On September 16, 2021, Thailand’s Board of Investment (BOI) published BOI Notification No. Sor. 3/2564, extending the scope of certain promoted activities to include lending money to related companies in Thailand and overseas.
The new notification brings these activities within the scope of “trade and investment support offices” (TISOs) and “international business centers” (IBCs)—two of the most popular categories of promoted activity under the BOI. Foreign-majority owned companies may now apply for either TISO or IBC promotion to cover lending funds to affiliates as an alternative to applying for a foreign business license, which can be less predictable. BOI-promoted companies that already have a BOI certificate in the TISO or IBC categories can amend the BOI certificate to cover this kind of lending activity.
The amended scope of the promoted activities for both TISO and IBC categories now provides more flexibility for BOI-promoted companies to provide financial services to their affiliates. Previously this was restricted—especially when foreign-majority-owned companies wished to lend money offshore.
Under the new notification, promoted business activities under the TISO category now include lending to “affiliated and group companies,” while those under the IBC category now include lending to “associated enterprises.” These terms are defined separately in Thai laws and regulations, but in practice the definitions are very similar and generally refer to companies that share structural connections. Companies must check carefully to make sure that their proposed structure falls within the appropriate legal definition before applying to the BOI for investment promotion.
Lending business activities now permitted under the IBC and TISO categories include loans in foreign currencies to associated enterprises and affiliated and group companies located overseas, and loans in Thai baht to associated enterprises and affiliated group companies in Thailand. The new BOI notification also allows loans in Thai baht to associated enterprises and affiliated and group companies in Cambodia, Laos, Malaysia, Myanmar, and Vietnam for trading or business investment purposes in those countries or in Thailand.
A promoted company cannot conduct lending business exclusively, but must conduct at least one other TISO business activity or IBC business activity (excluding treasury center and international trade business activities), depending on the category of the promoted company. The scope of the lending business must not fall under the scope of a treasury center business as defined by the BOI and the Bank of Thailand (BOT). Moreover, offshore lending must still comply with BOT exchange requirements.
The two categories differ in terms of tax incentives—no tax incentives are available for TISO lending activities, while tax incentives for IBC projects depend predominantly on the criteria for the special tax incentives scheme as laid out by the Revenue Department (RD), which has not yet recognized lending as an IBC business activity under its own IBC tax scheme. While the full impact of this is still unclear, it could mean that revenue from a promoted lending business might not be eligible for tax incentives under the RD’s IBC tax scheme.
Foreign-majority owned entities in Thailand may not engage in any financial service business activity, except for exempted money lending to affiliated and group companies in Thailand as prescribed by the relevant ministerial regulation issued under the Foreign Business Act B.E. 2542 (1999), unless they are granted either a foreign business license or a foreign business certificate for this purpose. The chances of obtaining either of these are low.