The global economic climate and investment environment have undergone a drastic change since the 1997 financial crisis. This prompted the Board of Investment to adjust the country’s investment promotion policies and criteria for granting tax privileges in order to respond to the current and future economic and investment situation.

The Board of Investment issues the following policies and criteria for investment promotion:

• To relieve the fiscal burden of the government and to respond to current and future economic situations, the following new policies are enforced:
  • The efficiency and effectiveness of tax privileges given shall be enhanced. Privileges to be granted to projects which truly benefit the economy. The application of tax and duty privileges will be managed and supervised through good governance. BOI will require regular reporting of the operating results of promoted projects for proper review prior to implementing the tax and duty privileges for that year.
  • Every promoted project with investment capital of 10 million baht and more, excluding land and working capital, must obtain ISO 9000 certification or similar international certification in an effort to promote quality and production standards in Thai industries and to enhance the competitiveness of Thai industry globally.
  • Repealing of previous conditions on exports and use of local materials will make the criteria for promotion in line with international trade and investment agreements.
  • Regions or areas with low income and insufficient investment facilities will be given special promotion by way of maximum tax and duty privileges.
  • Small and medium industries are given importance by requiring a minimum capital investment level of 1 million baht, exclusive of land cost and working capital, for projects eligible for promotion.
  • Agriculture and agricultural products, projects related to technological and human resource development, public utilities and infrastructure, environmental protection and conservation and targeted industries are given priority.

Criteria for Project Approval

• In determining the suitability of a project for which investment promotion privileges are requested, the BOI applies the following criteria:
  • Value added is not less than 20% of sales revenue, except projects that manufacture electronic products and parts or process agricultural produce, and projects granted special approval by the Board
  • Ratio of liabilities to registered capital should not exceed 3 to 1 for a newly established project. Expansion projects shall be considered on a case by case basis;
  • Modern production processes and new machineries are used. The efficiency of old machinery, if used, must be certified by reliable institutions and must obtain the Board’s approval;
  • Installation of adequate environmental protection systems. For projects with a potential environmental threat, the Board shall give special conditions on both the location of the project and the manner of pollution treatment.
• For a project with investment capital of not more than 80 million baht, excluding land cost and working capital, a feasibility study of the project must be submitted to BOI.
• For a concession project or privatization of a state enterprise project, the criteria shall be based on the cabinet’s decision dated 25 May 1998, as follows:
  • Projects of state enterprises according to the 1999 State Enterprise Corporatization Act shall not be granted promotion. For a Build Transfer Operate or Build Operate Transfer concession project by the private sector, the state agency that owns the project must submit its project to the Board for consideration prior to any invitation to bid, and bidders shall be informed of any promotional privilege entitled to them, prior to the bidding. In principle, the Board will not consider a project where the private sector pays for a concession, unless such payment is deemed to represent a reasonable investment for the state;
  • For a Build Own Operate project, including a lease by the private sector or rental payment to the state, normal criteria are used;
  • For privatization of state enterprises, only expansions after the privatization shall be considered for promotion.

Criteria for Foreign Shareholding

• As for projects in agriculture, animal husbandry, fisheries, mineral exploration and mining and service businesses under List One of the FBA BE 2542. Thai nationals must hold shares totaling not less than 51 percent of the registered capital.
• Manufacturing projects: there are no equity restrictions for foreign investors.
• The Board may set the amount of shares eligible to be held by foreign investors on promoted projects when deemed appropriate.

• BOI Zoning. As decentralization is a major theme in devising the BOI incentive scheme, the country is divided into three zones based on economic factors :
  • Zone 1 – Bangkok, Nakhon Pathom, Nonthaburi, Pathoum Thani, Samut Prakan, and Samut Sakhon
  • Zone 2 – Ang Thong, Ayutthaya, Chachoengsao, Chon Buri, Kanchanaburi, Nakorn Nayok, Ratchaburi, Samut Songkhram, Saraburi, Supanburi, Phuket and Rayong.
  • Zone 3 – The remaining 58 provinces with low income and with less-developed infrastructure, which are designated as Investment Promotion Zones.
    • 36 Provinces: Krabi, Kamphaeng Phet, Khon Kaen, Chanthaburi, Chai Nat, Chumphon, Chiang Rai, Chiang Mai, Trang, Trat, Tak, Nakhon Ratchsima, Nakhon Si Thammarat, Nakhon Sawan, Prachuab Khiri Khan, Prachin Buri, Phangnga, Phattalug, Pichit, Phitsanulok, Phetchaburi, Phetchabun, Mukdahan, Mae Hong Son, Ranong, Lop Buri, Lamphang, Lamphun, Loei, Songkhla, Sa Kaew, Sing Buri, Sukhothai, Surat Thani, Uttaradit, and Uthai Thani.
    • 22 Provinces: Kalasin, Nakhon Phanom, Narathiwat, Nan, Buri Ram, Pattani, Phayao, Phrae, Maha Sarakham, Yasothon, Yala, Roi Et, Si Sa Ket, Sakhon Nakhon, Satun, Nong Bua Lamphu, Chaiyaphum, Nong Khai, Ubon Ratchatani, Udon Thani and Amnatcharoen.

Criteria for Granting Tax and Duty Privileges as Investment Zones

• Zones 1 and 2 – Approved projects in Zones 1 and 2 will be granted:
  • 50% reduction of import duties on machinery that is subject to import duties of not less than 10%
  • 3 years exemption from corporate income tax for projects located within industrial estates or promoted industrial zones, provided that such projects of 10 million baht capitalization has ISO 9000, ISO 14000 or similar international standard certification within two years of their start-up date, otherwise the corporate income tax exemption will be reduced by one year.

For Zone 2, corporate income tax exemption for three years will be increased to seven years for projects located within industrial estates or promoted industrial zones.

• Exemption of import duty on raw or essential materials used in the manufacturing of export products for one year.
• Zone 3 – Approved projects will be granted:
  • Exemption on import duties on machinery;
  • Corporate income tax exemption for eight years provided that projects with 10 million baht capitalization has ISO 9000, ISO 14000 or similar international standard certification within two years of its start-up date, otherwise the corporate income tax will be reduced by one year.
  • Exemption of import duty on raw or essential materials used in the manufacturing of export products for five years.
  • Deduction from net profit of 25 percent of the project’s infrastructure installation or construction costs and such deduction can be made from the net profit of one or several years, within 10 years from the date of first revenue derived from the promoted activity.