New BOI Incentives: (i) PCB Supply Chain; (ii) International Concerts, Festivals & Sporting Events; and (iii) EV Policies
On 28 March 2024, the Board of Investment (“BOI“) announced the clarification of incentives it will provide to promote foreign investment in the manufacture of printed circuit boards (“PCBs“), with the intention of covering the entire PCB supply chain. BOI’s modified definition of PCB business clarifies that qualified types of businesses relating to PCB include manufacturers of parts and providers of related services such as lamination, drilling, plating, routing and electrical testing, among others.
The expanded definition of PCB business will also now include producers of PCB parts such as copper clad laminate (CCL), flexible copper clad laminate (FCCL), and PREPREG, as well as producers of raw materials such as dry film, transfer film, and backup board.
In the same press release, BOI also announced new incentives to attract the organisation of large international concerts, sporting events and festivals. Organisers of large international events with an investment, or expenses, of not less than THB100 million (US$2.8 million), will receive incentives in the form of an import duty exemption on equipment. BOI will also facilitate the temporary entry into the country of the required foreign staff. This will not cover the organisation of conferences and trade shows.
Prior to this, on 21 February 2024, Thailand’s National Electric Vehicle Policy Committee (EV Board), chaired by Prime Minister Srettha Thavisin, approved (i) incentives to encourage companies to transition their commercial fleets of large trucks and buses to battery electric vehicles (BEV), and (ii) cash grants for electronic vehicles (“EV“) battery cells manufacturers. The intention of the two policies is to expand the country’s support of the EV ecosystem and reinforce its status as an EV manufacturing hub.
Potential Upcoming Exemption of New Service Businesses from Application of Foreign Business Act
The conduct of business in Thailand by a foreign person, foreign juristic person or Thai registered company with half or more than half of the share capital owned by foreigners is regulated by the provisions of the Foreign Business Act B.E. 2542 (1999) (“FBA“), which came into effect on 4 March 2000. The FBA is administered by the Ministry of Commerce (“MOC“), more specifically, the Department of Business Development (“DBD“).
Schedule Three of the FBA lists the businesses which foreigners are prohibited from conducting unless with the approval of the Director General of DBD of MOC. Clause 21 of Schedule Three includes “the provision of services other than those specified by the Ministerial Regulations”. Clause 21 operates as a catch-all provision which encompasses most “consulting” and service-oriented businesses. Certain service businesses have already been excluded from the FBA by way of Ministerial Regulations.
From 21 February 2024 to 15 March 2024, DBD held a public hearing to consider a draft ministerial regulation excluding nine other service businesses from this list:
- Telecommunications service businesses under the first type of telecommunications business license according to the Telecommunications Business Operations Act;
- Treasury Center Services Businesses under laws regarding exchange control;
- Software development businesses;
- Service business for administrative, human resources, and technological management for affiliated companies;
- Debt guarantee service businesses, only within Thailand, for affiliated companies;
- Partial space rental businesses for installing electronic devices used in financial services, vending machines, or automatic services to facilitate a company that has already received a foreign business license;
- Petroleum exploration service businesses;
- Various forms of lending businesses with securities under the Securities and Exchange laws, as well as the derivatives laws; and
- Service businesses that act as brokers, dealers, advisors, or fund managers for derivatives contracts where such goods and variables are not subject to the Derivatives Act B.E. 2546 (2003).
It is important to note that, in addition to the FBA restrictions, specific legislation may also set limits on the level of foreign share ownership in areas such as commercial banking, telecommunications, insurance, commercial transportation, aviation, commercial fishing, mining and commodity exporting.
Virtual Banking Licences: New Guidelines Released
On 4 March 2024, the Notification of the Ministry of Finance Re: Criteria, Methods, and Conditions of the Application for a Licence and Issuance of a Licence to Operate a Virtual Bank (“Notification“), dated 20 February 2024, was published in the Government Gazette. The Notification provides guidance on the process for applying for a virtual bank licence, as well as the relevant criteria, requirements and conditions.
The Notification comes into effect on 19 March 2024. A “virtual bank” regulated under this Notification is one which operates entirely online. Such virtual banks are potentially able to offer efficient financial services through digital channels, which would be principally operated by an operator who has the necessary expertise in technology, digital services, and data analytics. Conducting banking services online could save operational costs and also promote accessibility to financial services for underserved or unserved cuvstomers.
For more information, click here to read our Legal Update.
Removal of VAT Exemption Proposed
Thailand is currently considering the enactment of legislation where imports below THB1,500 in value will no longer enjoy a valued-added tax (“VAT“) exemption. Regarding the timeline, the Revenue Department will submit a draft law to the Ministry of Finance in May 2024 for subsequent consideration by the Cabinet of Thailand.
The purpose of this imposition of VAT is to address concerns of small and medium enterprises (SMEs) and local businesses regarding the proliferation of low value e-commerce goods which enter the country and are VAT exempt. If the draft law is passed, the sale will attract VAT at the online checkout, and it will be necessary for sellers to register for VAT and remit the VAT amounts.
This measure is in line with the measures that have applied to VAT on digital services since 2021.
New Cybersecurity Subordinate Laws
The National Cyber Security Committee of Thailand published two notifications on 18 January 2024 that require critical information infrastructure operators (“CIIOs“) to classify their data and information systems and implement cybersecurity protection measures.
The Notification on Standards for Determination of the Security Category for Data or Information Systems requires CIIOs to self-assess their data and information systems and assign them a risk level (low, medium, or high) based on their confidentiality, integrity, and availability. The assessment should also consider the potential impact on the CIIOs, the users, the public, and national security.
The Notification on Minimum Standards for Data or Information Systems requires CIIOs to implement minimum cybersecurity measures according to the risk level of their data and information systems. The measures include implementing a cybersecurity audit plan, risk assessment, incident response plan, and various risk protection, detection, response, and recovery actions.
The notifications will take effect one year after the date of publication, or on 18 January 2025.
For more information, click here to read our Legal Update.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice
