Please clarify the definition of parts and components? Under the IPO, what products are components?
The IPO can trade raw materials, parts and, components. This does not include final products (such as pen which does not need assembly before use). Therefore, the terms raw materials, parts and, components refer to materials that are not final products and need to be assembled into a product.
The IPO is eligible for an exemption of import duties on machinery used in the project. Is the machinery imported and sold to customers eligible for this incentive?
Machinery is a final product and not raw materials, parts and, components. Therefore, the IPO is not allowed to sell machinery.
Under the old IPO, a company must procure materials from various sources, and at least 10% of the procurement must be from local suppliers. Does this condition apply in the new IPO?
Presently, it is stipulated that the IPO must procure materials from at least 1 domestic supplier. As there is no minimum percentage of purchase, the company can purchase less than 10 percent from local supplier. However, an appropriate quantity of raw materials purchased in Thailand is recommended and not just to get around the BOI’s condition.
Under the old IPO, a company must procure materials from local sources and export at least 10%. Does this condition apply in the new IPO?
Presently, it is stipulated that the IPO must procure materials from at least 1 local supplier. As there is no minimum percentage of purchase, the company can purchase less than 10 percent from local supplier. However, an appropriate quantity of raw materials purchased in Thailand is recommended and not just to get around the BOI’s condition. Moreover, there is no condition regarding the percentage of exports.
A wholesale company with Thai majority shareholders and a registered capital of 2 million baht wishes to be promoted in the IPO activity. It plans to increase its capital and transform the shareholder structure to be 100% foreign shareholders. Does the company need to increase its capital before the issuance of a promotion certificate, or upon submitting the promotion application?
A capital increase of 10 million baht can be done and fully paid after submitting the application, but before the issuance of certificate. In the application form, it must be indicated that the company is increasing its capital.
A company has a 10-million-baht paid-up capital and a TISO license. If the company wishes to apply for the new IPO, does it need an additional 10-million-baht capital, or does it need to establish a new company?
The BOI has set the debt-to-equity ratio at 3/1. We will check from the company’s latest financial statement; if the ratio is less than the criteria of 3/1, the company does not need to increase its capital. The company can use its retained earnings or domestic or foreign loan for investment in the new project. However, if the D/E ratio is over 3/1, the company may need to consider increase its capital. This depends on the amount of investment in the IPO project. As for investment promotion of the IPO project, it can either be done through an existing company or a newly established company.
Is there a specific condition regarding number of staff in the IPO activity?
There is no employment condition in the IPO project.
A company imports animal food from Japan, can it apply for promotion under the IPO?
The company’s activity must conform to the conditions of IPO which are limited to the procurement of raw materials, parts and, components. If the animal foods are final products ready for feeding animals, the company cannot apply for promotion as the IPO project.
Are components and final products of prefabricated houses eligible for IPO?
The IPO is allowed only for trading of raw materials, parts and, components (not manufacturing, mixing or assembling). It does not include final products. The company must ensure that its goods are not final products. If the products are sold in the country, it must be wholesale only (not to end-users). For the prefabricated house, if the goods are parts or components, such as steel structures, and not a finished house ready to move in, it is in the IPO scope because the buyer (the contractor) have to assemble them into a house before selling to end users or house owners.
If prefabricated houses are not included in the IPO activity, does the company need to separate its account?
Initially, it must be identified if the prefabricated house business is the trading of house parts and components, or if it is the selling of prefabricated houses. If it is the trading of parts and components (both domestic wholesale and exports), it is the IPO activity and the relevant BOI conditions must be observed. For other types of business e.g., selling of finished houses, or assembling or building of houses, the business operators must contact the Department of Business Development (DBD), the Ministry of Commerce, to check if it is included in the list attached to the Foreign Business Act, and if so, a Foreign Business License must be obtained from the DBD instead.
Does a company need to notify details of raw materials, parts, and components to the BOI in advance? Or can a company conduct a procurement of any types of goods? Are consumables, such as lubricant, included in the IPO?
Details of the purchased raw materials, name of supplier and customer, as well as the industry of the goods to be sold must be indicated in the application. Moreover, if the company exercises the right on exemption of import duty, the material list and quantity must be notified for permission prior to importing. Lubricant used in the machinery is a ready-to-use or final product, therefore, it is not included in the IPO scope.
Are final products, which are accepted by the former ITC, included in the new IPO?
IPO is not allowed to trade final products.
Corporate income tax exemption and personal tax exemption are granted under the former ITC. Are these incentives granted under the new IPO?
IPO is not eligible for the rights and incentives on corporate income tax and personal income tax from the Revenue Department.
