Update on FDI in Thailand

1. 1
Thailand – Is Now the Right Time to Invest?
An Update on Foreign Direct Investment
in Challenging Times
Kowit Somwaiya
LawPlus Ltd.
17 September 2020
The information provided in this document is general in nature and may not apply to any specific situation. Specific
advice should be sought before taking any action based on the information provided. Under no circumstances shall
LawPlus Ltd. or any of their directors, partners and lawyers be liable for any direct or indirect, incidental or consequential
loss or damage that results from the use of or the reliance upon the information contained in this document. Copyright
© 2020 LawPlus Ltd.

2. 2
Thailand Economic Projections (June 2020) and Rankings
 GDP Growth: -8.1% in 2020 and 5% in 2021
 Headline Inflation: -1.7% in 2020 and 0.9%
in 2021
 Core Inflation: 0.0% in 2020 and 0.1% in
2021
 GDP from tourism industry: 15%
 Export Value: -8%
 Domestic Consumption: -1.7%
 Investment Value: -2.1%
 Rankings:
- 21st in the World Bank Ease of Doing Business
2020.
- 47th in Starting a Business by the World Bank.
- 1st in Covid-19 Recovery by the Global Covid-19
Index (GCI).
- 6th in the World and 1st in SEA in Health
Security by Global Health Security (GHS) Index.
Sources: Bank of Thailand, Office of the National Economic
and Social Development Council and the World Bank as of
June 2020

3. 3
Businesses Negatively Impacted by COVID-19
High Moderate Low
Hotels Shopping malls Electronics
Airlines Retail shops Electricity, gas
Wellness, Spa Restaurants Healthcare services
Hair salons, barber shops Construction Education
Pubs and bars Public transportation Professional services
Automobile and parts Gas station
Garments Real property
Entertainment venue/services
Booking agency
Tour companies
Sources: BOT, BOI, Bangkokbiznews, Thansettakij, Marketingoops, Phatra, SET, TRIS, TDRI

4. 4
Businesses Positively Impacted by COVID-19
 E-commerce (food, online marketplace, etc.)
 Delivery services and packaging
 E-services (education, banking, movie, etc.)
 Digital services
 Telecom services
 Medical supplies (face masks, alcohol,
medicines, vitamins, etc.)
 Food
 Insurance
Sources: BOT, BOI, Bangkokbiznews, Thansettakij, Marketingoops, Phatra, SET, TRIS,
TDRI

5. 5
FDI Values, January – June 2020
 Total FDI (BOI and Non-BOI): THB154.18 billion
 Total BOI Promotion: THB75.9 billion
 Total top 5 BOI countries: THB68.94 billion (327 projects)
Sources: Board of Investment of Thailand (BOI) and Bank of Thailand (BOT)
22.636
(99 Projects)
17.461
(95 Projects)
10.624
(55 Projects)
9.875
(50 Projects)
8.352
(28 Projects)
Japan 32.83%
China 25.32%
Singapore 15.40%
Netherlands 14.32%
Taiwan 12.11%

6. 6
Investment Promotion Act B.E. 2520 (A.D. 1977)
 Issued in 1977
 Amended 3 times (latest amended in 2017)
 Created the Board of Investment Promotion (BOI), requirements and procedures
for granting investment promotion, investment incentives, etc.
 BOI
• Chaired by the Prime Minister
• Members are economic ministers (finance, commerce, industry, technology,
science, etc.), senior civil servants, representatives of major private sector
organizations and academics
• Issues and implements implementation rules for investment promotion
 BOI Office
• Acts as secretariat of BOI
• Accepts and examines BOI applications for BOI to approve

