More investment incentives in pipeline as Thailand seeks to enhance competitiveness

More investment incentives in pipeline as Thailand seeks to enhance competitiveness

Thailand is introducing two new investment programmes -- Amendment No.4 of the Investment Promotion Act 2017 and the Competitive Enhancement Act for Targeted Industries 2017 -- aimed at enhancing the country's competitiveness on the world stage and maintaining a position as a major business hub within Southeast Asia for trade, investment and finance.

So what's on offer? The main attractions are a maximum of 15 years of corporate income tax exemptions and 10 billion baht towards a competitiveness enhancement fund.

Both new programmes were developed from the original investment promotion law to provide more incentives and make them attractive to high-value investors in industries using advanced technologies, geared towards innovation, research and development.

These incentives will be available to all investors investing in companies incorporated under Thai law. To qualify for all the perks on offer, they must invest in targeted core technologies consisting of biotechnology, nanotechnology, advanced materials technology and digital technology in the automotive, electronics, petrochemical, agriculture and food industries.

The privileges will also be available for investment in targeted enabling or supporting services such as research and development, specifically technical training centres, electronic design, engineering design, scientific laboratories and calibration services.

Investors must also co-operate with academic institutions for technology transfer as stipulated by the Board of Investment (BoI).

There are also special tax and non-tax incentives, including:

corporate income tax exemption for a maximum of 13 years for targeted core technologies and targeted enabling services, and a maximum of 15 years for strategic investments that will be considered and announced by the Competitiveness Enhancement Committee.

a 10-billion-baht subsidy under the Competitiveness Enhancement Fund for strategic investment projects involving research and development, innovation or human resource development.

50% corporate income tax reductions for a maximum of five years if the business is located in the Eastern Economic Corridor, the new growth hub envisioned by the government under the new Act that will be effective in the near future, covering Chachoengsao, Chon Buri and Rayong provinces. The targeted activities are next-generation automotive products, smart electronics, eco-friendly petrochemicals and biochemicals, automation and robotics, a medical hub, digital services and food for the future.

import duty exemptions for materials for research and development purposes.

other incentives currently granted by the Investment Promotion Act: import duty exemption or reduction on machinery and raw materials for export products, permission to own land, permission to bring in foreign experts and for business operations under a majority-owned structure.

In addition to these new programmes, the government has also amended the Investment Promotion Act by adding conditions to existing incentives and adding more incentives for current eligible activities. The main changes are:

additional incentives for some eligible activities that are categorised as non-tax, activity-based incentives, known as the B1 and B2 lists in BoI parlance;

50% corporate income tax reduction for a maximum 10 years, and

deduction on net profit derived over 10 years of up to 70% of the investment amount in addition to the normal deduction for depreciation. The investment amount does not exclude the cost of land and working capital used in the promoted project.

Conditions for utilising some tax incentives have also been amended:

Profit and loss calculation must follow the Revenue Code.

Dividend payments from net profits of BoI-promoted activities within six months from the expiry date of any tax holiday period will be exempt from withholding tax.

Plan ahead: Before considering investment in Thailand, those seeking to make maximum use of incentives are encouraged to consider not only the Investment Promotion Act but also the updated Investment Promotion Act, the Competitiveness Enhancement Act and the Eastern Economic Corridor Act.


Thiti Siriphairoj is the director of Tax and Legal Services with PwC Thailand. We welcome your comments at leadingtheway@th.pwc.com

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