Vacation and investment in Southeast Asia

It is easier to start a business in Thailand than ever

BOI company

Thailand is, everybody will agree, a fantastic destination for vacation; sun, beaches, palm trees, colorful culture, amazing food, awesome people, vibrant cities, eccentric nightlife… Add to this the low cost of living and we can clearly say It is also a wonderful country to live in.

But is there more to that? Is Thailand also a land of opportunities to start a business? To look for investors? To hire qualified staff? To lower your tax rate?

The answer is YES! Thailand is also a paradise for business owner, especially when you take advantage of the special BOI company setup.

What is the BOI?

The Thailand Board Of Investment or BOI is an agency set up by the Government of Thailand and under supervision of the Prime Minister Office dedicated to promote and encourage investments in Thailand.

The BOI has set investment promotion policies to: 

  • Promote investment that helps enhance national competitiveness by encouraging R&D, innovation, value creation in the agricultural, industrial and services sectors…  
  • Promote activities that are environment-friendly, save energy or use alternative energy to drive balanced and sustainable growth 
  • Promote clusters to create investment concentration in accordance with regional potential and strengthen value chains 
  • Promote investment in border provinces in Southern Thailand to help develop the local economy, which will support efforts to enhance security in the area
  • Promote special economic development zones, especially in border areas, both inside and outside industrial estates, to create economic connectivity with neighboring countries and to prepare for entry into the ASEAN Economic Community (AEC) 
  • Promote Thai overseas investment to enhance the competitiveness of Thai businesses and Thailand’s role in the global economy 

It provides investment information, services, as well as many incentives to local and foreign investors investing in promoted and priorities industries.                                                                                                                          The purpose of the agency is to attract investments in specific activities and to decentralize the country’s industrial base. The Office of the Thailand BOI is your best contact point if you want to set up a business in Thailand. It will assist you in numerous ways.

Moreover, the BOI is also Thailand's best marketing tool, promoting the country as one of the best investment locations in Asia. It is in charge of developing and implementing strategies under which promotional activities are organized around the globe.                                                                                                                                       The 14 BOI overseas offices (Beijing, Frankfurt, Guangzhou, Los Angeles, Mumbai, New York, Osaka, Paris, Seoul, Shanghai, Stockholm, Sydney, Taipei, and Tokyo) are as much Thai entities cooperating with potential investors.

Thailand making overseas investments a national priority, the BOI also created the ‘Thai Overseas Investment Services Center’ (TOISC) and the ‘Thai Overseas Investment Information Center’ (TOIIC). The TOIIC provides market data for investors, conducts in-depth studies on investment prospects in ASEAN and organizes conferences on investment-related issue, like laws and regulations on doing business overseas and identifying opportunities in growth industries.

What’s a BOI Company?

Usually, it can be complicated for foreigners to set up a competitive business in Thailand. The country voted many protective laws limiting the ability of foreigners to be competitive on the domestic market. However, the Thailand BOI has created special rules to promote companies investing in key sectors of the economy in order to compete on par with other Southeast Asia’s countries such as Singapore or Hong Kong, which have very low effective tax rate. For Thailand to compete against these business hubs and attract investors, the government need to offer strong incentives, to specific types of companies.

Thus, the BOI is promoting companies operating in industries which have a high benefit for the country and helps Thailand to be more competitive against its Southeast Asian neighbors.                                                                                    If the company is matching these criteria and is approved by the BOI, it will have the possibility to physically operate on Thai soil (which is not possible for most of the ‘offshore’ companies) and be 100% foreign owned, giving more opportunities for acquisition. Being able to run a business from the country you are operating in implies lower costs and gives a significant advantage regarding the official tax residency. And there are many more benefits to setting up as a BOI company in Thailand.

