Seven types of BOI investment promotion for Thailand’s digital industries
How to get the crypto and other digital businesses promoted by Thailand’s Board of Investment – and what about tokenization projects?
Three shareholder minimum: Under Thailand’s regulatory framework for crypto and blockchain businesses, foreign fintech companies are required to open an affiliate company in the land of smile to utilize the Thai benefits in the crypto sector. A 100% affiliate company is not possible, since the Thai Co., Ltd. requires at least three shareholders – even if two of the shareholders own a micro share only.
Majority Thai shareholding: Apart from this, Thailand’s foreigner legislation might require a Thai 51% majority shareholder to avoid the application of Thailand’s Foreign Business Act. In such cases, a sophisticated corporate structure can be set-up to allow the foreign headquarters to own all the profits and nearly all of the voting rights while protecting the foreigner from the influence of the Thai partner. Details are explained at “Seven steps: Company formation in Thailand“.
FBC option: Another option is to acquire a foreign business certificate, based on an investment promotion by Thailand’s Board of Investment. This government agency allows selected businesses to have a fully foreign circle of shareholders. Cryptocurrency ventures, digital asset businesses but also traditional digital businesses can under various aspects obtain the investment promotion by the Thailand Board of Investment.
Investment promotion by Thailand’s Board of Investment for digital businesses
#1. Software development: Promoted software ventures are mainly embedded software, applications, games, IOT platforms, Big Data, machine learning, and AI, etc, enterprise software and/or digital content, and high value-added software (HVAD). HVAD includes (i) big data, data analytics, and predictive analytics software, (ii) cybersecurity software, (iii) system software for advanced-technology devices, including business process management systems, and (iv) industrial software used to support manufacturing. A corporate income tax exemption of 5-8 years will be granted to activities in this group with a condition that there must be a minimum expenditure of THB 1.5 million for salaries of IT-personnel or a minimum investment of THB 1 million.
#2. e-commerce: An e-marketplace is one of the promoted e-commerce activities. The innovation incubation center as part of a software park is another portals to enter Thailand’s investment promotion. Even though, e-commerce projects are not entitled to tax-incentives, non-tax incentives will be granted.
#3. Digital infrastructure: Cloud services, submarine cables, data center, maker space, fabrication lab, innovation incubation center and digital park, etc. A corporate income tax exemption of 5-8 years will be granted to these activities. Co-working spaces are also one of the BOI promoted activities since they are essential for the startup ecosystem. Promoted co-working spaces must have at least 2,000 sqm and must have a space management system, customer relationship management system and service personnel. Tax incentives will not be granted to co-working spaces. However, co-working spaces are entitled to non-tax incentives.
#4. Digital technology development:A ten-year corporate income tax exemption with no tax exemption cap will be granted to activities in this group. As conditions to receive the incentives, these activities must include the development of targeted technology used as the basis of productions or services in target industries as well as technology transfer by cooperating with academic or research and development institutions as stipulated by the BOI. Projects located in the promoted science, technology and innovation zones are entitled to an additional two-year corporate income tax exemption. Projects located in the EEC are entitled to an additional one- to three-year corporate income tax exemption and can apply for merit-based incentives. The total period of corporate income tax exemption must not exceed 13 years.
#5. Datacenter: Moreover, the Board of Investment promotes e-commerce supporting businesses such as the Smart Distribution Center with the aim for Thailand to become a regional trade hub driven by technology and innovation. An eight-year corporate income tax exemption on revenue derived from the distribution of goods will be granted. The warehouses in these projects must be computerized and utilize high technology.
#6. Digital services: A pretty new type of promoted activity is “digital services”. These are mainly software platforms, managed services, and digital architecture design services. The investment regulations explicitly include FinTech, DigiTech, MedTech, and AgriTech. The project must have expenses for salaries for IT-personnel of at least yearly THB 1.5 million. Also, it must include software development processes specified by Thailand’s Digital Economy Promotion Agency (DEPA) and, if the investment is above THB 10 million, specific quality standard certificates – at least two years after the full operation start-up date.
FinTech-Projects must gain approval from the Ministry of Digital Economy and Society before applying for investment promotion. A BOI promoted venture can have 100% foreign sharehodlers and tax holidays for five years. Other benefits include an exemption on import duties and the permission to bring in crypto experts and skilled workers to the land of smile. The BOI application process might take 90 days. The company might decide to apply for its SEC licenses as a Thai majority owned company and restructure into a foreign-owned venture after the BOI investment promotion has been granted.
#7. Trade and Investment Support Office (TISO): As a fall-back solution, a digital asset company might apply for BOI promotion as a TISO for providing services in advisory, engineering and technical, international business process outsourcing, etc. For this, annual selling and administrative expenses must be at least THB 10 million during the lifetime of the BOI promotion. TISO promotion does not include any tax benefits. Details at “Thailand’s Trade and Investment Support Office“.
Professional service offer
PUGNATORIUS Ltd. is a Bangkok-headquartered specialist provider of bespoke transactional legal and tax advice in the corporate and property legal and taxation industry sectors. BOI-related professional services are explained at “Professional services regarding BOI promotions“.
The law firm provides Thai and foreign investors and stakehodlers solid and realistic advice on Thailand’s regulatory framework and cross-border opportunities in digital asset business and ICO/STO projects.
The law firm offers mainly these seven legal and tax services:
- Thai crypto-compliant company formations
- Regulatory-avoiding and tax-efficient cross-border structuring
- Digital asset and financial services licensing
- Blockchain and ICO advisory services
- ICO litigation and anti-litigation protection
- Cryptotransaction support services
- Legal opinions and professional statements