Thailand: Tax incentives for investment activities

Thailand: Tax incentives for investment activities

Legislation—the Investment Promotion Act (No. 4), administered by the Board of Investment (BOI)—was recently issued to amend certain provisions that were effective 25 January 2017. The amendments are aimed at encouraging continued investment in Thailand.

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Among amendments for the investment incentives are proposals that include:

  • A corporate income tax exemption of up to 13 years for businesses that use high technology and innovation and for businesses in research and development (R&D); tax losses incurred during the tax-exemption period could be carried forward and used within five years after the tax-exemption period expires
  • An exemption from import duty on goods imported to be used in R&D activities, including testing

Under the legislation, if the BOI were to find that a corporate income tax exemption would be inappropriate for a “promoted company,” the BOI could alternatively allow: (1) a 50% corporate income tax reduction for up to 10 years; and (2) the right to claim a tax deduction of no more than 70% of the total investment capital within 10 years from the year in which revenue is first generated (this would be in addition to normal depreciation). 

Other measures

  • Dividends paid from a project having been granted a corporate income tax exemption from the BOI would still be exempt from dividends tax if the dividends are paid within six months after the end of the corporate income tax-exemption period. 
  • Taxpayers that received corporate income tax benefits would have to comply with the Revenue Code in computing their taxable profit or loss. 
  • Some benefits or privileges provided to certain businesses that manufacture goods for export would be repealed in order to conform to Thailand’s obligations under the World Trade Organization (WTO) requirements that prohibit export subsidies. 
  • The BOI’s authority to stipulate conditions in a promotion certificate specifying the amount of local raw materials to be used would be repealed to conform to Thailand’s obligations under the WTO requirements that prohibit such specifications.

In addition to the above amendments, it is expected that new legislation could be issued to provide an opportunity to obtain investment privileges for businesses that may not otherwise qualify under the existing prescribed categories of promoted businesses under the Investment Promotion Act. At this stage there is no definite information on the target industries, criteria for qualification, framework for the new legislation or how it would operate. 

KPMG observation

Businesses considering making a new investment need to understand how these new rules may apply so as to benefit from the tax and non-tax incentives. Entities that have applied to the BOI for an investment promotion and have an application is currently in progress may want to liaise with the BOI to determine whether any tax benefits and privileges are maximized under the new rules. 

 

Read a February 2017 report prepared by the KPMG member firm in Thailand

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