BOI For Tech Startups
December 10, 2019
Starting a Business in Thailand is easier when you have the status of being promoted by the Board of Investment (BOI). Business owners may apply for investment promotion from the BOI if the nature of their business falls under one of the promoted activities. If a business is eligible for BOI promotion, they would be entitled 100% foreign ownership with the foreign business license (without the usual capitalization requirement) and would be permitted to bring in foreign skilled workers without having to comply with the general ratio of 4 Thai employees to 1 foreign national working in the company. In addition to the benefits previously mentioned, BOI promoted businesses are eligible for a corporate income tax exemption of up to 13 years.
- The Thai Board of Investment
The BOI was established pursuant to the Investment Promotion Act, A.D. 1977, for the purpose of promoting certain foreign and domestic investments that are regarded as welcome in Thailand.
The BOI has set policies to promote:
- National competitiveness;
- Environment-friendliness, saving energy or use of alternative energy;
- Regional development (upcountry) to help develop the local economy;
- Special economic zones, both inside and outside industrial estates;
- Thai overseas investment.
There is no government fee for applying for BOI privileges. This, among other reasons make it a highly recommended option for foreign investment. The application for promotion takes approximately four – six months overall, including the preparation, submission, interview, and consideration period.
The BOI bases its determination on promotion privileges upon the following general criteria:
- Must be a new project (established operations are not eligible);
- Total capital investment;
- Debt to equity ratio not exceeding 3:1;
- Projected number of Thai employees;
- Foreign technology transfer, technical assistance, and training;
- Environmental impact of projects; and
- Project location.
In addition to the above general criteria, there are specific criteria for each business category. The BOI has a list of approximately 100 categories and more sub-categories, each has specific criteria. The BOI certificate, once it is granted, is accompanied by a list of conditions. Failure to meet the conditions (and remain in compliance therewith) may lead to revocation of the BOI certificate.
The BOI officers in charge usually speak English well and they make themselves available to clarify any questions regarding the application requirements.
- Specific BOI promotion schemes for the tech industry
The tech industry is one of the fastest growing industries in Thailand, and the Thai government wants to make Thailand the center of technological innovation in ASEAN. The tech industries that may qualify for BOI promotion can be found under Category 5 of the list of BOI promoted activities.
The most popular tech industries under section 5 of the BOI promoted activities are outlined below.
a. Category 5.7: Software
Two categories, distinguished by product description:
- Embedded or High Value-Added Software (A1)
- Enterprise Software and/or Digital Content (A3)
General conditions for all software categories:
- Salaries for IT-personnel of at least 1,500,000 THB per year;
- Software development processes specified by DEPA (Digital Economy Promotion Agency);
- Projects with an investment of 10 million THB or more must obtain a quality standard certificate from DEPA or receive a Capability Maturity Model Integration (CMMI) quality standard certificate or any equivalent standard within two years from the full operation start-up date.
b. Category 5.8: E-Commerce
Thailand is currently experiencing a massive growth in opportunities related to e-commerce with current estimates for the next five years predicting an average growth of 18.2% per year. Thailand has one of the highest internet and mobile internet adoption rates throughout Southeast Asia.
General conditions for promotion in this category:
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- Set-up as a Company Limited (Co. Ltd)
- Special E-Commerce Business License
- Under the Direct Sales and Direct Marketing Act, certain e-commerce ventures might have, as the case may be, to be registered with the Office of the Consumer Protection Board (OCPB) as so-called direct sale business
- Compliance with Foreign Business Act
Definition of “e-commerce” is somewhat unclear and contradictory. According to the BOI, any business that is based on online transactions is regarded as e-commerce. The standard case is the “online marketplace,” where the operator acts as a broker who establishes the contact between customers and sellers and/or service providers. The income of the e-commerce operator is then based on agency commissions.
c. Category 5.9: Digital Services
Digital services include all types of digital services, including:
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- Software platform
- Managed service
- Digital architecture design service
- Digital services such as FinTech, DigiTech, MedTech, AgriTech, etc.
The conditions for a Digital Services company to be eligible for BOI promotion are as follows:
- Projects must hire digital specialists and have a capital investment (excluding cost of land
- and working capital) of not less than 1 million Baht.
- Project must include digital services.
- Projects with an investment of 10 million Baht or more (excluding cost of land and working capital) must be certified with ISO2000 or other quality standard certificate as approved by the Ministry of Information and Communication Technology within 2 years from the full operation date.
- Revenue derived from sales or provision of services that are directly related to a promoted digital services business shall be regarded as revenue of such promoted business.
- Projects must gain approval from the Ministry of Digital Economy and Society before applying for investment promotion.
- What benefits does BOI promotion provide?
The BOI has discretionary authority to grant certain taxation, employment, financial and other benefits.
- BOI incentives are divided into two categories (tax incentives and non-tax incentives) and specified in the BOI certificate granted to successful applicants.1
Non-Tax Incentives Non-tax incentives are available at BOI’s discretion and include such investment privileges as majority foreign ownership, land ownership and expedited visas and work permits for foreign executives and technicians (and their families).
- Tax Incentives
BOI’s basic package of tax incentives includes the following (subject to modification by the BOI on a case-by-case basis):
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- Exemption or reduction of import duties on imported machinery;
- Exemption or reduction of import duties on imported materials and components;
- Exemption of corporate income taxes for three (3) to eight (8) years, with permission to carry forward losses as deductible expenses for up to five (5) years;
- Exclusion of dividends derived from promoted projects from taxable income during corporate income tax holiday.
BOI tax incentives vary in accordance with the specific product or service under the promoted project, and the geographic location of the promoted project.
Conclusion:
As you can see, applying for BOI promotion is a highly recommended option for foreigners wanting to own 100% of a business in Thailand, and receive both tax and non-tax incentives. With such attractive benefits provided by the BOI promotional certificate, and Thailand’s tech industry being one of the fastest growing industries in ASEAN, the option of starting a tech business in Thailand is becoming increasingly attractive for foreigners.
Our firm can assist you in applying for BOI promotion. If you have any questions related to BOI promotion or setting up a business in Thailand, feel free to contact us at [email protected] or call us at +66 (0)2 117 9131-2.
