of duties and taxes for purchases of local machinery and raw materials.
10.	A promoted enterprise may be exempted from company income tax on net profits from three to eight fiscal years. If this exemption is granted, it may be extended to income derived from the sale of by-products and semi-finished products. If losses are incurred during the exemption period, they may be carried forward for five years after the exemption ends.
11.	Dividends paid to shareholders may be exempt from tax from three to eight fiscal years.
12.	Payments of royalties and fees may be exempted from tax for up to five years.

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