Thailand BOI Approves Enhanced Incentives to Promote R&D, Attract Semiconductor Manufacturing

Article By : Thailand Board of Investment

The Thailand BOI also approved enhanced incentives to attract investments in the growing semiconductor, digital and packaging industries.

The Thailand Board of Investment (BOI) has approved a series of measures to encourage more investment in research and development (R&D) and engage the industry more actively in human resource development (HRD). Enhanced incentives are also offered to attract investment in the growing semiconductor, digital and packaging industries.

As Thailand is aspired to become more innovation-driven, private sector R&D plays a very significant role. In order to encourage companies to step up their R&D, the BOI has proposed to the board that projects that invest or spend at least THB200 million or 1% of their total sales of the first three years be entitled to a longer tax breaks (maximum 13 years) with no corporate income tax exemption ceiling. The number of additional years of tax holidays depends on the amount of R&D spending/investment. Moreover, companies that participate in apprenticeship programs or spend on advanced technology training can also enjoy greater tax incentives.

“We see R&D and HRD being the most critical factors in strengthening the country’s competitiveness,” said Duangjai Asawachintachit, Secretary General of the BOI, at the meeting chaired by Prime Minister Gen Prayut Chan-ocha.

The Covid-19 crisis has further highlighted the importance of high technology and the digital economy, from the rising demand for electronics products of all sorts, to the increased usage of digital services and platforms. Amid the pandemic, the semiconductor industry has experienced demand hike and companies are looking for more resilience in the global supply chain. Thailand, with electronic products as the country’s top export products, aims to attract more semiconductor manufacturing. Front-end capital and technology-intensive manufacturing such as wafer fabrication will be given 10-year tax holidays while advanced integrated circuits, IC substrate and printed circuit board projects with machinery investment of at least THB1.5 billion will be offered eight-year tax break.

The BOI also approved a revamp of its promotion policy for businesses operating on the supply side of the digital economy by focusing on hiring and developing IT workforce as well as upgrading companies to relevant international standards. Companies applying for BOI privileges under the single reorganized category called “Development of Software, Digital Services Platform or Digital Content” will be eligible for 8-year tax holidays, with the yearly ceiling reflecting additional hiring of Thai IT personnel, training expenses and costs of international standard certifications, such as ISO 29110 and CMMI Level 2 and above.

“On the digital business side, the improved investment promotion aims to encourage the development of a broader pool of qualified Thai IT specialists, and to allow the creation of more competitive local platforms and IT operations,” Duangjai said.

Thailand, which has already made significant investment in its digital ecosystem, including by taking the lead in ASEAN in building a 5G infrastructure, has long attracted investment from around the world in the electronics sector, with a promotion policy that covers the entire supply chain. Thailand is currently the 13th largest exporter in the world for electronic products and parts.

To ensure that Thailand’s packaging industry stays on top of the global trends in the sector and to encourage investment in technology and environmental sustainability, as emphasized in the Government’s Bio-Circular-Green (BCG) model, the BOI today approved enhanced investment incentives for the production of so-called smart packaging and environmentally friendly packaging, including recycled materials.

The BOI also approved a revised scope for the International Business Center (IBC) and Trade and Investment Support Office (TISO) categories with the aim to allow for more flexible operations by foreign multinationals operating regional and international offices in Thailand. The revised scope of both categories will allow companies that do not operate a treasury center to provide lending to affiliated companies in and outside Thailand under the relevant exchange control regulations.

The board also approved five investment applications, with a combined investment value of THB49.9 billion.

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