With the world coming toward the post-pandemic situation, foreign investors and international ventures seek business opportunities in Thailand as one of their strategic investments. Foreign investors and Thai business owners need to know the perks and processes of the Board of Investment of Thailand (BOI) before welcoming direct investment from the international level. Here is the digestible and at-a-glance on everything you need to know about the Board of Investment Thailand (BOI).
What is Board of Investment Thailand (BOI) and what is the purpose of BOI?
The Board of Investment of Thailand is a government agency that is held accountable for encouraging domestic investments and foreign direct investments in Thailand.
BOI has the core mission to raise the Thai economy from the middle-income trap and create sustainable economic growth, which means they develop a competitive and attractive business environment for an investment opportunity. They promote and process foreign investment for domestic companies in Thailand through economic incentives and application processes.
What are the benefits?
Thailand is known for its ample natural resources and business infrastructure in various regions. For example, the central Thailand has a prominent industrial infrastructure and skilled labor. Factory and warehouse operations in Bangkok and nearby provinces are more than ready to welcome foreign direct investment through the application process of BOI. Here are some of the direct benefits that BOI provides should you be seeking to invest in Thai businesses under the BOI investment application:
Tax benefits
The Board of Investment in Thailand can provide investors with a corporate tax exemption for up to 8 years, depending on the business type and investing circumstances. In addition, the investors who invest in the BOI’s special economic zone will receive a further corporate tax deduction of up to 50% at the end of the tax exemption period for 5 more years. In total, BOI can provide the TAX benefit for 13 years.
In terms of other tax exemptions, the investor and business owner are also eligible to receive the tax exemption in imported operation machinery, exemption on export tariff for raw materials, including tax waiver from tax authorities for the imported goods required in R&D for the business.
Non-tax-related advantages
BOI not only provides tax incentives for foreign direct investors but also other forms of business advantages as well.
Foreign stakeholders are allowed to hold a total (100%) ownership of shares if the business is not limited or subject to the Thai Foreign Business Act. While operating and investing in Thailand, the foreign-owned company is also eligible for land ownership. In terms of skilled foreign personnel, the BOI-certified business can easily come to Thailand and work on the new business project.
Who and what type of business can apply for BOI?
There are 8 business sectors that Thai’s BOI encourages the foreign investor to invest in, as follows:
1) Agricultural sector: the business that produces agricultural goods, such as farming and agricultural materials manufacturer, such as fertilizer and chemical fertilizers.
2) Mineral and manufacturing sector: mining site, ceramics factories, metals manufacturers, mineral businesses, glass businesses.
3) Textile and light sector: clothes, fabrics, fashion goods (bags, shoes, etc.), and toys.
4) Machinery and automobile production sector: metal-manufactured products, machinery, and transportation equipment (specifically but not limited to automobile parts).
5) Electronic and technical sectors: Software businesses, electronic components, electrical appliances.
6) Chemical material sector: plastics, paper packaging, chemicals appliances, polymers, a pharmaceuticals company.
7) Public utility sector: energy businesses, industrial infrastructure development firms (warehouse and factory development project)
8) Technology and Innovation sector: BOI encourages foreign direct investment in technology firms and innovative startups, such as nanotechnology, digital technology, biotechnology, and automation technology.
How to apply?
To apply to the BOI promotion application process for foreign direct investment, there are several key application processes and steps the investors must prepare under the BOI rules for project submission as follows:
1. The business project must help to elevate the competitiveness of the industrial, agricultural, and service sectors in Thailand. The business project requires generating the value-added process at least 20% of the projected income. Meanwhile, the business project in electronic, metal manufacturing, and metal cutting has a lower value-added process requirement which is limited to 10% of the projected income.
2.The applicant’s company must have modern production methods.
3.The applicant’s company must use new machinery. Under the circumstance that the applicant required old machinery outside of Thailand, there are additional assessments category which are:
3.1When applicants apply for the corporation tax exemption, secondhand machines are considered a component of the overall capital investment. The applicant will not be eligible to get the benefit of import tax duties for these machines under this criterion. Additionally, they must be less than five years old from the manufacture year to the year of import to Thailand. Applicants also must receive a certification from a reputable organization evidencing the company’s operational effectiveness, environmental impact evaluation, and energy usage efficiency.
3.2 Used machines that are between five and ten years old from the manufactured year may qualify as an investment for the total corporate income tax exemption in cases of plant relocation. The value evaluation can be obtained by applicants from accredited institutions. After that, BOI would recognize 50% of its assessed value toward the overall capital investment. Similar to 3.1, applicants must receive a certification from a reputable organization evidencing the company’s operational effectiveness, environmental impact evaluation, and energy usage efficiency. Lastly, applicants require to pay the import duties for used machines in this category.
3.3 the BOI will allow the used machines that are less than fifteen years old to be in the sea/air transportation industry project. In this category, applicants are exempt from the import duties and the full value assessment recognition from BOI.
4. Minimum capital investment and project feasibility. After the mentioned requirement, the BOI must assess the capital asset and the feasibility of the project application under the criteria as follow:
4.1 Applicant business must have a minimum investment of at least 1 million THB for each project (excluding the cost of land acquisition and working capital) which may be exempted under specification directly stated by BOI.
4.2 For the service sector, the BOI would accept the collective annual salaries of your entire human capital as the scope of your capital investment.
4.3 In terms of a dept to-equity ratio, businesses must have a ratio less than 3: 1 for the initial operation phase which the BOI would later evaluate further expansion projects on a case-by-case basis.
4.4 For business investment projects with more than 750 million THB investments (excluding the cost of land acquisition and working capital), applicants must present a thorough feasibility report of the project as the additional application process for BOI approval.
The BOI application process may appear overarching and complicated. Here are the simplified diagrams for everyone to keep tracking the key steps and requirements for your BOI application:
For more information on business applications, learn more
Summary
To sum up, this article highlights the key point that investors and business owners should know about the Board of Investment (BOI) of Thailand. They are the governing agency that promotes foreign investment in Thailand through the promotion of tax benefits and business advantages. There are 8 business sectors that investors can apply for the business project application with 4 key requirements. The process may appear complex, but with all the preparation and guideline, it would greatly accelerate the preparation phase for everyone!
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