BOI Tax Incentives Explained: Sections 31, 32 and the A1-B2 Activity Categories

TL;DR

Thailand's Investment Promotion Act B.E. 2520 (1977) (พระราชบัญญัติส่งเสริมการลงทุน พ.ศ. 2520), as amended (most recently in B.E. 2560 [2017] and B.E. 2565 [2022]), authorises the Board of Investment (BOI / สำนักงานคณะกรรมการส่งเสริมการลงทุน) to grant promoted companies a package of tax and non-tax privileges. The corporate income tax holiday is granted under Section 31 (3 to 13 years, depending on activity category and bonuses); a 50% reduction in corporate income tax for a further 5 years follows under Section 32 for certain activities. Activities are classified A1, A2, A3, A4 (high-value) and B1, B2 (supporting), each with different tax-holiday lengths and caps. Non-tax privileges include 100% foreign ownership of the promoted company, work-permit and visa facilitation, machinery and raw-material import-duty exemptions, and the right to own land for the promoted activity under Section 27. Applications are submitted through the BOI's e-Investment Promotion system.

The Investment Promotion Act B.E. 2520 (1977) Framework

The Investment Promotion Act creates a parallel regulatory regime for selected investment projects. Promoted companies are exempted from many of the restrictions in the Foreign Business Act B.E. 2542 (1999), the Land Code Act B.E. 2497 (1954), and various tariff regulations, in exchange for delivering investments that the government has identified as economically strategic. The Act and its subordinate BOI announcements form the operative framework. The BOI publishes activity lists and incentive matrices through periodic announcements (ประกาศคณะกรรมการส่งเสริมการลงทุน) — the current matrix (Announcement No. 9/2565 and revisions) governs applications submitted from 1 January B.E. 2566 (2023).

Key statutory provisions

• Section 16 — eligibility criteria for promotion (capital, technology, environmental and locational requirements).
• Section 25 — exemption from Foreign Business Act restrictions for the promoted activity.
• Section 27 — permission to own land for the promoted activity.
• Section 28 — exemption or reduction of import duties on machinery.
• Section 29 — exemption or reduction of import duties on raw materials for export production.
• Section 31 — corporate income tax holiday (3-13 years).
• Section 32 — 50% reduction in corporate income tax for 5 years after the Section 31 holiday ends.
• Sections 33-35 — additional deductions for transport, electricity, water and infrastructure costs.

Section 31 — The Corporate Income Tax Holiday

Section 31 grants promoted companies a complete exemption from corporate income tax on profits derived from the promoted activity. The duration depends on the activity's category. For activities A2-A4 and the lower tier of A1, the cumulative tax-saved amount is capped at the value of the project's investment (excluding the cost of land and working capital). For top-tier A1 activities, there is no cap. Period bonuses for additional R&D, training, area-based investment (Eastern Economic Corridor / EEC), and merit-based criteria can extend the holiday — up to 13 years in combination.

Section 32 — Post-Holiday Tax Reduction

Section 32 provides a follow-on benefit: a 50% reduction in the corporate income tax rate (i.e., 10% rather than 20%) on profits from the promoted activity for an additional 5 years after the Section 31 holiday ends. Section 32 is applied selectively — it is generally available for activities with a Section 31 holiday of 3-5 years (the A3 and A4 tiers), and for activities located in lower-income provinces or special development zones. The combined effect is a meaningful runway of preferential taxation, particularly for capital-intensive projects.

Activity Categories — A1 to B2

The BOI's incentive matrix classifies promoted activities into six tiers. The table summarises the headline incentives. Specific activity coverage is published in the BOI's annual Activities Eligible for Investment Promotion list.

Even B1 and B2 projects, which receive no corporate income tax holiday, retain valuable non-tax privileges — exemption from machinery import duty, foreign-ownership permission, work-permit facilitation, and the right to own land for the promoted activity.

