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Understanding BOI Company Formation Step-by-Step guide
23/06/2022
When considering opening a company in Thailand, entrepreneurs should always consider applying for a Board Of Investment (BOI) promotion. Thailand’s BOI is a special government agency who focuses on promoting foreign investment within Thailand.
A BOI promotion removes many of the barriers to doing business in Thailand, such as the restrictions of the Foreign Business Act. More information on the Foreign Business Act can be found here.
Key points
- Tax benefits such as income tax exemptions for a fixed period.
- 100% foreign ownership.
- Reduced requirements for supporting work permits i.e. no quotas for hiring foreigners
- The ability to own land.
What benefits are available for BOI companies in Thailand?
As mentioned above, companies who have been approved for a BOI promotion are eligible for special incentives.
While BOI companies are eligible for a variety of different incentives, 100% foreign ownership of the business and reduced requirements for hiring foreign staff are a significant bonus for companies. These incentives could be very beneficial for foreign companies looking to establish a presence in Thailand.
100% foreign ownership
Depending on the activities a business undertakes, it is likely that foriegn ownership of a regular Thai Limited company would be limited to 49.99%. This limitation is due to the Foreign Business Act and the restrictions it places on foreign owned companies from undertaking certain business activities. For more information about this, please take a look at this article.
BOI promoted companies are not subject to these restrictions and generally can be 100% foreign owned (subject to certain exceptions).
Reduced quota for hiring foreign employees
BOI promoted companies, unlike other company structures, are not subject to any quotas when hiring foreign employees. For example, Thai Limited Companies cannot hire a foreign employee unless the following quotas are satisfied:
- A ratio of 4:1 Thai to foreign employees. Essentially, there must be 4 Thai employees employed by the company per 1 foreign employee.
The removal of this quota takes away a massive barrier to employing foreign staff and is a huge advantage to a BOI promotion.
Other non-tax incentives:
- Permit to own land
- Permit to remit money abroad in a foreign currency
- Protection against nationalization of the business
- The BOI will also announce a wide range of additional and often time-sensitive incentives for companies already operating under a BOI license.
Tax Incentives:
- Exemption or reduction of import duties
- Exemption of a juristic person’s income tax and dividends
- Double deductions from the costs of transportation, electricity and water supply
- Eight-year corporate income tax exemption for:
- Knowledge-based activities focussing on R&D and design to enhance Thailand’s competitiveness, or
- Activities in infrastructure for Thailand’s development, or
- Activities using advanced technology to create value-added
- Five-year corporate income tax exemption for high-technology activities which are important to Thailand’s development, with few investments already existing here.
- Three-year corporate income tax exemption for activities with lower technology than above, but add value to domestic resources and supply-chain.
What is the process for registering a BOI company in Thailand?
1. Feasibility Study
A business feasibility study enables companies to assess the viability and chances of success for a BOI application.
The feasibility study is an important process as it could save the client a lot of time and effort in the long run. Belaws BOI experts are available to help you undertake a business feasibility check. For more information, please click here.
Timeline: 3 business days
2. BOI application and interview process
As part of the application process, companies must submit application forms relating to the company’s specific business category.
Information required by the BOI includes:
✓ The total amount of registered capital and how the company will provide this capital.
✓ Information on the company’s project
✓ Employee details e.g. the number of foreign and Thai employees the company anticipates hiring
✓ Information regarding the management team’s skills and experience
✓ Estimated earnings and expenses of the company for its initial three years
Once the application has been submitted, a BOI officer will review and often ask for complementary information. The BOI officer notably checks that the numbers included in the business plan match and make economic sense. The back and forth may continue until the BOI officer is satisfied with the additional answers provided (the amount of additional questions asked ranges from 2 to more than 10 for complex projects with a high capital investment).
Following the application acceptance, a meeting is convened at the BOI office with the applicant to present the project. The meeting usually takes around one hour.
Following the meeting, the BOI officer will present the project at the next BOI officer meeting for approval. Some applications will get approved quickly and some others get dogged down with additional questions and requests for information. It possible for poorly executed BOI applications to be delayed for up to 1 year due to these extra requests.
Timeline: 1 to 3 months
3. BOI approval and acceptance of Terms
The timeframe for the approval will depend on the investment value of the BOI application.
- Not more than 200 million Baht will receive approval for the project within 40 business days.
- Not more than 2,000 million Baht will receive approval for the project within 60 business days.
- More than 2,000 million Baht will receive approval for the project within 90 business days.
Timeline: Up to 3 months
The BOI officer will notify the applicant in writing of their decision within 7 days. This notification will outline the criteria of approval, BOI privileges, and perks that have been awarded to the applicant. The applicant has 30 days to accept or decline the conditions offered by the BOI.
