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New Business Incentives under BOI’s promoted activities

STLO Asia > News & Publications  > New Business Incentives under BOI’s promoted activities

New Business Incentives under BOI’s promoted activities

ิะฟ

NEW BUSINESS INCENTIVES UNDER BOI’S PROMOTED ACTIVITIES
OF
INTERNATIONAL HEADQUARTERS
AND
INTERNATIONAL TRADING CENTERS

Preamble 
At this present, Thailand Board of Investment (“BOI”) has just launched of the new attractive incentives and privileges to the interested foreign investors. Such new incentives and privileges are even more investor-friendly environment under the BOI promoted business activities of International Headquarters (“IHQ”) and International Trading Centers (“ITC”). Those attractive incentives and privileges are included of the reduction or exemption of Corporate Income Tax (“CIT”), Personal Income Tax (“PIT”) for expatriates, Specific Business Tax (“SBT”) and so forth.

Thereby, kindly find for more details as follows:
1. International Headquarters 
Thailand defines an International Headquarters (“IHQ”) as a company incorporated under the law of Thailand that provides any of the following activities to its branches or “associated enterprises” 1, whether or not located in Thailand or overseas.

(1) Managerial services or technical services,
(2) Supporting services engaged in:

(2.1) General management, business planning and business coordination,

(2.2) Procurement of raw materials and parts,
(2.3) Research and development of products,
(2.4) Technical support,
(2.5) Marketing and sales promotion,
(2.6) Human resource management and training,
(2.7) Financial advisory services,
(2.8) Economic and investment analysis and research,
(2.9) Credit management and control,
(2.10) Other supporting services as stipulated by the Director-General of the Revenue Department (“RD”), New Business Incentives under BOI’s Promoted Activities Page 2

(3) Financial management, including:
(3.1) Financial management by corporate treasury centers being approved under the Bank of Thailand and its relevant laws,
(3.2) Borrowing and lending in Thai Baht in the following events:
(3.2.1) Borrowing in Thai Baht from financial institutions or associated enterprises in Thailand,
(3.2.2) Managing of Thai Baht obtained from 3.1 or 3.2.1 by lending in Thai Baht to associated enterprises in Thailand,

(4) An International Trading Center (“ITC”) refers to a company incorporated under the law of Thailand that purchases and sells of goods, raw materials and parts or that provides international trading-related services to juristic persons incorporated under foreign laws. International trading-related services being included:
(4.1) Procurement of goods,
(4.2) Warehousing and inventory services prior to delivery,
(4.3) Packaging services,
(4.4) Transportation of goods,
(4.5) Insurance on goods,
(4.6) Advisory, technical and training services on goods,
(4.7) Other services as stipulated by the Director-General of RD.

Remark 1: An associated enterprise is defined as follows:
1. A company or juristic partnership that is a direct or indirect shareholder in the IHQ
of not less than 25% of the total capital.

2. A company or juristic partnership in which IHQ is directly or indirectly a shareholder or partner of not less than 25% of the total capital.

3. A company or juristic partnership in which the company or juristic partnership specified in Clause 1. is a direct or indirect shareholder or partner of not less than 25% of the total capital.

4. A company or juristic partnership which has power to control or supervise the operation and management of the IHQ. New Business Incentives under BOI’s Promoted Activities Page 3

5. A company or juristic partnership in which IHQ has power to control or supervise the operation and management.

6. A company or juristic partnership in which the company or juristic partnership under No. 4. has power to control or supervise the operation and management.

IHQ’s Incentives 
(a) Incentives Offered by Thailand Board of Investment 
Ø Permission to bring-in skilled personnel and experts into Thailand to work in the promoted investment activities.
Ø Permission to own land.
Ø Exemption on import duty on machinery (only machinery for Research and Development and training activities).
Ø Exemption of import duty on raw materials and parts used in the production for export.

Criteria to Apply for Incentives Offered by BOI 
Ø An applicant must supervise at least one branch or associated enterprise outside Thailand.
Ø An applicant’s paid-up capital must be at least 10 Million Baht.

