International Headquarters: Tax benefits and BOI promotion

The IHQ as tax-driven investment opportunity for foreign investments

There is no particular IHQ-company. The IHQ  legislation is a tax shelter scheme and not a change of the corporation laws of Thailand. The decision to use the new benefits is purely tax driven. This is not an additional investment promotion by the BOI Board of Investment, but the registration as IHQ or ITC can be combined with a BOI promotion.


The International Headquarters had been known before as Regional Operating Headquarters. The 2002 legislation (ROH One), as well as the retouched 2010 legislation (ROH Two) had been quite unsuccessful for good reasons. The new 2015 legislation has to be treated with utmost care. To promote Thailand to be a global business hub with

  • Regional Operating Headquarters (ROH),
  • International Headquarters (IHQ),
  • International Trading Center (ITC),
  • Treasury Center,
  • Information Technology Service Center (ITSC),
  • International Procurement Offices,
  • International Distribution Centers (IDC), and
  • Trade and Investment Support Offices (TISO),

it needs more than some tax benefits and a handful of fancy abbreviations.

The IHQ as tax shelter – but much more than a tax-driven business scheme

According to a study made by Roland Berger Strategy Consultants, the following criteria are most important for the location of a regional headquarters: (i) proximity to clients and markets, (ii) favorable legal and regulatory environment, (iii) stable and favorable political environment, (iv) favorable business environment, (v) favorable tax environment, (vi) access to human capital, (vii) cost of operations, (viii) transparent and easy market access, (ix) proximity to production facilities, and (x) access to distribution channels. Other criteria as incentives to attract foreign business, infrastructure and transportation, IPR enforcement, proximity to supply markets and special incentives to set-up a regional headquarters did not rank high in this study.


Companies have been moving for years from high-tax, high regulation, high-litigation legislations to business-friendly, low-tax, low regulation, right-to-work countries with normal employment laws and limits on frivolous lawsuits. Apart from China (including Hong Kong), the international business community up to now considers Bangkok as fourth most attractive Asian headquarters location – following Singapore, Tokyo, Kuala Lumpur and followed by Seoul, Jakarta, Hanoi, and Manila.

In the era of the ASEAN Economic Community, the need for strategically located regional headquarters is paramount. However, as companies continuing their regional optimization of internal business support operations, we see a further increase in the implementation of shared services organizations. While traditionally a headquarters had everything, we see more and more divisions of activities consolidated into one location. Cluster-based divisional headquarters might oust and replace old corporate structures – and the legislation has to follow to remain its attractiveness.

Tax exemptions and reductions for services for associated enterprises only

The general idea is to privilege services and deliveries within group company, without offering benefits for transactions with third parties. Therefore, these tax schemes could be described as an extended cross-border group taxation. Tax benefits are granted exclusively for intra-group services, both domestic (within Thailand) or abroad. Enterprises qualify for IHQ and ITC under the following conditions:

  1. A company or juristic partnership that is a direct or indirect shareholder in the International Headquarters with not less than 25% of total capital.
  2. A company or juristic partnership in which the International Headquarters is directly or indirectly a shareholder or partner with not less than 25% of total capital.
  3. A company or juristic partnership in which the company or juristic partnership specified in number 1 is a direct or indirect shareholder or partner with not less than 25% of total capital.
  4. A company or juristic partnership which has the power to control or supervise the operation and management of the International Headquarters.
  5. A company or juristic partnership in which the International Headquarters has the power to control or supervise the operation and management.
  6. A company or juristic partnership in which the company or juristic partnership under number 4 has the power to control or supervise the operation and management.

The business fields of the IHQ cover administrative, managerial, research, technical support, marketing, human resources, business advisory and financial management services within the group. Requirements and key qualifications are

  1. a minimum registered share capital of THB 10 Million, fully paid in,
  2. minimum annual expenses in Thailand of THB 15 Million (a total investment of THB 30 Million for capital expenditures is no longer needed), but conditions apply,
  3. services for at least one affiliated company outside Thailand starting in the first fiscal year.

There is no need to have at least three affiliated companies within five years as required under the ROH-II regime.


Under Royal Decree 612, published on June 2, 2016, an exemption from SBT (Specific Business Tax) has been granted for financial management services.

Offshore profits from group companies are exempted for 15 years from corporate income tax, while corporate income tax on profits of the Thai companies is reduced from 20% to 10%. Dividends paid by the IHQ to a group company abroad are exempted from withholding taxes. Loans between group companies are exempted from withholding tax and special business tax. The personal income taxes on the income of certain expatriate employees is reduced to a flat rate of 15%. Existing ROH-companies may upgrade as an IHQ without jeopardizing their tax status.

