On October 14, 2021, Thailand’s Board of Investment (BOI) published an explanatory note (Note) on an earlier update about investment promotion for software development, digital platforms, and digital content. The noted followed the 16 September 2021 BOI’s announcement in regard to the consolidation of the list of promoted digital activities—‘software’ (5.7), ‘e-commerce’ (5.8) and ‘digital services’ (5.9)—into Category (5.10). MPG published the announcement in an earlier update.
Incentives for Promoted Business Activities under Category 5.10
The promoted businesses that fall into Category 5.10 will be eligible for activity-based incentives in Group A2. This Group provides benefits such as exemption from corporate income tax for eight years as well as exemption from import duties on raw materials that are utilized for producing goods for export, in addition to any other non-tax incentives.
Eligibility Criteria for Investment Promotion under Category 5.10
1. Software development, digital platforms, or digital content in Thailand.
i. Projects must result in the development of an entirely new software, digital platform, or digital content in Thailand. The Note defines Digital Content as “computer-generated motioned pictures, including games, animation, Augmented Reality (AR), and Virtual Reality (VR)”.
ii. If a project was developed prior to applying for a BOI investment promotion, it must undergo further developments and enhancements in Thailand in order to meet the BOI eligibility criteria and fall into Category 5.10 (such developments or enhancements of the product must not be those listed in the appendix of the explanatory note). In this event, a comparative analysis between the product developed before and after applying for investment promotion must be provided to the BOI. This comparative analysis must at least contain the following details:
✓ Product name;
✓ Product features or functions;
✓ Platform / content / software architecture;
✓ Programming tools and computer language.
2. Investment promotion applicants must invest no less than THB 1,500,000 per annum for newly hired Thai IT personnel’s salaries.
i. The Note defines “Thai IT Personnel” as professionals who develop software, digital platforms, and Digital Content (e.g., Developer, Programmer, System Analyst, Tester, Software Engineer, Front End/Back End Developer, Tester, Project Manager, Animator, 2D Artist, 3D Modeler, Game Artist, Game Designer, Visual Artist, Computer Graphic, etc.).
ii. The Thai IT personnel must be employed full-time.
Types of Revenue Exempt from Corporate Income Tax
The types of revenue that enjoy corporate income tax exemption must derive from providing services that are directly related to software development, digital platforms, or digital content, including but not limited to: royalties (license fees), subscription fees, additional sales of features or functions on the application (i.e., in-app purchases), and advertisements; however, revenue must not include commissions and other service fees that are not directly associated with the digital project, and profits from data distribution or data analysis reports for projects that do not entail software development.
The following activities are not eligible for investment promotion:
✓ Website development;
✓ Provision of services for data analysis without the development of algorithms, programming tools, or engines;
✓ Trading of goods and services, transportation, and credit extension through a platform;
✓ Conversion or addition of languages to software or platforms;
✓ Development or improvement of user interface of software or platforms;
✓ Development of computer graphics or visual effects for movies, theaters, advertisements, documentaries;
✓ Video editing;
✓ Audio editing for sound effects.