New Rules for BOI Promotion of Digital Activities

February 3, 2022

Thailand’s Board of Investment (BOI) announced the merging of its list of promoted digital activities into a single new category for software development, digital services platforms, or digital content (5.10) to support software development platform, digital services, digital content, and development of Thailand personnel in information technology.

Promotion terms and conditions

According to the BOI announcement, category 5.10 Development of Software, Digital Platform, or Digital Content has the following conditions:

1. To be eligible for investment promotion, projects must involve activities to develop whole new software, digital platforms, or digital content in Thailand

2. Where a project has a developed product before applying for promotion, further developments or improvements in Thailand of the product are required and must not be on the list appended to this explanatory note. In these cases, the applicant must provide comparison information between the developed product before applying for promotion and the further developments or improvements after applying for promotion.

The comparison information must contain the following details at a minimum:

• Product name
• Feature or function of the software or digital platform
• Structure of software, digital platform, or digital content
• Tools and computer language used in the development

3. The minimum investment capital of each project must not be less than Baht 1,500,000 per year calculated based on the expenditure on salaries for Thai information technology personnel additionally employed after applying for investment promotion.

4. Projects must have software, digital platform, or digital content development process in Thailand as stipulated by the Office.

5. Projects are allowed to utilize the existing or used machinery.

6. The investment promotion of this activity does not include the retail and wholesale of all types of products.

7. The revenue eligible for corporate income tax exemption must be derived from sales or services directly related to the promoted development of software, digital platform, or digital content as stipulated by the Office.

8. The corporate income tax exemption cap is set based on the actual expenditure in the year of application for the incentives as follows:

• The corporate income tax exemption cap accounts for 100 percent of the expenditure on salaries for Thai information technology personnel additionally employed in comparison with Thai information technology personnel employed before the submission date of application for investment promotion.
• The corporate income tax exemption cap accounts for 200 percent of the expenditure on the information technology development-related training courses to develop Thai personnel’s skills and the expenditure on human resource development under the cooperation project with educational institutions under the specified models. These models could include Work-integrated Learning (WiL), Cooperative Education, Dual Vocational Education, or the cooperation to develop Thai information technology personnel as approved by the Office.   

•  The corporate income tax exemption cap accounts for 100 percent of the expenditure on the operation to acquire the standard quality system certificate ISO 29110 or CMMI from Level 2 or other equivalent international standards

9. The projects cannot apply for additional incentives for competitiveness enhancement and the incentives according to Investment Promotion Measure for Small and Medium Enterprises (SMEs).

10. Should the projects want to apply for the incentives according to the Investment Promotion Measure in the Eastern Economic Corridor (EEC) for human resource development, they must inform about their request when applying for investment promotion. They are not allowed to change their request after investment promotion approval.

The rights and benefits of corporate income exemption

The revenue applicable to corporate income tax exemption must come from selling and providing services directly related to software development, digital platform, or digital content in the promoted activities. The types of the prescribed incomes based on our experience are:

• The revenue earned from developing, installing, testing, improving, and maintaining software, digital platform, or digital content in the projects
• The revenue derived from selling software, digital platform, or digital content developed in the project
• The revenue earned from royalties (license fees) for the uses of software developed in the project
• The revenue from subscription fees for services of the software or digital platform developed in the projects
• The revenue from additional sales of feature/function on the application (In-App Purchase)
• The revenue from advertisements appearing in the software, digital platform, or digital content developed in the projects
• In the case of investment projects for further development of existing software, digital platform, or digital content, the first date of earning revenues shall be the date on which the projects sell or service software, digital platform, or digital content that has been further developed as specified in the projects

However, the revenues applicable to a request for exercising rights and benefits of corporate income tax exemption do not include revenue earned in the form of commission, expenses, and other services fees which are not directly related to the software or digital platform of the promoted projects and earnings from data distribution or data analysis reports without software development in the project, or any other incomes that the Office considers not relevant to the specified criteria. The Office will primarily consider the revenue types or intents acquired.

Conclusion

Because of the high volume of applications related to the digital industry, The Board of Investment (BOI) decided to combine the above categories into one category, 5.10 (Development of Software, Digital Platform, or Digital Content), including adding new conditions to attract investors. Furthermore, it should be highlighted that the development process in the project is a key element for BOI promotion under new category 5.10.

Feel free to contact us if you have any questions at [email protected]

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