The new criteria of the BOI for investmentbecame effective on 1 January 2015 and will be used for seven years (2015-2021).However, existing projects already promoted by the BOI and applications submitted before 1 January 2015 will not be affected by the n
Altogether there will be 231promoted activities of which 183 will be granted tax incentives while the remaining 48 will only be granted non-tax incentives. In addition, 53 activities will be removed from the list of activities eligible for promotion.
There are 15 activities classified as priority activities of special importance and benefit to the country that will be entitled to the maximum benefit of eightyears corporate income tax exemption without any cap. Under the promotion criteria, the previous zone-based incentives will be cancelled and more focus will be placed on the activities and their importance. Tax incentives will be under four categories and the non-tax incentives under two categories.
Additional incentives based on the value of the project (merit-based incentives) will be launched in order to motivate the investor to invest in or spend on activities that will benefit the country or theindustry as a whole. Investment in R&D for example, whether in-house, outsourced or in cooperation with educational or research institutions abroad, will be entitled to an increase in the investment cap, and consequently the tax deduction,by 200% of the expenditure. Investment or expenditure in other areas such as licence fees paid for technology developed within the country, the provision of advance training to employees or even the development of local supplierswould increase the cap by 100% of the expenditure. An additional year of tax exemptionwill also be added to the standard tax incentives received based on the above expenditure in excess of THB 200 million for each of the first three years.
An example of the tax exemption received will be as follows:
Nevertheless, the maximum period of tax incentives granted will remain at eight years being the maximum according to the Investment Promotion Act. Activities that have already been granted eight years tax incentives (A1 and A2)will receive a 50 % tax reduction for a further five years from the date on which the tax exemption expired.
As the zone-based promotion has been abolished, regional clusterswill be promoted to create a new integration of the investment, consistent with the potential and needs of each area and enhancing the strength of the value chain as a whole. The new clusters will include two dimensions, namely the sector focus and area focus. These include the tourism cluster, food processing cluster and special economic zones according to the government policy.
However, some provinces still lack the basic infrastructure to support investmentas their per capita income is less than in the remainder of the country. Therefore, the BOI will continue to provide additional benefits to theseprovinces.
The benefits will comprisea further three years’ tax exemption period from the standard incentives and activities that already have eight years’ tax exemption will receive a 50% tax reduction for a furtherfive years from the date on which the tax exemption |expired.
The criteria for project approval remain unchanged with some adjustmentmade to align them with the new strategy,e.g. the minimum project investment capital in order to prepare a feasibility study will increase from Baht 500 million to Baht 750 million (excluding land and investment capital).
Moreover, the BOI will also require additional information to support the project approval that explains the value of the project.
As the aim is to create value to the industrial sector and the country as a whole, the new investment strategy should bring with it a new investment atmosphere in Thailand.
Author: Janist Aphornratana, Director of PwC Thailand