Board of Investment Recommends New Investment Package
The Office of the Board of Investment is a government agency under the Office of the Prime Minister. Its core roles and responsibilities are to promote valuable investment, both investments into Thailand and Thai overseas investment. The Board of Investment (BOI) likewise aims to achieve sustainable growth in accordance with the sufficiency economy policy.
In recent years, Thailand has greatly improved its foreign trade and the influx of foreign direct investment had widely contributed to the Thai economy. As per the data published by the Bank of Thailand, the country’s foreign direct investment (FDI) has increased by 34,566.49 THB Million in October of 2019. Foreign Direct Investment (FDI) in Thailand averaged 21,199.41 THB Million from 1997 until 2019, reaching an all-time high of 125,800.99 THB Million in December of 2013 and a record low of -95,430.07 THB Million in June of 2013. It is expected to be 36400.00 THB Million by the end of this quarter, according to Trading Economics global macro models and analysts’ expectations. Looking forward, it is estimated that the Foreign Direct Investment (FDI) in Thailand is to stand at 35,000.00 in 12 months’ time. In the long-term, the Thailand Foreign Direct Investment (FDI) is projected to trend around 24,000.00 THB Million in 2020, according to econometric models.
Recently, Thailand’s key economic ministers endorsed a new investment promotion package recommended by the Board of Investment (BOI) to enhance the country’s ability to attract foreign investment and encourage foreign investors seeking to relocate operations in order to escape the impact of the ongoing US-China trade war.
Ms. Duangjai Asawachintachit, Secretary-General of Thailand Board of the Board of Investment (BOI), revealed after the board meeting with, chaired by Prime Minister Prayut Chan-ocha, that the board agreed with measures under the “Thailand Plus Package” which was endorsed at the economic ministers meeting.
The “Thailand Plus” campaign covers four main investment-related areas.
There will be an additional five-year, 50% reduction of corporate income tax (CIT) for investment projects that have an actual value of at least THB 1 billion by December 2021, and that application for BOI promotion must be submitted before the end of 2020. This measure is geared to accelerate investment and expedite large-scale projects in targeted industries.
Improved Regulatory Efficiency
A new committee will be set up to propel and coordinate investment in Thailand—similar to the One-Stop Service and chaired by the Prime Minister. The committee will work to facilitate investment activity and resolve any problems that might arise. It will also empower the BOI office to approve investment projects that are not entitled to CIT benefits—regardless of project size—in order to expedite responses to demands from investors who wish to quickly relocate their investments.
Business operators who provide training for advanced technology will be allowed to include these expenses as a tax allowance over two years (2019–2020). Similarly, business operators that hire highly skilled labor in the areas of science, technology, and advanced engineering will be able to include these related wages as deductible expenses during the same period. For BOI promoted projects for which CIT benefits are still valid, the BOI may allow training expenses relating to advanced technology to be calculated together with the cap amount for CIT exemption, possibly up to 200 percent. This measure aims to provide training as well as apprenticeship programs as well as incentivizing corporates to establish professional training/educational institutions in science, technology and engineering (STEM). The details of the measure are as follows:
- Training and Apprenticeship Support: Investment or expenses related to human resource development can be included in the calculation of corporate income tax (CIT) exemption ceiling with no minimum threshold. Two categories of investment or expenses can benefit from this measure:
- 100% of the actual expenses related to apprenticeship programs such as Dual Education, Cooperative Education or Work-Integrated Learning programs will be included in the calculation of corporate income tax exemption.
- 200% of the actual expenses related to providing employees with advanced STEM training, both in-house and external, will be included in the calculation of corporate income tax exemption given that these training courses must be endorsed by the Ministry of Higher Education, Science, Research and Innovation, or the Eastern Economic Corridor Office (in case of educational/training institutions located in EEC). Applications for these additional incentives must be submitted by the year 2021.
- Measures to support private sector investment in the establishment of human resource development institutions. Corporate (parent companies) in any business not related to educational or training institutions, when investing in the establishment of STEM education or vocational training institutions endorsed by the Ministry of Higher Education, Science, Research and Innovation, will be eligible to a 5-year corporate tax exemption for 100% of the investment fund used for the establishment of the institution. As for the educational or training institutions, they will receive an exemption of import duty on machinery. Applications must be submitted by the year 2021 and applicants must be engaged in the BOI eligible activities under the current investment promotion scheme.
Understanding the importance of a skilled workforce when deciding where to locate a facility, the new incentive package includes assistance to investors in training the workforce. While Thailand currently has approximately 1.8 million students in higher education, the country recognizes that continual training is necessary. So, employers will be eligible for a special deduction of training expenses related to advanced technology. This incentive is endorsed by the Ministry of Higher Education, Science, Research and Innovation in order to expedite reskilling and upskilling of the workforce. Expenses spent hiring skilled manpower, in fields of science and technology will also be entitled to a special deduction.
Developing Further Measures
A number of agencies have been instructed to plan additional measures:
- The Ministry of Commerce (MOC) is instructed to review and amend the list of restricted businesses attached to the Foreign Business Act B.E. 2542 (1999), as well as other laws that restrict investment in targeted industries. The BOI and relevant agencies (such as the Department of Industrial Works, Customs Department, Department of Land, and Revenue Department) are instructed to share information to expedite investment-related procedures, including by improving visa and work permit regulations for highly skilled foreign workers.
- The Industrial Estate Authority of Thailand (IEAT) is instructed to prepare the land for use specifically by foreign investors who wish to relocate business operations to Thailand.
- The MOC is further instructed to summarize their findings and the relevant steps for restarting negotiations for the Thailand-EU Trade Agreement, and for entering into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) within 2019. They are also instructed to request the Budget Bureau to allocate funds for compensation to businesses impacted by these free trade agreements.
- The Ministry of Finance is instructed to support investments in automation systems with further deductions from 2019–2020.
With Thailand’s very strategic location, the Board of Investment (BOI) is expecting to generate foreign investments. To note, Foreign Direct Investment (FDI) is often seen as an important catalyst for economic growth in developing countries. FDI has a positive impact on the country’s economy as these investments increase the provision of funds for domestic investments, encourage the creation of new jobs, reinforce the technology transfer and increase the total economic growth.
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