New investment incentives passed by Cabinet
Acting on proposals from the Board of Investment, Thailand’s Cabinet approved the first major draft amendments to the Investment Promotion Act of 1997 since the year the Act was passed, offering greater incentives and tax exemptions for businesses and business activities associated with research and development and innovation.
Members of the Board of Investment (BoI) and the government said the incentives regime that had been offered for the last 18 years had lost the ability to attract businesses, and so the time had come to revise them. For more than four decades Thailand’s openness, infrastructure and incentives made it the preferred destination in the region for foreign investment, particularly in manufacturing. As other countries have begun to develop, however, they have been offering more competitive incentives and begun to challenge the Kingdom as a place to do business.
“The existing tax measures and incentives have been tested by the BoI and have been found to be ineffective now, so some tax measures will be revised and new incentives will be provided to encourage more investment in the country,” said Government Spokesman Sansern Kaewkamnerd.
Among the changes approved by the Cabinet are measures that allow the government to exempt corporate income tax for 13 years, up from eight years. It would also raise the reduced rate for corporate income tax to 90 percent for 10 years after tax holidays from 50 percent for five years now.
These privileges and incentives would only be available and offered to companies engaging in high- or advanced-technology manufacturing, green businesses or who are investing heavily in research and development. The BoI is developing a list of industries that will be eligible for the new incentives.
Thailand is determined to evolve from an economy driven mainly by manufacturing and exports to one in which knowledge, innovation and creativity play larger roles, and one where consumption is a more significant engine of growth. Successive governments have been advocating this agenda for at least 15 years, but few concrete steps have been taken to turn it into reality.
The new incentives regime is a solid step towards achieving that goal. The changes will need to be approved by the National Legislative Assembly. BoI Secretary General Hirunya Suchinai said they would be implemented next year. He added that the new incentives conform to all World Trade Organization rules.
Government spokesman Sansern downplayed any concerns over possible lost revenue because of the new regime.
“The government and the country do not lose anything by amending the tax measures and increasing the incentives, but what we will gain is an increase in the private sector’s motivation to invest,” he said.
Thailand Focus September 21, 2015
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