Thai Government To Introduce Tax Breaks For Venture Capital Funds

by Mary Swire, Tax-News.com, Hong Kong

16 July 2001

The Thai Finance Ministry announced recently that it plans to entice domestic and foreign investors to set up venture capital funds for investment into SMEs and companies which have undergone debt restructuring, by offering tax incentives. The proposal requires investment of at least 80% of total capital in small and medium-sized enterprises or larger companies which have undergone debt restructuring, and stipulates that the period of investment by each fund should be at least seven years.

Finance Minister Somkid Jatusripitak spoke last week about the need to structure the plan, a preliminary outline of which is at present being examined by the Thai Fiscal Policy Office director, Sathit Limpongpan, in such a way as to offer investors strong potential for solid returns. 'We should draft the fund regulations in a way that is attractive to both domestic and foreign investors, which could be based on the exemption of dividends from capital gains taxes,' he said.

In 1999, the Thai government established a one billion baht venture capital fund aimed specifically at helping small firms. However, to date only 32 million baht has been invested, and Dr Somkid noted that this clearly revealed the need for more incentives. The proposal is still very much on the drawing board, and several factors, including the investment ratio for the two differing types of business, still need to be formulated. Despite the wave of indifference which greeted the previous enterprise two years ago, however, all concerned are confident that the new legislation, when implemented, will provide a significant boost to SMEs. Sathit Limpongpan said last week that the government expects to gain tax revenues from investment profit, in addition to boosting employment.

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