7. 7
Activities Eligible for BOI Investment Promotion
No. 8 Main Categories 130 Sub-Categories
1. Agriculture and Agricultural
Products
Crop drying, grading/packaging/storage of fruits, manufacturing of biological
fertilizer, natural extracts or products, foods/beverage using modern technology
2. Mining, Ceramics and Basic
Metals
Potash mining, manufacturing of advanced or nano products, glass or ceramic
products, gypsum products, steel pipes, construction materials for public
utilities
3. Light Industry Manufacturing of textile products, bags or shoes or products made from leather
or artificial leather, sport equipment, musical instruments, furniture, jewelry
4. Metal Products, Machinery and
Transport Equipment
Manufacturing of metal products, multi-purpose engine and equipment,
automobile engine and vehicle parts, aircraft devices and equipment, hybrid
electronic vehicle
5. Electronic Industry and
Electronic Appliances
Manufacturing of electrical products, parts or equipment used for electronic
products, electronic design, software, e-commerce, digital services
6. Chemicals, Paper and Plastics Manufacturing of industrial/eco-friendly chemicals, petrochemical, plastic
products for industrial goods, medicine, pharmaceutical ingredients, pulp or
paper
7. Services and Public Utilities Production of electricity, tap water, commercial airport, natural gas station, IHQ,
ITC, TISO, distribution center, real estate development for industrial use
8. Technology and Innovation
Development
Biotechnology/nanotechnology development, advanced material technology
development

8. 8
Tax Incentives for BOI Promoted Activities
 Exemption of corporate income tax (“CIT”) for up to 13 years
 Maximum 50% CIT reduction up to 10 years (if no CIT exemption is granted)
 50% CIT reduction up to 5 years (for investment in the designated area)
 Double deduction of public utilities costs as expenses (for investment in the
designated area)
 25% additional deduction of infrastructure construction and installation costs as
expenses (for investment in the designated area)
 Deduction up to 70% of the investment capital from net profits derived within 10
years (Investment Tax Allowance – ITA)
 Exemption of import duties for (i) machinery, (ii) raw or essential materials used in
production for export and (iii) materials for R&D activities

9. 9
Non-Tax Incentives for BOI Promoted Activities
 100% foreign ownership of shares in company operating promoted activities
 Permission to own land for the promoted project
 Permission to bring in skilled workers and experts to work for the promoted project
under the one-stop service and smart visa schemes
 Permission to remit and repatriate funds in foreign currencies

10. 10
BOI Notification No. 3/2020
 Measures for Stimulation of Investment dated 11th March 2020
 Eligible activities are
 knowledge-based activities focusing on R&D and design to enhance the country’s competitiveness (A1)
 infrastructure activities for the country’s development, activities using advanced technology to create
value-added with a few existing investment or none of investment in Thailand (A2)
 high technology activities important to development of the country with a few existing investment in
Thailand (A3)
 manufacturing of certain products, e.g. construction materials and pre-stressed concrete for public
utilities (2.17), body care products (6.15), plastic products for consumer goods (6.16), products from
paper (6.17), and factory development for industrial plant and warehouse (only for the projects located
in the SEPZ).
 Having investment capital (not include land costs and working capital) of not less than THB 500 million
from 6th February 2020 to 30th December 2020 or THB 1,000 million from 6th February 2020 to 30th
December 2021.
 Additional 50% CIT reduction for 5 years after the expiry of the existing CIT exemption period.

11. 11
BOI Notification No. 7/2020
 Measures for Promotion of Investment in Medical Industry dated 14th May 2020
 Measure for Acceleration of Investment in Medical Industry
• Promoted activities: manufacturing of non-woven fabric as raw material for manufacturing of face
masks or medical device, medical device or parts of medical device, active pharmaceutical
ingredients, medicines, and biotechnology
• Incentives: 50% CIT reduction for 3 years after the expiry of the CIT exemption
• Applying from 1st January 2020 to 30th June 2020 and starting to manufacture and generate income
within 31st December 2020
• At least 50% of the products must be sold and/or donate in Thailand.
 Measure for Adjustment of Existing Manufacturing Lines to Manufacture Medical Device
• A request for amendment of the project to include manufacturing of medical device or parts and/or
equipment that can be used for medical purposes must be made within September 2020
• Additional business activities include additional import duty exemption for import of machinery
within 2020.