The BOI sets three main criteria for a project approval: 

  • Development of competitiveness in the agricultural, industrial and services sectors
  • Environmental protection
  • Minimum capital investment and project feasibility

Concerning foreign investors, most of them will prefer to set up a BOI company instead of obtaining a Foreign Business Act (FBA) License. The differences between the two are enormous, and any investor will not hesitate to go through the BOI process even if there are only a few chances to be promoted. On the contrary, even if they have serious chances to be granted a FBA License, they will go through this FBA Licensing process only on very rare occasions. Investors rightly perceive the BOI as an ‘open door’ for them to start a business in Thailand. Indeed, if the role of the FBA administration is to limit foreign investments or to control them very tightly, the BOI is much more welcoming and will do everything to help foreigners invest in Thailand. It’s core role is really to attract investors.

What are the benefits of a BOI Company?

As an institution dedicated to attract and facilitate foreign investments, the BOI is offering a whole bunch of advantages and incentives in order to fulfill its duties.                                                                                               To enhance competitiveness and facilitate investments, it will offer attractive package of tax incentive and costs deductions, provide assistance and ease visa and work permit proceedings (one stop visa), lift restrictions on land ownership by foreigners for industrial related projects, allow a foreign majority ownership of a business.                                                The BOI will also offer business support services by providing information and advices on establishing operations in the country, organizing visits on site, help identifying suppliers, subcontractors and partners or coordinating the foreign business community with other public agencies.

Key Incentives under the investment promotion act:

Tax Incentives

  • Exemption/reduction of import duties on machinery
  • Reduction of import duties for raw or essential materials
  • Exemption of import duty on raw or essential materials imported for use in production for export
  • Exemption of corporate income tax and juristic person income tax
  • Double deduction from the costs of transportation, electricity and water supply
  • A 25% deduction of the cost of installation or construction of facilities

Non-Tax Incentives

  • Permit for foreign nationals to enter the Kingdom for the purpose of studying investment opportunities
  • Permit to bring into the Kingdom skilled workers and experts to work in investment promoted activities
  • Permit to own land
  • Permit to take out or remit money abroad

In addition to these guarantees, permissions and incentives the BOI offers as part of its investment promotion package, it also facilitates investment by speeding up the paperwork with two different ‘service centers’ it is collaborating with.

A ‘One Stop Center for Visas and Work Permits’ processing applications or renewals of documents (visas and work permits) within three hours.

A ‘One Start One Stop Investment Center’ also called OSOS easing the process of opening a business and providing a central source of information regarding business operations. Thus, all the investment-related agencies (38 governmental and private agencies in total) are grouped in one building.                                                                                                                                                          OSOS is helping investors with various applications to make sure they understand what is needed to register a company, obtain investment promotion privileges, obtain a foreign business license, complete an environmental impact assessment, request permission to use land for industrial operations, obtain utilities, etc.

Both ‘centers’ are located in Bangkok.

Last year, the government announced programs to encourage investment in International Headquarters (IHQ) and International Trading Centers (ITC), as well as investment in Special Economic Zones. These newly announced programs are coming with new fiscal incentives and other support. This way, foreign investors can increase their competitiveness, develop their activities, access growing market and capitalize on the ASEAN Economic Community (AEC) benefitting from Thailand's strategic location in Southeast Asia.

A ‘One Stop Service Center for International Headquarters (IHQ) and International Trading Centers (ITC)’ assisting with related issues providing information to investors.

A ‘One Stop Service Center (OSS)’ dedicated to 10 Special Economic Zones (Tak, Mukdahan, Sa Kaeo, Trat, Songkhla, Kanchanaburi, Chiang Rai, Nong Khai, Nakhon Phanom, Narathiwat). It provides basic information on Special Economic Zones and cooperates with other One Stop Service Centers (OSS) located in each Special Economic Zone, to provide local information or organize on-site visits.

Criteria for Granting Tax and Duty Privileges

The BOI stipulates 2 types of incentives, Activity-based and Merit-based incentives

Activity-based incentives

The Board classifies 2 groups of incentives based on the importance of activities as follows: 

  • Group A consists of activities that shall receive corporate income tax incentives (from 3 to 8-year corporate income tax exemption), machinery and raw materials import duty incentives (Exemption of import duty on machinery and Exemption of import duty on raw or essential materials used in manufacturing export products for 1 year) and other non-tax incentives.
  • Group B consists of activities that shall receive only machinery and raw materials import duty incentives (Exemption of import duty on machinery and/or Exemption of import duty on raw or essential materials used in manufacturing export products for 1 year) and other non-tax incentives.

