Investment in Thailand

Law Firm in Bangkok, Thailand

Anurak & Associates takes a proactive role in advising both on-shore and off-shore clients on a diverse range of banking facilities and instruments including interest arbitrage, swaps, forward contracts, American Depository Receipts (ADR), Floating Rate Notes, Warrants, Convertible Debentures, Negotiable Certificates of Deposit (NCD), Subordinate Term Debt Certificate (STDC) and many other derivative products including financial restructuring and planning administration.

Financial Markets

Thailand’s financial markets keep developing at a steady pace due to the build-up of market infrastructures and the facilitation of further market advances that include:

• Instituting a new clearing and settlement system
• Easing of certain supervisory regulations
• Encouraging new types of transaction as determined by market needs
• Improving the tax system and accounting standards
• Creating Codes of Conduct and standard market practices
• Establishing market associations to gather and distribute market data and help standardize market practices

Thailand’s capital market is governed under the Securities and Exchange Act of 1992 (SEA) and both the primary and secondary markets are supervised and regulated by the Securities and Exchange Commission (SEC). Thailand’s capital market includes the Stock Exchange of Thailand (SET), the Market for Alternative Investment (MAI), the Bond Electronic Exchange (BEX), the Thai Futures Exchange (TFEX), and the Agricultural Futures Exchange of Thailand (AFET). Thailand’s money market is controlled by the Bank of Thailand (BOT) and the money market’s transactions include unsecured interbank borrowing, trading of short-term papers such as treasury bills, BOT securities, promissory notes, and bills of exchange, and two types of repurchase agreements, a bilateral repo between the BOT and its PDs and a private repo between market participants.

Under the Financial Institution Act of 2008, Thailand’s bank sector is regulated by the Ministry of Finance and the Bank of Thailand. The Ministry of Finance sets fiscal and economic policy, and oversees public finances, taxation, and the treasury. The Bank of Thailand is the central bank which sets monetary policies, controls foreign exchange, and supervises all banks and financial institutions, and prints and issues all currency. All foreign exchange transactions must be done through commercial banks or authorized non-banks. Both direct and portfolio foreign investments are freely permitted. Repatriation of investment funds and repayment of overseas borrowing in foreign currency can be remitted freely upon submission of supporting evidences.

Direct Investment Incentives

Thailand encourages foreign direct investment as a means of promoting economic development, employment, and technology transfer. In recent decades, Thailand has been a major global destination for foreign direct investment, but avoids dependence on any one country as a source of investment. The Foreign Business Act of 1999 defines and regulates which business activities foreigners can participate in. Some activities are prohibited, some may need prior approval, and some don’t require any special approval. The Treaty of Amity and Economic Relations between the United States and Thailand exempts Americans from most restrictions on foreign investment and allows them to engage in business on the same basis as Thais.

Thailand Board of Investment (BOI)

The Investment Promotion Act of 1977 offers investment incentives for both foreign and domestic investment and is administered by the Board of Investment of Thailand (BOI). Companies which have been granted BOI status receive special privileges and exemptions from certain laws.

BOI tax incentives:

• Exemption/reduction of import duties on machinery
• Reduction of import duties for raw or essential materials
• Exemption of a juristic person’s income tax and dividends
• 50% reduction of a juristic person’s income tax
• Double deductions from the costs of transportation, electricity and water supply
• Additional 25% deduction of the cost of installation or construction of facilities
• Exemption of import duty on raw or essential materials for use in production for export

BOI non-tax incentives:

• Permission for foreign nationals to enter the Kingdom for the purpose of studying
• Permission to bring skilled workers and experts to work in investment promoted
• Permission to own land
• Permission to take out or remit money abroad in foreign currency

Industrial Estate Authority of Thailand (IEAT)

To further Thailand’s overall industrial development, the Industrial Estate Authority of Thailand (IEAT) was established in 1979 to develop industrial estates and ports equipped with wide range of infrastructure and facilities coupled with full-scale administrative systems and numerous privileges. Companies which are located in the industrial estates and ports can receive these privileges without applying for BOI status. The original act was amended and re-enacted in 2007 as the Industrial Estate Authority of Thailand Act (No.4) B.E. 2550 in order to meet the needs the global marketplace and Thailand’s obligations under its World Trade Organization (WTO) agreements. Currently, there are 46 industrial estates in operation in Thailand across 14 provinces of which 11 are operated by IEAT and 35 are jointly operated with developers. Industrial estates are divided into two zones, General Industrial Zones and IEAT Free Zones, and overall IEAT tax incentives include import duty, excise tax and VAT exemptions on machinery, components, equipment, and raw materials and supplies used for the production of goods and other merchandise.

General Industrial Zone incentives:

• Service businesses are allowed and service business operators can own the land required for their operations
• Industrial operators are provided with comprehensive services essential for investment opportunities activities into the Kingdom industrial operations including transportation, warehouses, training centers and clinics, and can own the land required for their operations
• The right to bring in foreign skilled workers and their spouses and dependents
• The right to remit money abroad

IEAT Free Zone incentives:

• Operators can export products without any restrictions
• Operators can import merchandise or raw materials strictly for their business purposes without any restrictions
• Supplies taken into a Free Zone are entitled to improved tax and duty privileges
• Tax relief for products taken out of a Free Zone for domestic use or consumption
• If produced domestically, content or raw material components are entitled to tax and duty exemptions
• All privileges under the previous IEAT Act

The Industrial Estate Authority of Thailand’s environmental obligations include developing industrial estates and ports that have acceptable impact on natural resources, the environment, and the community and are in strict compliance with all laws, rules, regulations and standards on the environment, safety, occupational health and energy management.

Contact: ANURAK CHAYUT | Email: cheyut@anuraklaw.com | Telephone: (66) 2879-6389