What is the Board of Investment? Thailand’s Board of Investment (”BOI”) is an agency formed by the Thai government tasked with promoting foreign investment into the Kingdom. It does so by incentivising qualified investors with numerous benefits and providing them information to facilitate a smoother investment process in Thailand. The BOI operates directly under the Prime Minister’s Office. What benefits does the BOI provide? The incentives provided by the BOI can be split into two main categories: tax and non-tax incentives. The former consists of several exemptions and/or reductions in taxes for certain amounts of time, depending on the prospective applicant’s business activities. The latter consists of provileges that are not normally afforded to foreign investors, including full foreign ownership of a corporate entity and permission to own land in the Kingdom. How do I apply for BOI promotion? The process of applying for BOI promotion is complex and involves a bureaucratic process of compiling paperwork and other documents required by the Board. It is highly recommended for applicants to seek assistance from an experienced law firm to facilitate their application. A summary of the Board of Investment What do B1 privileges include? According to the Announcement of the Board of Investment No. Sor. 1/2564, a company that conducts activities that fall within the scope of buying and selling raw materials, parts, and components to and from manufacturers or distributors in Thailand and abroad are eligible for B1 privileges. These privileges include exemptions on import duties and several non-tax incentives. International Procurement Offices under the BOI Tax Incentives Non-tax Incentives Exemption on import duties on machinery Import tax exemption on raw materials used in the production of goods for export. 100% foreign ownership (except those that conduct activities that fall under the list of prohibited occupations under the Foreign Business Act) Limited permission to own land Permission to bring skilled workers and professionals to work in Thailand For several years, International Procurement Offices have been among the most popular promotional categories of the BOI. Through this category, the BOI aims to promote Thailand as a leading international procurement and distribution hub for industrial components, and to strengthen Thailand’s supply chains. It also aims to bring technological innovation and industry best practices into Thailand, as well as to develop the technical capabilities of the Thai labour force via specialists from abroad. While this promotional category was initially replaced by the International Headquarters and International Trading Centres categories, it was subsequently reinstated by the BOI on 4 November 2020 in order to encourage trade and investment into the country amid the COVID-19 pandemic. What qualifies as an International Procurement Office? An International Procurement Office must be a company incorporated in Thailand that specifically buys and sells raw materials, parts, and components for manufacturing purposes. They should essentially act as an intermediary between manufacturers and suppliers both in Thailand and abroad. The BOI, however, makes a distinction between International Procurement Offices and sourcing agents. In order to qualify for BOI promotion, an International Procurement Office must conduct activities that go beyond that of an agent, such as buying, selling, and storing raw materials, parts, and components. Conditions for BOI promotion It must sell components to domestic or overseas manufacturers on a wholesale basis. It should own or rent a warehouse and manage its inventory using IT-based systems. The procurement office should conduct appropriate activities pertaining to sourcing and procurements, including quality inspection, packaging, and others. It should source certain raw materials, parts, or components from at least one domestic supplier. It must have a paid up registered capital of at least THB 10 million prior to obtaining the BOI certificate. The BOI also makes it clear that under its conditions for promotion, an International Procurement Office can only procure raw materials or parts used to make finished goods. They should not procure finished goods and must include components produced in Thailand as part of their procurement offerings. International Procurement Offices are not eligible for merit-based incentives. The role of an International Procurement Office is illustrated accordingly: The international procurement office purchases components from an overseas supplier. International Procurement Office Acts as an intermediary that conducts sourcing and warehousing activities on behalf of an affiliate company. Domestic Supplier Overseas Supplier Overseas Customers Domestic Customers The international procurement office buys parts and components from domestic suppliers. The international procurement office sells components to overseas customers. The international procurement office sells parts and components to domestic customers. Breakdown of activities conducted by International Procurement Offices Coordinating the procurement of raw materials, parts, and components between suppliers, manufacturers, and distributors. Overseeing the logistics of acquiring and delivering the manufacturing components. Inspecting the quality of raw materials, parts, and components to be sold to manufacturers. Packaging or repackaging of raw materials, parts, and components. Storing or turning over inventory of raw materials, parts, or components. Developing innovative IT systems used in warehouse/inventory management and goods fulfilment. Why did the BOI reinstate International Procurement Offices as a promotional activity? When the BOI reinstated the ITC promotional category, it required applicants to conduct headquarter activities in Thailand prior to carrying out trading activities, which many companies did not want to do. Moreover, the Thai government, in its bid to push the country forward as a regional trading hub, came to the decision that the Interntaional Procurement Office category provided better incentives for investors to pour capital into Thailand’s service sector. Follow us on LinkedIn
Understanding Board of Investment Promotions – International Procurement Offices
