The Thai Board of Investment (BOI) Announcement No. 4/2563 (“Announcement”), dated 11 March 2020, outlines investment promotion measures for small and medium enterprises (SMEs). To be eligible for these measures, applications for investment promotion must be submitted to the BOI by the last business day of 2021.
Under the Announcement, qualifying SME investors conducting category A activities are eligible for a corporate income tax exemption of up to 200% of the capital investment, excluding the cost of land and working capital. All businesses conducting category A and category B1 activities may receive an exemption from import duties on machinery.
To qualify for exemptions, SME investors must:
1. Conduct promoted activities in category A or B1.
2. Have a minimum investment of THB 500,000 per project (excluding the cost of land and working capital).
3. Thai shareholders (who are natural persons) must hold at least 51% of the company’s registered capital.
4. The company’s debt to equity ratio must not exceed 4:1.
5. The company must make new investments in required machinery. New machinery must comprise at least 50% of the total machinery used.
6. The company may avail itself of used machinery with a value of up to THB 10 million, as long as it is domestically sourced.
7. The total revenue from both BOI-promoted and non-BOI-promoted activities must not exceed more than THB 500 million per year for the first three years from the start date of the BOI-promoted project.
The Announcement also outlines the merit-based incentives available to businesses, including SMEs. These are additional incentives granted to projects perceived to augment Thailand’s competitiveness, stimulate investment, or otherwise aid the development of the Thai economy. Like the activity-based incentives, the amount and type of the tax incentives granted depends on how the BOI categorizes the project’s business activities and merits.
Merit-based incentives to enhance competitiveness will grant projects an additional corporation income tax exemption of up to 300% of the investment for a period up to three years. This includes research and development, technology, and innovation (in-house, jointly with organizations overseas, or outsourced to Thailand); technology training; and the development of proprietary technology or packaging products and designs.
Merit-based incentives for decentralization are open to projects located in one of the 20 provinces with the lowest per capita income. Eligible projects may receive three additional years of corporate income tax exemption, provided that the total duration of the exemption does not exceed eight years. Projects in categories A1 and A2, which already receive corporate income tax exemptions for eight years, will instead receive a 50% reduction of corporate income tax on the promoted project after the end of the exemption period.
Projects located in industrial estates or promoted industrial zones may avail themselves of merit-based incentives for industrial area development. Eligible projects will receive an additional year of corporate income tax exemption, provided that the total period of exemption does not exceed eight years.
Finally, projects located in special economic zones (SEZs) may enjoy an additional corporate income tax exemption equal to 200% of the investment (excluding the cost of land and working capital).