Introduction
Thailand’s dynamic economic landscape and strategic location in Southeast Asia has resulted in the Thailand becoming as an attractive destination to invest. To further enhance its attractiveness as an investment hub, the Thai government established the Board of Investment (BOI), a dedicated agency committed to fostering foreign investment through various incentives and benefits such as 100% foreign ownership.
By taking advantage of the exclusive advantages offered by the BOI, investors can gain a competitive edge in the Thai market and navigate the regulatory environment with greater ease.
This blog post explores the BOI company formation procedure, eligibility criteria, application procedure, and the benefits of BOI promotion, empowering you to obtain BOI approval and Thailand’s vast investment opportunities.
Key Points
- A BOI promotion removes many barriers to business in Thailand for eligible companies.
- The BOI application procedure can take between 3-9 months to complete and can be very complex and time consuming if the initial application is not prepared well
- Companies approved for a BOI promotion are eligible for special incentives such as 100% foreign ownership,educed requirements to support work permits and tax incentives
- BOI promotions are only offered to companies that operate in specific areas of business activities identified by the BOI.
Why should investors consider a BOI Promotion for their company formation?
Companies approved for a BOI promotion enjoy a range of special incentives and benefits to help their businesses. These incentives and benefits can significantly enhance the attractiveness for investors to invest in Thailand, particularly for foreign companies seeking to establish a strong presence.
One of the most notable advantages of securing a BOI promotion is owning 100% of a company as a foreigner. Unlike regular Thai Limited companies, which are subject to a 49.9% foreign ownership restriction for numerous business activities under the Foreign Business Act, BOI-promoted companies are exempt from these limitations. This flexibility allows foreign investors to exercise complete control over their operations and decision-making processes.
In addition to unrestricted foreign ownership, BOI-promoted companies may apply for and, in practice, are granted a Foreign Business Certificate (FBC), which removes the restrictions imposed by the Foreign Business Act (FBA). The FBA typically limits foreigners or foreign-owned companies from engaging in certain business activities; however, an FBC grants the freedom to pursue these activities without limitations.
Furthermore, BOI-promoted companies are not subject to quotas when hiring foreign skilled employees. This exemption from the typical 4:1 Thai to foreign-employee ratio significantly reduces the barriers to employing international talent, enabling companies to build a diverse and highly qualified workforce.
Beyond these key advantages, BOI-promoted companies can also enjoy:
- Permits to own land
- Streamlined visa and work permit processes
- Permit to remit money abroad in foreign currency
Moreover, the BOI, depending on the business activity, may be awarded tax incentives from the BOI. Potential tax incentives include:
- Exemption or reduction of import duties
- Exemption of corporate income tax and dividends
- Double deductions from the costs of transportation, electricity, and water supply
- Corporate income tax exemption (up to 8 years, depending on the business activity).
What business activities are eligible for a BOI promotion?
The Board of Investment (BOI) of Thailand supports businesses that invest in specific targeted industries identified by the government. To be eligible for BOI support, a business must operate in one of the following industries:
- Agriculture and food
- Manufacturing
- Digital and technology
- Tourism and services
- Other high-value industries
What is the BOI registration procedure for company formation?
To apply for a promotion, investors must complete the following BOI registration procedure to obtain BOI approval.
1. Feasibility Study:
Conducting a thorough feasibility study is essential before embarking on the BOI application process. This comprehensive assessment will evaluate the viability of your business plan and the likelihood of success in the Thai market. By identifying potential challenges and opportunities early on, you can make informed decisions and maximize your chances of securing BOI promotion.
Timeline: 3 business days
2. Preparation of the BOI Application and Interview Process:
The BOI application process involves submitting detailed information about your company, including the project’s scope, financial projections, and employee plans. It is essential to note that the application process must be completed properly. Should there be any inconsistencies or wrongly input information, the application won’t be accepted and need to be redone. This could happen a couple of times as the BOI may request information and data each time before accepting the application. This area is often the cause of many delays and can cost a lot of time.
Once submitted, your application will be reviewed by BOI officers, who may request further additional documentation or information.
