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Income tax exemptions on offer for investment in target companies
01/09/2022
Thailand continues efforts to promote scientific and social development within the Thai economy. A recent Royal Decree (“RD”) was issued which granted income tax exemptions for investment in certain target industries companies. The Royal Decree relating to the Revenue Code Governing Exemption of Taxes and Duties (No. 750) B.E. 2565 (2022) became effective June 15th, 2022, and will remain in full effect until June 30th, 2032.
Key points
- Income Tax exemptions made available to those who invest in targeted industries and companies.
- The exemptions also apply to Thai Private Equity and Venture Capitalist trusts who have invested in the targeted industries and companies.
What is this Royal Decree for?
The Royal Decree focuses on exempting gains earned by natural persons, companies, and juristic partnerships, specifically those that have invested in companies or juristic partnerships engaged in target industries (“Target Companies”).
The exemption also applies to any investments made in qualifying Thai private equity companies (“PE”), and Thai venture capital trusts (“VCT”). However, for the exemptions to apply the aforementioned companies must have invested in Target Companies.
What are the relevant target industries?
To qualify as a Target Company, the company must undertake business operations in one or more of the following “Target Industries”.
The following Target Industries have been identified by The Committee on Policy for National Competitiveness Enhancement for Target Industries:
- Next generation automotive
- Intelligent electronics
- Advanced agriculture and biotechnology
- Food for the future
- High-value and medical tourism
- Automation robotics
- Aviation and logistics
- Medical and comprehensive healthcare
- Biofuels and biochemicals
- Digital development
- Defence
- Education and human resource development
What types of investments qualify for the exemptions?
The following investments will be able to qualify for the income tax exemptions on offer.
Direct Investments
Any gains earned from the transfer of shares in a Target Company will be exempt from personal income tax (“PIT”) or corporate income tax (“CIT”).
The following conditions apply:
a. The investor must have held the shares for at least twenty-four (24) months before the capital gain incurs; and
b. At least 80% of the Target Company’s operating revenue must have arisen from business operations in Target Industries in each of the two (2) consecutive accounting periods prior to earning gains from the transfer of shares.
Investments Through VCTs
Unit Transfer Gains
Any gains earned from the transfer (disposal) of units in a VCT, which were invested in a Target Company, will be exempt from PIT and CIT provided that the investor held the shares for at least twenty-four (24) months before the gain arose.
Furthermore:
i. If the VCT had no retained earnings, the capital gain exemption is only in proportion to the VCT’s investment in Target Companies. Furthermore, at least 80% of the Target Company’s operating revenue must have arisen from business operations in Target Industries in each of the two (2) consecutive accounting periods before the gain from the transfer of units arises. The required proportion of investment in Target Companies by the
VCT shall be prescribed by the Director General (“DG”) of the Revenue Department.
ii. If the VCT has retained earnings, and it had retained earnings, in each of the two (2) accounting periods preceding the unit transfer, which arose from investment in a Target Company, which has earned at least 80% of its total income from business in target industries, then the entire gain from transfer of units will be exempt from PIT or CIT.
Dissolution Gains
The revenue earned by a unit holder in a VCT, upon dissolution of that VCT is exempt from income recognition, however only in proportion to the VCT’s investment in Target Companies. Furthermore, at least 80% of the Target Company’s operating revenue must have arisen from business operations in Target Industries in each of the two (2) consecutive accounting periods preceding the VCT’s dissolution.
Are there any conditions for companies to satisfy?
For private equity companies to qualify they must:
- be registered under Thai law.
- Must have 20,000,000 THB or more in paid up capital.
- Must be properly registered as a private equity company under the Thailand SEC.
- Must not have claimed any of the income tax exemptions under the following Royal Decrees:
- RD (No. 481) 2009
- RD (N0. 597) 2016
- RD (No. 636) 2017
For a venture capital trusts to qualify they must:
- be registered as a VCT with the SEC.
- have 20,000,000 THB or more in paid up capital.
- be properly registered as a private equity company under the Thailand SEC.
- not have claimed any of the income tax exemptions under the following Royal Decrees:
- RD (N0. 597) 2016
- RD (No. 636) 2017
For a natural person, company or juristic partnership to qualify they must:
- not have claimed any of the income tax exemptions under the following Royal Decrees:
- RD (N0. 597) 2016
- RD (No. 636) 2017
How can Belaws help?
If you need more information about taking advantage of these tax exemptions or investing in businesses in Thailand, why not talk with one of our experts right now.
If you would like to learn more about how our experts can help with your accounting and secretary needs, please check out our full list of services.
Please note that this article is for information purposes only and does not constitute legal advice.
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Frequently asked questions
How much is a work permit in Thailand?
Official fees for a Work Permit in Thailand are 3,000 THB.
How long does it take to get work permit Thailand?
Once you have the correct Visa, the work permit process takes about 10 days to complete.
Are foreigners allowed to work in Thailand?
Yes foreigners can work in Thailand but they require the correct visa and a work permit to do so.
Can I change tourist visa to work permit in Thailand?
Yes it is possible but first the applicant will need to change from a tourist visa to a Non-Immigrant B visa. Once they have the Non-Imm B, they can apply for a Work Permit.
How do I get a 1 year visa for Thailand?
One year Visas are usually available for people who are employed by a Thai company, those married to a Thai national and those who hold a retirement Visa.
How can I live and work in Thailand?
In order to live and work in Thailand you need to have received a job offer from a company who can support your work permit application. Alternatively, you can open your own company in Thailand.
What type of visa is work permit?
A Work Permit is not a Visa, it is a seperate document which allows the holder to legally work in Thailand. In order to get a work permit, holders are required to obtian the relevant visa, in most cases a Non-Immigrant B visa.
How long does a work permit take to process?
Approximately 10 days
How can I get permanent residence in Thailand?
For those wishing to seek permanent residency, they must satisfy one of the following options.
- You have held a Thailand Work Visa and Work Permit for at least three years, and:
- You have an Extension of Stay based on Employment at the time of application
- You have worked at your current company for at least one year at the time of application
- You had a monthly salary of at least 80,000 Baht for two consecutive years or you filed a tax return for an annual income of at least 100,000 Baht for two consecutive years
- You have invested at least 3 Million Baht in a limited or public company in Thailand
- Family: You are a close family member of a Thai citizen (parent, child or spouse)
- Expert: You have at least a BA Degree and are employed in a position in which you have to work in for at least three consecutive years.
How can I stay in Thailand for a year?
One year Visas are usually available for people who are employed by a Thai company, those married to a Thai national and those who hold a retirement Visa.
Can foreigners become Thai citizens?
Yes, it is possible for foreigners to be able to take Thai citizenship, however, there are strict guidelines and requirements which must be satisfied.
How long can foreigners live in Thailand?
This depends on which Visa the foreigner holds. Holders of Non-Immigrant Visas based on Work, Marriage or Retirement can apply for yearly extensions of stay which can be an unlimitied amount of times (as long as they still meet the application requirements). There are also Visas which allow longer periods of stay such as the Thailand Elite Visa as well.
How much money do I need to move to Thailand?
The answer to this will depend entirely on your lifestyle, where you choose to live and your expectations.
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