Quality tax incentives existing in Thailand in 2023
The Board of Investment in Thailand implemented the Investment Promotion Act and the Competitiveness Enhancement Act following which the Thai government provides a range of incentives as follows:
Standard BOI Incentives:
- 100% corporate tax exemption for up to 15 years, for multiple business activities including: i) Agriculture and agricultural products, ii) Light industry, iii) Chemicals, paper and plastics, and iv) Technology development and innovation;
- 100% exemption from import duties on i) imported machinery and ii) raw material for manufacturing export-oriented products;
Incentives for R&D based activities:
- Income derived from the provision of R&D services are exempted from Corporate Income Tax for up to 13 years;
- Exemption from import duties on items used for: i) R&D and ii) raw materials for manufacturing for exports;
- Subsidy of US$301,204,800 to all the investment projects involving R&D or innovation;
- Dividends derived from promoted enterprises from taxable income during the period of CIT exemption and within 6 months from the date of expiry of any tax holiday period are excluded.
Incentives for Special Zones:
- The zones of: i) Special industry promotion zone, ii) Target industry promotion zone and iii) Industrial estate within the EEC together form the Eastern Economic Corridor. As a result, they enjoy the standard BOI incentives as well as a deduction of the CIT by 50% for a period of five years after the end of the tax holiday;
- For Regional Operating Headquarters (ROHs):
- A CIT of 10% is levied on net profits on i) services provided to foreign and domestic affiliates and ii) qualified royalties and interest income after lending borrowed funds to domestic and foreign partners;
- ROHs are exempted from withholding taxes on dividends i) paid to overseas corporate shareholders on net profit derived from qualified income and ii) received from partners;
- Expatriates employed have the choice of being taxed at a flat rate of 15% for four successive years.
- For International Headquarters (IHQs):
- 10% CIT levied on the net profits for income derived from qualified services provided to domestic associates;
- 100% exemption of: i) CIT on the net profit from qualified services provided to, royalties and dividends obtained from, and capital gains from the transfer of shares to overseas foreign associates and ii) withholding taxes on dividends paid to overseas corporate entities by an IHQ;
- Expatriates employed in an IHQ have the choice of being taxed at a flat rate of 15%.
- For Treasury Centers (TCs):
- 100% exemption from i) Withholding taxes on interest paid to foreign companies that are not carrying out business in Thailand on loans borrowed for re-lending to affiliates and ii) specific business tax on all remuneration received from financial management services provided to affiliates;
- They are entitled to the same tax incentives as an IHQ noted above.
- For International trade Centers (ITC):
- 100% exemption from i) CIT on income from buying and selling goods abroad without importing such goods into Thailand and ii) WHT on dividends paid to foreign corporate shareholders from the net profit derived from the income exempt from tax;
- Expatriates employed by the ITC can choose to be taxed at a flat rate of 15%.
Incentives on decentralization:
- Currently the investment promotion zones are a part of the decentralization merit to businesses that have operations in these 20 provinces with lowest income per capita;
- CIT exemption for additional three years. However, a reduction of 50% of CIT for five years after the end of the tax holiday for projects under Groups A1 and A2;
- Double deduction from taxable income for costs pertaining to transportation, electricity, and water supply for ten years;
- A deduction of 25% from net profit of the project’s infrastructure installation or construction costs in addition to normal depreciation.
Foreign tax credit:
A Thailand incorporated company can utilize its foreign tax paid on business income or dividends as its credit against its liability of CIT.