Foreigners employed at international headquarters will enjoy a lower income tax rate for 15 years

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BANGKOK -- Thailand's military junta has expanded a program offering tax incentives for companies serving as headquarters for subsidiaries throughout the region, hoping to spark more foreign investment to revive a sluggish economy.

At a Thailand Board of Investment briefing Tuesday, Deputy Prime Minister Pridiyathorn Devakula said the policy will lead the Thai economy into the next generation of growth. The new incentives were set up under his leadership. Though they were implemented at the end of April, Tuesday's meeting marked the first official explanation of the details.

Broader base

In Thailand, international headquarters are defined as companies that manage domestic and foreign subsidiaries, handling areas such as business planning, research and development, marketing and human resources management. Businesses that serve financial management functions, including fundraising and procuring materials and parts, also qualify. Though the revised program covers both foreign and domestic companies, it is aimed at high-value-added industries that can help Thailand add to its technical know-how or foster talent.

The major changes to the program expand the tax breaks, let financial management companies be considered international headquarters and eliminate a rule requiring regional headquarters to earn at least 50% of their revenue overseas. Overseas revenue includes dividend income from foreign affiliates and compensation for support services.



Thailand has a high concentration of production bases, particularly for the auto industry. Manufacturing subsidiaries often handle regional management functions, and domestic sales exceed overseas revenue in nearly all cases. Under the old system, businesses that were not pure holding companies or something similar could not qualify as regional operating headquarters.

Many of the international headquarters under the old system were industry giants, such as Honda Motor and Toyota Motor. Fewer than 150 companies had been approved at the end of 2014 -- only about one-third of the figure in Singapore. Removing the revenue requirement makes the program easier to take advantage of, said the Japanese Chamber of Commerce, Bangkok. Companies in a wider range of industries are expected to use the incentives, including small and midsize enterprises.

Generous incentives

The benefits have improved as well. Corporate tax breaks have been extended to 15 years from 10. Overseas revenue, which qualified for partial tax breaks under the old system, is now completely exempt. Foreigners employed at international headquarters will enjoy a lower income tax rate for 15 years, up from eight previously.

And as companies with financial management functions now qualify as international headquarters, such eligible businesses are permitted to handle in Thailand procurement of funds, payment settlement and currency transactions for their subsidiaries.