Once the application has been accepted, you will be invited to a meeting to present your project. In practice, available meeting times will be available 1 to weeks after the application has been accepted. Following the meeting, the BOI may have some follow up questions about the application and may ask you to make some revisions.
After the meeting has ended, the BOI will consider your application and whether to approve it. During this time, the BOI officer will report the application to the Board of the BOI. Should everything be in order, they will accept it or they may ask for more information or questions which will result in delays. This usually takes approximately 1 month. Having a legal team, who is familiar with BOI applications will provide valuable assistance in ensuring the application is accepted smoothly.
It is important to note that with some specific categories from the BOI with higher investment requirements, the consideration period may be longer.
Timeline: 1 to 3 months
3. BOI Approval and Acceptance of Terms:
If your application is successful, you will receive a formal notification from the BOI outlining the terms of your promotion, including the specific incentives and privileges granted. You will have 30 days to review and accept these terms. Failure to respond within the stipulated time frame may result in delays or even cancellation of your promotion.
Timeline: 1 month
4. BOI Company Formation and BOI License:
Upon accepting the BOI’s terms, you must register your company in Thailand within six months. If you have already established a Thai company, it can be used for BOI promotion. However, the company’s capital must be increased to the amount specified by the BOI, and the funds must be transferred abroad. To obtain your BOI License, you must submit a comprehensive set of documents, including financial statements, shareholder information, and proof of capital transfer.
Please note that if you need more time to start the company and transfer the required funds into Thailand, you can provide a written request with an explanation. If accepted by the BOI, they will provide you with an extension of 6 months. This can only be done twice.
Timeline: 1 month
5. Foreign Business Certificate:
If your BOI-promoted business activities fall under the purview of the Foreign Business Act, you will need to obtain a Foreign Business Certificate. This certificate allows your company to engage in restricted activities and grants you the necessary permissions to operate legally in Thailand.
Timeline: 2 weeks
6. BOI Work Permits and Visa:
To hire foreign staff, your company must register in the BOI single window system, a platform for managing foreign worker applications. Once your job postings are approved, you can apply for visas and work permits for eligible foreign employees through the BOI’s one-stop service center.
Timeline: 1 month
7. BOI Reporting and Compliance:
BOI-promoted companies are subject to specific reporting and compliance requirements. These include timely machinery and equipment importation, construction completion within specified timelines, and adherence to BOI regulations regarding asset disposal or usage changes. Failure to comply with these requirements may result in warnings or, in severe cases, withdrawal of BOI promotion.
8. BOI Accounting:
BOI-promoted companies must maintain accurate and transparent accounting records to ensure compliance with tax regulations and demonstrate adherence to BOI-specific accounting requirements. Additionally, they must fulfil the same mandatory reporting obligations for VAT, Withholding Tax, and Social Security and half-year/yearly auditing.
How long does it take to complete the BOI registration procedure?
While the BOI undoubtedly offers significant advantages for eligible companies, the application process requires careful consideration and planning due to its extended timeframe. For instance, registering a traditional Thai limited company eligible to support a visa and work permit for a foreigner takes approximately 3 to 4 months. The BOI registration procedure, on the other hand, typically takes 6 to 9 months to complete. This extended timeframe is due to the thorough evaluation and vetting process that the BOI undertakes to ensure that only companies that align with Thailand’s economic development goals and investment strategies are granted promotion status.
Our Thoughts
Prospective investors should consider the extended BOI registration process when planning their business ventures in Thailand. Early planning and thorough documentation preparation can help streamline the process and minimize delays. Additionally, seeking guidance from experienced lawyers who are familiar with BOI applications can provide valuable insights and reduce the application time and/or increase chances of getting the application accepted smoothly by providing support throughout the BOI application journey. Should time be a significant factor and you wish to enter the Thai market and begin operations as soon as possible, the temporary use of a PEO service during the application stage should be considered.
Despite the extended timeframe, the potential benefits of securing BOI promotion far outweigh the initial investment of time and resources. The comprehensive package of incentives and exemptions the BOI offers can significantly enhance a company’s competitiveness and performance in the Thai market.
