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Thailand: New Law on Competitiveness in Targeted Industries

(Mar. 1, 2017) On February 13, 2017, the King of Thailand announced the adoption of the National Competitive Enhancement Act for Targeted Industries, BE 2560 (2017), in the country’s Royal Gazette. (Thailand Waives Corporate Tax in Targeted Industries, THAI LAW FORUM (Feb. 22, 2017); Act to Enhance the Competitiveness of Targeted Industries B.E. 2560, 134:19 RATCHAKITCHANUBEKSA [ROYAL THAI GOVERNMENT GAZETTE, GG] (Feb. 13, 2560 [2017]), GG website (in Thai).) The law entered into force the following day. The Act is part of Thailand’s long-term investment promotion strategy, “Thailand 4.0,” and the country’s national agenda on investment-led transformation. (Kowit Somwaiya & Paramee Kerativitayanan, Thailand’s Act on Enhancement of Competitiveness for Targeted Industries Comes into Force, LAW PLUS (Feb. 2017); New Chapter of Investment Promotion (Feb. 15, 2017), Thailand Board of Investment website.)

According to news reports, the law aims to enhance the competitiveness of industries “in line with Thailand’s capabilities” and foreign companies that meet certain criteria will be permitted and encouraged to invest in industries that are “new to the country or use new technology or advanced production that will bring in development and promotion of innovation.” (New Law to Make Thailand More Competitive in Targeted Industries, NATION (Feb. 15, 2017).) The law’s provisions apply to companies that invest in “core industries such as biotech, advanced manufacturing, creative and digital industries, as well as companies using new technology or advanced production methods, in areas such as nanotechnology, advanced materials and digital technology.” (Government of Thailand Announces New 4.0 Investment Attraction Policies, PRWEB (Feb. 28, 2017).)

Investment Incentives

Incentives for promoted projects under the Act have been characterized as falling into three main categories. One type of incentive is an exemption from corporate income tax for up to 15 years. (Somwaiya & Kerativitayanan, supra.)

Another category of incentives is non-tax benefits that already exist under Thailand’s Investment Promotion Act. Those incentives include, for example, permitting foreigners to have a shareholding beyond the foreign shareholding limit specified by the Foreign Business Act; allowing foreigners to own land; and “exemption or reduction of import duties on machinery and essential or raw materials.”  (Id.)  They also include the provision of visas and permits that will allow foreign experts and craftsmen to work in Thailand. (New Law to Make Thailand More Competitive in Targeted Industries, supra.) Only the previous tax exemption incentive and deductibles under the Investment Promotion Act are excluded as incentives for promoted projects under the new Act, because the latter already provides the tax exemption mentioned above. (Somwaiya & Kerativitayanan, supra; Investment Promotion Act B.E. 2520 (Jan. 2002), Thailand Board of Investment website; Investment Promotion Act No. 4 (amending the Investment Promotion Act), 134:10 GG 47 (Jan. 24, 2017) (in Thai).)

A third type of incentive is subsidies provided from the Fund for Enhancement of Competitiveness for Targeted Industries, newly created by the Act, which has seed money of THB10 billion (about US$285 million) for investment projects involving research and development or innovation. (Somwaiya & Kerativitayanan, supra.)

Administrative Infrastructure

The Act provides for the establishment of the Committee on Policy for National Competitive Enhancement for Targeted Industries, with Thailand’s Board of Investment as the secretariat; members of the Committee include, among others, the Prime Minister, one of the Deputy Prime Ministers, the Minister of Finance, and the Minister of Science and Technology. (Id.; Act to Enhance the Competitiveness of Targeted Industries, art. 5.) The Committee is assigned the tasks of formulating a strategic plan to enhance national competitiveness, specifying the types of target industries to be promoted, and approving the payment of grants from the Fund, among other responsibilities.  (Somwaiya & Kerativitayanan, supra; Act to Enhance the Competitiveness of Targeted Industries, art. 6.)

The Act also prescribes that the Sub-Committee on Nomination and Negotiation be established, “to look for and negotiate with potential investors to invest in the targeted industries and get incentives under the Act.” (Somwaiya & Kerativitayanan, supra; Act to Enhance the Competitiveness of Targeted Industries, arts. 8 & 9.)