12. 12
Eastern Economic Corridor Act B.E. 2561 (A.D. 2018)
 Known as “EEC Act”.
 Enacted by the National Legislation Assembly, published in the Government Gazette on 14th
May 2018 and came into force on 15th May 2018.
 General requirements and procedures for promoting, facilitating and enhancing competitiveness
of Thailand’s economy.
 Specific objectives:-
• developing environmental friendly economic activities
• providing Government one-stop services to reduce obstacles and costs of doing business
• developing basic, effective and continued public utilities completely connected and
accessible to all
• specifying types of sustainable land use in compliance with the principle of sustainable
development
• developing smart cities to be internationally modern, convenient, safe and widely accessible.

13. 13
EEC Policy Committee, EEC Office and EEC Blueprint
 EEC Policy Committee: (1) chaired by the Prime Minister (2) grants licenses
and permits in place of other government authorities
 EEC Office: (1) implements the EEC Act (2) operates as Secretariat of the EEC
Policy Committee
 EEC Blueprint
• EEC Development Master Plans and Policies:-
(1) land use plan
(2) infrastructure development plan
(3) project plan
(4) government service plan
• prepared by the EEC Office
• approved by the EEC Policy Committee in July 2018
 Land Use Plan and Infrastructure Development Plan
• Issued on 9th December 2019
• These plans also include plans on IT, communications, pollution control
system, transportation and logistics, settlement and geosocial, water
management system, prevention of accident.

14. 14
EEC Location / Area
Land Area: 13,266 sq. km.
- Chachoengsao: 5,351
sq. km.
- Chonburi: 4,363 sq. km.
- Rayong: 3,552 sq. km.
Population: 3,013,167
- Chachoengsao: 720,133
- Chonburi: 1,558,301
- Rayong: 734,753Source: Notification of Central Registry Office re: Population Number Nationwide Based on
Civil Registration Records as of 31st December 2019 dated 30th January 2020, Wikipedia
and Asia Briefing Ltd.

15. 15
EEC 12 Targeted Industries
1. Next-Generation Automotive
2. Smart Electronics
3. Affluent, Medical and Wellness Tourism
4. Agriculture and Biotechnology
5. Food for the Future
6. Robotics
7. Aviation and Logistics
8. Biofuels and Bio-chemicals
9. Digital Technology
10. Medical Hub
11. Defense Industry
12. Education and HR Development

16. 16
Special Economic Promotion Zones (SEPZ)
 Located in the EEC area
 Owned by private sector or government offices
 Approved by EEC Policy Committee
 As of September 2020, 29 SEPZs have been approved for the EEC
Source: https://www.eeco.or.th/en/

17. 17
Some Approved SEPZ
 EEC Aviation City (EECa)
• U-Tapao International Airport, Rayong
• Aircraft MRO Center and Regional Aviation Hub
at U-Tapao International Airport, Rayong
 EEC Innovation (EECi)
• Wangchan Valley, Wangchan District, Rayong
• Space Inspirium and Community and Industry of R&D and
Innovation, Sriracha District, Chonburi
 EEC Digital Park (EECd)
• Digital Park Thailand, Sriracha District, Chonburi
• Digital Infrastructures and ASEAN Regional Data Hub
Sriracha District, Chonburi
 Industrial Promotional Zones
• Map Ta Phut Industrial Estate, Rayong
• Hemaraj Eastern Seaboard Industrial Estate No. 4, Pluak Daeng District, Rayong
• Several other “Smart” industrial parks
Chachoengsao
3 SEPZ
Chonburi
15 SEPZs
Rayong
10 SEPZs

18. 18
Tax and Duty Incentives for Projects in SEPZ
 Maximum tax exemption under BOI law
and competitiveness enhancement law
 Maximum tax reduction under BOI law
and competitiveness enhancement law
 Exemption of customs duties for import to
and export from the EEC area
 Reduction of customs duties for import to
and export from the EEC area

