Announcement of the Board of Investment No. 2 /2557

Due to significant changes in both domestic and international economic and investment landscape, the Board of Investment deems it appropriate to revise the investment promotion policies and criteria to respond to the current and future situation to be in line with the direction of Thailand’s development under the National Economic and Social Development Plan and the country’s development policies for the agricultural, industrial and services sectors in order to enhance the country’s competitiveness and achieve sustainable development in the long run.

By virtue of Sections 16, 18, and 19 of the Investment Promotion Act of B.E. 2520, the Board of Investment hereby prescribes the investment promotion policies and criteria as follows:

1. The following announcements shall be repealed:

1.1 Board of Investment Announcement No. 1/2543 dated August 1, 2000 on Policies and Criteria for Investment Promotion

1.2 Board of Investment Announcement No. 3/2549 dated March 20, 2006 on Additional Rights and Privileges for Investment on Developing Skill, Technology & Innovation (STI)

1.3 Board of Investment Announcement No. 5/2549 dated March 20, 2006 on Policy to Promote Continuous Long-Term Investment Projects in Electronics and Electrical Industry

1.4 Board of Investment Announcement No. 8/2549 dated June 27, 2006 on Policy to Promote Continuous Long-Term Investment Projects that have High Investment Capital and Special Importance to the Electronics and Electrical Industry

1.5 Board of Investment Announcement No. 1/2550 dated April 9, 2007 on Measure to Promote Research and Development Collaboration between the Industrial Sector and Educational Institutions

1.6 Board of Investment Announcement No. 6/2552 dated May 29, 2009 on Amendment on Granting Rights and Benefits for Investment in Skill, Technology and Innovation (STI)

1.7 Board of Investment Announcement No. 10/2552 dated October 15, 2009 on Types, Sizes and Conditions of Activities Eligible for Promotion

1.8 Board of Investment Announcement No. 11/2552 dated October 15, 2009 on Granting of Additional Rights and Benefits for Investment in Skill, Technology and Innovation (STI)

2. If any announcement of the Board of Investment or the Office of the Board of Investment is in conflict with this announcement, this announcement shall prevail.

3. Investment Promotion Vision

The Board of Investment has envisioned investment promotion as follows:2

“To promote valuable investment, both investment in Thailand and Thai overseas investment, in order to enhance the nation’s competitiveness, to overcome the middle income trap and to achieve sustainable growth in accordance with the philosophy of sufficiency economy.“

4. Investment Promotion Policies

In order to achieve the vision, the Board of Investment has set investment promotion policies as follows:

4.1 Promote investment that helps enhance national competitiveness by encouraging R&D, innovation, value creation in the agricultural, industrial and services sectors, SMEs, fair competition and inclusive growth

4.2 Promote activities that are environment-friendly, save energy or use alternative energy to drive balanced and sustainable growth

4.3 Promote clusters to create investment concentration in accordance with regional potential and strengthen value chains

4.4 Promote investment in border provinces in Southern Thailand to help develop the local economy, which will support efforts to enhance security in the area

4.5 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).

4.6 Promote Thai overseas investment to enhance the competitiveness of Thai businesses and Thailand’s role in the global economy

5. Activities Eligible for Investment Promotion

5.1 Activities on the list attached to this announcement are eligible for investment promotion.

5.2 Conditions and rights and benefits of projects that receive investment promotion shall be specified for each activity.

5.3 The following activities are classified as activities of special importance and benefits to the country that will be granted corporate income tax exemption without being subject to a corporate income tax exemption cap:

  • Category 1.3 Economic forest plantations (except for Eucalyptus)
  • Category 3.9 Creative product design and development centers
  • Category 4.11.1 Manufacture of airframes, airframe parts and major aircraft appliances, e.g. engines, aircraft parts, propellers and avionics
  • Category 5.6 Electronic design
  • Category 5.7 Software
  • Category 7.1.1.1 Production of electricity or steam power from waste or refuse-derived fuel
  • Category 7.8 Energy Service Company (ESSO)
  • Category 7.9.2 Industrial zones or technology industrial zones
  • Category 7.10 Cloud services
  • Category 7.11 Research and development
  • Category 7.12 Biotechnology
  • Category 7.13 Engineering design 3
  • Category 7.14 Scientific laboratories
  • Category 7.15 Calibration services
  • Category 7.19 Vocational training centers

6. Criteria for Project Approval

The Board of Investment stipulates the following criteria for project approval:

6.1 Development of competitiveness in the agricultural, industrial and services sectors

6.1.1 The value added of the project must not be less than 20% of revenues, except for projects in agriculture and agricultural products, electronic products and parts, and coil centers, all of which must have value added of at least 10% of revenues.

