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BOI: New Measures to Promote Thailand’s Automotive Parts Industry

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BOI: New Measures to Promote Thailand’s Automotive Parts Industry

Introduction:

On June 28, 2024, the Thailand Board of Investment (BOI) unveiled new investment promotion measures aimed at bolstering the country’s automotive parts industry. These measures, detailed in the BOI Announcement No. 11/2024, are designed to motivate and encourage automotive parts manufacturers to enhance their production capabilities and facilitate their transition to new industries.

Background:

As the global automotive industry shifts towards electric vehicles (EVs), Thailand, a leading automotive hub, recognizes the need to support both traditional combustion engine vehicle manufacturers and emerging EV parts producers. The BOI’s new measures aim to encourage manufacturers to modernize their machinery, invest in personnel training, and adopt advanced technologies. This approach is intended to enhance efficiency and competitiveness, positioning Thailand to thrive in the evolving automotive landscape and explore new industry opportunities.

Eligibility Criteria:

To qualify for support under these measures, entrepreneurs must meet the following criteria:

  1. Operational Status: The project must be currently operational, regardless of previous promotion status. Projects that were previously promoted must either no longer be eligible for corporate income tax exemptions and reductions or must have never received such benefits.
  2. Investment Plan: Applicants must submit a comprehensive investment plan to the BOI, outlining strategies for industry upgrade or transition. This plan should address technological advancements, industry standards, and workforce development.
  3. Minimum Investment: A minimum investment of 1 million baht is required, excluding land costs and working capital. The investment value will be calculated based on: a. Machinery and equipment b. Standards certification for the new industry c. Consultancy fees for production enhancement or transition d. Employee training for relevant technology or courses e. Software, programs, or information systems investments f. Cloud services or data center usage

Application Deadline:

Interested parties must submit their applications for promotion under this announcement no later than the last business day of 2025.

Benefits for Eligible Projects:

Upon approval and receipt of a promotion certificate, eligible projects will be granted the following benefits:

  1. Machinery Import Duties Exemption: Full exemption on import duties for qualifying machinery.
  2. Corporate Income Tax Exemption: A three-year corporate income tax exemption, calculated as follows:
    • 50% of the project investment (excluding land and working capital)
    • 100% of the project investment (excluding land and working capital) if at least 30% of the changed machinery’s value supports the domestic automatic machinery manufacturing industry

Conclusion:

These new measures reflect Thailand’s commitment to maintaining its position as a key player in the global automotive industry. By incentivizing modernization and technological adoption, the BOI aims to ensure that Thailand’s automotive parts sector remains competitive and adaptable in the face of evolving industry trends, particularly the shift towards electric vehicles.

Key Takeaways:

  1. Modernization Focus: The BOI is encouraging manufacturers to adopt advanced technologies, modernize machinery, and invest in personnel training to enhance efficiency and competitiveness.
  2. Comprehensive Eligibility Criteria: Applicants must demonstrate a commitment to industry upgrade or transition, meet minimum investment thresholds, and adhere to specific investment guidelines.
  3. Attractive Financial Incentives: Eligible projects benefit from exemptions on import duties and corporate income tax.
  4. Time-Sensitive Opportunity: Investment promotion applications must be submitted by the end of 2025, emphasizing the need for timely action by interested parties.

Author: Panisa Suwanmatajarn, Managing Partner.

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