Merit-based incentives  

In order to attract and stimulate more investment or spending on activities that benefit the country or industry at large, the Board stipulates additional incentives based on merits of the projects. This includes:

  • Merit on competitiveness enhancement In case the projects invest or spend in  Research and development in technology and innovation, Donations to Technology and Human Resources Development Funds, educational institutes, specialized training centers, research institutes or governmental agencies in the science and technology field in Thailand (IP acquisition/licensing fees for commercializing technology developed in Thailand, Advanced technology training, Development of local suppliers, Product & Packaging Design). 
  • Merit on decentralization Projects located in investment promotion zones specified
  • Merit on industrial area development Projects located within industrial estates or promoted industrial zones

Comparing major differences between a Regular Company to a Thailand BOI Approved Company

 

Effective Corporate Tax Rate

Imports of Machinery

Maximum Foreign Ownership

Foreign to Thai Ratio of Employees

Ongoing Requirements

BOI Approved Company

0%

No tax

100%

Negotiable based on requirements

BOI update from submissions

‘Normal’ Thai Company

15% to 20%

VAT tax

49% restriction

4 / 1

On-site inspections from immigration

How are incentives attributed by the BOI?

The types of incentives and their amount depend of how your investment match the governmental goals. If you invest into an activity which is declared priority, or if you locate your investment in a specific geographic area, you will receive more benefits from the BOI. But if you invest into a non-priority activity or in an area already developed area like Bangkok you will receive the less benefits or incentives only.

Amongst activities eligible for promotion you can find Agriculture and Agricultural Products, Mining, Ceramics and Basic Metals, Light Industry, Metal Products, Machinery and Transport Equipment, Electronic Industry and Electric Appliances, Chemicals, Paper and Plastics, Services and Public Utilities.

Other activities of special importance and benefits to the country that can be granted corporate income tax exemption without being subject to a corporate income tax exemption cap, are Economic forest plantations (except for Eucalyptus), Creative product design and development centers, Manufacture of air frames, air frame parts and major aircraft appliances, e.g. engines, aircraft parts, propellers and avionics, Electronic design, Software, Production of electricity or steam power from waste or refuse-derived fuel, Energy Service Company (ESCO), Industrial zones or technology industrial zones, Cloud services, Research and development, Biotechnology, Engineering design, Scientific laboratories, Calibration services, Vocational training centers

Obtaining the BOI approval and license doesn’t mean it is the end.

When a Project is Approved for Promotion, The BOI will notify the applicant that his project is approve. The letter will detail the conditions, privileges and benefits granted. Upon receipt of this letter, the applicant replies by completing the form of promotion acceptance and send it back to the BOI. To receive the investment promotion certificate, the company must be set up within six months of accepting the approval, and submit all of the required documents to the BOI. Then the BOI will issue the investment promotion certificate (after receipt of all specified documents), and the promoted company will have to follow the conditions laid out in the Certificate.

Once the company receives the BOI license the process is just beginning as a BOI promotion is subjected to conditions.

After receipt of the investment promotion certificate, the promoted company must meet all the conditions stipulated in the certificate to benefit from the granted tax reductions or tax exemption and inform the BOI at each stage. If an inspector finds that the promoted company is not meeting the prescribed conditions, the BOI can recommend to the Board that the promotion certificate be withdrawn.

This mean that you will have to actually implement every engagement you took into your BOI application and fulfill all the conditions the BOI has subjected your license to.

For the whole duration of your investment, you will be under the BOI control, which will keep himself informed of your business to insure that you fulfill the conditions of your promotion.

If you want to know more about the BOI and the promoted activities visit http:// www.boi.go.th/english/. The BOI web site is well conceived, easy to use, full of information and frequently updated.

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