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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