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Investment Opportunities in Thailand

With an industrialized and emerging economy, there are diverse business opportunities in Thailand for foreigner investors. The country is experiencing robust growth with rapidly growing population and rising exports. Also, Thailand market economy is second largest next to Indonesia in the South East Asian Region.

The country is one of the best options for investors, as it provides skilled workforce, liberal economic policies and strategic location as an entrance to the greater Mekong region. Thailand provides a striking and modern legal structure for foreign investment with economy assistance from the regional zing. With newer and investor-friendly investment policies in place and political stability, the country is now one of the most attractive destinations in the Asean region.

Irrespective of several investment disputes during FDI (Foreign Direct Investment) as a means of endorsing economic development, technology transfer and employment. Thailand welcomes investment from countries all around the globe and try to avoid relying on any sole country as a source of investment.

Thailand is country of attractive beauty and is truly the land of smiles with hospitable people and historical treasures. The country offers the world-class cuisine, incredible natural beauty; relaxed lifestyle and tropical climate are some of the main attractions of doing business in Thailand. Opening a business in Thailand is the best way to earn a comfortable living and enjoy the charmed lifestyle in the Kingdom. It is the second prevalent economy among the other ten nations in ASEAN. Thailand has abundant natural resources, like rice, timber and precious and semi-precious stones. Tourism, jewelry, textile and electronic goods are also some of the major players which add to its GDP.

Starting a business in Thailand was not considered a straightforward process which has now changed for these good.

The fresh investment policies  encourage foreign investors while sustaining the economic growth. The framework comprises of a blend of merit and non-tax incentives, elimination of zoning limitations applicable to foreign investors, and other benefits. The application of these new investment policies will have a positive result over investment choices for foreigners. All of these new policies intend to promote investment for restructuring the economic. It is believed that the investment policy will energetically develop the following investment opportunities in Thailand for foreigners in 2016.

Investments in Property

Most of the foreigners visiting Thailand, staying in the country for some time develop interest in owning a home, be it an a condominium, an apartment or a house. Furthermore, since owning a home is common in these countries, foreigners coming from countries like the United States, UK and the likes wishes to buy home in Thailand. Hence, investing in property markets or real estate in 2016 is an absolutely wise decision. There are many reasons to invest in real estate in Thailand:

  • The property prices are very attractive, and the property owners can anticipate higher rental incomes as compared to most of the other countries.
  • There is no tax on property and no tax on inheritance. Further, the country does not have any confiscatory taxes on assets.
  • An investor can expect minimum return on investment of 6 percent to 8 percent and capital appreciation of 5 percent to 10 percent a year.
  • Thailand offers hassle-free and straightforward procedures for buying a property.

Foreign residents are not eligible to own land in the country, however, owning a freehold flat by a foreign national is permitted. Also, a foreign national is allowed to invest into a leasehold property and usually, the tenure is for 30 years and is renewable.

Investing in Financial Market

Over the last decade, Thailand’s stock market has been performing extremely well. Thailand is now an export hub with substantial growth and dynamic market performance.

Thai stocks display stability and growth. Most of the decent picks on the SET(Stock Exchange of Thailand) come from infrastructure, healthcare and industrial sectors. Thai stocks and bonds are good investment options in 2016 in spite of their comparative below-average performance in the past. The reason behind this theory is that the Thai stocks and bonds have real growth potential.

Board of Investments (BOI) has been providing incentives for large investors which are coming from foreign country, boosting Thai economy. In the recent time, Thai government is also making compromises by giving up land ownership or rights to foreign stakeholders, which may have been unthinkable in the past. But all these efforts are towards future betterment, keeping in view the best investment opportunities in Thailand.

As Startup Specialists in Thailand, we have worked in 15+ Industries and have compiled a market research report for each industries which maybe a useful read before doing an investment in Thailand. Click here to read more about the Industries in Thailand

Thailand is now regarded as the region’s most striking destination for foreign investment. Thai government has come up with different strategies and is now providing many enticements and incentives to lure the foreign investors. These incentives comprises of tax exemptions and various substantial concessions, import duty exemptions and permission to own land. Still, ownership of land by the foreigners is not allowed outright.

Foreign Business Act governs and outlines the categories and types of businesses which are open to the foreigners. The Act also forms the regulations and laws and restrictions for specific segments such as real estate, insurance business and financial services. In order to run the business effectively in Thailand, you need knowledge about its Foreign Business Act, tax laws and legal system.

It takes 33 days on an average to setup a business in Thailand as compared to a minimum of 38 days in most of the other countries. Construction and manual labor and is very reasonable as compared to most of the other nations. The large, intelligent and adaptable workforce upsurges the potential for success and development of Thai business. Some of the advantages of starting a business in Thailand include:

An Open Economy

The society, specifically the business community, is very warm and welcoming to foreign companies and investment wishing to institute operations in the country. Establishments setting up business in Thailand will find the systems and the infrastructure ready to begin operating effectively.

