Under the Foreign Business Act (“FBA”), foreigners are legally restricted in doing certain businesses in Thailand as prescribed in the lists Annexed to the FBA.
Fortunately, there are various possibilities to obtain official permissions. And there are also government schemes available which provide for tax exemptions and tax reductions. Until now the Thai government authorities offered investment promotions for international headquarters (IHQ) and international trading centers (ITC). These have been replaced by the international business center (IBC). The differences between IHQ/ITC and IBC are as follows:
On 11th December 2018, the BOI has published BOI Announcement No. Ngor. 1/2561 to suspend the investment promotion for 7.5 International Headquarters: IHQ and 7.6 International Trading Center: ITC. This suspension is active since the date of the announcement.
At the same time, the BOI published Announcement No. Sor. 6/2561 to facilitate 7.34 International Business Center: IBC as a newly promoted activity. Any company wishing to apply for the new BOI promotion for IBC must comply with the conditions as follows:
In comparison: There is no minimum amount of employees required for IHQ/ITC.
The IBC shall receive B1 incentives which include all Non-Tax Incentives and exemption of import duties on machinery. The new promoted activity is valid since 11th December 2018.
Regardless of whether a company operates the IBC business with BOI promotion or conducts a business exempted from FBA requirements, the company may also be eligible to apply for certain IBC tax privileges directly at the Thai Revenue Department.
An IBC is a company incorporated under Thai law and approved by the Thailand Revenue Department to provide administrative and technical support service, treasury service and/or international trading service.
To obtain the tax privileges from Royal Decree (No 674) for IBC, a company has to fulfill much stricter requirements than under the ITC/IHQ schemes. Applicants must have paid up a minimum capital of 10 million THB, which is similar to the IHQ and ITC, but annual expenses for operation in Thailand must be at least 60 million THB, while it was 15 million THB in the former schemes. Further, the applicant is required to employ a minimum of 10 employees (if the applicant will only provide treasury services; only 5 employees). Such a rule does not exist in the IHQ/ ITC.
There is also a possibility to switch from an old IHQ/ITC scheme to the new IBC scheme. Applicants switching from an old plan are only required to have at least 15 million THB of annual local spending.
Because of the Royal Decree No. 674, from December the 28th 2018, there are several tax incentives for the IBC, these privileges are guaranteed for 15 years. These privileges are shown and compared to the old ITC/IHQ schemes as follows:
Personal income tax for expatriate employees for the IBC is based on a 15% flat tax rate.