Thailand is one of the fastest growing economies in Asia. As a result, many people, including foreign nationals and locals, are interested in exploring the great business opportunities in the South East Asian country.
Whether your aim is to establish a business that takes advantage of an entirely new sector in the Thai economy, or to develop an existing opportunity, BOI promotion can help. By obtaining a BOI Thailand certificate, your business can access important tax and non-tax incentives that can facilitate early growth.
However, the process can often be complex, as it involves numerous steps and certain complicated legal rules. Understanding the process is critical for a successful outcome and because of this, many entrepreneurs and business owners choose to work with professionals.
At Siam Legal International, we can help. We have extensive knowledge and a great skill set to help you achieve your corporate and business goals. We have assisted hundreds of individuals by providing the most suitable options for a business structure in Thailand. Our track record of success speaks for itself; you can depend on our qualified team of Thai business lawyers for fast and efficient service.
In this article, our Thailand business attorney explains how to apply for BOI approval, what the process entails and how you can enjoy BOI Thailand privileges.
What exactly does BOI promotion entail?
BOI promotion or BOI approval Thailand is a way for companies run by locals or internationals to access crucial business incentives in Thailand.
The office of the Board of Investment (BOI) was established by the Thai government to encourage local and international investment in the country. The job of the BOI is primarily to promote local innovation, sound investment opportunities and encourage economic growth in Thailand.
The BOI was established in 1966 to help create an environment that encourages business growth and investment in the country. Part of the BOI’s duties includes exploring ways to diversify the country’s economy through the exploration of cutting-edge R&D activities and 21st century business opportunities.
In fulfillment of its duties, the BOI administers incentives that can be applied for and obtained by companies in the Thailand. These incentives include tax holidays, regulatory exemptions, and other non-tax benefits.
By pursuing BOI promotion, companies are able to fast-track their growth and access opportunities that can help them scale faster.
Benefits of applying for Thailand BOI incentives
Contrary to the norm of general regulations and tax systems which apply to companies in Thailand, companies promoted by the BOI are qualified to receive several tax and non-tax incentives. Thailand BOI tax incentives include but are not limited to the following:
- Corporate income tax exemption for a certain number of years depending on which industry activity you embark on.
- Exemption or reduction of import duties on machinery, raw materials, and or essential materials used in manufacturing export products.
- Exemption of import duties on raw and or essential materials used in research and development purposes.
- Deductions from the costs of transportation, electricity, water supply, and on installation expenses.
Apart from tax exemption privileges, there are also non-tax privileges. Some of these privileges enjoyed under the BOI promotion in Thailand include:
- 100% foreign ownership. That is, a foreigner can own 100% of a Thailand based company. This is contrary to the norm.
- Permission to bring in external workers and foreign expertise. This includes express visa and work permit processing.
- Permission to own land
- Solid protection against nationalization of the business.
How to apply for BOI approval in Thailand
For your company to be eligible for BOI promotion, it needs to (a) fall under one of the 8 business categories for foreigners, (b) perform eligible activities in these business industries, (c) have the minimum capital investment, (d) have the right debt-to-equity ratio, and (e)meet the business-type specific requirements.
BOI’s 8 Business Categories for Foreigners
To get a BOI Promotion, you have to be interested or involved in any of these 8 business categories:
- Agriculture and Agricultural Products
- Mining, Ceramics and Basic Metals
- Metal Products, Machinery and Transport Equipment
- Electronic Industry and Electric Appliances
- Chemicals, Paper and Plastics
- Services and Public Utilities
- Light Industry
- Technology and Innovation Development.
This list is further broken down into several smaller activities in each business industry. Some of them mainly involve manufacturing, design, development, and technology transfer in Thailand.
You cannot get BOI promotion if your company is involved in any one of the 8 categories listed but doesn’t perform any of the eligible activities.
You can read through the list here, to find out if your company is involved in any of the business activities and is thus eligible for BOI promotion.
Build Capital Investment
Capital investment is the funds invested in your company to further its business goals. Before seeking to apply for a BOI promotion, your company must have at least 1 million baht in capital. It can be a lot more depending on which business industry your company operates in.
It is not necessary that the capital is shown in cash. It could include cost of construction and machinery, company assets and other business expenses. Capital used for payroll, to produce goods, and to perform daily operations do not apply.
Have the right debt-to-equity ratio
Debt-to-equity ratio shows how much financial leverage your company has. Your company’s debt cannot be 3 times higher than its capital. To qualify for a BOI Thailand certificate, you need to be sure you don’t take out a loan that can increase chances of bankruptcy.
Your company’s debt-to-equity ratio can be a minimum of 3-to-1. If your company’s ratio is higher than this, you have to either increase your company’s equity or decrease your company’s debt.
But this 3-to-1 ratio only applies for new companies. If you run an existing company, the BOI considers it with different parameters.
Meeting the business type requirements
In addition to the considering the business categories, you need to consider the business type requirements. This is a list of considerations the BOI sets in place to ensure an achievement of Thailand’s economic, social and environmental development.
The BOI would only invest in businesses that:
- Promote special economic development zones to create economic interaction with neighboring countries.
- Promote gatherings that help create investment concentration in line with existing potential to strengthen value chains.
- Promote investment in surrounding provinces to help develop the local economy.
- Promote Thailand’s overall investments both locally and internationally, and improves Thailand’s role in the global economy.
Procedure for Application
BOI Thailand requirements for application involve 6 steps. Each of these steps takes place at a different department. The departments include The Board of Investment, Department of Business Development and One Start One Stop investment Centre for Visa and Work Permits.
Getting your application ready: This is where you fill out your application. This includes your business plan and your project plan. Information about your work processes and value adding skills will be needed.
Submitting your Application: Once you have completed your application, the next step is submitting your application. You will also schedule a date for your interview and project presentation for the BOI committee.
Interview: Your interview is an opportunity for you to sell your business idea or plan in person. You shouldn’t go unprepared for questions.
Receiving Approval: In approximately 40 days after your interview, the BOI gets back to you. If you receive approval, you have 6 months to register with the Department of Business Development. Only companies registered in Thailand can be promoted.
Issuance of BOI Certificate: You only receive the BOI certificate after your company has completed registration in Thailand. This also includes showing a proof of funds. (It has to be at least 25% of the minimum capital requirement of 1 million baht)
Visa and Work Permit: After all of the formalities are completed, the next step is to secure visa and work permits for directors and employees.
These steps usually take at least 3-4 months and once they are completed, you regularly notify appropriate officials about your progress. It can be a bit overwhelming to embark on this journey without professional assistance. A qualified business attorney can help significantly in the smooth sailing of the process.