The list of qualified IHQ services covers the following items:

  1. Managerial services or technical services,
  2. Supporting services engaged in: 2.1  General management, business planning, and business coordination, 2.2  Procurement of raw materials and parts, 2.3  Research and development of products, 2.4  Technical support, 2.5  Marketing and sales promotion, 2.6  Human resource management and training, 2.7  Financial advisory services, 2.8  Economic and investment analysis and research, 2.9  Credit management and control, 2.10  Any other supporting services stipulated by the Director-General of the Revenue Department,
  3. Financial management, including: 3.1  Financial management by corporate treasury centers approved under the Exchange Control Law, 3.2 Borrowing and lending in Thai Baht for the following cases: 3.2.1  Borrowing in Thai Baht from financial institutions or associated enterprises in Thailand, 3.2.2  Managing Thai Baht obtained from 3.1 or 3.2.1 by lending in Thai Baht to associated enterprises in Thailand.

Upgrade from IPO to ITC

The ITC has basically the same requirements and key qualifications as the IHQ. Out-out tradings are exempted from corporate income tax, while corporate income tax on profits from in-out transactions is reduced from 20% to 10%. Dividends paid by the IHQ to a group company abroad are exempted from withholding taxes. The personal income taxes on the income of certain expatriate employees is reduced to a flat rate of 15% for an unlimited period of time.

Out-out trading is defined as procurement of goods outside of Thailand from a group company and sale to another group company without transporting these goods to Thailand. In-out trading means the procurement of raw materials or parts located in Thailand from a group company to manufacture or assemble outside of Thailand.

An International Trading Center (ITC) purchases and sells goods, raw materials, and parts or provides international trading-related services to juristic persons incorporated under foreign laws. International trading-related services include:

  1. Procurement of goods,
  2. Warehousing and inventory services prior to delivery,
  3. Packaging services,
  4. Transportation of goods,
  5. Insurance on goods,
  6. Advisory, technical and training services on goods,
  7. Any other services stipulated by the Director-General of the Revenue Department.

What else: Which non-tax benefits are offered?

The status as IHQ or ITC provides the company with some advantages apart from the tax reduction or exemption. This covers mainly the following:

  1. Permission to bring in skilled personnel and experts into the Kingdom to work in investment promoted activities,
  2. Permission to own real estate in Thailand in order to carry on the promoted activity to such an extent as the BOI deems appropriate,
  3. Exemption of import duty on machinery (but only machinery for R&D and training activities),
  4. Exemption of import duty on raw materials and parts used in the production for export.

In December 2014 the regulation of the Ministry of Labor’s Department of Employment has been amended by raising the number of work permits at an ROH respectively now IHQ from five to ten.

How to adjust your company to meet IHQ/ITC requirements

Is it fact or just a preconception that this new scheme is appropriate for big corporations, but is out of reach of smaller enterprises? First, a minimum registered capital of THB 10 million should not be a deal breaker. Foreign entrepreneurs traditionally prefer a lower equity investment to finance growth by shareholders’ loans. However, this type of thinking is in principle tax-driven, since interest payments are, unlike dividends, tax deductible. However, since the tax burden is under the IHQ/ITC scheme dramatically reduced, this should more than compensate for the disadvantages of equity financing.

Other conditions of IHQ/ITC status relate to the annual expenses incurred within Thailand and the income to be derived from the services provided to the associated companies. Without a doubt, annual expenses of THB 15 million are not insignificant. However, an entrepreneur well advised in tax matters knows there are ways and means to structure a group IHQ/ITC-efficiently, to concentrate assets from a book-keeping perspective in Thailand and to pool and channel payments diligently and beneficially at the same time.

The IHQ/ITC rules will allow for a minimum number of specialized professionals and top executives as well as minimum salaries. These requirements may potentially be a hurdle even for bigger corporations since the IHQ/ITC services can typically be provided by a small number of qualified staff. However, before this condition can be condemned as the death knell at an IHQ/ITC wake, one should bear in mind that expatriates are taxed at 15% only. A smart staffing plan and remuneration schemes within the group should not result in a situation where the head is too big for the body.

When the general decision to go ahead with the establishment of an IHQ/ITC is made, the current overall tax structure should be reviewed and subjected to new scrutiny. The transfer pricing policy of the group companies will have to be examined and adjusted as well as the supply chains, group financing, and employment structures. Under the IHQ/ITC structure, a big corporation might actually be smaller, smarter and more efficient. For a medium-sized company this will not be an option, but actually a necessity.

How the law firm assists international groups of companies

  1. Identification and calculation of potential sustainable tax benefits by utilizing the IHQ or ITC tax schemes in the particular case
  2. Adjustment of the Thai company and its business dealings with group companies and third parties to meet the IHQ /ITC requirements
  3. Registration for tax benefits at the Thai Revenue Department
  4. Application for BOI benefits at the Board of Investment
  5. Implementation of a risk management system to assure that the current and future legal and tax requirements are fulfilled.

If you have any queries about what we do, or if you would like to approach us to discuss your legal requirements, please e-mail, message or call us using the details set out on the top of this page. Secure your IHQ in paradise.

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