6.1.2 Modern production processes must be used.

6.1.3 New machinery must be used.

In case of imported used machinery, criteria are as follows:

  1. In case of used machinery not over five years old, counting from the manufacturing year to the importing year, the machinery shall be allowed to be used in the project and counted as investment capital for the calculation of the cap on corporate income tax exemptions; however, they shall not be granted import duty exemption. A machinery performance certificate issued by a trusted institute identifying efficiency, environmental impact and energy usage for the machine, as well as its fair value, must be obtained.
  2. In case of used machinery over five years old but not exceeding ten years old, counting from the manufacturing year to the importing year, only press machines shall be allowed to be used in the project and counted as investment capital for the calculation of the cap on corporate income tax exemptions; however, they shall not be granted import duty exemption. A machinery performance certificate issued by a trusted institute identifying efficiency, environmental impact and energy usage for the machine, as well as its fair value, must be obtained.
  3. For sea and air transport activities and molds and dies, used machinery over ten years old, counting from the manufacturing year to the importing year, may be allowed to be used in the project as deemed appropriate, counted as investment capital for the calculation of the cap on corporate income tax exemptions and granted machinery import duty exemption. Criteria shall be as specified by the Office of the Board of Investment.

6.1.4 Projects that have investment capital of THB 10,000,000 or more (excluding cost of land and working capital) must obtain ISO 9000 or ISO 14000 certification or similar international standard certification within 2 years from the full operation startup date, otherwise corporate income tax exemption shall be reduced by one year. 4

6.1.5 For a concession project and the privatization of a state enterprise project, the Board’s criteria shall be based on the Cabinet’s decisions dated May 25, 1998, and November 30, 2004, as follows:

  1. An investment project of state enterprise according to the 1999 State Enterprise Corporatization Act shall not be entitled to investment promotion.
  2. For Build-Transfer-Operate or Build-Operate-Transfer projects, the state agency that owns the project must submit its project to the Board for consideration prior to any invitation to bid, and bidders shall be informed of any promotional privilege entitled to them, prior to the bidding. In principle, the Board will not promote a project where the private sector pays the state for a concession, unless such payment is deemed reasonable in comparison with what the state has invested in the project;
  3. For Build-Own-Operate projects, including those leased to or managed by the private sector, which in return pays rent to the state, the Board shall use normal criteria for investment promotion.
  4. For the privatization of state enterprises according to the 1999 State Enterprise Corporatization Act, in case of expansion after the privatization, only the expansion investment shall be eligible for promotion. Incentives shall be granted according to normal criteria for investment promotion.

6.2 Environmental protection

6.2.1 Adequate and efficient guidelines and measures to protect environmental quality and to reduce environmental impact must be installed. The Board will give special consideration to the location and pollution treatment of a project with potential environmental impact.

6.2.2 Projects or activities with type and size that are required to submit environmental impact assessment reports must comply with the related environmental laws and regulations or Cabinet resolutions

6.2.3 Projects located in Rayong must comply with the Office of the Board of Investment Announcement No. Por 1/2554 dated May 2, 2011 on Industrial Promotion Policy in Rayong Area.

6.3 Minimum capital investment and project feasibility

6.3.1 The minimum capital investment requirement of each project is THB 1,000,000 (excluding cost of land and working capital) unless specified otherwise on the list of activities eligible for investment promotion that is attached to this announcement. As for knowledge-based services, the minimum capital investment requirement is based on the minimum annual salaries expense specified in the list of activities eligible for investment promotion that is attached to this announcement. 5

6.3.2 For newly established projects, the debt-to-equity ratio must not exceed the quota 3 : 1. Expansion projects shall be considered on a case-by-case basis.

6.3.3 For projects with investment value of over THB 750,000,000, (excluding cost of land and working capital), the project’s feasibility study must be submitted with details as specified by the Board.