Diversified Manufacturing Sector

Thailand has a very active and large manufacturing sector which produces a diverse range of goods which includes fish products, toys, furniture, rubber and jewelry. These manufacturing and FMCG’s have made Thailand a regional leader in commerce and trade.

Pro-active Policies of the Government

The government here is an innovative and forward-thinking body that aggressively encourages socioeconomic progress and development. The Thai authorities strongly embolden the foreign investment in both financial and in the local workforce, and its policies over last few years has invited foreign organizations and businesses.

Adaptable and Cost-effective Workforce

The country has an adaptable and large workforce. As per the BOI(Board of Investment), literacy rates reach 94 percent for men and 90 percent for women, which allow foreign investors to find intellectual workforce with the prospects of further development. Apart from being educated and flexible, the Thai workforce is also one of the most cost-effective in terms of pay in the region with the daily wage averaging to 203 THB which is equivalent to as low as $6.

In the year 2015, the Thai government announced two new programs to boost its competitiveness and establish itself as an economic hub of Asia under Royal Decrees referring to International Trading Centre and the International Headquarters.

These programs include incentive packages provided by the Board of Investment and the Revenue Department.

International Headquarters (IHQ)

International headquarters has been defined by Thailand as a company which is incorporated in Thailand and which offers any of an extensive list of services to its associated enterprises or branches in Thailand.The services consists of business planning, managerial services, coordination, research and development, procurement, human resources, marketing and sales and few financial services such as lending or borrowing in local currency.

International Headquarters which qualify under the above mentioned Royal Decrees are eligible for the below mentioned corporate income tax incentives for a period 15 years: Income which are exempt from CIT includes:

  • Income which is derived from technical services or managerial services, supporting services, or financial services to associated enterprises which are recognized under foreign laws;
  • Royalties which are received from associated enterprises established under the foreign laws;
  • Dividends which are received from associated enterprises incorporated under the foreign laws;
  • Capital gains that are received from sale of shares of associated enterprises incorporated under foreign laws;
  • Income which has been derived from buying and selling goods overseas, provided that such goods are not imported except for transit or trans-shipment purposes under the Thai Customs law;
  • Income resulting from international trade related facilities and services provided to juristic persons recognized under foreign laws, provided that such income has been received from or in a foreign country.

The Revenue Department also have decreased the withholding rates and personal income tax for gross income and taxed benefits which are paid to expat International Headquarter employees to 15 percent, the gross revenues received from loaning to associated enterprises has been exempted from specific business tax, and has also approved final corporate income tax exemptions for interest and dividends paid to juristic enterprises and foreign companies having no operations in Thailand by the International Headquarter on loans which are borrowed in turn by the Headquarter to the associated enterprises.

Revenue Department Incentives for International Trading Centre

For an outstanding 15 accounting years, an International Trade Centre is eligible to CIT exemption on:

  • Income derived from buying and selling of goods outside of Thailand; and
  • Income resulting from international trade related services to foreign juristic persons that is received in or from a foreign country.

Also, the rates of personal income tax are also decreased to 15% on gross income and taxed benefits which are paid to expat employees. Lastly, dividends received from the International Trade Centre’s tax exempt income to a foreign company with no involvement in Thai operations are also exempt from tax.

Subject to certain conditions, the following are the incentives available from BOI:

  •  Permission for foreign investors to own land
  • Permission to operate under 100% foreign ownership
  • Work permit and Visa privileges for foreign technicians and experts  as many as needed
  • Import duties exemptions on machinery for R&D (research and development) and training activities
  • Corporate income tax exemption for up to 8 years
  • Deduction of Transportation, Electricity and Water Costs
  • Permission to remit foreign currency abroad
  • Deduction of Project’s Infrastructure Installation
  • Exemption of import duty on raw or essential materials used in the manufacturing of export products  for 5 years

The following are some promoted activities which BOI Thailand offers as special privileges:

  • Agriculture & Agricultural Products
  • Projects with direct involvement in technological and human resource development
  • Industrial zones for environmental preservation, Waste water treatment
  • Mining, Ceramics & Basic Metals
  • Light Industry
  • Metal Products, Machinery & Transport Equipment
  • Electronics Industry & Electrical Appliances
  • Chemicals, Paper & Plastics
  • Software

Under the new policy draft, the BOI plans to shift its investment promotion focus to 10 target industries, including

  1. Infrastructure and Logistics series
  2. Primary Industries
  3. Medical & Scientific Equipment
  4. Renewable Energy and Environmental Services
  5. Business Support Services Industries
  6. Advanced Core Technologies
  7. Food and Agricultural Processing
  8. Hospitality & Wellness
  9. Automotive and other Transport Equipment
  10. The Electronics and Appliances Industry.

