Understanding special economic zones (SEZs) in Thailand.

When starting a company in Thailand, you should consider setting up one in the special economic zones around the country, as investors will be entitled to a vast range of incentives. We have put together a guide on understanding special economic zones in Thailand.

Let’s find out more in-dept information about special economic zones.

What are the special economic zones?

Special economic zones (SEZs) are special areas that support trade and investment opportunities across the borders of Thailand.

Investing in SEZs also provide investors with tax and non-tax incentives, one-stop service provisions, access to foreign workers and infrastructure development.

The SEZs in Thailand are located at the border of neighbouring countries: Tak and Kanchanaburi border Myanmar; Chiang Rai, Mukdahan, Nong Khai and Nakhon Phanom border the People’s Republic of Laos; Sa Kaeo and Trat border Cambodia; and Songkhla and Narathiwat border Malaysia.

Provinces situated near the borders will be able to access natural resources and cross-border trade routes between Thailand and neighbouring countries.

Special economic zones in Thailand

The SEZs in Thailand are categorised into two phases; the first phase, which started in 2015 and the second phase in 2016.

Phase one

The first phase consists of five provinces, 10 districts and 36 sub-districts.

Phase two

Phase two of the SEZs includes five provinces, 12 districts and 55 sub-districts.

Special economic zone incentives

Board of Investment special economic zone incentives

Incentives that are given for BOI general activities located in the SEZs listed on the Announcement on the Board of Investment No. 2/2557 are:

• Exemption on import duties on machinery
• Three-year additional corporate income tax exemption, but not exceeding eight years in total
• Projects with activities in Group A1* and Group A2** which have already been granted an eight-year corporate income tax exemption shall receive an additional incentive of a 50% reduction of corporate income tax for five years.
• Double deduction of the costs for transportation, electricity and water supply for 10 years
• 25% deduction of the costs of installation or construction of facilities in addition to the deduction of normal depreciation
• Exemption of import duties on raw and essential materials used in manufacturing for export for five years
• Non-tax incentives, such as permission to own land and employ foreign unskilled and skilled labour.

Incentives are also given to 13 targeted industries in the SEZ, which include:

• Agro-industry, fisheries and related businesses
• Ceramic products manufacturing
• Textile, clothing and leather manufacturing
• Furniture manufacturing
• Gems and jewellery manufacturing
• Medical devices manufacturing
• Automotive, machinery and parts manufacturing
• Electronics and electrical appliances manufacturing
• Plastics manufacturing
• Pharmaceutical’s manufacturing
• Logistic businesses
• Industrial zones or industrial estates
• Businesses that support tourism

The incentives that the 13 targeted industries are entitled to are:

• Exemption of import duties on machinery
• Corporate income tax exception for up to eight years
• Additional 50% corporate income tax exemption for five years
• Double deduction of the costs for transportation, electricity and water supply for 10 years
• 25% deduction of the costs of installation or construction of facilities in addition to the deduction of normal depreciation
• Exemption of import duties on raw and essential materials used in manufacturing for export for five years
• Non-tax incentives, such as permission to own land and employ foreign unskilled and skilled labour.

* Group A1 – knowledge-based activities focusing on R&D and design to enhance the country’s competitiveness.

** Group A2 – infrastructure activities for the country’s development using advanced technology to create value-added, with no of very few existing investments in Thailand.

Special economic zone incentives from the Revenue Department

Non-BOI activities are entitled to incentives offered by the Revenue Department. The incentive includes a corporate income tax reduction to 10% of the company’s net profits for 10 years.

To qualify for the tax incentive, companies must meet the following requirements:

• Companies registered as a corporate entity after 23 June 2020 must be established in a permanent building located in an SEZ
• Companies registered before 23 June 2020 must be established in an extension or addition to an existing permanent building located in an SEZ
• Registered as a company or juristic partnership with the Revenue Department before 30 December 2020
• Must not claim tax incentives under the following:
  • Corporate income tax exemptions and reductions under the law on investment promotion
  • Corporate income tax reductions for Regional Operating Headquarters granted under Article 6 of the Royal Decree No.530 and amendments
  • Income tax exemptions for SMEs under Article 7 of the Royal Decree No.530 and amendments
  • Income tax reductions for investors in SEZs under Article 4 of the Royal Decree No.591
• Must have separate accounts for business activities in the SEZ for projects receiving incentives and projects not receiving incentives

Conclusion

Investing in the SEZ provides companies with a wide range of tax and non-tax incentives and also attract foreign investment in different regions around Thailand. Feel free to schedule a consultation with Acclime for more information.