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June 6, 2017

BOI Incentives in Thai Aerospace

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Thai-American Business, Journal of the American Chamber of Commerce in Thailand

The Thai government has identified the aviation industry as a key driver for the country’s economic growth. To spur investment in aerospace manufacturing, the government, through the Board of Investment (BOI), has introduced a number of incentives. The areas of focus include the manufacturing and repair of aircraft and aircraft components.

Most of the incentives involve tax exemptions. These include relief on corporate income tax (CIT) and import duties. Nontax incentives include the right to operate a business with a foreign-majority owned structure, work permits for expatriate workers, foreign land ownership, and permits to take or remit foreign currency abroad. A table highlighting the incentives is provided at the conclusion of this article.

Merit-Based Incentives

Examples of merit-based incentives are as follows:

  • Merits for competitiveness enhancement – These include projects that involve research, technology development and innovation, technology donations, human resource development funds, and IP acquisitions.
  • Merits for development of industrial areas – These are for projects located within an industrial estate or a promoted industrial zone.
  • Merits for decentralization – These include investment projects that are located in 20 designated low-income provinces. The provinces are: Kalasin, Chaiyaphum, Nakhon Phanom, Nan, Bueng Kan, Buri Ram, Phrae, Maha Sarakham, Mukdahan, Mae Hong Son, Yasothon, Roi Et, Si Sa Ket, Sakhon Nakhon, Sa Kaew, Sukhothai, Surin, Nong Bua Lamphu, Ubon Ratchatan, and Amnatcharoen (excluding border provinces in Southern Thailand and Special Economic Development Zones which have separate special incentive packages).

As for the zoning, the BOI used to target zoning clusters for the aerospace industry, but by virtue of a recent BOI notification issued on November 29, 2016 the BOI cancelled the target clusters for the aerospace industry, and allowed projects to be set up in any area (subject to other laws, such as building control laws, town planning laws, etc.).

Industrial Estate

In addition to the incentives, the government is establishing a specialized aerospace industrial estate at U-Tapao-Pattaya International Airport. The plan is being executed in three phases:

  1. The Aerospace Industrial Estate – planned utilization is a total of 80 hectares;
  2. Original Equipment Manufacturers – planned utilization of 50 hectares; and
  3. Maintenance Repair Operation sector – planned utilization of 32 hectares.

Conclusion

Thailand is taking positive measures to promote investment in aviation. If the plans come to fruition, Thailand has the potential to become a central aviation manufacturing hub in Southeast Asia. To ultimately achieve that goal, along with economic incentives, the country must invest in research and development, as well as engineering and aviation training. The BOI has recognized this fact. Hopefully the combination of the right incentives and an improvement in human resources will enable Thailand to raise its aviation sector to new heights.

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