The late Minister Josep Piqué, who passed away a few weeks ago, was one of the few politicians with enough vision to advocate for investment in Thailand and the need for a stronger and more determined Spanish presence, both publicly and privately, in Southeast Asia. This region, boosted by new organizations and treaties such as the ASEAN Economic Community (2015) and the Regional Comprehensive Economic Partnership (RCEP) (2020), continues to grow in recent years. This growth led Piqué to acknowledge, in line with previous statements by Robert D. Kaplan and C.R. Boxer, that “whoever wins Southeast Asia, wins the world.” At present, the world market consists of over 660 million consumers, with an annual GDP of €2.76 trillion and the potential to become the fourth largest economy globally in the coming years.
Among the countries within this region, Thailand stands out as offering significant opportunities for foreign investors, further enhanced by Chinese companies relocating parts of their supply chain to Thailand. This trend is particularly notable in sectors like electronics (hard drives, semiconductors, diodes, and capacitors), automotive (electric vehicles), and spare parts. Alongside these sectors, other areas with promising investment opportunities in Thailand include infrastructure (transportation, ports, airports, water, energy, waste management), healthcare (medical devices), digital economy (cloud computing, Internet of Things, data analytics), agriculture (“smart farming” technologies), and highly skilled professionals (infrastructure, logistics, digital economy) presenting noteworthy investment prospects.
The granting of incentives, which complements an attractive framework for foreign investors, is contingent upon the nature of the sector being invested in. The Thai government has classified eligible activities into two groups, “A” and “B”, based on their significance. Activities in group “A” may access both fiscal and non-fiscal incentives, while those in group “B” are eligible for non-fiscal incentives and potentially tariff exemptions. Group “A” includes research and development activities (A1), infrastructure-related activities with advanced technologies (A2 or A3), or activities that add value to national resources and strengthen the supply chain (A4). On the other hand, group “B” comprises activities related to auxiliary industries that are essential for the value chain (B1-B2).
In the case of research and development activities in Thailand, if the investment in this sector reaches a minimum of $5.5 million or 1% of total sales in the first three years, exemption from corporate tax (20%) can extend up to thirteen years; for infrastructure activities with advanced technologies, up to eight years; and for activities that add value to national resources and strengthen the supply chain without being high-tech, up to three years. When discussing fiscal incentives, it is important to mention those related to startups, whether investments are made by individuals, corporations, or corporate venture capital in specific industries or activities such as aviation and logistics, agriculture and biotechnology, or defense and education. These investments qualify for exemptions in personal income tax and corporate tax proportional to the invested capital.
In this context, it is essential to mention the Thailand Board of Investment (BOI) and its role in providing incentives, services, and information. According to the Investment Promotion Act of 1977, amended in 2001 and 2017, especially within the Five-Year Investment Promotion Strategy 2023-2027, the BOI is empowered to grant fiscal and non-fiscal incentives to Thai and foreign companies engaging in activities within Thailand, particularly in areas promoted by the Board. These include Investment Promotion Zones (in twenty provinces from Kalasin to Ubon Ratchatami), Special Economic Zones (on the borders with Myanmar, Laos, and Cambodia), and the Eastern Economic Corridor (in three provinces: Rayong, Chonburi, and Chachoengsao).
Finally, concerning investment mechanisms related to investment in Thailand, foreign investors wishing to establish a presence in the country generally prefer limited liability companies over branches or international business centers. If they aim to own 100% of the capital and exceed the 49% limit stipulated by current regulations – specifically under the Foreign Business Act – they must obtain the corresponding license from the BOI. Otherwise, the remaining 51% must be held by a local partner. This arrangement can be controlled through the issuance of common and preferred shares and voting rights limitations. Additionally, investors must consider activities that are prohibited (e.g., fishing) or require approval from the Cabinet (national security, natural resources) or the Ministry of Commerce (engineering, tourism, food and beverages) according to the accompanying lists in the regulations.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