If the applicant does not respond within 30 days, they must send a letter of clarification to the BOI explaining why they missed the deadline (extensions of 30 days may be granted up to 3 times at the BOIs discretion).
4. BOI Company Registration in Thailand and BOI Certificate
After approval for acquiring a BOI promotion has been granted, a limited company must be registered in Thailand within six months of the acceptance. In order to obtain the BOI Certificate, the applicant will have to submit the following documents:
- Application form for a BOI promotion certificate
- Memorandum of association of the company
- Certificate of company registration
- Certificate stating the registered capital, authorized directors indicating signing authority and the registered address
- Shareholder list of the company
- Evidence of the transfer of funds from overseas corresponding to the minimum capital requirement requested by the BOI as per the BOI approval letter
Please note, that should the business activities of an investment project fall under List 1 of the FBA, the company will be required to have at least 51% of capital from Thai shareholders.
Should this not be possible the applicant must send an explanation letter to the BOI seeking an extension of the deadline by four months (this can be done up to three times).
Timeline: 1 month
5. Foreign Business Certificate
If the business activities for which the BOI Certificate has been granted include activities regulated under the Foreign Business Act (really likely), a Foreign Business Certificate allowing the company to undertake the said regulated activities is required.
Timeline: 2 weeks
6. BOI Work Permits and Visa
In order for the company to be able to hire foreign staff, they must register their company into the e-expert system. Registration on the e-expert system will allow the company to make future requests for foreign workers.
After a post has been submitted, opened, and accepted through the e-expert system, the applicant may apply for their visa and a work permit at the BOI one-stop service center (OSOS).
Timeline: 1 month
7. BOI Reporting and Compliance
After the company has received their investment promotion certificate, they must meet the following requirements:
- Within 30 months, the machinery and equipment must be imported to benefit from the reduction of taxes and duties
- Within 36 months, construction must be completed, the machinery and equipment installed, and the factory ready to commence operations
- The company must ask for permission from the BOI if the operation has to be halted for a duration longer than two months
- The BOI must give written permission before a promoted company may mortgage, sell, lease, or transfer machinery which was imported either exempt from, or at a lower rate of tax. Additionally, permission must also be obtained to use machinery for non-approved purposes.
Furthermore, the Company must submit an application for start-up of operations within 36 months after the issuance BOI certificate. This is required as proof that the Company is operating under the BOI conditions as required. Failure to satisfy this criteria could result in he BOI revoking the promotion from the business. Should this happen, the company must pay an exemption tax retroactively. This tax would count as though the company had never received a promotion.
Should a company not satisfy any of the requirements set out by the BOI, The BOI will issue an official warning notice to the offending company. If there is no valid reason for the failure, the BOI may recommend to the Board that the promotion be withdrawn.
8. BOI Accounting
While BOI promoted companies are eligible for attractive incentives, they are also subject to specific regulations and additional scrutiny from the regulator.
One of the things that is often checked is your company accounts, it’s important to remember that accounting does not lie, so make sure you are aware of this.
Moreover, BOI companies will receive special accounting requirements as part of their specific promotion category. Please also note that BOI companies are also required to adhere to the same mandatory reporting requirements for VAT, WHT, and SSF, and the filing of half-year and yearly auditing.
For more information on BOI accounting, please check out our article on this subject here.
How can our team of experts help?
Belaws has a team of expert lawyers and accountants who specialize in working with BOI companies and are familiar with all the requirements and obligations. For more information about how our experts can help you with your BOI application, please click here.
In order to learn more about BOI promotions in Thailand, please feel free to book a consultation with our experts.
Please note that this article is for information purposes only and does not constitute legal advice.
Our consultations last for a period of up to 1 hour and are conducted by expert Lawyers who are fluent in English, French and Thai.
Consultations can be hosted via WhatsApp or Video Conferencing software for your convenience. A consultation with one of our legal experts is undoubtedly the best way to get all the information you need and answer any questions you may have about your new business or project.
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Frequently asked questions
What is BOI company in Thailand?
Thailand’s Board of Investment is a special government agency who focuses on promoting foreign investment within Thailand.
A BOI promotion removes many of the barriers to doing business in Thailand, such as the restrictions of the Foreign Business Act.
The BOI also provides qualifying projects with a series of impressive incentives such as:
- – Tax benefits such as income tax exemptions for a fixed period.
- – 100% foreign ownership of a company.
- – Reduced requirements for supporting work permits i.e. no quotas for hiring foreigners
- – The ability to own land.
What is BOI Visa in Thailand ?
Foreigners who wish to either work, conduct business or undertake investment activities in Thailand are required to apply for the relevant visa and work permit. BOI promoted companies can support visa and work permits for foreign staff and are subject to less requirements than traditional Thai companies.