(b) Incentives Offered by Thailand Revenue Department 

Corporate Income Tax (“CIT”) 
CIT Exemption for 15 accounting periods from the date of approval by the Director-General of The Revenue Department. New Business Incentives under BOI’s Promoted Activities Page 4

(1) Revenue entitled to CIT exemption:

(1.1) Income derived from managerial services or technical services, supporting services or financial management services to associated enterprises incorporated under foreign laws.
(1.2) Royalties received from associated enterprises incorporated under foreign laws.
(1.3) Dividends received from associated enterprises incorporated under foreign laws.
(1.4) Capital gains received from the sales of shares in associated enterprises incorporated under foreign laws.
(1.5) Income derived from the purchase and sales of goods overseas on the condition that such goods must not be imported into Thailand, except for the purpose of transit or transshipment under Thai customs law, and income derived from providing of international trading-related services to juristic persons incorporated under foreign laws on the condition that such income must be received from or in foreign country.

(2) Revenue entitled to 10% CIT rate * (CIT reduction from 20%)

(2.1) Income derived from managerial services or technical services, supporting services or financial management services to associated enterprises established under Thai laws.
(2.2) Royalties received from associated enterprises established under Thai laws.

Remark *: The amount of revenue entitled to CIT reduction under Clause (2) must not be greater than the revenue entitled to CIT exemption according to Clause (1.1) and (1.2).

Personal Income Tax (“PIT”) 
The PIT rate for expatriates working in an IHQ is reduced to 15% on gross income and benefits derived from their employment.

Specific Business Tax (“SBT”) 
SBT exemption for the gross receipts from lending to associated enterprises.

Final Tax 
Final tax exemption for the following revenue:
Ø Dividends paid by the IHQ (dividends paid from revenue entitled to CIT exemption) to a company or juristic partnership incorporated underforeign laws and has no operation in Thailand.
Ø Interest paid by the IHQ (interest from loans taken out by an IHQ to re-lend to associated enterprises under financial management) to a company or juristic partnership incorporated under foreign laws and has no operation in Thailand.

Criteria to Apply for Incentives Offered by Thailand Revenue Department 
Ø An applicant must provide managerial services or technical services or supporting services or financial management to its associated enterprises incorporated under foreign laws.
Ø An applicant’s paid-up capital must be at least 10 Million Baht on the last day of each accounting period.
Ø An applicant’s total operating expenses which are paid to the recipients in Thailand (sales and administrative expenses) must be at least 15 Million Baht per accounting period.

Remark: If the IHQ is unable to meet any of the foregoing specified criteria within an accounting period, the tax incentives in that accounting periodwill not be granted.

2. International Trading Centers 
Thailand defines an International Trading Centers (“ITC”) as a company incorporated under the law of Thailand that purchases and sells of goods, raw materials and parts or that provides international trading-related services to juristic persons incorporated under foreign laws.
International trading-related services being included:
(1) Procurement of goods,
(2) Warehousing and inventory services prior to delivery,
(3) Packaging services,
(4) Transportation of goods,
(5) Insurance on goods,
(6) Advisory, technical and training services on goods,
(7) Other services as stipulated by the Director-General of the Revenue Department (“RD”).

ITC’s Incentives 
(a) Incentives Offered by Thailand Board of Investment 
Ø Permission to bring-in skilled personnel and experts into Thailand to work in the promoted investment activities.
Ø Permission to own land.
Ø Exemption on import duty on machinery. (Being slightly different as compared to IHQ)
Ø Exemption of import duty on raw materials and parts used in the production for export.

Criteria to Apply for Incentives Offered by BOI 
Ø An ITC must have its paid-up capital of at least 10 Million Baht.

(b) Incentives Offered by Thailand Revenue Department 

Corporate Income Tax (“CIT”) 
CIT Exemption for 15 accounting periods from the date of approval by the Director-General of The Revenue Department. An ITC is entitled to CIT exemption on:
Ø Income derived from purchase and sales of goods overseas on the condition that such goods must not be imported into Thailand, except for the purpose of transit or transshipment under Thai customs law.
Ø Income derived from proving of international trading-related services to juristic persons incorporated under foreign laws on the condition that such income must be received
from or in foreign country.

