The Current Framework of Rules Regarding Foreign Business Ownership: the Framework Is Quite

Thailandproposes to revise Board of Investment eligibility

Stephen Frost, Bangkok International Associates

Background: In this article, we discuss government proposals to change the categories of businesses that may apply to the Board of Investment for tax breaks and other promotional privileges.

The Board of Investment:The Board of Investment is the government agency with power to offer attractive financial and non-financial incentives to investment in Thailand. The incentives are largely aimed at manufacturers, but certain service businesses are also eligible for promotion. The incentives available can include:

(a) up to eight years exemption from corporate income tax

(b) exemption from import duties on machinery and raw materials for use in the promoted business

(c) exemption from customs duty for new machinery used in the business, and materials used in manufacture of goods that are exported

(d) double deduction against tax of utilities expenditure

(e) permission for a majority foreign owned company to own land for use in, and for the duration of the promoted business (this would not otherwise be available).

The BOI has for nearly two years been engaged in a review of the business categories that are available for promotion, and the privileges available. Regrettably, as at the date of drafting this article, the final version of the revised list of eligible business categories and privileges is not available, although we are told that the revised list will come into effect and apply to all applications for promotion made to the BOI after 1 January 2015.

Companies contemplating applying to the BOI for investment privileges, should check beforehand whether their business activities are eligible for promotion under the current or revised BOI rules, and what privileges are available.

Comment: The last review of the foreign business ownership rules took place in 1999. The Thai economy has expanded and developed further since then. It is questionable how long Thailand can claim that it is not ready for free competition and to continue a protectionist approach to business ownership based on nationality, when its Asian competitors are lowering barriers to foreign investment and thus attracting greater interest from potential investors. One approach would be to delete item 21 from Schedule 3. The effect of this would be that all services would be de-regulated, unless they are specifically referred to in the FBA, or other legislation. A bolder approach would be to delete Schedule 3 altogether, it being accepted that the business activities listed in Schedules 1 and 2 are more sensitive than those in Schedule 3.

Note that the current situation is in flux, and current and prospective investors should consult their professional advisors regarding then progress of changes to the Foreign Business Act, or the BOI investment promotion rules.

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Bangkok International Associates is a general corporate and commercial law firm. For further information, please contact Stephen Frost by email at or telephone (66) 2 231 6201/6455.