Introduction
If you’re an entrepreneur looking to establish a business in Thailand, checking to see whether your business qualifies for a Thailand Board of Investment (BOI) promotion should be one of your first considerations. The BOI offers special incentives and benefits to companies approved for BOI promotion. However, only specific business activities the BOI approves are eligible for promotions.
This comprehensive guide will explore the eligibility criteria, incentives available, and the process for registering a BOI company in Thailand.
Key Points
- 100% foreign ownership of the company is possible.
- Tax benefits include temporary income tax exemptions for specific business activities.
- Reduced requirements to support work permits for hiring skilled foreign experts.
- The ability to own land.
Why should entrepreneurs consider a BOI promotion in Thailand?
Thailand’s Board of Investment (BOI) is a special government agency dedicated to attracting foreign investment. The BOI aims to stimulate economic growth and create favorable business conditions by promoting investment in Thailand. BOI promotions remove various barriers to business in Thailand, including certain restrictions outlined in the Foreign Business Act.
Obtaining a BOI promotion and the incentives that come with it could significantly benefit companies looking to start a business in Thailand.
Other incentives available to qualifying companies include:
100% foreign ownership
Depending on the company’s business activities, 100% foreign ownership may not be possible. This is due to the Foreign Business Act and its restrictions on certain business activities by foreign companies.
BOI-promoted companies are not subject to the restrictions established by the Foreign Business Act and can be 100% foreign-owned.
Foreign Business Certificates
Companies granted a BOI promotion can apply for a Foreign Business Certificate. A company with a BOI promotion will be granted a Foreign Business Certificate. The Foreign Business Act is problematic for many companies as it restricts foreigners or foreign-owned companies from undertaking over 50 categories of business activities in Thailand; however, being granted a Foreign Business Certificate removes these restrictions.
Foreign Business Certificates will be granted to all companies that receive a promotion from the BOI, removing many barriers to business in Thailand.
Reduced restrictions on hiring foreigners
BOI-promoted companies are not subject to any quotas when hiring foreign skilled employees and experts. On the contrary, a Thai Limited Company must satisfy the following requirements:
- A ratio of 4:1 Thai to foreign employees. Essentially, there must be 4 Thai employees employed by the company per 1 foreign employee.
Other non-tax incentives
- The ability to own land
- Simplified visa and work permit applications/renewals
- The ability to remit money abroad (in foreign currencies)
Tax incentives
Please note these incentives are dependent on your business activities and promotion obtained from the BOI. Not all promotions are eligible for tax incentives.
- Exemption or reduction of import duties
- Exemption of a juristic person’s income tax and dividends
- Double deductions from the costs of transportation, electricity, and water supply
- Eight-year corporate income tax exemption for:
- Knowledge-based activities focussing on R&D and design to enhance Thailand’s competitiveness or
- Activities in infrastructure for Thailand’s development or
- Activities using advanced technology to create value-added
- Five-year corporate income tax exemption for:
- High-technology activities are important to Thailand’s development, with few investments already existing here.
- Three-year corporate income tax exemption for:
- Activities with lower technology than above add value to domestic resources and supply chains.
What type of business activities are eligible for a BOI promotion?
Different business activities are eligible to apply for a BOI promotion in Thailand. The BOI typically encourages investment in select target sectors such as manufacturing, technology, research and development, tourism, agriculture, and renewable energy.
Eligibility standards and incentives can differ based on the sector and the company’s activities.
The following business activities are eligible to receive a BOI promotion:
Section 1: Agriculture, Food, and Biotechnology Industry
Section 2: Medical Industry
Section 3: Machinery and Vehicles Industry
Section 4: Electrical Appliances and Electronics Industry
Section 5: Metal and Material Industry
Section 6: Chemical and Petrochemical Industry
Section 7: Public Utilities
Section 8: Digital Industry
How do I register a BOI company in Thailand?
The following process must be completed to register a BOI company in Thailand successfully.
- Business Feasibility Study: A business feasibility study allows companies to evaluate a BOI application’s potential success and viability. This study is a crucial step, as it can ultimately save the client time and effort. Belaws’ BOI experts are on hand to assist you in conducting a thorough business feasibility assessment.
- Application and interview: Applicants are required to submit an application form and supporting documents relating to their intended promotion. Examples of common information requested by the BOI include:
✓ The total amount of registered capital and how the company will provide this capital.
