Services / Cross-border transactions and investment
BOI promotion and what comes attached
BOI benefits are not a bonus that arrives free. They attach to the promoted activity specifically, with conditions, and they have consequences if the business is closed or transferred.
Corporate income tax exemption
The first paragraph of section 31 of the Investment Promotion Act B.E. 2520 (1977) provides that a promoted person is exempt from corporate income tax on the net profit of the promoted activity as the Board prescribes, determined as a proportion of the investment excluding land and working capital, for a period not exceeding eight years from the day income from the activity first arises.
Only the promoted activity's profit
Section 31 ties the exemption to the net profit derived from the promoted activity, not to the company's profit as a whole. A company carrying on both promoted and other activities must therefore separate its accounts from the outset, because an inability to separate them later is hard to remedy and puts the whole benefit at risk.
Advanced technology gets longer
Section 31/1 provides that, to build national competitiveness, the Board may grant activities using advanced technology and innovation, or research and development, as it prescribes, an exemption of up to thirteen years from the day income first arises. The longer period is therefore not automatic but tied to the character of the activity as the Board has defined it.
Losses in the exempt period carry forward
The fourth paragraph of section 31 provides that where the activity runs at a loss during the exemption, the Board may allow the annual losses arising in that time to be set against net profit after it ends, for up to five years from its expiry, taken against the profit of one year or of several.
Land ownership, and the condition attached
The first paragraph of section 27 allows a promoted person to own land for the promoted activity in such quantity as the Board thinks fit, even beyond what other law would permit. The second adds that where a promoted person who is a foreigner under the Land Code closes or transfers the promoted business, the land must be disposed of within one year of that, failing which the Director-General of the Land Department may dispose of it.
PREPARE
What to bring
- The project details, capacity and investment plan
- The shareholding structure and sources of funding
- Details of the technology or research involved, if any
- The employment and technology-transfer plan
- The project location and the land required
QUESTIONS
Questions this raises
With BOI promotion, is there no tax at all?
Section 31 exempts corporate income tax only on the net profit of the promoted activity, in the proportion and for the period the Board sets. It is not an exemption from every tax, nor from tax on all the company's income. Income from other activities remains taxable, which is why separating the accounts from the outset matters so much.
If I close the promoted business, what happens to the land?
The second paragraph of section 27 requires a promoted person who is a foreigner under the Land Code, on closing or transferring the promoted business, to dispose of the land within one year, failing which the Director-General of the Land Department may dispose of it under the Land Code. The exit should therefore be thought through at the time of purchase.
LAW
The legislation
- Investment Promotion Act B.E. 2520 (1977), sections 27, 31 and 31/1
ENQUIRIES
