In a meeting on 6 September 2021, the Thailand Board of Investment (BOI) approved several measures in an effort to support carbon reduction in the country. Three overarching measures were approved, including:
1. Incentives aimed at encouraging companies to reduce greenhouse gas emissions;
2. An upgraded scheme to support Thailand’s production of electric vehicles; and
3. Measures to mitigate the effects of COVID-19 and to support local vaccine development.
Measures to encourage greenhouse gas reduction
The approved measures are aimed at encouraging investments that will reduce Thailand’s impact on the environment, support sustainable development, and participate in the development of the Bio, Circular and Green economy (BCG) model. The BCG model has been given priority status by the Thai government, to lead the post COVID-19 recovery in this area.
The promotion measures include:
1. A grassroots economy support scheme
This scheme will support local organizations involved in the development of sustainable agricultural activities (including activities such as low-methane rice farming). The scheme aims to encourage companies to move towards sustainable agricultural practices. In relation to this measure, the BOI has extended the deadline for applications under the grassroots economy support scheme until the end of 2022.
2. A 3-year tax holiday for investments in machinery upgrades aimed at reducing greenhouse gas emissions
This incentive is offered in addition to the previously existing productivity enhancement scheme. It is expected that the measure will assist Thailand’s commitment to reducing greenhouse gas emissions.
3. Adjustments to the conditions and benefits for some business categories to encourage eco-friendly technologies
A 3-year corporate income tax exemption will be offered to investments in cold storage facilities and cold storage transport operations using natural refrigerants that reduce environmental impact. Likewise, an 8-year corporate income tax exemption will be offered to petrochemical production facilities that implement Carbon Capture Utilization Storage (CCUS) technologies.
4. A new promotion category for natural gas separation plants
If these plants are using the CCUS technologies, they will also be offered an 8-year corporate income tax exemption.
Figure 1. BOI investment incentives in the Bio, Circular and Green (BCG) economy.
Measures to propel Thailand into an EV manufacturing hub
The electronic vehicle (EV) sector is one of Thailand’s target industries. This week’s BOI meeting agreed to improve the investment promotion policy for the production of EVs of all types in Thailand, in an effort to boost the sector and provide a comprehensive promotion scheme.
The investment promotion not only covers EVs themselves, but also extends to the production of Battery-Powered Electric Vehicle (BEV) platforms. These platforms consist of an energy storage system, charging module and front and rear axle module. A platform speaks for around 70% of the total cost of a BEV and is a growing trend in the automotive industry. This method of production will allow for greater flexibility, shorter production development times and economies of scale. As the BEV market is quite small, this type of manufacturing process (one that results in unit cost reduction) will assist BEVs competitiveness and ensure faster market expansion.
In line with the BOI’s objective to provide a comprehensive promotion scheme, the Board has also approved the promotion of electric bicycles (E-bikes) which are becoming increasingly popular. Companies involved in the production of E-bikes will be offered a minimum of 3 years corporate income tax exemption.
Figure 2. BOI investment incentives for Electric Vehicles and battery manufacturing.
Measures to mitigate the effects of COVID-19
The meeting further introduced a number of measures aimed at mitigating the impacts of the pandemic, as well as supporting local vaccine development. The BOI approved the relaxation and waiver of certain investment requirements on promoted businesses. These include a 6-month extension on the deadlines for companies required to be certified by international standards such as ISO 9002 or CMMI during the period of April 1- December 31, 2021. Within this time, companies are also able to apply for waivers for temporary cessations of operations for a period of two months.
Approvals were also given to grant companies that already enjoy tax holidays the opportunity to apply for additional tax incentives when they provide financial support to vaccine or medicine research and development projects run by public educational institutions and research institutes as well as government agencies. Where the financial support given is at least 1% of the total sales in the first three years, or 200 million baht, the company will receive an additional 1-3 years of corporate income tax exemption and an increase in their corporate income tax exemption ceiling equal to their contribution amount. If the contribution is less than this threshold, companies will still be eligible to receive an addition to their corporate income tax exemption ceiling, but they will not be eligible for additional years of tax holidays.
Finally, the board approved Glow Energy PLC application to invest an amount of around 6 billion baht in a cogeneration power plant, so that it can expand its production of electricity and steam. The new plant will be based in the Map Ta Phut Industrial Estate area in Rayong Province. It is estimated the plant will have a power generation capacity of around 200 megawatts and will produce 46 tons of steam per hour.