Seven benefits in Thailand’s Eastern Economic Corridor
Seven advantages and benefits in Chon Buri, Rayong and Chachoengsao
The official name of the EEC Act is “Eastern Special Development Zone Act B.E. 2561”. Particular areas of the Eastern Special Development Zone (“ESDZ”) are designated as Special Economic Promotional Zone (“SEPZ”) for Special Targeted Industries (“STI”). Not all SEPZ benefits are applicable for the whole ESDZ-arena. This post gives an introduction to the seven main tax and non-tax advantages at the EEC:
1. Corporate income taxation: The exemption for corporate income taxation (CIT) will be granted up to 15 years instead of the current maximal tax holidays of eight years.
Under the Thailand Plus Scheme, Investment projects worth at least THB 1 billion (USD 32.26 million) in the identified activities submitted to Thailand’s Board of Investment (BOI) by the end of 2020 will be entitled to additional 5 years of 50% reduction of corporate income tax given that at least THB 1 billion of actual investment is put in place by December 2021.
2. Personal income taxation: A fixed personal income tax (PIT) rate of 17% for management, investor, experts, (i) with “world class” skills, (ii) never worked before in Thailand and (iii) work in BOI promoted company in ten “S-curve” industries (Draft EEC Act).
Thailands personal income tax has a progressive rate up to 35%. This results in an unreasonably high tax burden for individuals compared with the 20% corporate income tax (CIT) rate. Under the proposed EEC tax scheme, the personal income tax burden will be cut to a fixed 17% rate. Individuals paying more than 17% can use this EEC flat tax incentive to reduce their tax bill. In some cases, this might result in a 50% tax reduction.
These tax benefits will apply to individual income owners in Chon Buri, Rayong and Chachoengsao provinces only. According to press reports, all local and foreign employees whose companies are investing in one of the ten targeted industries headquartered in the EEC or have received investment incentives from the Board of Investment can enjoy from this scheme.
3. Smart visa: The smart visa program is not EEC exclusive and has been introduced in February 2018 separate from the EEC Act. There are four types of smart visa:
- Smart T (talent) for highly skilled professionals in science and technology.
- Smart I (investors) with a minimum investment of THB 20 million.
- Smart E (executive) with a minimum salary of THB 200,000.
- Smart S (startup) for foreign startup entrepreneurs.
All four visa schemes are limited to foreign experts, executives, entrepreneurs, and investors working or investing in the ten S-curve industries.
4. Property investment: A land lease or sublease for up to 50 years “for the attainment of the purposes of the development and promotion of the Special Targeted Industries,” and a renewal for up to 49 years. The intrinsic value of such renewal option has to be evaluated in detail. However, the law is silent on
- the possibility of a valid extension option agreement,
- the grandfathering of currently existing lease agreements
Foreign-owned Thai companies can hold legal ownership in SEPZ-land and condominium units beyond the restrictions of the Land Code or the Condominium Act, if they hold a SEPZ license. If the licensed business is not started within three years, the property has to be sold or can be seized by the government.
5. Trade: Trade using foreign currencies directly without having to exchange it into Thai baht,
6. PPP: Under the new PPP EEC TRACK structure, public-private partnerships are streamlined and fast-tracked. Details at Seven-speed public-private-partnerships in Thailand.
7. EIA: Any required environmental impact assessment or assessment for public or community health impact will be approved within 120 days from the date of receipt of the correct and complete report. Responsible body is an ad hoc committee of experts, appointed by the National Environment Board.
Professional services for investments and business activities in the Eastern Economic Corridor
Doing business in the EEC is one of the law firm’s areas of competence, long-standing experience, and unique market reputation. The scope of professional services and the terms for assigning PUGNATORIUS Ltd. are described at “Legal advice, tax structuring, transaction support services and business matchmaking on Thailand’s Eastern Economic Corridor.”