Personal Income Tax (“PIT”) 
The PIT rate for expatriates working in an ITC is reduced to 15% on gross income and benefits derived from their employment.

Final Tax 
Final tax exemption for dividends paid by the ITC (dividends paid from revenue entitled to CIT exemption) to a company or juristic partnership incorporated under foreign laws and has no operation in Thailand.

Criteria to Apply for Incentives Offered by Thailand Revenue Department 
Ø An applicant’s paid-up capital must be at least 10 Million Baht on the last day of each accounting period.
Ø An applicant’s total operating expenses which are paid to the recipients in Thailand (sales and administrative expenses) must be at least 15 Million Baht per accounting period.

Remark: If the ITC is unable to meet any of the foregoing specified criteria within an accounting period, the tax incentives in that accounting period willnot be granted.

3. Executive Summary 
According to all of the afore-mentioned information, the readers may notice some substantial similarity between IHQ and ITC; meanwhile, a bit slightly difference thereof.

In sum, ITC is more or less a sub-set in IHQ, to which an applicant can opt to apply only for ITC under the BOI, as ITC is one of the BOI’s promoted activities that having less criteria as compared to IHQ. Thereby resulting in narrower incentives to be entitled to.

On the flipside, should an applicant opts to apply for IHQ, by having broader incentives being offered besides ITC is included as one of the activities therein, such applicant shall enjoy broader incentives, whether or not, being offered by BOI, RD or even Bank of Thailand (on corporate treasury centers).
By those newly-launched business incentives, there be more advisable to the interested foreign investors may try to structure or re-structure of their newly set up or existing business to be able to enjoy of those fascinating incentives and privileges.

Somphob Tax and Law Office Limited
Author

1 August 2015 New Business Incentives under BOI’s Promoted Activities Page 9

REFERENCE 
1. Thailand Board of Investment (“BOI”)’s brochures and publications
2. Thailand Department of Business Development (“DBD”)’s brochures and publications
3. Thailand Foreign Business Act B.E. 2542 (1999)
4. Thailand Investment Promotion Act B.E. 2520 (1977)
5. Thailand Civil and Commercial Code
6. Thailand Revenue Code
7. Thailand Revenue Department’s website
8. Bank of Thailand’s website
9. Paid-materials from BOI’ seminars

Preamble 
At this present, Thailand Board of Investment (“BOI”) has just launched of the new attractive incentives and privileges to the interested foreign investors. Such new incentives and privileges are even more investor-friendly environment under the BOI promoted business activities of International Headquarters (“IHQ”) and International Trading Centers (“ITC”). Those attractive incentives and privileges are included of the reduction or exemption of Corporate Income Tax (“CIT”), Personal Income Tax (“PIT”) for expatriates, Specific Business Tax (“SBT”) and so forth.

Thereby, kindly find for more details as follows:
1. International Headquarters 
Thailand defines an International Headquarters (“IHQ”) as a company incorporated under the law of Thailand that provides any of the following activities to its branches or “associated enterprises” 1, whether or not located in Thailand or overseas.

(1) Managerial services or technical services,
(2) Supporting services engaged in:

(2.1) General management, business planning and business coordination,

(2.2) Procurement of raw materials and parts,
(2.3) Research and development of products,
(2.4) Technical support,
(2.5) Marketing and sales promotion,
(2.6) Human resource management and training,
(2.7) Financial advisory services,
(2.8) Economic and investment analysis and research,
(2.9) Credit management and control,
(2.10) Other supporting services as stipulated by the Director-General of the Revenue Department (“RD”), New Business Incentives under BOI’s Promoted Activities Page 2

(3) Financial management, including:
(3.1) Financial management by corporate treasury centers being approved under the Bank of Thailand and its relevant laws,
(3.2) Borrowing and lending in Thai Baht in the following events:
(3.2.1) Borrowing in Thai Baht from financial institutions or associated enterprises in Thailand,
(3.2.2) Managing of Thai Baht obtained from 3.1 or 3.2.1 by lending in Thai Baht to associated enterprises in Thailand,

