The Investment Promotion Act B.E. 2520 (1977) has been amended by the newly announced Investment Promotion Act B.E. 2560 (No. 4) (2017) (the "Investment Promotion Act"), effective since 25 January 2017. The rationale behind the amendment is to maintain the Investment Promotion Act up-to-date with current economic, technology and investment trends. Subject to more specific announcements from the Board of Investment (the "BOI"), the essential changes are as follows.
The new Investment Promotion Act has broadened the scope of exemption of import duties. The former Investment Promotion Act granted exemption of import duties only for materials used for manufacture for re-exportation which has now been revised to include materials imported for used domestically in R&D activities and related testing. Further, the BOI may now grant corporate income tax (CIT) exemption for a period of up to 13 years for certain R&D and advanced technology and innovation activities. Previously, the maximum period of CIT exemption provided by the BOI for various activities was limited to eight years.
In addition, the new Investment Promotion Act also empowers the BOI to grant CIT rate reduction privilege instead of only CIT exemption. This will allow some businesses that may not qualify for CIT exemption to get some tax reduction benefit. Moreover, even for projects that are neither eligible for the said CIT exemption nor CIT reduction, the BOI is also empower to grant privilege such that such project may be permitted to deduct 70% of the amount invested in the promoted business from the net profits derived from the promoted business (in addition to deduction of normal depreciation) for a period of up to 10 years in calculation of the CIT to be paid.
The new Investment Promotion Act is also more favorable in terms of the duration for the payment of dividends derived from the promoted business. The exemption of tax for dividends extends to dividends that are declared within the exemption period and paid within six months from the expiration of such exemption period. Whereas, the previous act only offered this benefit for dividends that were actually paid within the exemption period.
Lastly, during the past years, it was often confusing and debated whether the calculation of the net profit and loss of a promoted business which is entitled to CIT exemption shall be done pursuant to the BOI's practice or the Revenue Code. To resolve this, the new Investment Promotion Act now clearly prescribes that such calculation shall be done pursuant to the Revenue Code.
Apart from the amendment to the existing investment law, a brand new investment act has been enacted on 14 February 2017. The National Competitiveness Enhancement for Target Industries Act B.E. 2560 (2017) (the "Competitiveness Enhancement Act") is now officially in force. However, the regulations and announcements which would clarify certain definitions and terms under this Act are still working its way through.
The main idea of the Competitiveness Enhancement Act is to establish a new and effective tool to attract foreign investments with respect to businesses involving advanced technology and innovations i.e. the "Target Industries". The Competitiveness Enhancement Act provides various incentives to promote businesses such as CIT exemption up to 15 years and other non-tax benefits granted by the BOI under the Investment Promotion Act. Moreover, the Act establishes a Competitiveness Enhancement Fund, starting with Baht 10 billion which has been contributed by the government pursuant to this Act. The fund will be used to fund or subsidize promoted businesses pursuant to the terms and conditions of the Act.