The government's recent tax incentives for international headquarters (IHQs) have beefed up the country's competitiveness in attracting companies to use Thailand as their regional hub.
Krisda: Incentives to attract more FDI
Multinational companies with diverse affiliated networks in the manufacturing, supply chain and service sectors have increasingly sought to establish an IHQ here, while a number of local conglomerates with international ventures have also sought treasury centre (TC) licences in Thailand, said Krisda Phatcharoen, head of commercial banking at HSBC Thailand.
He said the positive signs were seen after the government granted tax incentives to a broader scope of businesses — regional operating headquarters (ROHs), TCs or international trading centres — for 15 consecutive accounting periods.
The current IHQ rules eliminate the requirement of regional headquarters to earn at least half their revenue abroad including dividend revenue from foreign affiliates and compensation for support services.
Applicants seeking to set up an IHQ in Thailand must have minimum registered capital of 10 million baht with at least one foreign business entity and minimum annual operating expenses of 15 million baht.
Thailand has tried to outshine Singapore and Malaysia in being a regional hub of multinational companies by introducing the first ROH rules in 2002, with a second set in 2010, but only about 200 regional headquarters have been set up in Thailand compared with 4,000 in Singapore.
Mr Krisda said the new incentives would boost international trade and investment and attract more foreign direct investment.
This will be a boon to the country's economic growth in the long run, he said.
Mr Krisda expects the IHQ regulations will strengthen Thailand’s potential and competitiveness and upgrade the country to an Asean trading and investment centre, particularly regarding Cambodia, Laos, Myanmar and Vietnam.
In addition, it should create greater opportunities for the banking industry in the area of international trade and transactional banking services.
"Thailand’s advantageous location among the cluster of Cambodia, Laos, Myanmar and Vietnam will support the country upgrading itself to become a regional financial hub," Mr Krisda said.
"At the same time, the banking sector must develop international financial services to capture greater business opportunities."
He said international banks in Thailand were likelier than local banks to reap benefits from the IHQ tax incentives, given their global networks.
HSBC stands ready to provide a full range of financial services covering commercial loans, international trade, cash and liquidity management, foreign exchange and risk management, Mr Krisda said.