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Thailand: Incentivising investments

Prisna SungwannaSupattra Sathapornnanon
The Thai Board of Investment (BOI) administers the Investment Promotion Act (1977) under which projects are granted investment incentives, guarantees, and rights to own land. These are important factors in securing project financing. The BOI announced a Seven-Year Investment Promotion Strategy (2015 to 2021) following the issue of Announcement No 2/2557 on December 3 2014, which repeals eight past announcements. It includes a new list of activities eligible for promotion, which has a number of changes from former lists. It prescribes new activity-based incentives and merit-based incentives.

Activity-based incentives are divided into Group A and Group B, as indicated in the new list. Group A activities receive corporate income tax incentives, machinery and raw materials import duty incentive,s and other non-tax incentives. Group A is divided into four subgroups. Group B activities receive only machinery and raw material import duty incentives and other non-tax incentives. Group B is divided into two subgroups.

Merit-based incentives are described in section 9.2 of the Announcement, under the following categories: merit on competitiveness enhancement (six classes of projects are specified); merit on decentralisation, being projects located in investment promotion zones (20 provinces with low per capital income).; and merit on industrial area development (projects located within industrial estates or promoted industrial zones).

Projects with activities in Group A and Group B can apply for merit-based incentives at the time of applying for investment promotion (and in the case of Group A, after being promoted). Group A projects are granted the following activity-based tax incentives: three, five or eight -year corporate income tax exemptions; exemption of import duties on machinery; and reduction of import duties for raw and essential materials for use in production for export for one year, which may be extended.

Additional merit-based tax incentives may include: 50% reduction of corporate income tax after initial tax holiday; double deductions from the costs of transportation, electricity and water supply; and additional 25% deduction of the cost of installation or construction of facilities.

Both Group A and Group B activities are given the following non-tax incentives: permit for foreigners to enter Thailand to study an investment opportunity or work; permit to own land; and permit to bring in and take out money in foreign currency.

The Announcement is only applicable to applications submitted after January 1 2015 (section 13). For more information, see BOI website

Prisna Sungwanna and Supattra Sathapornnanon

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