Understanding Key Incentives and Requirements for IT and Tech Investments in Thailand
The Thailand Board of Investment (BOI) offers a variety of incentives to support the growth of IT and tech businesses. These benefits, available to both Thai and foreign companies, include tax breaks, 100% foreign ownership, and streamlined visa processes. This article outlines the key incentives and requirements for businesses involved in software development, digital platforms, and content creation in Thailand.
Newly Defined Digital Technology Business Category
In Announcement No. Sor 2/2567, dated March 15, 2024, the BOI updated its incentive structure to align with the evolving IT and technology landscape. The “8.1 Digital Technology Business” category is now divided into two main activities:
- 8.1.1: Development of software or platforms for digital services or content.
- 8.1.2: Improvement of software or platforms for digital services or content.
Definitions of Supported Activities
In Announcement No. Por. 12 / 2566, the BOI defines eligible activities as:
- Software: Computer programs, applications, systems, or a set of commands written in computer language, designed to instruct a computer or electronic device to operate as specified.
- Platform for Providing Digital Services: Systems, channels, or processes used to deliver digital services. These platforms facilitate the exchange of information, goods, or services between developers and users through the internet or other electronic networks.
- Digital Content: Computer-generated animations, encompassing video games, animations, Augmented Reality (AR), and Virtual Reality (VR).
BOI Base Requirements for Digital Technology Business Category
The BOI has outlined two primary requirements for projects related to software development, digital platforms, or digital content: development must take place in Thailand, and there is a minimum investment requirement based on the salaries of Thai IT personnel.
Development in Thailand
The development of software, digital service platforms, or digital content in Thailand must commence anew after applying for promotion. If a project introduces pre-developed products before applying for promotion, it must then develop new, distinct functionalities subsequent to the application.
Minimum Investment Requirement
Projects must allocate a minimum annual salary expense of THB 1.5 million for Thai IT personnel. This includes both permanent and temporary employees hired after the submission of the promotion application.
Specifics on Thai IT Personnel
Eligible roles for Thai IT personnel include:
- Developers
- Programmers
- System Analysts
- Software Engineers
- Testers
- Front End/Back End Developers
- Project Managers
- Animators, 2D/3D Artists
- Game Designers
- Visual Artists and Computer Graphic Designers
The BOI will verify the qualifications of Thai IT personnel based on evidence demonstrating relevant IT skills. This includes academic transcripts, work experience of at least one year (verified by previous employers), certificates from relevant training courses (minimum six months from credible institutions), and professional qualification certificates or those approved by the BOI.
The hired personnel must be newly added to the company’s payroll after the application for BOI incentives. Rehired staff, who were let go less than a year before their reemployment date, are not eligible.
Employment of Thai IT staff must be confirmed through tax filings, specifically forms PND 1 or PND 1 Kor, to count towards the minimum investment requirement.
Other Essential Requirements
Machinery Use: Existing or secondhand machinery is permitted for use in the project.
Project Start Deadline: Operations must begin within 12 months of receiving the promotion certificate. Extensions for starting operations or importing machinery are not allowed.
Retail and Wholesale Exclusion: The BOI does not grant investment promotion for retail or wholesale activities of any kind.
Projects Not Eligible for BOI Approval
Certain types of software, platforms, and digital activities do not qualify for BOI incentives. These include:
- Development of a website that is not a web application
- Consultancy services
- Sale of goods or services via platforms (e.g., wholesale, retail trade, transportation, lending)
- Enhancements to software or platforms that do not introduce new features (e.g., user interface changes, language additions)
- Acquisition, installation, configuration, or maintenance of equipment/software from other providers
- Data analysis services without developing data analysis tools
- Software testing services not using the applicant’s own development resources
- Creation of computer graphics or visual effects for movies, dramas, commercials, or documentaries
- Video and audio editing
- Digital drawing (e.g., web caricatures, stickers)
- Cryptocurrency-related services unrelated to platform development (e.g., ICOs)
- Software or platform development intended for internal organizational use only
- Other activities not directly related to new product or feature development, which will be reviewed by the BOI on a case-by-case basis
What incentives are available for software development, digital platforms, and digital content creation?
The BOI offers a variety of tax and non-tax incentives to encourage investment in IT/Tech businesses. These incentives are designed to support software development, digital platforms, and digital content creation, attracting both domestic and foreign companies.