What are the benefits of a BOI Licence?
Aside from specific tax incentives, the most benefits of a BOI promotion is the possibility for foreigners to hold up to 100% of the company’s shares, buy land and facilitation for visas and work permit:
| TAX INCENTIVES
Tax privileges granted by the BOI varies depending on the category and the location of the project |
|
| OTHER INCENTIVES
Other incentives are granted to all BOI project |
|
BOI Company vs. Thai Limited Company
A BOI Company gets to enjoy a number of attractive benefits over a traditional Thai Limited Company but this comes with additional scrutiny from official authorities. The key differences are highlighted below:
| BOI COMPANY | THAI LIMITED COMPANY | |
| Foreign ownership | Up to 100% | Limited to less than 50% in most activities |
| Thai to foreign employee ratio | No ratio for foreign skilled employees | 4:1 |
| Corporate income tax rate | Up to 9 years exemption depending on the nature and location of the project | 20% |
| Import of machinery | No tax. | No specific restriction if more than 50% of the capital is held by Thais shareholders |
| Reporting and audits | Regular updates and audit from the BOI Annual accounting audit | Annual accounting audit |
What business activities are promoted by the BOI?
- Agriculture and Agricultural Products
- Mining, Ceramics and Basic Metals
- Light Industry
- Metal Products, Machinery and Transport Equipment
- Electronic Industry and Electric Appliances
- Chemicals, Paper and Plastics
- Services and Public Utilities
- Technology and Innovation Development
For more information about the Promoted activities, please visit here
What is the BOI looking for when approving Licence applications?
- Promote investment that helps enhance national competitiveness by encouraging R&D, innovation, value creation in the agricultural, industrial and services sectors, SMEs, fair competition and inclusive growth
- Promote activities that are environment-friendly, save energy or use alternative energy to drive balanced and sustainable growth
- Promote clusters to create investment concentration in accordance with regional potential and strengthen value chains
- Promote investment in border provinces in Southern Thailand to help develop the local economy, which will support efforts to enhance security in the area
- Promote special economic development zones, especially in border areas, both inside and outside industrial estates, to create economic connectivity with neighboring countries and to prepare for entry into the ASEAN Economic Community (AEC)
- Promote Thai overseas investment to enhance the competitiveness of Thai businesses and Thailand’s role in the global economy
How can I get BOI in Thailand?
In order to be able to get a BOI promotion for your company in Thailand, you will need to complete the following process:
- Business feasibility study
- BOI application and interview
- Approval from the BOI and acceptance of proposed terms
- Registration of BOI company in Thailand
- Issue Work Permits and Visa
- Undertake the required reporting and compliance
- Complete the BOI accounting procedures.
Do I need a lawyer to obtain a BOI promotion?
There is no legal requirement to appoint a lawyer to obtain a BOI promotion but it is highly recommended to ensure a smooth process and increase your chances to obtain a BOI promotion. At Belaws, our expert lawyers take a pragmatic approach and will intervene only when it is strictly necessary for savvy clients. This is notably the case with young entrepreneurs applying for eCommerce or software promotion where the fees can start from THB 50,000 for limited assistance.
What is a BOI letter?
Once an application has been submitted to the BOI, they will inform the company in writing whether or not the application has been accepted. This letter is usually issued after seven working days. The approval letter will also include details about the benefits the company will be entitled to.
Can I work remotely from Thailand?
As mentioned above, anyone who wishes to work in Thailand is required to obtain the relevant visa and work permit. At the time of writing there is no visa that supports Remote Work from Thailand, it is also not possible to obtain a work permit for this purpose either.
Can a foreigner open a company in Thailand?
Yes it is possible for a foreigner to open a company in Thailand. There are also options available which allow 100% foreign owned companies as well.
Is it good to start a business in Thailand?
Thailand is an attractive option for those wishing to start a business. Thailand has a great infrastructure in place and scheme such as the BOI provide great incentives for companies to take advantage of.
How can a foreigner start a small business in Thailand?
Yes, foreigners can start a business in Thailand. However, certain business activities are restricted by the Foreign Business Act and in order for businesses to undertake them they must obtain a Foreign Business Licence/Certificate which can be time consuming and complicated.
Can I own a company in Thailand?
Yes, foreigners can start a business in Thailand. However, certain business activities are restricted by the Foreign Business Act and in order for businesses to undertake them they must obtain a Foreign Business Licence/Certificate which can be time consuming and complicated.
What is BOI visa?
BOI companies are able to hire foreigners without the restrictions faced by normal Thai Limited Companies. Therefore, BOI companies can provide visas and work permits for employees.
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