Board of Investment expands incentives for investors

Thailand’s Board of Investment has increased, extended and expanded tax breaks and incentives for investors with the goal of sparking a surge in investment in 2019 as a university lecturer said research shows tax incentives are the most effective tool in attracting foreign investment to the region.

Board of Investment (BoI) Secretary-General Duangjai Asawachintachit said 2019 would be a “golden year for investment in Thailand” should the new incentives work and the agency achieves its goals. The privileges became available for projects that apply for them on starting November 19, 2018, and will be available until December 31, 2019.

The new incentives include a 50 percent reduction in corporate income tax for an additional three years after the tax holiday for large investment projects worth more than 1 billion baht ($30 million), excluding land cost and working capital. These three years would be in addition to the five to eight years of corporate tax exemptions already offered by the BoI.

If the projects are in the Eastern Economic Corridor advanced development zone, the Board will extend the corporate tax exemption for an additional five years instead of three.

Projects that have already submitted applications for privileges and incentives, but have not yet been implemented, can re-apply to take advantage of the new offers, Duangjai said.

The value of tax incentives to countries in the region seeking investment can’t be overstated, according to Athiphat Muthitacharoen, a lecturer in economics at Chulalongkorn University in Bangkok

Having researched the effects of tax incentives offered by countries in the region, he concluded that a one-year extension of tax breaks by Thailand could result in an 11 percent increase in investment. Removing tax breaks would cause the Kingdom to lose more than 8 percent in investment.

Corporate tax rates in the region have declined over the past two decades, he said, because countries are fiercely competing for investment.  His research surveyed 6,166 multinational corporations in Thailand, Indonesia, Malaysia, the Philippines, and Viet Nam.

However, tax incentives aren’t as effective in attracting high-tech companies, he said. Those companies are more concerned with ease of doing business.

Among the other measures approved by the BoI were extensions of corporate tax exemptions for those that invest in community businesses as long as the investment was a minimum of 1 million baht ($30,000). The Board also broadened the types of community business eligible for the privileges. They now include tourism enterprises and light industry.

The Board also approved additional privileges for projects related to smart cities, smart industrial estates, and laboratories and research facilities.