7. Criteria for Foreign Shareholding

The Board stipulates the following criteria for foreign shareholding in projects that apply for investment promotion:

7.1 For projects in activities under List One annexed to the Foreign Business Act, B.E. 2542, Thai nationals must hold shares totaling not less than 51% of the registered capital.

7.2 For projects in activities under List Two and List Three annexed to the Foreign Business Act, B.E. 2542, there are no equity restrictions for foreign investors except as otherwise specified in other laws.

7.3 The Board may set foreign shareholding limits for certain activities eligible for investment promotion as deemed appropriate.

8. Investment Promotion Zones

The Board specifies investment promotion zones as follows:

8.1 Twenty provinces with low per capita income:

Kalasin, Chaiyaphum, Nakhon Phanom, Nan, Bueng Kan, Buri Ram, Phrae, Maha Sarakham, Mukdahan, Mae Hong Son, Yasothon, Roi Et, Si Sa Ket, Sakhon Nakhon, Sa Kaew, Sukhothai, Surin, Nong Bua Lamphu, Ubon Ratchatani and Amnatcharoen

8.2 Special economic development zones

8.3 Science and Technology Parks that are promoted or approved by the Board.

9. Criteria for Granting Incentives

The Board stipulates 2 types of incentives as follows:

9.1 Activity-based incentives

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

9.1.1 Group A consists of activities that shall receive corporate income tax incentives, machinery and raw materials import duty incentives and other non-tax incentives. This group can be divided into four subgroups as follows:

Group A1 shall receive the following incentives:

  • 8-year corporate income tax exemption without being subject to a corporate income tax exemption cap
  • Exemption of import duty on machinery
  • Exemption of import duty on raw or essential materials used in manufacturing export products for 1 year, which can be extended as deemed appropriate by the Board
  • Other non-tax incentives

Group A2 shall receive the following incentives:

  • 8-year corporate income tax exemption, accounting for 100% of investment (excluding cost of land and working capital)
  • Exemption of import duty on machinery
  • Exemption of import duty on raw or essential materials used in manufacturing export products for 1 year, which can be extended as deemed it appropriate by the Board
  • Other non-tax incentives

Group A3 shall receive the following incentives:

  • Five-year corporate income tax exemption, accounting for 100% of investment (excluding cost of land and working capital) unless specified in the list of activities eligible for investment promotion that the activity shall be granted corporate income tax exemption without being subject to a corporate income tax exemption cap
  • Exemption of import duty on machinery
  • Exemption of import duty on raw or essential materials used in manufacturing export products for 1 year which can be extended as deemed it appropriate by the Board
  • Other non-tax incentives

Group A4 shall receive the following incentives:

  • 3-year corporate income tax exemption, accounting for 100% of investment (excluding cost of land and working capital)
  • Exemption of import duty on machinery
  • Exemption of import duty on raw or essential materials used in manufacturing export products for 1 year, which can be extended as deemed it appropriate by the Board
  • Other non-tax incentives

9.1.2 Group B consists of activities that shall receive only machinery and raw materials import duty incentives and other non-tax incentives. This group can be divided into 2 subgroups as follows:

Group B1 shall receive the following incentives:

  • Exemption of import duty on machinery
  • Exemption of import duty on raw or essential materials used in manufacturing export products for 1 year which can be extended as deemed it appropriate by the Board
  • Other non-tax incentives

Group B2 shall receive the following incentives:

  • Exemption of import duty on raw or essential materials used in manufacturing export products 7 for 1 year which can be extended as deemed it appropriate by the Board
  • Other non-tax incentives

9.2 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 as follows:

9.2.1 Merit on competitiveness enhancement

In case the projects have the following investments or expenditures:

  1. Research and development in technology and innovation including in-house R&D, outsourcing R&D in Thailand or joint R&D with overseas institutes.
  2. 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, as approved by the Board
  3. IP acquisition/licensing fees for commercializing technology developed in Thailand
  4. Advanced technology training
  5. Development of local suppliers with at least 51% Thai shareholding in advanced technology training and technical assistance or
  6. Product & Packaging Design; either in-house or outsourcing in Thailand, as approved by the Board Details shall be in accordance with criteria set by the Office of the Board of Investment.

