Tax incentives in Asia-Pacific

Thailand

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With the aim of enhancing the country’s competitiveness and maintaining Thailand’s position as one of the most preferred investment destinations in Southeast Asia, the Thai Government has announced and improved various investment incentives to attract FDI into Thailand. The Thai Government is currently taking serious steps to move Thailand toward a new economic model known as “Thailand 4.0”, focusing on moving the Thai economy from a manufacturing-based economy to a value-based and innovation-driven one, with an emphasis on R&D, science and technology, creativity and innovation. Several investment incentives have been continually refined and modified to reflect the transformation and development of the investment promotion under the Thailand 4.0 policy. The revised Investment Promotion Act and the Competitiveness Enhancement Act have recently been enforced mainly to extend the CIT exemption period from the maximum of 8 to 15 years for targeted industries, including cash grant for investment in R&D and innovation activities.

With the recent enforcement of the revised Investment Promotion Act and the Competitiveness Enhancement Act, additional incentives will be granted to the targeted industries. This is mainly to promote investments in core technologies and high-impact investments to be in line with the Thailand 4.0 policy, enabling Thailand to become the hub of trade and investment in Southeast Asia and the world’s investment destination in targeted industries.

To support the above, the Board of Investment (BOI) has recently increased the BOI sectors from seven to eight sectors, with the latest BOI sector targeting technology and innovation development, e.g., biotechnology, nanotechnology, advanced material technology and digital technology. Additional tax incentives will be provided to the targeted industries. The list of targeted industries are gradually being announced.

Additionally, the incentives for area-based development will also be introduced under the Eastern Economic Corridor Act. It is currently in a draft version and expected to be enforced by end 2017. The target locations include Chachoengsao, Chonburi and Rayong provinces. These locations are considered as the center of the east-west economic corridor, boasting connectivity with the Indian Ocean, Pacific Ocean, Cambodia, Lao People’s Democratic Republic, Myanmar and Vietnam countries and South China.

Thailand incentive regime overview

The BOI is the main government agency granting both tax and non-tax incentives to the investors in various industries including manufacturing and R&D activities. The incentives are granted mainly based on the eligible activities as listed under the BOI-promoted activities which is called as “activities-based incentives”. Additional incentives can also be granted under the “merit-based incentives” by taking into consideration of; i.) additional contribution for competitiveness enhancement; ii.) projects located in specific provinces to support the decentralization; and iii.) projects located in promoted industrial estate area.

Whilst the International Headquarter (IHQ) and International Trading Center (ITC) companies will only be eligible for non-tax incentives from the BOI, the Revenue Department (RD) will be responsible for approving the tax incentives to the IHQ and ITC companies.

We provide an overview of key tax incentives available in Thailand for manufacturing, headquarter services, trading centers and research and development activities available through application and approval processes from the relevant government agencies.

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