Introduction:
Thailand has emerged as a popular destination for companies looking to establish themselves in the software development industry. Thailand’s Board of Investment (BOI) has played a key role in promoting and supporting the growth of the software, digital platforms, and digital content sectors.
Until recently, the BOI investment promotions on offer were limited to newly developed software or substantial modifications made within Thailand. However, a recent notification by the BOI, announced on March 15th, 2024, has expanded the scope of investment promotions to include the modification of software, digital platforms, or digital content.
This article explores the details of this new promotion and its implications for businesses in Thailand.
Key Points
- The Board of Investment (BOI) in Thailand has introduced a new promoted activity for the modification of software, digital platforms, or digital content, expanding eligibility for the existing investment promotions for this category.
- Previously, only newly developed software or substantial modifications made within Thailand qualified for BOI investment promotions, excluding minor modifications.
- The new promotion covers various types of modifications, including API integration, user interface changes, functional enhancements, efficiency improvements, and customizations based on customer requirements.
- To qualify, projects must have a minimum investment of THB 1.5 million, start operations within 12 months, and undertake eligible modification activities.
- Eligible businesses can receive non-tax incentives like 100% foreign ownership, no foreign business restrictions, and no employee quotas, as well as import duty exemptions on machinery.
What is Contained in the BOI’s New Notification?
On March 15, 2024, the BOI issued a new notification that introduced a new promoted activity, the modification of software, digital platforms, or digital content.
The addition of this new activity is a significant development for the software, digital platforms, and digital content sectors as it expanded the eligibility criteria for investment promotions in these sectors.
Prior to this announcement, only newly developed software or substantial modifications made to software within Thailand were eligible for investment promotions. Minor developments or modifications were excluded. However, the new notification now allows businesses to seek investment promotions for the modification of software, digital platforms, or digital content.
What Types of Modifications are Covered by the new Activity
The notification from the BOI provides clarifications on the types of modifications that are eligible for investment promotions. These modifications include:
Modification to connect to other software or services (Application Programming Interface or API): Businesses can now seek investment promotions for making modifications that enable their software or digital platforms to connect with other software or services through APIs.
Modification of user interface (UI), other than adding new languages: Investment promotions can be obtained for making modifications to the user interface of software or digital platforms, excluding the addition of new languages.
Modification of certain functions or properties of the system: Businesses can seek investment promotions for modifying specific functions or properties of their software or digital platforms to accommodate new products or services, customers, or tools/devices.
Modification of the system to improve efficiency or support new equipment: Investment promotions can be obtained for making modifications to the system that enhance efficiency or support new equipment, such as using a new computer language, database, or operating system.
Customized modifications according to customer requirements: Businesses can now seek investment promotions for customized modifications based on customer requirements, excluding installation, configuration, and maintenance.
What are the Eligibility Requirements for Investment Promotions
To qualify for these new investment promotions, businesses must meet certain requirements set by the BOI. The BOI requires the following:
- Projects must have a minimum investment of THB 1.5 million. This will be calculated based on the annual salary expenses of newly hired Thai IT personnel and/or the annual salary expenses of temporary Thai IT personnel.
- Projects must begin their business operations within 12 months of the promotion certificate being issued. No extensions are permitted by the BOI.
- Projects must undertake at least one of the following activities:
- the improvement of existing software,
- development of a digital platform,
- creation of digital content to be sold or provided.
What Incentives are Available for Eligible Businesses?
In order to facilitate economic growth and development in Thailand and attract investment, the BOI offers a wide range of incentives and support measures to both domestic and foreign investors. These incentives are designed to encourage the establishment of new businesses, promote technological innovation, and boost investment in targeted industries aligned with Thailand’s economic priorities and create an attractive and conducive environment for investors.
Under this new promotion for software, digital platforms, or digital content, the BOI offers both Non-Tax and Tax Incentives.
Non-Tax Incentives:
100% Foreign Ownership: While regular Thai Limited companies are typically limited to 49.9% foreign ownership due to the Foreign Business Act, BOI-promoted companies face no such restriction, allowing complete foreign ownership.
Foreign Business Certificate: BOI-promoted firms receive a Foreign Business Certificate, exempting them from the 50+ restricted business categories under the Foreign Business Act. This opens up opportunities for a wider range of business activities in Thailand.
No Employee Quotas: Unlike other structures, BOI-promoted companies face no quotas when hiring foreign skilled employees. For example, Thai Limited Companies typically need a 4:1 ratio of Thai to foreign employees, but this requirement doesn’t apply to BOI-promoted businesses.
Please also note, that under this new promotion, projects may not own land.
Tax Benefits:
While income tax benefits are not provided for this promotion, promoted companies will be eligible for import duty exemption on machinery (if applicable).
Opportunities for Business Operators
The BOI’s new promotion for the modification of software, digital platforms, or digital content presents significant opportunities for business operators in Thailand. It expands the range of activities that qualify for investment promotions, allowing more businesses to benefit from the incentives provided by the BOI. Business operators engaged in relevant businesses or those who have previously applied for investment promotions for the development of software, digital platforms, or digital content should consider taking advantage of this new activity promoted by the BOI.
What Were the Previous Promotions for Software Development in Thailand?
The previous activities the were eligible for a BOI promotion can be found under Section 8.1 – Development of software, digital platforms, or digital content.
To be eligible for a promotion under Section 8.1, applicants must be able to satisfy the following requirements:
- The yearly salary expenditures for Thai information technology (IT) personnel must be at least 1,500,000 THB per year. Previously, this calculation was based on the salaries incurred for Thai information technology personnel after the investment promotion application. However, now as part of the new regulations, personnel hired temporarily after applying for investment promotion can now be included in this calculation. Foreign specialists, shareholders, and directors are not included in this calculation.
- Have a capital investment (excluding land, working capital, and vehicle) of not less than 1 million baht. However, in practice, a minimum capital investment of 1,500,000 THB is often required.
- The project must involve the development of software, digital platforms, or digital content in Thailand in accordance with the guidelines set by the BOI.
- Projects have the option to utilize existing or previously used machinery.
- This investment promotion does not encompass the retail and wholesale of various product types.
Please note that e-commerce is no longer supported as a business activity eligible for a BOI promotion under this criteria.
The new eligible activities show a significant shift from the BOI as now the modification of existing software is eligible for a promotion. Previously only software developed within Thailand was eligible, which did not include any activities related to modification.
Our Thoughts
The Board of Investment (BOI) in Thailand has expanded its scope of promoted activities, and provides additional options for businesses whose activities include software, digital platforms, or digital content. This new notification from the BOI allows such businesses to apply for investment promotions when previously they would not have been eligible. Now more businesses can take advantage of the BOI’s investment promotion package, which includes a range of tax and non-tax benefits.
By expanding the eligibility criteria, the BOI aims to attract more investments and offer exciting opportunities for eligible businesses.