(4) An International Trading Center (“ITC”) refers to a company incorporated under the law of Thailand that purchases and sells of goods, raw materials and parts or that provides international trading-related services to juristic persons incorporated under foreign laws. International trading-related services being included:
(4.1) Procurement of goods,
(4.2) Warehousing and inventory services prior to delivery,
(4.3) Packaging services,
(4.4) Transportation of goods,
(4.5) Insurance on goods,
(4.6) Advisory, technical and training services on goods,
(4.7) Other services as stipulated by the Director-General of RD.

Remark 1: An associated enterprise is defined as follows:
1. A company or juristic partnership that is a direct or indirect shareholder in the IHQ
of not less than 25% of the total capital.

2. A company or juristic partnership in which IHQ is directly or indirectly a shareholder or partner of not less than 25% of the total capital.

3. A company or juristic partnership in which the company or juristic partnership specified in Clause 1. is a direct or indirect shareholder or partner of not less than 25% of the total capital.

4. A company or juristic partnership which has power to control or supervise the operation and management of the IHQ. New Business Incentives under BOI’s Promoted Activities Page 3

5. A company or juristic partnership in which IHQ has power to control or supervise the operation and management.

6. A company or juristic partnership in which the company or juristic partnership under No. 4. has power to control or supervise the operation and management.

Thereby, kindly find for more details as follows:

1. International Headquarters 
Thailand defines an International Headquarters (“IHQ”) as a company incorporated under the law of Thailand that provides any of the following activities to its branches or “associated enterprises” 1, whether or not located in Thailand or overseas.

(1) Managerial services or technical services,
(2) Supporting services engaged in:

(2.1) General management, business planning and business coordination,

      (2.2) Procurement of raw materials and parts,
(2.3) Research and development of products,
(2.4) Technical support,
(2.5) Marketing and sales promotion,
(2.6) Human resource management and training,
(2.7) Financial advisory services,
(2.8) Economic and investment analysis and research,
(2.9) Credit management and control,
(2.10) Other supporting services as stipulated by the Director-General of the Revenue Department (“RD”), New Business Incentives under BOI’s Promoted Activities Page 2

(3) Financial management, including:
(3.1) Financial management by corporate treasury centers being approved under the Bank of Thailand and its relevant laws,
(3.2) Borrowing and lending in Thai Baht in the following events:
(3.2.1) Borrowing in Thai Baht from financial institutions or associated enterprises in Thailand,
(3.2.2) Managing of Thai Baht obtained from 3.1 or 3.2.1 by lending in Thai Baht to associated enterprises in Thailand,

(4) An International Trading Center (“ITC”) refers to a company incorporated under the law of Thailand that purchases and sells of goods, raw materials and parts or that provides international trading-related services to juristic persons incorporated under foreign laws. International trading-related services being included:
(4.1) Procurement of goods,
(4.2) Warehousing and inventory services prior to delivery,
(4.3) Packaging services,
(4.4) Transportation of goods,
(4.5) Insurance on goods,
(4.6) Advisory, technical and training services on goods,
(4.7) Other services as stipulated by the Director-General of RD.

Remark 1: An associated enterprise is defined as follows:
1. A company or juristic partnership that is a direct or indirect shareholder in the IHQ
of not less than 25% of the total capital.

2. A company or juristic partnership in which IHQ is directly or indirectly a shareholder or partner of not less than 25% of the total capital.

3. A company or juristic partnership in which the company or juristic partnership specified in Clause 1. is a direct or indirect shareholder or partner of not less than 25% of the total capital.

4. A company or juristic partnership which has power to control or supervise the operation and management of the IHQ. New Business Incentives under BOI’s Promoted Activities Page 3

5. A company or juristic partnership in which IHQ has power to control or supervise the operation and management.

6. A company or juristic partnership in which the company or juristic partnership under No. 4. has power to control or supervise the operation and management.

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