Thailand began to recognize foreign investment as an important element in developing the country’s economy in the 1950s by enacting its first investment promotion legislation in 1954 through the Industrial Promotion Act No 19. However, the lack of an administrative agency limited this Act’s effectiveness.
To address the issue, the Industrial Promotion Act B.E. 2503 (1960) created the Board of Investment. The Industrial Promotion Act B.E. 2505 (1962) and the National Executive Council Announcement No. 227 B.E. 2515 (1972) followed. These laws contained similar provisions for the administration and granting of incentives for both foreign and domestic investment.
Currently governing the investment promotion in Thailand is The Investment Promotion Act B.E. 2520 (1977) wherein the Board of Investment is mandated by the government to grant the following incentives, guarantees and protection.
Tax Incentives. The Act stipulates that promoted investments are entitled to receive numerous types of tax exemptions. Promoted investments are exempted from corporate income tax on net profits for a period of three to eight years.
- Exemption from payment of import duties on machinery may be granted by the BOI provided comparable machinery is not being produced locally.
- If not satisfying the above condition, BOI may grant 50% reduction on machinery import duties instead.
- BOI may provide reductions on import duties of up to 90% on imported raw materials which are not available locally.
- Exemption from corporate income tax equal to the amount of investment not including the cost of land and working capital for up to 8 years.
- Exemption on a juristic person’s income tax and dividends derived from promoted activities
- 50% reduction of the juristic person’s income tax
- Double deductions from the cost of transportation, electricity and water supply
- Additional 25% deduction of cost of installation or construction of facilities
- Exemption of import duty on raw or essential materials for use in production for export
On top of the tax incentives, the BOI grants non-tax incentives to a promoted enterprise regardless of location which include:
- Bringing in foreign nationals to engage in investment feasibility studies
- Bringing in foreign technicians and experts to work on promoted projects
- Owning land to undertake the promoted activities
- Remitting foreign currencies
The Board of Investment provides guarantees against:
- Nationalization of the activity of the promoted person
- Competition from state enterprise
- State monopolization of products similar to products produced by the promoted project
- Price controls on the products of the promoted activities
- Tax exempt imports by state enterprises
- Granting of permission to export at all times
Protection measures include:
- Imposition of a surcharge on imports at a rate not more than 50% of the price of overseas insurance and freight charges for a period of not exceeding one year.
- Import bans on competing products to provide additional protection for the promoted project or activity.
- Authority of the BOI Chairman to order any action or tax relief sanctions to benefit the promoted projects especially in cases where problems or obstacles in the course of carrying out the promoted project are encountered.
To know more about BOI promotion incentives and the procedure on how to apply for it, read this article.