In addition, incentives will be given to new regional industry clusters such as food processing industries, a change from the previous zoning-based policy. The benefits provided to the project, which has been further encouraged by the new strategy, will be divided into two categories, basic incentives and additional merit-based incentives. BOI focuses on promoting the activities of investment projects that are beneficial to the country. Read More

The Board of Investment provides similar incentives based on similar conditions to International Trade Centers as it does to International Headquarters.The Business Development department of its Ministry of Commerce also agreed to decrease the time duration for allowing the requests for foreign business licenses and certificates from 30 to 15 days for corporations endorsed by the Board of Investment and from 60 to 30 days for businesses which are not promoted by the board. Additionally, the Bank of Thailand, the central bank of the country, has also approved relaxing of foreign currency restraints for both International Headquarters and International Trade Centers.

Double Depreciation Expense
A company which acquires new assets from November 3, 2015 to December 31, 2016 is eligible to claim double depreciation. Assets which qualify for double depreciation include machinery, tools, equipment, vehicle, computers, software and building. Incentive:

Public-Private Partnership
The approval process for Public-Private Partnership has been shortened from 25 to 9 months.

Research & Development Promotion for Automobile Industry
Automobile industries which use Thailand for research and development prototypes will be allowed tax incentives for eligible R&D centers which include excise tax, VAT, import duty and depreciation.

Triple Research & Development Tax Expense
Tax deduction up to three times will be allowed for expense which relates to R&D of innovation and technology. R&D expenditures which are incurred between 2015 to 2019 are eligible for such tax deduction.

Thailand Future Fund
Thai Government has also introduced an investment opportunity amounting to 100 billion baht pooling national infrastructure projects which also offers a minimum guaranteed return.

Special Economic Zones Privileges

  • Improved privileges from the Board of Investment on investment promotion
  • Reduction in the corporate income tax (CIT) rate from 20 percent to 10 percent
  • Fee waiver for two-years on loan guarantee by the TCGC (Thai Credit Guarantee Corporation)
  • Super incentives: 8 years exemption in CIT, with an additional 50 percent reduction for 5-years, and exemption on excise duty on Machinery.
  • Other targeted incentives: 3-8 years of exemption of CIT with an additional 50 percent reduction for further 5 years.

Thailand’s government is looking to begin construction of projects under a $45 billion (1.5 trillion baht) investment plan prior the kingdom’s likely return to the democracy late next year. Allowing laws for the Eastern Economic Corridor lead must be in place by the closure of 2017 for bolstering investor confidence, and construction of planned infrastructure might begin next year.

The Government views the eastern seaboard project as crucial for persuading advanced industries and are complementing airport, port and railway capacity, with tax breaks for luring private-sector investment. The Thai government is looking to develop classy and erudite industries like robotics, digital technology and aviation maintenance in the corridor’s three eastern provinces of Chachoengsao, Rayong and Chonburi.

The Thai administration has wooed companies like Lockheed Martin Corp., Airbus SE, Alibaba Group Holding Ltd. and ’sSikorsky Aircraft for assessing the corridor’s prospect. Earlier this year, the government hosted several Japanese companies in Thailand for marketing investment opportunities.

The Thai economy boasts a flourishing, vigorous medical industry which leads Southeast Asia and is also well-known globally.  From the leading medical tourism sector to rising sectors in medical devices, academic research and pharmaceuticals and implants, the country’s medical sector offers an abundance of opportunities, for entrepreneurs and investors eyeing for largescale growth opportunities in medical field.

Relative to its neighbors and also to global leaders, Thailand has a huge healthcare sector which is the leading priority for the government of Thailand.   The country tops the list in the ASEAN group with respect to expenditure on public healthcare, with 14 percent of the country’s budget allotted to healthcare.  Although western countries outperform all the countries in this region (the United States at 17 percent, the United Kingdom at 9 percent), Thailand heads the Asian countries in its commitment to healthcare.

As said, the medical and biotechnology sectors are the main concern for the BOI and finds significant incentives for encouraging business partnerships and foreign investment.  Biotechnology R&D and specific medical devices could be exempted from the corporate income tax bucket for a period up to 8 years, and other medical devices could be exempted for 3-5 years.  Furthermore, firms in the medical or biotechnology fields are qualified for exemption for duties to be paid on imported components and raw materials.

Over and above the BOI, the Thai government has various active programs for encouraging R&D of innovative pharmaceuticals, devices, and several medical products and services.  The NSTDA offers channels of communication between the private sector and Thai research institutions.  The government of Thailand has also created Thailand Science Park and Thailand Centre of Excellence for Life Sciences for promoting research and development.  The Thai National Innovation Agency funds up to 90 percent of research and development expenses by supported Thai companies and offers interest-free loans to start-ups.