Non-Tax Incentives
Non-tax incentives provided by the BOI include:
- 100% Foreign Ownership: Foreign investors can fully own IT/Tech businesses in Thailand, which is a significant exemption from the usual foreign ownership restrictions.
- Simplified Employment of Foreign Experts: The BOI streamlines the process of hiring foreign experts, allowing businesses to recruit skilled talent from abroad more efficiently.
- Equipment Usage: IT/Tech businesses are permitted to use both new and secondhand equipment, giving companies flexibility in managing costs.
- Land Ownership: Under certain conditions, foreign companies may acquire land ownership to support their promoted business activities.
- Currency Repatriation: Companies can repatriate profits and capital in foreign currencies, providing flexibility in managing international finances.
Tax Incentives
Businesses engaged in software development, digital platforms, and digital content may qualify for Group A2 tax incentives, which offer significant benefits, including:
- Corporate Income Tax (CIT) Exemption: Businesses may receive up to 8 years of CIT exemption, covering up to 100% of the investment, excluding land and working capital costs.
- Customs Duty Exemption on Equipment: Businesses are exempt from customs duties on imported equipment used in the project.
- Exemption on Raw Materials for R&D: Companies are exempt from customs duties on raw materials used for research and development purposes.
- Exemption on Materials for Export: Exemption from customs duties on raw materials or essential materials used in the production of export goods, applicable for one year, with the possibility of extension.
Specific Conditions for Tax Exemption
To qualify for the tax incentives, businesses must meet specific conditions, and the CIT exemption is calculated based on eligible expenses incurred after the BOI application has been submitted. Eligible expenses include:
- Payroll for Thai IT Personnel: 100% of the payroll costs for newly hired Thai IT staff are eligible for exemption.
- Technology-Related Training: Expenses for training that enhances IT skills and technology expertise are eligible.
- Costs for Quality Certifications: Expenses for obtaining recognized quality standards such as ISO 29110 or CMMI Level 2+ are included.
Revenues that are exempt from CIT must be directly related to the sales or services generated from the software, digital platforms, or content developed under BOI criteria. Eligible revenue sources include:
- License Fees
- Subscription Fees
- Pay-per-Use Fees
Incentives for Improvement Projects
For businesses focused on improving existing software or digital platforms, the BOI offers specific incentives, though CIT exemptions do not apply. The key criteria for improvement projects include:
- Minimum Salary Requirement: A minimum of THB 1.5 million must be allocated annually to salaries for Thai IT personnel, including temporary staff hired after submitting the promotion application.
- Improvement Plan Submission: Companies must submit a detailed plan outlining improvements to the software, platform, or digital content, which the BOI will review for approval.
- Category Stability: Once a business category is selected during the application process, it cannot be changed.
- Use of Existing or Secondhand Machinery: The BOI allows the use of existing or secondhand machinery for improvement projects.
- Operational Initiation Deadline: Projects must commence operations within 12 months of receiving the promotion certificate, with no extensions allowed.
- Machinery Importation: No extensions are permitted for the importation of machinery.
- Land Ownership: Land ownership for promoted improvement projects is not allowed.
These rules are essential for projects looking to get BOI incentives for making improvements.
BOI IT Incentives Application Process
When submitting your BOI application through their online platform, ensure you include the following key details:
- Business Background and Objectives: Information on the company’s establishment, activities, employees, and past revenue, along with the objectives for seeking BOI promotion.
- Project Overview: Overview of the technology, processes, and operational structure.
- Employee Information: Planned roles, number of Thai and foreign employees, and salary details.
- Training & Technology Transfer: Plans for upskilling Thai employees and transferring knowledge.
- Financial Plan: Revenue forecasts, funding sources, and capital allocation.
- Market & Production: Projected sales, production capacity, and market reach.
- Product Development: Details of where the software, platform, or digital content was developed, including key functions and features.
- Planned Development: Description of future software, platforms, or content, focusing on new functionalities.
- Technology Used: List of hardware and software tools for the project.
To implement the project, it will be necessary to open a company in Thailand.
Related articles
How to Apply for BOI Incentives in Thailand: A Simple Guide for Investors
Thailand Updates Investment Incentive Criteria for Software Development and Data Centers
How to Start a Business in Thailand
How to Register a Company in Thailand
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