BOI Tax Incentives Thailand Bangkok

The BOI provides investment matchmaking services to both Thai and foreign investors seeking co-operation in the areas of technology, management and marketing. In addition, the BOI offers a matchmaking service for investors in regional areas looking for joint-venture partners from Bangkok and abroad, as well as for firms that want to invest in provincial areas.

Tax incentives offered by the BOI include:
* Exemption or reduction of import duties on imported machinery
* Exemption or a reduction of import duties on imported materials and components
* Exemption of corporate income taxes for three to eight years, with permission to carry forward losses and deduct them as expenses for up to five years
* Exclusion of dividends derived from promoted enterprises from taxable income during the corporate income tax holiday.
* Additional incentives for enterprises in the Special Investment Promotion Zones include:
* Reduction of corporate income tax by 50 percent for five years after the exemption period
* Double deduction from taxable income of water, electricity, and transport costs for 10 years from the date of first sales
* Deduction, from net profit, of 25 percent of the project’s infrastructure installation or construction cost.
* Additional incentives for export enterprises:
* Exemption of import duties on imported raw materials and components
* Exemption of import duties on re-exported items
* Exemption of export duties
* Allowance to deduct from taxable corporate income an amount equivalent to five percent of an increase in income derived from exports over the previous year, excluding the cost of insurance and transportation.

Criteria for project approval

In determining both the economic and technological suitability of a project for which investment is requested, the Board applies different criteria depending on the level of investment capital. For a project with investment capital, excluding land and working capital, not greater than 200 million baht, the following criteria are used:

* Value added not less than 20 percent of sales revenue, except projects which export more
* than 80 percent of total sales, or use domestic agricultural resources as raw materials, or conserve, restore or develop natural resources and the environment
* Registered capital is at least 20 percent of the total investment
* Modern machinery and production processes are used
* Adequate environmental protection systems are installed.

For a project with investment capital, excluding land and working capital, greater than 200 million baht, the same criteria as for projects with investment capital less than or equal to 200 million baht, plus:

* Impact on its own industry
* Impact on government finances
* Impact on consumers
* Contribution to technological development.

For a project with investment capital, excluding land and working capital, of over 500 million baht, the same as for projects with investment capital greater than 200 million baht, plus:

* A feasibility study.
* Projects which qualify for investment promotion incentives and the conditions under which awards are made are set out on BOI’s “List of Promoted Activities.” The List is broad enough to encompass most industrial projects. The award of tax-related incentives is based on project location and, in certain cases, on type of industry or export orientation.
* The BOI divides Thailand into three investment zones for promotional purposes. These are:
* Zone 1, comprising Bangkok and five contiguous provinces;
* Zone 2, comprising 10 provinces, most of which are within a 180-kilometre radius of Bangkok;
* Zone 3, comprising all other provinces.
* Standard BOI incentives provided to promoted firms include:
* Investment guarantees against nationalization, state monopolies, price controls, tax exempt imports by government agencies, export restrictions
* Visas and work permits for expatriate personnel
* Permission to own land
* Permission to remit money abroad in foreign currency

The principal incentives offered by Zone are:

Zone 1

* No tax exemption or reduction on machinery, except projects which export not less than 80 percent of total sales or locate their factories in industrial estates or promoted industrial zones. Such projects will receive a 50 percent import duty reduction on machinery which is not included in the tariff reduction notification of the Ministry of Finance (Notification No.C 13/2533) and which is subject to import duty greater than or equal to 10 percent
* No corporate income tax exemption, except for projects that export not less than 80 percent of total sales and locate their factories in industrial estates or promoted industrial zones, in which case a three-year exemption will be granted
* Exemption of import duty on raw or essential materials used in export products for a period of one year for projects exporting at least 30 percent of total sales.

Zone 2

* A 50 percent import duty reduction on machinery that is not included in the tariff reduction notification of the Ministry of Finance (Notification No. C 3/2533) and that is subject to import duty greater than or equal to 10 percent
* Corporate income tax exemption for three years, extendible up to seven years for projects that locate their factories in industrial estates or promoted industrial zones
* Exemption of import duty on raw or essential materials used in export products for a period of one year for projects exporting at least 30 percent of total sales.

Zone 3

* Import duty exemption on machinery
* Corporate income tax exemption for eight years
* Exemption of import duty on raw or essential materials used in export products for a period five years for projects exporting at least 30 percent of total sales
* 75 percent import duty reduction on raw and essential materials used in production for domestic sales for five years. This reduction is renewable on an annual basis, provided that raw or essential materials comparable in quality are not being produced or are not originating within the Kingdom in sufficient quantity to be acquired for use in such activity. This does not include projects or factories in Laem Chabang Industrial Estate.

Special privileges are granted as follows:

* Reduction of corporate income tax by 50 percent for five years after the exemption period
* Double deduction from taxable income of water, electricity, and transport costs for 10 years from the date of first sales
* Deduction, from net profit, of 25 percent of the project’s infrastructure installation or construction cost.

Priority activities

The Board has identified projects in the following five areas to be priority activities:

* Basic transportation systems
* Public utilities
* Environmental protection and/or restoration
* Direct involvement in technological development; and
* Basic industries.

Such projects will be eligible to receive the following privileges:

* Corporate income tax exemption for eight years, regardless of location
* A 50 percent import duty reduction on machinery which is not included in the tariff reduction notification of the Ministry of Finance (Notification No. C 13/2533) and which is subject to import duty greater than or equal to 10 percent for projects located in Zones 1 or 2
* Import duty exemption on machinery for projects located in Zone 3.