Please describe the incentives and conditions of the promotion under the IBC
The BOI grants non-tax incentives for IBC activities, which are, for example, foreign majority shareholders, land ownership, and visa and work permit for aliens working in the country. In addition, the exemption of import duties on machinery is also granted for machinery used in product research and development, and trainings. The Revenue Department shall grant the incentives on corporate income tax exemption and personal tax exemption for aliens. Details and conditions are shown in these links: https://www.rd.go.th/fileadmin/images/IBC/Presentation%20by%20Revenue%20Department%20%28EN%29.pdf (English), and https://www.rd.go.th/fileadmin/images/IBC/Presentation%20by%20Revenue%20Department%20%28JP%29.pdf (Japanese). The conditions or limitations for IBC are: minimum investment capital of 1 million baht during the course of 3 years (excluding cost of land and working capital). This amount can include cost of assets used for providing services to clients, office renovation, office rental for a period of over 36 months, as well as a minimum of 10 employees (both Thais and aliens).
Please explain the application process for the treasury center
A license to operate a treasury center must be obtained from the Bank of Thailand. The company has to fill in the treasury center request form and prepare documents as stipulated by the Bank e.g., certificate of business registration, etc. It takes about 60 days for license issuance. For details and conditions, please enter the website: https://www.bot.or.th/Thai/FinancialMarkets/ForeignExchangeRegulations/ForeignMeansOfPaymenBusinesses/Pages/TreasuryCenter.aspx. The English and Japanese translation of the treasury center details and scope of works can be downloaded from https://www.rd.go.th/fileadmin/images/IBC/Presentation%20by%20Bank%20of%20Thailand%20%28EN%29 (English) and https://www.rd.go.th/fileadmin/images/IBC/Presentation%20by%20Bank%20of%20Thailand%20%28JP%29.pdf (Japanese).
Please describe the scope of eligible activities under the TISO
A company can conduct one of the following activities:
1. Controlling and/or providing services for associated enterprises, as well as services on provision or rent out offices or factory buildings to associated enterprises.
2. Providing consultation and advice on business operations, except for trading of assets and foreign exchange, accounting and legal services, advertising, architecture, and civil engineering. Operators of such businesses must apply for a Foreign Business License from the Department of Business Development, (in case of foreign majority shareholders or 100% foreign shareholders).
3. Providing information on product procurement.
4. Providing engineering and technical services, excluding architectural and civil engineering services.
5. Business operations related to machinery and equipment i.e., import for selling, training, installation, maintenance and repair, and calibration.
6. Wholesale of local manufactured products.
7. International Business Process Outsourcing, e.g., Administration Services, Finance & Accounting Services, Human Resource Services, Sales and Marketing Services, Customer Services, Data Processing, through various communication platforms.
1. Controlling and/or providing services for associated enterprises, as well as services on provision or rent out offices or factory buildings to associated enterprises.
2. Providing consultation and advice on business operations, except for trading of assets and foreign exchange, accounting and legal services, advertising, architecture, and civil engineering. Operators of such businesses must apply for a Foreign Business License from the Department of Business Development, (in case of foreign majority shareholders or 100% foreign shareholders).
3. Providing information on product procurement.
4. Providing engineering and technical services, excluding architectural and civil engineering services.
5. Business operations related to machinery and equipment i.e., import for selling, training, installation, maintenance and repair, and calibration.
6. Wholesale of local manufactured products.
7. International Business Process Outsourcing, e.g., Administration Services, Finance & Accounting Services, Human Resource Services, Sales and Marketing Services, Customer Services, Data Processing, through various communication platforms.
Please describe the incentives under the TISO
Non-tax incentives, for example, foreign majority shareholders, land ownership, and visa and work permit for aliens working in the TISO project.
If a company is permitted to buy a land under the promoted TISO project, can the company rent such land to its associated enterprises?
The TISO cannot rent out a land. However, the company can rent out part of the office space which is left unused by main TISO activities only to associated enterprises. The TISO cannot conduct building rental as core business according to item 1 of the scope of activities: controlling and/or providing services for associated enterprises, as well as services on provision or rent out offices or factory buildings to associated enterprises.
Is it possible for a company to buy the land that it is currently renting after it is granted a TISO incentive?
The BOI shall approve the land ownership as necessary for use in the promoted activities in accordance with its scope of services.
A company wishes to conduct trading activities but it does not conduct manufacturing activities. What should it do?
Trading business is a service activity according to List Three of the Foreign Business Act B.E.2542 (1999) of the Department of Business Development (DBD). The Act stated that in case the company has a majority of foreign shareholders, it must apply for Foreign Business License (FBL) from the DBD. If it is the activity eligible for promotion by the BOI, an application can be submitted in advance, and as soon as the promotion certificate is issued, the company can then apply for Foreign Business Certificate (FBC) from the DBD without a need to apply for FBL.
