Thailand Plans Further Investment Incentives

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

31 July 2002

The Thai Board of Investment has put forward a five-year plan to encourage venture capital funds to invest in new businesses, waive corporate tax and import duty on machinery and establish an institute to assist new companies. The BoI also recommends that a one-stop service should be provided for new businesses, offering them information, training programmes and help in navigating legal procedures.

The Board wants to change the timeframe in which companies take up fiscal privileges granted to aid factory construction and other projects, saying that currently only 50% of approved projects are launched in the timeframe stated by the applicant. The Board proposes to require applicants after Oct 1 to import machinery within 30 months of receiving promotion certificates, in order to receive duty waivers, and to open factories no later than within the following six months. The new rule applies for projects costing less than 500 million baht.

For applications received up to Sept 30, the Board plans to extend the rules by requiring machinery imports to be made within two years after certificates are issued, with factory openings required within the following year.

Thailand has been quite active in the last two years in reorganising its incentive programmes for foreign and domestic investment. Last December the country inaugurated a 'headquarters' regime for service companies, offering a reduction in corporate tax from 30% to 10%, and in personal taxation from 37% to 15%. And in January, the Government announced an income tax cut to 10% for foreign actors in order to encourage overseas movie makers to produce more films in the country.

SMEs already benefit from a preferential corporate tax regime which took effect from 1st January this year. SMEs with less than 5 million baht in registered capital and under 1 million baht in annual profits are entitled to pay a lower corporate tax of 20 per cent as against the current rate of 30 per cent. Companies with 3 million baht in annual profits will pay 25 per cent and those with profits in excess of 3 million baht will be required to pay the full 30 per cent rate. To qualify for the tax exempt privileges, venture capital companies are required to be limited or listed companies with a minimum of 200 million baht in registered capital.

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