Enhanced focus on international business
The Thai government offers both tax and non-tax incentives to investors and, more recently, to specified foreigners. This article provides a high level overview of the types of benefits that are available to qualifying businesses and individuals.
Brand new incentives
The Board of Investment in November 2022 released several packages of new incentives for investors, including tax incentives for qualifying long-standing investors, companies that relocate their activities to Thailand and companies that invest in sustainable activities, which will apply from 1 January 2023. These include: (i) privileges to support expansion by longstanding investors in the country; (ii) a comprehensive relocation program covering headquarters and R&D and manufacturing facilities; (iii) a package for investment in sustainable activities such as the manufacturing of hydrogen vehicles and the setup of electric vehicle battery stations; (iv) premium incentives for industries involving innovation and high technology such as biotech, nanotech and advanced materials; (v) the addition of new economic corridors or special investment zones, in four regions of Thailand; and (vi) a special mechanism to improve the ease of doing business in the country.
International business centres
The IBC regime is designed to promote Thailand as a hub in the Asia-Pacific region. Introduced in 2019, the IBC regime replaced the International Headquarters (IHQ) and the International Trading Centres (ITC) regimes (for prior coverage, see the article in the May 2019 issue of Corporate Tax News). An IBC company is a company engaged in the provision of managerial and technical support or financial management services to its associated enterprises located in Thailand and overseas. Benefits available to IBC companies include:
- Reduced corporate tax rate on qualifying income;
- Tax exemption on domestic and foreign-source dividend income derived from affiliates;
- Withholding tax exemption on dividends paid to offshore shareholders and on interest payments to foreign beneficiaries in relation to loans for treasury activities;
- Exemption from specific business tax on qualifying treasury centre income;
- Flat personal income tax rate of 15% for eligible expatriate employees;
- Permission for the IBC to be wholly owned by foreigners;
- Permission to own land for use in the IBC’s business;
- Visa and work permit privileges for foreign nationals working for the IBC; and
- Import duty exemption for machinery used for research and development (R&D) or training purposes.
Various tax reliefs
The government recently approved the following tax benefits:
- Income tax and VAT exemptions for persons and companies donating money or property to the government from 6 March 2022 through 31 December 2023 to support COVID-19-related measures;
- Additional 50% corporate income tax deduction for expenses incurred on the purchase of COVID-19 test kits for testing employees from 1 April 2022 through 31 December 2022;
- Corporate income tax and VAT exemptions on imports used for the treatment, diagnosis or prevention of COVID-19 and donated to specified organisations (e.g., hospitals, government agencies, etc.) during the period 1 April 2022 through 31 December 2023;
- Tax exemption on gains from the sale of property with a buyback option;
- Import duty exemption on machinery to be used for R&D and training activities;
- Permission to bring in foreign skilled personnel and experts to work on IBC investment-promoted activities; and
- Lending foreign currency to associated enterprises in foreign countries and lending Thai Baht to associated enterprises in Thailand, Vietnam and other countries bordering Thailand.
Long-term resident (LTR) visa
The government approved the LTR visa in May 2022 under a program that offers a range of special tax and nontax benefits to enhance the country’s attractiveness as a regional hub for living and doing business (for prior coverage, see the article in the August 2022 issue of Global Employer Services News). The renewable LTR visa—which is available as from 1 September 2022—makes it easier for “high-potential foreigners” to live and work in Thailand. Four categories of foreign individuals may benefit from the LTR visa provided they meet the relevant requirements:
- Wealthy global citizens, i.e., those with total assets of at least USD 1 million and personal income of at least USD 80,000 per year for the previous two years and who invest at least USD 500,000 in Thailand;
- Wealthy retirees, i.e., retirees over 50 years of age that have annual personal income of at least USD 80,000; if personal income is below USD 80,000/year but not less than USD 40,000/year, the applicant must also invest at least USD 250,000 in Thai government bonds, foreign direct investment or in Thai property;
- Work-from-Thailand professionals, i.e., remote employees working for a well-established foreign company (e.g., a publicly listed company or a private company that has been in operation for at least three years and having combined revenue of at least USD 150 million in those three years) and with at least five years’ relevant work experience in the field and earning at least USD 80,000 per year for the past two years; and
- Highly skilled professionals, i.e. employees with annual personal income of at least USD 80,000, having specific skills in the relevant industry and not less than five years’ work experience in the field.
The visa program also applies to the spouse and minor dependents of a LTR visa holder, subject to certain restrictions.
Benefits under the LTR visa program include the following:
- A 10-year renewable visa;
- Fast-track services at Thailand’s international airports;
- Multiple re-entry permit;
- Immigration and work permit facilitation services through a One Stop Service Centre for visa and work permits;
- Once per year reporting to Thai immigration (rather than every 90 days);
- Reduction in the personal income tax rate to 17% for highly skilled professionals and an exemption from personal income tax on foreign-source income derived by wealthy global citizens, wealthy retirees and work-from-Thailand professionals; and
- Permission to own land if certain conditions are fulfilled.
These benefits can be revoked with retroactive effect if the individual fails to comply with the conditions and requirements.
In addition to the availability of competitive incentives for both businesses and individuals, several other factors make Thailand an attractive location for investment. Thailand stands at the heart of the ASEAN Economic Community and has excellent connections with the fast-growing neighbouring “CLMV” countries (i.e., Cambodia, Laos, Myanmar and Vietnam). The powerhouse economies of nearby China and India are also easily reachable from Thailand by virtue of its world-class infrastructure for air, land, sea, and rail transportation. The country also boasts excellent digital connectivity, high-skilled workers and an excellent standard of living, making Thailand an outstanding value when considering its overall cost effectiveness.