Government approves new tax incentives for R&D

Companies in five sectors that collaborate on research and development will be eligible for greater tax deductions of up to 300 percent, according to a proposal submitted to the Cabinet last week that would cover companies in agriculture, biotechnology, healthcare, robotics, and the creative economy as part of the Thailand 4.0 initiative.

Prime Minister Prayut Chan-o-cha approved the incentives in his capacity as chairman of the National Policy Council for Research and Innovation, according to Deputy Prime Minister Prajin Juntong. The proposal originated with the Pracha Rat (People’s State) steering committee on research and development, which is chaired by Kan Trakulhoon, former president of Siam Cement Group, long considered one of the best-managed Thai companies.

The incentives are the latest in a series of privileges, incentives and other inducements that support private sector investment and participation in ventures that support Thailand 4.0. A 20-year policy initiative of the Prayut administration, Thailand 4.0 aims to transform Thailand’s economy from one reliant on traditional manufacturing into one driven by innovation, digital technology, creativity and green technology. This transformation is seen as essential to ensuring Thailand’s future competitiveness and preventing the Kingdom from being caught in the “middle income trap” that affects many developing countries.

Under the new incentives, companies that group together to collaborate on research and development can claim deductions for R&D expenses of 300 percent, up from 200 percent, as long as the research pertains to one of the five sectors. The group deductions will be offered through 2019, but similar deductions for individual companies conducting R&D in those areas will be available through 2020, according to Prajin.

One of the pillars of Thailand 4.0 is an effort to get Thai companies to invest more in R&D. Average spending on R&D by Thai companies currently lags behind that of their counterparts in more advanced economies. The government wants that to change.

Kittipong Promwong, secretary-general to the National Science Technology and Innovation Policy Office, said a survey conducted by his office had found the country’s spending on R&D in 2015 accounted for 0.62 percent of GDP. Of that, 30 percent or $750 million came from the government and 70 percent or $1.7 billion was invested by the private sector.

He said R&D expenditure in 2016 was estimated at 0.75 percent of GDP and is forecast to increase to 0.8 percent of GDP in 2017. The original target for this year was 1 percent of GDP, but he said that target should be achieved in 2018.

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