Recent BOI announcements encourage existing businesses, either BOI or non-BOI promoted, to upgrade their machinery, specifically in relation to energy conservation, alternative energy utilization, environmental impact reduction, research and development, engineering design, upgrading of production lines to acquire international sustainability standard certification, adoption of digital technology, and upgrading to industry 4.0 for efficiency enhancement.
Who can apply for these incentives?
1. Existing projects, whether BOI or non-BOI promoted. In the case of non-BOI promoted projects, the activities must be eligible for investment promotion as specified by the Board of Investment at the time of application submission.
2. Promoted projects can apply for efficiency enhancement incentives when the period of corporate income tax exemption or reduction has expired. Projects that have not been granted corporate income tax exemption can also apply for this promotion. There is an exception for certain activities which are not eligible for the incentives as described by the Board of Investment.
What are the conditions?
1. The minimum capital investment must not be less than 1 million Baht (excluding land cost and working capital) unless the project is for SMEs, in which case the investment size must be at least 500,000 Baht (excluding cost of land and working capital).
2. SMEs must meet the following eligibility criteria:
2.1. The total corporate income, whether BOI or non-BOI promoted, must not exceed 500 million Baht per year for the first 3 years from the date in which the SME starts deriving income from the operations of the efficiency enhancement project.
2.2. The company must have at least 51% of registered shares held by Thai nationals.
3. The application must be submitted within the last working day of 2022, and the upgrades must be completed within 3 years of the Efficiency Enhancement certification issue date.
Figure 1. Efficiency Enhancement Investment Incentives.
The 6 Areas Eligible for the Efficiency Enhancement Investment Incentives
1. Energy conservation, alternative energy utilization, or environmental impact reduction
The applicant must propose an investment plan to satisfy at least one of the following conditions:
i. Upgrading machinery to reduce energy consumption at a percentage specified by the BOI; or
ii. Upgrading machinery to utilize alternative energy as a proportion of total energy consumption. The proportion of alternative energy usage will be specified by the BOI; or
iii. Upgrading machinery to reduce environmental impact, such as reduction of waste, wastewater or air pollution. The percentage reduction will be specified by the BOI; or
iv. Upgrading machinery to reduce the amount of greenhouse gas emissions by a BOI specified proportion. The project must be registered and certified for the amount of greenhouse gas emissions by the Thailand Greenhouse Gas Management Organization.
2. Efficiency improvement using machinery
The applicant must submit an investment plan to upgrade machinery involving at least one of two areas:
i. Adoption of an automation system, that may include robotics, in an existing production line or service.
ii. Upgrading or replacing non-automated machinery that satisfy at least one of the following conditions:
✓ Enhances work or management processes; or
✓ Uses new versions of machinery in an existing production line; or
✓ improves the quality of existing products.
The plan must include a performance indicator for any enhancement proposed.
3. Increasing efficiency in research and development, or engineering design
The applicant must submit an investment plan for research and development or engineering design valued not less than 1% of total expected sales in the first 3 years from the date of application submission.
In the case of small and medium enterprises (SMEs), they must invest in research and development or engineering design not less than 0.5% of total expected sales in the first 3 years from the date of application submission.
4. Improving efficiency to acquire international sustainability certification for production lines
The applicant must propose an investment plan to meet international sustainability criteria, for example:
✓ Good Agriculture Practices (GAP); or
✓ Forest Stewardship Council (FSC); or
✓ Food Safety Management System (ISO 22000); or
✓ Other international standards.
The project must be international standard certified within 3 years of the promotion certificate issue date.
5. Adoption of Digital Technology
The applicant must propose an investment plan to adopt digital technology to upgrade operations that enhance production or service efficiency using the following technology:
i. Adopting software, programs or information systems with functional links inside the organization (integrated), partial links outside the organization (connected) or links internally and externally, provided the software has at least 3 functions that create data links improving resource management and increase production or service efficiency.
ii. Applying artificial intelligence (AI), Machine learning or utilizing big data or data analytics.
iii. Adopting software, programs or information systems that connect data between the company’s systems and public sector online systems, such as a link to the National E-Payment System, and others approved by the Board of Investment.
For items i. and iii., investment must be in software, programs or information systems developed or modified by entrepreneurs in Thailand and certified by related agencies.
6. Supporting Industry 4.0 transformation (NSTDA approved)
To be eligible for incentives under this area, the efficiency improvement investment plan must include investments that support the Industry 4.0 agenda. Projects must be approved by the National Science and Technology Development Agency.
This includes investments in:
✓ Automation and Network Technology;
✓ Smart Operations;
✓ Machine Learning;
✓ Digital Technology in Production and Enterprise Processes; and
✓ Other NSTDA approved technology.
Incentives for Investment
Projects that fall within the scope of the Measure are exempted from machinery import duty.
Eligible projects are also given Corporate Income Tax exemptions as follows:
Figure 2. CIT exemption rates.
Corporate Income Tax exemption periods begin from any revenue after the promotion certificate issue date.