Additional incentives shall be granted as follows:

  1. One additional year of corporate income tax exemption will be granted if qualified investments or expenditures are not less than 1% of the project’s total revenue of the first three years combined, or not less than THB 200,000,000, whichever is less. However, the total period of corporate income tax exemption shall not exceed eight years.
  2. Two additional years of corporate income tax exemption accounting will be granted if qualified investments or expenditures are not less than 2% of the project’s total revenue of the first three years combined, or not less than THB 400,000,000, whichever is less. However, the total period of corporate income tax exemption shall not exceed eight years.
  3. Three additional years of corporate income tax exemption will be granted if qualified investments or expenditures are not less than 3% of the project’s total revenue of the first three years combined, or not less than THB 600,000,000, whichever is less. However, the total period of corporate income tax exemption shall not exceed eight years. The cap on additional corporate income tax exemption accounts for 200% of the investments and expenditures specified in No. 8 9.2.1(1) and 100% of the investments and expenditures specified in No. 9.2.1(2-6).

9.2.2 Merit on decentralization Projects located in investment promotion zones specified in No. 8.1 shall receive additional incentives as follows:

  1. Three additional years of corporate income tax exemption shall be granted. However, the total period of corporate income tax exemption shall not exceed eight years. Projects with activities in Group A1 or A2 which are already granted 8-year corporate income tax exemption shall instead receive a 50% reduction of corporate income tax on net profit derived from promoted activity for five years after the corporate income tax exemption period expires.
  2. Double deduction for transportation, electricity and water costs for ten years from the date of first revenue derived from the promoted activity shall be granted.
  3. Deduction from net profit of 25 percent of the project’s infrastructure installation or construction costs shall be granted in addition to normal depreciation. Such deduction can be made from the net profit of one or several years within ten years from the date of first revenue derived from the promoted activity.

9.2.3 Merit on industrial area development

Projects located within industrial estates or promoted industrial zones shall be granted one additional year of corporate income tax exemption. However, the total period of corporate income tax exemption shall not exceed eight years.

This merit-based incentive shall not be granted to activities with conditions specifying that projects must be located within industrial estates or promoted industrial zones.

9.2.4 Projects Eligible for merit-based incentives application

  1. Projects with activities in Group A can apply for merit based incentives at the time of applying for investment promotion or after being promoted. If the application is submitted after being promoted, promoted projects can apply for merit-based incentives whether or not revenue has already been derived from the projects. On the date of the application for merit-based incentives, the projects must have remaining corporate income tax exemption incentives under Section 31 of the Investment Promotion Act, both in terms of period and amount of corporate income tax exemption.
  2. Projects with activities in Group B can apply for meritbased incentives No. 9.2.1 merit on competitiveness enhancement and 9.2.2 merit on decentralization and must submit the application for merit-based incentives at the time of applying for investment promotion only. This excludes activities for which the list of activities eligible for 9 investment promotion specifies that they are not entitled to merit-based incentives.

10. Incentives for Production Efficiency Improvement

In order to improve production efficiency and develop competitiveness, the Board grants promoted projects an exemption of import duty on the following machinery as long as the project is promoted:

10.1 Machinery used for research and development

10.2 Machinery used for pollution prevention or treatment

10.3 Machinery used in the promoted projects that manufacture  electronic products and parts for improving or replacing existing  machinery or for increasing production capacity in existing  projects, regardless of whether the projects have started their full  operation or not

11. Use of Corporate Income Tax Incentives

To ensure that the incentives are granted effectively and exercised correctly in accordance with promotion conditions and to ensure the clear cost-and-benefit evaluation of investment promotion, promoted persons must report operating results for their projects to the Office of the Board of Investment for review prior to being granted corporate income tax incentives for that year. The reporting criteria and method shall be as prescribed by the Office of the Board of Investment.

12. Provisional Clause

Promoted persons under the Board of Investment Announcement No. 5/2549 dated March 20, 2006 on Policy to Promote Continuous LongTerm Investment Projects in the Electronics and Electrical Industry or the Board of Investment Announcement No. 8/2549 dated June 27, 2006 on Policy to Promote Continuous Long-Term Investment Projects that have High Investment Capital and Special Importance to the Electronics and Electrical Industry that submit applications for investment promotion after this announcement comes in to effect shall be granted the incentives according to the two aforementioned announcements as the case may be.

13. This announcement shall be effective for applications submitted from January 1, 2015 onwards.

Comments are now closed for this article.