Further to its announcement of a new promotional category for Digital Services Platforms and Digital Content, the Board of Investment (BOI) has introduced revisions to the scope of activities conducted by International Business Centres (IBCs[1]) and Trade and Investment Support Offices (TISOs) that do not operate as treasury centres. The revisions will allow them to lend funds to affiliated enterprises in and out of Thailand following current exchange control regulations.

These revisions come as part of the BOI’s efforts to strengthen Thailand’s position as a hub for international business by permitting more flexibility to Thailand-based multinational corporations in providing the necessary support services to companies within the same corporate group. However, as previously mentioned, these revisions do not apply to IBCs and TISOs that are considered Treasury Centres[2], which are entities that conduct business activities related to the management of foreign currency funds for a Conglomerate Group[3].

According to BOI officials, if an entity that already operates as a treasury centre seeks to apply for BOI promotion as an IBC or TISO, it will not be required to declare its lending activities in their application. However, this is unless they intend to lend out to affiliate companies using Thai Baht, in which case they will be required to declare lending activities in their application. Moreover, applicants must be aware that providing loans in Thai Baht can only be provided to affiliate companies in Thailand, Vietnam, and countries bordering Thailand.

BOI officials also reiterate that loans denominated in foreign currencies are not subject to limits in terms of the amount. However, IBCs and TISOs must be aware of the purpose of providing these funds to affiliate companies, as it would need to be under the goals and objectives of IBCs and TISOs; which is to support prospective trade and investment activities. On the other hand, loans denominated in Thai Baht may not be subject to limitations in the amount disbursed; however, they can only be lent out to affiliate companies in Vietnam and other countries bordering Thailand to support trade and investment

Importantly, the lending activities are still subject to other exchange control regulations including the Exchange Control Act B.E. 2485, Ministerial Regulation No. 13 B.E. 2497, the Notification of the Ministry of Finance regarding Exchange Control, and the Notice of the Competent Officer on Rules and Practices regarding Currency Exchange (B.E. 2547).

In addition, IBCs and TISOs that wish to conduct these activities must also adhere to certain requirements which are summarized accordingly:

Type of Entity	Requirements	Additional Incentives
International Business Centres (IBCs)	–       An IBC must provide a clear business plan that outlines the type of support services it will provide to affiliated companies, particularly those about providing loans. –       In addition to providing loans to affiliated companies, the IBC must also provide at least one other service activity listed in the pre-existing scope of services for IBCs and TISOs.	Under the BOI’s revisions, IBCs will be eligible for exemptions on import duties for machinery on top of other tax and non-tax incentives
Trade and Investment Support Offices (TISOs)	–       Like IBCs, TISOs must provide a clear business plan that highlights the scope of the support services provided to their affiliate companies, including any proposed lending services. –       A TISO must conduct at least one other support service prescribed by the BOI.	The revisions highlight that TISOs will be eligible for non-tax incentives.

What are IBCs and TISOs?

Unveiled by the BOI in 2018, the IBC scheme is a structure that aims to incentivise multinational companies to establish regional or global hubs in Thailand. Applicants seeking to establish such a company in Thailand are eligible for B1 benefits which only covers non-tax incentives, including permission to remit funds abroad in foreign currencies, purchase land in the country, and apply for permits to bring in foreign specialists; on top of exemptions on import duties for machinery and raw materials used for producing exports goods. However, IBCs may be able to avail tax incentives from the Revenue Department, which include exemptions on corporate taxes[4], Withholding Tax[5], Specific Business Tax[6], personal income tax[7].

Moreover, companies applying to be promoted as International Business Centres must conduct at least one of the activities listed in the BOI’s scope of activities, including business planning, procurement of war materials, economic and investment analysis, and technical support.

On the other hand, TISOs do not conduct business activities of their own, but rather provide ancillary activities that may contribute towards potential investment into Thailand[8]. This means that functions held by TISOs are particularly versatile, though they are required by the BOI to have annual expenditures of at least THB 10 million to ensure that only applicants that have the capacity for a considerable impact on trade and investment are eligible for the promotion.

Unlike IBCs, TISOs are usually only eligible for non-tax incentives[9]. Those applying for benefits under a TISO will be required to prepare documents explaining the scope of their service processes and other corporate information such as its source of funds, manpower requirements, and marketing plans.  Furthermore, the debt-to-equity ratio must not exceed 3:1.

For more information about IBCs and TISOs or the new scope of activities announced by the BOI, please contact us at [email protected] or using the contact form provided on this page.

 

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[1] An International Business Centre (IBC) is a company incorporated under the laws of Thailand for the purpose of providing administrative services, technical services, supporting services, or financial management services to its associated enterprises, or conducting international trade

[2] A Treasury Centre (TC) manages foreign currency funds for its Conglomerate Group (CG) both in Thailand and overseas.

[3] Conglomerate Group (CG) means a group of companies consisting of a parent company, affiliated companies, companies with related business, or companies with business relationship that entrust the TC to manage foreign currencies on their behalf, according to the rules as prescribed.

[4] Corporate Income Tax (CIT) rate may be reduced to

1. 8% if the IBC incurs expenditure paid to recipients in Thailand of 60 million Baht in the accounting period; or
2. 5% if the IBC incurs expenditure paid to recipients in Thailand of 300 million Baht in the accounting period; or
3. 3% if the IBC incurs expenditure paid to recipients in Thailand of 600 million Baht in the accounting period.

[5] The exemption from Withholding Tax (WHT) on

1. dividends paid by the IBC to companies or juristic partnerships incorporated under foreign laws and not carrying on business in Thailand; and/or
2. On interests paid by the IBC to companies or juristic partnerships incorporated under foreign law and not carrying on business in Thailand but only from loans taken out by the IBC to relend to its associated enterprises in Thailand or overseas for the purpose of providing financial management services

[6] An exemption from specific business tax (SBT) may be possible on the gross receipts received from providing financial management services to associated enterprises in Thailand or overseas.

[7] A reduction in personal income tax (PIT) rate may be possible from the progressive rates (maximum 35%) to 15% for expatriate employees working for the IBC

[8] The following business activities are covered by the TISO promotion:

1. Monitoring and/or servicing associated enterprises, including providing or renting out offices or factory buildings to associated enterprises; or
2. Advisory services on business operations, except those engaged in buying and selling securities and foreign currency exchange. As for accounting, legal, advertising, architectural and civil engineering businesses, the business license must be obtained from the Department of Business Development or related governmental agencies prior to submitting the investment promotion application; or
3. Information services on goods sourcing; or
4. Engineering and technical services, except those related to architecture and civil engineering; or
5. Business activities related to machinery, engines, tools and equipment such as ➢ importing for wholesaling; or
6. Training services; or
7. Installation, maintenance, and repair; and calibration. or
8. Wholesaling products manufactured in Thailand; or
9. International business process outsourcing whose services are provided through telecommunication networks, such as administrative services, finance and accounting services, human resource services, sales, and marketing services,

[9] The most important TISO incentives are the following:

1. 100% foreign ownership of the promoted company; and
2. Potentially right of land ownership, limited to the following:
   1. Land for the establishment of offices for promoted projects must not exceed five (5) rai (one (1) rai equals 1,600 sqm); and
   2. Land for the residences of executives or experts must not exceed one (1) rai; and
   3. Land for the residences of employees must not exceed two (2) rai.