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FAQ
New BOI Investment Promotion Policy
Question : 1. Concept on investment promotion under the new BOI policy
Answer : The underlying concept of the new BOI policy is to shift away from zone-based incentives, in which incentives are granted on a decentralization basis (Zone 1, 2, 3) to activity and merit-based incentives. Under the new BOI policy, incentives will be granted, regardless of zone, to activities that involve economic contribution, economic reform, dependency on corporate income tax exemptions to induce investment and strengthening competitive advantage. Take as an example the manufacturing of rice cookers, if the project is located in an northern industrial estate, like Lamphun province, the project will be entitled to corporate income tax exemption, under the former BOI policy, for a period of 8 years (with a corporate income tax exemption cap), which is equivalent to those incentives listed under Group A2 under the new BOI policy. However, under the new BOI policy such a project would be entitled to incentives under Group B1, which excludes corporate income tax exemption, even if the project is located as far away in Lamphun.
Question : 2. Types of Eligible Activities and Incentives for Investment Promotion
Answer :
In determining eligible activities, the impact on the country’s economy has to be considered, e.g. the level of technology, manufacturing difficulty, value added creation for domestic raw materials and parts. Additional conditions have been added to emphasize the development of high technology industries. For instance, some eligible activities for investment promotion must have a designing process, specific production process or product specification. The incentive package will then be identified (e.g. the duration of corporate income tax exemption) for activity-based groups according to the importance of the activities and categorized into groups as follows:
Group A1 (8 years without being subject to a corporate income tax exemption cap);
Group A2 (8 years subject to a corporate income tax exemption cap);
Group A3 (5 years subject to a corporate income tax exemption cap);
Group A4 (3 years subject to a corporate income tax exemption cap);
Group B1 (exemption of import duty on machinery only); and
Group B2 (permission to bring in foreign skilled workers and permission to own land only).
In general, the new BOI policy will grant incentives on a target-oriented basis; reducing basic incentives and additional merit-based incentives can be obtained when MERIT is earned in order to promote economic development. Most activities eligible for investment promotion are entitled to the activity-based incentives group, from B1 (excluding corporate income tax exemption) to A4 (3-year corporate income tax exemption). Meanwhile, activities contributing to economic reforms, e.g. technology and knowledge-based products are entitled to activity-based incentives under A3, A2, and A1.
Question : 3. Changes in Project Approval Criteria
Answer :

The changes in criteria for project approval are as follows:

Criteria

Former Policy

New Policy

Value Added

Not less than 20%

Exceptions

1.Agriculture and Agricultural Products

2.Electronics products and Parts

3.Other activities as approved by the Board

Not less than 20%

Exceptions

1. Agriculture and Agricultural Products

2. Electronic products and Parts

3.Coil Center

Value added must be above 10%

The Ratio of Debt to Equity

-       New project (in case the applicant has not established a company or a company has been established but revenue has not been generated) must have debt per equity ratio of 3:1

-       Expansion project (company has been established and revenue has been generated) will be as deemed appropriate

Unchanged

Manufacturing Process

Modern or as approved

Unchanged

Condition of Machinery

New or imported machinery must not exceed 10 years of usage

New or imported machinery must not exceed 5 years of use with strictly enforced criteria and conditions (See response to Questions 6 through 10 for more information)

Minimum Investment Capital

Minimum investment of Bt1 million, excluding cost of land and working capital, for all eligible activities

Minimum investment of Bt1 million, excluding cost of land and working capital, for all eligible activities, except activities that include per annum salaries of experts as part of the minimum investment regarding software development as well as research and development activities (See response to Question 18 for more information)

ISO Condition for Projects with Investment Capital exceeding 10 million baht (excluding cost of land and working capital)

 

Must obtain ISO 9000 or ISO 14000 or similar international certification within 2 years counting from the full operation start-up date. Otherwise, the privilege for corporate income tax exemption will be reduced by one year. For example, if the project entitled to 5-year corporate income tax exemption cannot obtain ISO, then the privilege will be reduced to 4 years.

For projects not entitled to corporate income tax exemption are not subject to such a condition even if the investment capital exceeds Bt10 million.

Unchanged

 

Remarks

Projects classified under the grouping of A1, A2, A3, A4 are subject to ISO conditions if the investment capital exceeds 10 million baht.

Projects entitled to incentives under the grouping of B1 and B2 are not subject to this condition since corporate income tax exemption is not granted to this incentive group unless merit-based incentives have been granted and the investment capital exceeds Bt10 million; ISO conditions will apply.

Feasibility Study

Applicable to projects with investment capital exceeding Bt500 million, excluding cost of land and working capital

Applicable to projects with investment capital exceeding Bt750 million, excluding cost of land and working capital

Question : 4. Projects Eligible for Investment Promotion under the New BOI Policy
Answer :

Projects eligible for investment promotion under the new BOI policy include projects with applications submitted from 1 January 2015 onwards. Furthermore, promoted projects applying for expansion will be subject to criteria for project approval under the new BOI policy, regardless of whether the expansion project is producing the existing promoted product or a new product, regardless of factory location, whether it be the existing facility or a relocated facility. Determined by the submission date of the application, the project is entitled to an incentives package under the former or new policy guidelines. Under the new BOI policy, the submission date of the application will be use as a criteria.

