Introducing a 200% Tax Deduction Incentive for Digital Transformation of SMEs

Introducing a 200% Tax Deduction Incentive for Digital Transformation of SMEs

Introduction:

As digital transformation continues to reshape business operations and competitiveness, the Thai Government has introduced a significant tax incentive aimed at encouraging small and medium-sized enterprises (SMEs) to adopt digital technologies. Pursuant to the Royal Decree Issued Under the Revenue Code (No. 802) B.E. 2569 (2026), eligible SMEs are entitled to claim a tax deduction of up to 200% of qualifying expenditures incurred for the acquisition of digital products and services.

The measure forms part of Thailand’s broader strategy to accelerate digital adoption, enhance productivity, and strengthen the competitiveness of domestic businesses in the digital economy.

Overview of the Tax Incentive:

Under the Royal Decree, qualifying SMEs may deduct eligible digital-related expenses at twice the actual amount incurred for corporate income tax purposes. The enhanced deduction applies to expenditures relating to digital products and services procured from vendors or service providers registered or certified by the Digital Economy Promotion Agency (DEPA).

The incentive covers a wide range of digital investments, including:

• Software acquisition and licensing fees;
• Cloud computing and digital platform services;
• Enterprise resource planning (ERP) and business management systems;
• Smart devices and digital hardware;
• Digital technology consulting and implementation services;
• Cybersecurity solutions and related digital services; and
• Other digital products or services approved under the applicable DEPA framework.

The policy is intended to lower the effective cost of digital adoption while encouraging businesses to modernize their operations and improve efficiency.

Eligible Businesses:

To qualify for the enhanced deduction, a taxpayer must satisfy the SME criteria prescribed under the Royal Decree. Specifically, the business must:

• Have paid-up registered capital not exceeding THB 5 million as of the end of the accounting period; and
• Generate annual revenue not exceeding THB 30 million.

Only businesses meeting both conditions are eligible to claim the incentive.

Deduction Amount and Limitation:

Eligible expenditures may be deducted at 200% of the actual amount paid, subject to a maximum qualifying expenditure of THB 300,000.

For example, if an eligible SME incurs THB 150,000 in qualifying software or digital service expenses, it may claim a tax deduction of THB 300,000 when calculating its corporate income tax liability.

The incentive applies to qualifying expenditures incurred between 24 June 2025 and 31 December 2027.

Practical Tax Benefits:

The enhanced deduction effectively reduces the taxable profit of qualifying businesses and lowers their corporate income tax burden.

For instance, if a company purchases an eligible system for THB 300,000:

• Under normal tax rules, the company may deduct THB 300,000 as an expense.
• Under the Royal Decree, the company may deduct THB 600,000.

The additional THB 300,000 deduction reduces taxable income and can generate meaningful tax savings, particularly for growing businesses investing in digital infrastructure.

Beyond the immediate tax benefit, the incentive encourages SMEs to accelerate investments in technology that may improve operational efficiency, data management, customer engagement, and cybersecurity resilience.

Compliance Considerations:

Businesses seeking to utilize the incentive should carefully consider the following legal and tax compliance issues.

Verification of DEPA Registration:

The enhanced deduction is available only for qualifying purchases or services obtained from vendors and service providers that have been registered or certified under the relevant DEPA program. Businesses should conduct appropriate due diligence before entering into transactions.

Qualification of Expenditures:

Not all technology-related expenditures automatically qualify for the enhanced deduction. Businesses should review whether a particular expense falls within the categories recognized by the Royal Decree and relevant implementing regulations.

Interaction with Other Tax Incentives:

Companies receiving benefits under other incentive regimes, including Board of Investment (BOI) promotion programs or research and development tax incentives, should evaluate whether multiple incentives may be claimed concurrently and ensure compliance with any anti-double-dipping restrictions.

Policy Significance:

The introduction of the 200% tax deduction reflects Thailand’s continued commitment to promoting digital transformation among SMEs. By reducing the after-tax cost of digital investment, the Government aims to encourage broader adoption of modern technologies and strengthen the country’s digital economy.

For many SMEs, the measure presents a timely opportunity to invest in software, cloud solutions, cybersecurity systems, and digital business processes while simultaneously benefiting from substantial tax savings.

Key Takeaways:

• Eligible SMEs with paid-up capital of not more than THB 5 million and annual revenue not exceeding THB 30 million may claim a 200% tax deduction for qualifying digital expenditures.
• The incentive applies to expenditures on software, digital services, smart devices, cloud solutions, cybersecurity systems, and other approved digital technologies.
• Qualifying products and services must be purchased from suppliers or service providers registered or certified by DEPA.
• The enhanced deduction is available for expenditures incurred from 24 June 2025 through 31 December 2027.
• The maximum qualifying expenditure eligible for the enhanced deduction is THB 300,000.
• Businesses should maintain comprehensive supporting documentation and verify eligibility requirements before claiming the incentive.
• The measure represents a significant opportunity for SMEs to reduce tax liabilities while accelerating digital transformation initiatives.

Author: Panisa Suwanmatajarn, Managing Partner.

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