Doing business in Thailand / Foreign Investment
Board of Investment
One institution that is of particular interest to any foreign investor is the Board of Investment (BOI). The BOI was established in 1959 to promote investment through the provision of a number of fiscal and non-fiscal incentives to both local and foreign investors. The basic package of guarantees and incentives that is provided has remained relatively constant for more than a decade although the actual incentives provided have been modified periodically to achieve various policy goals.
In recent years, the government has put considerable emphasis on the use of BOI privileges to achieve policy targets related to exports and the decentralization of industries into the regions. Export firms almost automatically qualify for the most attractive set of incentives and a majority of firms recently promoted by the BOI are export-oriented.
In order to promote decentralization, the BOI overhauled the criteria for granting tax privileges on September 1, 1987 and again on January 1, 1989. The country is now divided into three zones.
Zone 1 includes Bangkok, Samut Prakan, Samut Sakhon, Nakhon Pathum, Nonthaburi, Pathum Thani; Zone 2 includes 10 provinces surrounding Zone 1 (excluding Laem Chabang industrial estate), and Zone 3 includes the remainder of the country.
Promoted projects which are located in Zone 1 receive the least tax benefits, while those in Zone 3 obtain the maximum tax benefits. The new criteria have already resulted in a decline in the number of investors locating their factories in Bangkok and the 5 neighboring provinces.
The BOI has also established three regional offices in Surat Thani in the South, Nakhon Ratchasima in the Northeast, and Chiang Mai in the North (for addresses, see below). These offices provide assistance both to local investors and to Thai and foreign investors exploring the possibilities of investing in the regions.
Furthermore, the BOI has been addressing the technological development of the Thai industry. Promotional privileges are provided to firms undertaking research and development efforts, and a BOI subcommittee has recommended that the Ministry of Finance and the Bank of Thailand implement additional policies to encourage research and development.
The BOI has recently explored possibilities to promote supporting industries through a variety of measures. Subcontracting is actively encouraged and a special incentive package has recently been implemented to promote the development of supporting industries, especially to facilitate the growth of the electronics industry and electronics exports.
In addition to guarantees and incentives, the BOI has an explicit policy to provide investors with a wide range of services. These include the provision of investment information, investment opportunity surveys and the identification of potential joint venture partners.
There is a One-Stop Service Center which assists promoted companies to obtain the permits and licenses that are required for starting operation. The center also facilitates work permits and visas for foreign technicians and experts who enter Thailand to carry out feasibility studies, as well as to work in promoted projects.
Board of Investment
Head Office
Thailand
555 Vibhavadi Rangsit Road
(Opposite Central Plaza Hotel)
Bangkhen, Bangkok 10900
Tel (662) 270-1400, 270-1410, 270-1420
Fax (662) 271-0777
Tlx 72435 BINVEST TH
Cable BINVEST
Overseas Offices:
Germany
Thai Trade and Investment Center
Bethmann Strasse 58
6000 Frankfurt am Main
Tel (069) 281-091/2, Fax (069) 292-460
Tlx 4189399 TTIC D
Cable THAICENTER FRANKFURT
United States
Royal Thai Embassy
5 World Trade Center, Suite 3443
New York, NY 10048
Tel (212) 466-1745/6, Fax (212) 466-9548
Tlx 645690 THAICOM NYK
Cable THAIBOI NEW YORK
Japan
Royal Thai Embassy
3rd floor Akasaka Brighton Building
1-5-2 Akasaka, Minato-ku, Tokyo 107
Tel (03) 582-1806, 582-0976, Fax (03) 589-6176, Tlx 242-6991 BOITYO
Cable THAIBOI TOKYO
Australia
12th floor, Royal Exchange Building
56 Pit Street, Sydney, N.S.W. 2000
Tel 274-8905/6, Fax (612) 251-6905
Tlx 23467 THAITC AA
Cable THAIBOI SYDNEY
Promotional Privileges
As mentioned, all businesses under the above named categories A, B and C are governed by the provisions of Thailand’s Alien Business Law of 1972. Under this law category A and B businesses are closed to aliens, except when in category B an alien is granted promotional privilege by the BOI.
To apply for a promotional privileges. an application form is filled in, with the supporting documents required by the application, and then submitted to the Board of Investment for deliberation. If approved, the board will grant the investor assistance in dealing with the various government agencies, approve machinery and equipment lists for duty free entry and take procedures for the admission of foreign technicians to Thailand.
BOI promoted businesses should be carried out with the firm registered as a limited company. There usually are a designated minimum investment and some regulatory conditions on equity participation, nationality of shareholders, personnel training and hiring, quality of products and distribution.
Guarantees and Incentives
To encourage foreign investment in fields defined by the BOI, the Thai government grants investors in such fields guarantees as well as incentives.
The following guarantees are given:
* Against nationalization
* Against competition by new state enterprises
* Against state monopolization of the sale of products similar to those produced by promoted firms
* Against price controls
* Permission to export
* Against imports by government agencies or state enterprises with taxes exempted
The following protection measures are available (subject to justification and need)
* Imposition of surcharge on foreign products at a rate not exceeding 50% of the CIF value for a period not more than 1 year at a time
* Import ban on competitive products
* Authority to order any assisting actions or tax relief measures for the benefit of promoted projects
The following permissions may be granted:
* To bring in foreign nationals to undertake investment feasibility studies
* To bring in foreign technicians and experts to work on promoted projects
* To own land for carrying out promoted activities
* To take or remit abroad foreign currency
Some tax incentives may also be available:
* Exemption from business taxes on imported machinery
* 50% import duty reduction on machinery which is subject to import duty greater than or equal to 10%
* Reduction of import duties and business taxes of up to 90% on imported raw materials and components
* Exemption from corporate income taxes 3 to 8 years with permission to carry forward losses and deduct them as expenses for up to 5 years
* Exemption for up to 5 years from withholding tax on goodwill, royalties or fees remitted abroad
* Exclusion from taxable income of dividends derived from promoted enterprises during the income tax holiday
Additional incentives are offered for enterprises in Special Investment Promotion Zones.
* Maximum reduction of 90% of business tax for a period of up to 5 years
* Reduction of 50% of corporate income tax for 5 years after the termination of a normal income tax holiday or from the date of income earning
* Permission to double the cost of transportation, electricity and water supply for deduction from taxable corporate income
* Permission to deduct from the taxable corporate income up to 25% of the costs of installing infrastructure facilities for 10 years from the date of income earning
Additional incentives might be granted for Export Enterprises.
* Exemption from import duties and business taxes on imported raw materials and components
* Exemption from import duties and business taxes on re-exported items
* Exemption from export duties and business taxes
* Allowance to deduct from taxable corporate income the amount equivalent to 5% of an increase in income derived from exports over the previous years, excluding costs of insurance and transportation
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