For example, Company A has operated its business since 2007 with a promoted project manufacturing rice cookers located in an industrial estate in Chonburi (Zone 2), thereby entitled to a 7-year corporate income tax exemption under the former policy. When the executive of the company knew about the new BOI policy, the company then decided to submit applications for 2 new projects. One application was submitted on 25 December 2014 to produce washing machines, which is a new product, located in an industrial estate in Lamphun (Zone 3). As the application was submitted prior to the announcement takes into force, the manufacturing of washing machines is classified under the former incentive package of zone 3, despite the fact that the project is producing a new product and factory is situated in a new location. Another application was submitted on 5 January 2015 to manufacture the same product but will be located in the existing factory location. However, since the application was submitted after the announcement date that the new BOI policy came into force, the incentive package will be according to the new policy, in which the manufacturing of rice cookers is classified under B1, which does not include corporate income tax exemption.

Question : 5. Criteria for Project Approval under the New BOI Policy
Answer :

1. Applicants must clearly specify the product type and check whether the product is recognized as an eligible activity for investment promotion. If there is uncertainty, then the applicant must consult the OBOI official prior to submitting the BOI application.

2. Criteria affecting considerations for project approval are detailed as follows:

Subject

Criteria

Example

Value Add

Not less than 20%

Exceptions

1.Agriculture and Agricultural Products

2.Electronics Products and Parts

3.Coil Center

Must have value added not less than 10%

Value Add Calculation

(Product selling price per unit - raw material price per unit - water rate per cubic meter - electricity rate per kWh) / Product selling price per unit

Example: Product selling price is Bt500 per unit, raw material price is Bt300 per unit, while the water rate (per cubic meter) and the electricity rate (per kWh) total Bt50, therefore the value added is (500-300-50)/500 = 150/500 = 30%

The Ratio of Debt to Equity

New project (in the case applicant has not set up a company or a company has been set up but revenue has not been generated) must have a debt to equity ratio of 3:1.

Expansion project (company has been set up and revenue has been generated), the debt to equity ratio will be set where appropriate.

Formula Example

New project with investment capital of Bt500 million;

Liability (loan) of Bt300 million;

Registered capital of Bt200 million

Debt/Equity Ratio =  300/200 =1.5/1

Manufacturing Process

Modern or in accordance with the manufacturing process conditioned for investment promotion

The manufacturing process must be clearly described and if there is a special condition attached to the activity, e.g. Activity 4.1.1 products from metal or alloy powder must undergo sintering process, the project must have such a manufacturing process

 

Condition of Machinery

New or imported used machinery not exceeding 5 years (except press machines must not exceed 10 years). A performance efficiency certificate on environmental impact, energy consumption and estimated price must be provided in accordance with the condition.

 

New Machinery means machinery that has never been used, regardless of when it was built. For example, a machine that was built in 2012 but has never been used, and imported to Thailand in 2016, will be regarded as new machinery.

 

Used Machinery is machinery that operated even for a day. Usage period will be counted from the date of production to importation date. For example, if a machine was built in 2011 and has been used abroad, even if the application form for investment promotion was submitted in 2015, the machine is considered to be 4 years old on the date that the application was submitted. However, on the actual importation of the machine in 2017, it will be considered as used for a period of 6 years, which is not in accordance with the criteria.  

New Machinery

-used in the promoted project

-exemption of import duty

-counted as investment capital

-counted as production capacity

 

All types of used machinery must not exceed 5 years and must be imported (except press machines which must not exceed 10 years)

-must be used in the project

-not entitled to import duty exemption

-counted as investment capital

-counted as production capacity

 

Special Exceptions

For sea and air transport activities as well as molds and dies, used machinery over 10 years old, counting from the manufacturing year to the importation year, is allowed to be used in the project, receiving equivalent incentives as new machinery.

Minimum Investment Capital

The minimum investment capital requirement of each project is Bt1 million (excluding cost of land and working capital) for all activities eligible for investment promotion. However, the exception is for activities that regard minimum annual salary expenses as minimum investment capital, e.g. software development as well as research and development as specified in the BOI Announcement, including salaries of specified personnel of at least Bt1.5 million per year.

Only investment capital of the submitted application for investment promotion will be calculated, e.g. additional machinery purchased and additional cost of construction. Investment capital of the existing promoted project will not be included.

 

Some activities, e.g. software, research and development, regard personnel expenses as investment capital, in which there is a separate application specifically for those activities.

ISO Condition for Projects with Investment Capital exceeds 10 million baht (excluding cost of land and working capital)

 

An ISO 9000 or ISO 14000 or similar international certification must be obtained within 2 years of the full operation start-up date. Otherwise, exemption of corporate income tax shall be reduced by one year. This condition will be based on the amount of investment capital specified in the application or can be added later if there is an increase in investment capital.  

 

Projects in B1/B2 will not be considered as corporate income tax exemption is not granted unless the project has earned MERIT and if the investment capital exceeds Bt10 million; ISO conditions will apply.

The full operation start-up date as specified in the condition is 3 years, counting from the issuance date of the BOI Certificate. For example, BOI Certificate No. 1234/2558 is dated 6 January 2015, therefore the full operation start-up date will be 6 January 2018. Meanwhile, the application of ISO conditions will be 2 years from the full operation startup date, which in this case would be 6 January 2020.

Feasibility Study

Project with investment capital exceeding Bt750 million (excluding cost of land and working capital)

To be conducted in accordance with the BOI Announcement No. 50/2534