19. 19
Non-Tax Incentives for Projects in SEPZ (1)
 Real Property Ownership and Long-Term Lease
• Foreigner investing in SEPZ can own land for business operation and own condominium
for residential purpose
• Lease and sublease of land and other immovable properties in SEPZ for a term of 50
years plus one-time renewal for not more than 49 years
 Visa and Work Permit
• Non-Thai executives, specialists and skilled employees can
– work for businesses in SEPZ without a work permit
– have their spouses and dependents exempted from immigration law requirements.
• Licensed foreign professionals (engineers, architects, etc.) can
– practice in the SEPZ
– subject to requirements and conditions to be imposed by the EEC Policy Committee

20. 20
Non-Tax Incentives for Projects in SEPZ (2)
 Exemption from compliance with the exchange control law in whole or in
part for business operators.
 Payment of goods and services in the EEC area can be made in foreign
currencies.
 Licenses and permits under laws on building control, factory, etc. as the EEC
Policy Committee may grant in place of officials in charge of such laws
 Other rights and privileges under the investment promotion law and the law
on enhancement of competitiveness for the targeted industries as the EEC
Policy Committee may grant on a case-by-case basis

21. 21
Foreign Ownership Limits
 Foreign Business Act B.E. 2542 (A.D. 1999) (“FBA”)
 The “Foreigner” under the FBA:
(1) a foreign natural person (not having Thai nationality)
(2) a foreign juristic person registered outside Thailand
(3) a Thai juristic person registered in Thailand with a half or more of its capital shares owned by a
person or juristic person under (1) or (2).
(4) a Thai juristic person registered in Thailand with a half or more of its capital shares owned by a
person or juristic person under (1), (2) or (3)
 If the “Foreigner” holds more than 40% or 49% of the shares in a company, the
company must obtain a foreign business license (“FBL”) to operate the restricted
business activities in List 2 and List 3 respectively.

22. 22
Business Activities and Foreign Ownership Limits
List Business Activities Limits FBL Approval
1 Prohibited for special reasons
(television station, rice farming, plantation, livestock
farming, trading and auction sale of antique objects,
land trading, etc.)
Prohibited No FBL
2 Restricted because they are related to national safety
or security or affecting arts, culture, traditional
customs, folk handicrafts, natural resources and
environment
(distribution of firearms and explosive, manufacturing
of ships, aircraft or vehicles for military use, production
of wood carvings, salt farming, mining, etc.)
40% of shares Minister of
Commerce with
approval of the
Cabinet
3 Restricted because Thai nationals are not ready to
compete with foreigners
(accounting services, engineering services, brokerage
or agency (with exceptions), wholesales and retail sales
of goods, services business (with exceptions), etc.)
49% of shares Director-General of
the DBD with
approval of the
Foreign Business
Committee

23. 23
Business Activities Not Subject to FBL
 Businesses not listed under any of the 3 lists of businesses under the FBA
(manufacturing of products under self-owned brands, etc.)
 Businesses exempted from List 3 by MOC regulations (securities trading, investment
consulting, mutual fund and private fund management, futures trading, trustee under the
law on trust for transactions in capital market, representative office, regional office, etc.)
 Businesses promoted by the BOI under the Investment Promotion Act, the IEAT under
the Industrial Estate Authority of Thailand Act, or the EECPC under the Eastern Economic
Corridor Act
 Businesses exempted under the Treaty of Amity and Economic Relations between
Thailand and the USA or the economic partnership agreements between Thailand and
other countries, such as JTEPA
 FBL is not required for a BOI company and a treaty company but an FBC is
required.

24. 24
Investment Structures of Foreign Investors
 Joint Venture Company
• Registered in Thailand with Thai partner(s) holding at least 51% shares.
• FBL/BOI is not required for the business activities restricted to foreigners.
 Foreign–Owned Company
• Registered in Thailand with foreign shareholder(s) holding up to 100% shares.
• FBL/BOI is required for the business activities restricted to foreigners.
 Branch Office
• A branch of a parent company registered abroad (treated as the same legal
entity as the parent company).
• FBL is required for the business activities restricted to foreigners.

25. 25
kowit.somwaiya@lawplusltd.com
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IV Road, Bangkok 10500, Thailand
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26. 26
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