Thailand is a booming business hub in Southeast Asia. It attracts local and international companies with its strategic location, strong infrastructure, and skilled workforce. Moreover, the country offers appealing tax advantages that foster business growth and investment.
In this article, we’ll explore Thailand’s tax incentives for businesses, outlining their benefits and eligibility criteria.
1. Board of Investment (BOI) Promotion
The Board of Investment (BOI) is a key government agency responsible for promoting investment in Thailand. The BOI offers a range of incentives to domestic and foreign companies operating in specific industries and sectors such as:
- Tax Holidays: Eligible businesses can enjoy an exemption from corporate income tax for a specified period, which ranges from three to eight years, depending on the business location and sector.
- Reduction of Import Duties: BOI-approved companies can benefit from a reduction or complete exemption from import duties on machinery, raw materials, and essential equipment necessary for their operations.
- Land Ownership: In certain cases, BOI-promoted companies are permitted to own land for their approved activities, even if the majority of their shareholding is held by foreigners.
- Permission for Foreigners to Work: BOI-approved companies have the advantage of employing foreign experts and skilled workers in proportion to the level of investment and job creation.
2. Regional Operating Headquarters (ROH)
The government introduced the Regional Operating Headquarters (ROH) scheme to encourage multinational corporations to set up regional headquarters in Thailand. Companies approved under this scheme enjoy a lot of tax benefits, including:
- Corporate Income Tax Exemption: ROH companies are exempted from corporate income tax on certain qualifying income, such as dividends received from overseas subsidiaries, interest income from loans to affiliated companies, and income from the provision of support services to affiliated companies.
- Reduced Withholding Tax: ROH companies benefit from a reduced withholding tax rate of 10% for certain payments made to overseas affiliates for services rendered.
- Work Permit for Foreign Employees: ROH companies are allowed to have a higher number of foreign employees holding work permits compared to regular companies.
3. Double Taxation Agreements (DTAs)
Thailand has concluded comprehensive Double Taxation Agreements (DTAs) with several countries to avoid double taxation and encourage cross-border investment. These agreements provide tax benefits to businesses operating in both Thailand and their home countries. The main benefits of DTAs include:
- Reduction of Withholding Taxes: DTAs often specify lower withholding tax rates on dividends, interest, royalties, and fees for technical services. This reduction in withholding tax ensures that businesses can repatriate income to their home countries more efficiently.
- Tax Credit for Foreign Taxes Paid: Businesses can claim a tax credit in their home country for taxes paid in Thailand, thereby avoiding double taxation and reducing the overall tax burden.
Thailand’s corporate tax incentives play a crucial role in attracting investment, stimulating economic growth, and encouraging innovation. The Board of Investment’s promotion scheme, the Regional Operating Headquarters scheme, and the Double Taxation Agreements offer significant benefits to companies operating in the country.
Based on these tax incentives, domestic and foreign businesses can reduce their tax liabilities, increase profitability, and focus resources on expansion, research and development, and job creation.
However, it’s important for businesses to meticulously understand the eligibility criteria and respect the regulations set by the respective government agencies to fully benefit from these tax incentives.
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