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BOI Back on Track with New Policy
You may have been hearing over the past year or so about the plan of the
Board of Investment (“BOI”) to overhaul its investment policy.
The first draft of the new policy was circulated in early 2013 and public hearings
were held soon after. There were many comments on the draft and the BOI
revised it to reflect those comments. Initially, it was expected that the new policy
would come into effect in June 2013, but due to various factors the new policy is
still not in effect and the revised draft policy has not yet been circulated.
However, recently, the National Council for Peace and Order (“NCPO”)
restarted the movement to introduce the new policy, with the BOI Secretary-
General announcing that the new policy would enter into force as of 1 January
2015 and would apply to project applications filed after 1 January 2015.
The wording of the new policy is yet to be announced; many details are still
pending, but briefly, the key points to note are:
1. Privileges will be granted based on the type of business. The more value
added or the more advanced the technology, the better the privileges
2. The zone-based privileges will be replaced with the concept of industrial
3. Sector-based incentives will be replaced with basic incentives and meritbased
The new BOI policy aims to refocus promoted activities on those that utilize
advanced technology, R&D, and environment-friendly techniques. Conversely,
some businesses that are considered to be low value-added, low technology or
to have environmental impacts will no longer be able to receive investment
promotion. Although the initial draft contained a list of businesses that would be
removed from the promoted activities, the final list is still pending.
The current zoning policy (Zones 1, 2 and 3) will be replaced with the concept of
industrial clusters, although details of how the industrial clusters will be decided
are still pending.
The new BOI incentives will be on the basis of Basic Incentives (tax and nontax)
and Merit-based incentives.
The tax incentives are similar to the existing tax incentives, e.g. corporate
income tax (“CIT”) exemption, exemption of import duties on machinery, and
exemption of import duties on raw materials for the manufacture of exports.
However, the period of CIT exemption will no longer be tied to zoning. Instead,
the period will depend on the nature of the activity. Generally, activities with
more advanced technology will receive longer periods of CIT exemption.
The non-tax incentives are similar to the existing non-tax incentives, meaning permission to own land and facilitation regarding visas and work permits.
For the purpose of tax incentives, the promoted activities will be divided into two groups:
Group A - This group will receive CIT exemption as well as the other tax and non-tax incentives. Within Group A there are four sub-groups which reflect a sliding scale of years of CIT exemption.
Group B - This group will receive only the duty exemptions and non-tax incentives mentioned above.
The merit-based incentives are divided into two types as follows:
1. Merit on competitive enhancement
2. Merit on industrial area development and decentralization
The first type, merit on competitive enhancement, means that any investment or expenditure that qualifies will result in additional years of CIT exemption. Examples of qualifying investment/expenditure include R&D, donation to educational or research institutes, advanced technology training, and development of local suppliers in advanced technology training and technical assistance. The concept is similar to the BOI’s current Skills, Technology and Innovation incentives.
The second type is awarded for merit on industrial area development and decentralization. For example, if the project is located in an industrial estate or promoted industrial zone, one additional year of CIT exemption is granted. If the project is located in certain provinces or districts specified by the BOI (mainly the special provinces in the BOI’s current Zone 3), additional years of CIT exemption or reduction are granted.
All Group A activities and some Group B activities are eligible to apply for merit-based incentives.
We expect that transition arrangements would be implemented, i.e. firstly, projects promoted under the current policy would be unaffected; secondly, applications submitted before 1 January 2015 would be considered under the current policy; and thirdly, expansion of existing projects submitted after 1 January 2015 would be considered under the new policy.
We will continue to monitor developments and keep you updated.
Suriyong Tungsuwan Tel: 0 2636 2000 ext. 4112 email@example.com
Benedict Yong Tel: 0 2636 2000 ext. 4902 firstname.lastname@example.org
Chana Sooppipat Tel: 0 2636 2000 ext. 4047 email@example.com