✓ Information on the company’s project
✓ Employee details, e.g., the number of foreign and Thai employees the company anticipates hiring
✓ Information regarding the management team’s skills and experience
✓ Estimated earnings and expenses of the company for its initial three years
After applying, a BOI officer will review it and may request additional information. Notably, the BOI officer ensures that the figures presented in the business plan are consistent and economically sound.
This back-and-forth communication can continue until the BOI officer is satisfied, which may involve anywhere from 2 to 10+ iterations for complex projects with significant capital investments.
Once the application is accepted, a meeting is scheduled at the BOI office to present the project. Typically, this meeting lasts for approximately one hour. Subsequently, the BOI officer will present the project for approval at the next BOI Officer meeting. The approval process varies in speed; some applications are swiftly approved, while others are subject to additional inquiries that can extend the acceptance timeline to as long as one year, notably when the BOI application lacks a well-structured presentation.
Expected Timeline: 3 to 5 months. - Receiving Approval From the BOI: The BOI offices will communicate their decision to the applicant in writing, typically within 7 days of making their decision. This notification will detail the approval criteria, BOI privileges, and benefits offered to the applicant. After receiving this notification, the applicant is afforded a 30-day window to accept or decline the BOI’s conditions. If the applicant fails to respond within this 30-day timeframe, they must send a letter to the BOI explaining the reason for the delay. The BOI may grant extensions of 30 days, up to a maximum of three times, at their discretion.
Expected Timeline: 1 month. - Company Registration and receiving the BOI license: Upon receiving approval for a BOI promotion, a limited company must complete its registration in Thailand within six months of obtaining said approval.
It’s worth noting that if the applicant has already established a company in Thailand, this existing entity can be used for the BOI promotion. In such a case, the company’s capital must be amended to meet the amount specified by the BOI for its promotion. The funds used for the capital change must originate from foreign sources, and the company must provide conclusive evidence of this capital transfer from abroad, along with all the pertinent and up-to-date documents listed below. To secure the BOI License, the applicant is required to submit the following documents:- BOI Promotion Certificate Application FormCompany’s Memorandum of AssociationCertificate of Company RegistrationCertificate detailing Registered Capital, Authorized Directors with Signing Authority, and Registered AddressCompany Shareholder RosterProof of Overseas Fund Transfer, aligning with the minimum capital requirement specified in the BOI Approval Letter.
If this isn’t possible, the applicant must send a letter of explanation to the BOI, requesting an extension of the deadline for an additional four months. This extension request can be made up to three times.
Expected Timeline: 1 month. - Applying for the foreign business certificate: If the business activities covered by the BOI Certificate fall under the purview of the Foreign Business Act (which is highly probable), the company must obtain a Foreign Business Certificate to engage in these regulated activities legally.
Expected Timeline: 2 weeks. - Applying for the Work Permit and Visa: To enable the company to employ foreign personnel, they must enroll their organization in the e-expert system. Enlisting in the e-expert system allows the company to submit future requests for foreign workers.
Once a job position has been posted, approved, and accepted via the e-expert system, the applicant can proceed to apply for their visa and work permit at the BOI’s one-stop service center (OSOS).
Expected Timeline: 1 month. - Reporting and Compliance Requirements: Once a company has obtained its investment promotion certificate from the BOI, it must satisfy the following conditions:
- Import machinery and equipment to benefit from the tax incentives within 30 months.
- Any construction must be completed, the machinery and equipment installed, and the factory ready to begin operations within 36 months.
- Receive permission from the BOI if the operation has to be suspended for longer than two months.
- The BOI must provide written permission to mortgage, sell, lease, or transfer machinery imported that was either exempt from or at a lower tax rate.
- Additionally, permission must also be obtained to use machinery for non-approved purposes.
Failure to satisfy any of the requirements set out by the BOI will result in an official warning notice being issued to the offending company. If there is no reason for failing to satisfy the above, the BOI may recommend that the company’s promotion be withdrawn. - Accounting Requirements: BOI-promoted companies are subject to specific regulations and additional regulatory scrutiny, such as audits of the company accounts. Furthermore, BOI companies will receive special accounting requirements for their promotion. BOI companies must also complete the mandatory reporting requirements for VAT, WHT, and SSF and the filing of half-year and yearly auditing.
Conclusion
The BOI in Thailand offers numerous benefits for both companies and foreign employees. By providing valuable incentives, reducing requirements, and providing additional support, the BOI aims to attract and retain foreign investments.
