Impact from the New Investment Promotion Scheme
The Office of Board of Investment (‘BOI’) introduced its new strategy and draft new investment promotion scheme at a public hearing in Bangkok on Monday 14 January 2013. More than 1,000 people from many sectors including government bodies, trade chambers and business leaders joined the public hearing and shared their views on the new scheme.
Keywords: Mazars, Thailand, Legal, BOI, Tax Holiday, Promotion, Incentive
15 January 2013
Although the new scheme is still a draft and subject to further revision, it is important for all stakeholders to consider how the new scheme could impact your business.
The new scheme is designed to help Thailand move into a higher development level, focusing on competitiveness and value creation in the industrial sector, the promotion of green industries, new regional industrial clusters and Thai overseas investment.
For many investors, the new scheme is likely to have a significant impact because many business activities will no longer be promoted. Further, the tax incentives being offered are being scaled back and will be lower than under the current scheme.
The major changes and their effects are as follows:
Changes in BOI Strategy
Effects of the changes
“Broad-based” to “focus and prioritised”
Approximately 80 business activities will no longer be promoted.
The number of activities eligible for a maximum 8 year tax holiday will be reduced from approximately 80 to 30 activities.
“Sector-based” to “merit-based”
Basic tax incentives will be reduced. Other incentives will be granted if businesses meet research and development expenditure targets, obtain an ISO 14001 certificate, reduce their carbon footprint or locate the project in an industrial estate/zone.
Tax holidays granted to expansion projects (approximately 70 activities) will be shorter than the initial project: from 5 years to 3 years and from 3 years to 1 year.
“Zones” to “clusters”
‘Industrial clusters’ will replace zones 1, 2 and 3.
“Tax incentives” to “facilitation oriented” benefits
Instead of granting generous tax incentives to investors, the BOI will focus on:
- non-tax incentives and one stop service;
- improving investment rules and regulations to reduce barriers and create a better investment environment;
- promoting and coordinating human resource development; and
- packaging the support of various government agencies.
In addition to the above changes, the BOI will move from promoting only inbound investment to promote both inbound and outbound investments. The BOI will change the way it measures performance from the value of investment to the value of the project’s outcome (i.e. the value-added created by the promoted project in Thailand).
After the public hearing in Bangkok there will be further public hearings in other major regions. It is expected that the new final version of the investment promotion strategies and criteria will be announced in March 2013 and will come into effect by the middle of this year.
Please note that the new scheme will not affect existing promoted projects or projects that have applied for investment promotion prior to the effective date. Therefore, if you intend to invest in a new project, we advise you to check with Mazars as whether your business activity will be eligible for BOI promotion under the new scheme and the nature and extent of the new promotion incentives to which it will be entitled.
On the other hand, if you have new projects that may be disadvantaged under the new scheme, you may wish to take the opportunity to file your application with the BOI before the new regulations come into effect. Proper consideration of your options, in light of the upcoming date of the implementation of the new scheme, will require you to start this review soon. Mazars’ professionals are ready to help you in planning your BOI strategy during this critical period of regulatory change.
For more information, please contact Khun Chatchawat Kriengsuntikul, Legal Partner.