Non-Tax Privileges

Across all categories, BOI-promoted companies benefit from:

• 100% foreign ownership of the promoted company, notwithstanding FBA Section 25. This is the single most valuable non-tax benefit for foreign investors.
• Work-permit and visa facilitation via the BOI's One-Stop Service Centre: expedited B-visa and work-permit issuance for foreign experts, technicians and executives, with reduced minimum capital and Thai-employee ratio rules under Section 24-25.
• Land ownership for the promoted activity under Section 27: the company can own freehold land needed for factory, warehouse, R&D and ancillary infrastructure. Limits: location must be appropriate for the promoted activity; sale of unused land requires BOI approval.
• Foreign-ownership of residence connected to the promoted business is permitted in narrow cases — primarily for foreign experts under separate BOI announcements, with strict caps on residential land area.
• Import-duty exemptions on machinery (Section 28) and on raw materials used in export production (Section 29).
• Additional deductions for utility costs, transport infrastructure, and certain training and R&D expenditures (Sections 33-35).
• Repatriation of capital, dividends and profits in foreign currency without exchange-control restriction.

Eligibility Criteria

Each activity category sets its own minimum criteria. Broad recurring requirements:

• Minimum capital: Generally THB 1 million for the activity (excluding land and working capital), but this varies by activity. Knowledge-based services may have lower thresholds; manufacturing higher.
• Technology level: Activities are classified by their technology profile. R&D projects, advanced manufacturing, and digital-economy services attract higher tiers.
• Location: Investment in lower-income provinces, the Eastern Economic Corridor (EEC) provinces of Chachoengsao, Chonburi and Rayong, or designated Special Economic Zones, attracts location-based bonuses (typically 1-3 additional years of holiday or further deductions).
• Environmental compliance: Approved EIA (Environmental Impact Assessment) where applicable; ISO 14001 certification within 2 years of project commencement.
• Thai employment: Minimum proportion of Thai employees, varying by sector.
• Ownership: Foreign and joint-venture ownership generally permitted across categories. Some activities reserve majority Thai ownership (agriculture, mining).

Application Process via the e-Investment Promotion System

The application is submitted online through the BOI's e-Investment Promotion portal. The standard procedure:

1. Pre-application consultation (optional). The BOI offers free consultations at its head office in Bangkok and provincial offices to confirm category eligibility and prepare the application.
2. Online application. The applicant uploads project details: shareholders, capital structure, business plan, technology description, environmental impact, employment plan, and proposed timeline.
3. BOI review. The BOI Investment Promotion Committee or sub-committee reviews the application. For projects above THB 200 million in capital, the full Board (chaired by the Prime Minister) considers the application.
4. Promotion decision. Decision typically issued within 40-90 working days depending on project size and complexity.
5. Promotion certificate (บัตรส่งเสริม). If approved, the BOI issues a Certificate of Promotion specifying the privileges, conditions, and timelines.
6. Implementation. The company has 6 months to start the promoted activity (extendable in cases of complex construction).
7. Compliance reporting. Annual reports on production, exports, employment, and Thai-content ratios. The BOI inspects sites to verify compliance.

BOI Committee Review and Certificate

The Board of Investment Committee reviews each application against the published criteria and the Cabinet's investment policy. Key review factors:

• Economic and technological merit of the project.
• Capital adequacy and financial feasibility.
• Environmental impact and locational fit.
• Contribution to Thai employment and skills transfer.
• Foreign-currency earning potential (for export-oriented projects).

The Certificate of Promotion is the operative document. It identifies: the promoted activity (by code from the Activities List), the privileges granted (specifying years and caps), the conditions (minimum production capacity, employment ratios, technology transfer commitments), and the implementation timeline. Conditions are binding — failure to meet them results in revocation of privileges and clawback of taxes saved.

Post-Promotion Compliance and Reporting

Compliance is non-trivial. Promoted companies must:

• File annual operations reports (Tor.5/2 form) detailing production, exports, employment, and use of raw materials.
• Apply for permission for any change to the project — relocation, expansion, capital increase, share transfer, machinery substitution.
• Maintain segregated accounting for the promoted activity (the tax holiday applies only to revenue from the promoted activity, not to other revenue).
• Maintain ISO 14001 certification where required.
• Submit to BOI inspections.

Failure to comply: the BOI can revoke the promotion, terminate privileges, and refer the case for clawback of corporate income tax that was exempted under Section 31. Clawback comes with surcharges under the Revenue Code (1.5% per month).

Comparison with EEC Special Incentives

The Eastern Economic Corridor (EEC) — established under the EEC Act B.E. 2561 (2018) covering Chachoengsao, Chonburi and Rayong — overlays the BOI matrix with additional benefits for projects in 11 target industries (next-gen automotive, smart electronics, advanced agriculture, biotech, food processing, robotics, aviation and logistics, biofuels, digital, medical hub, defence). EEC projects can receive up to 15 years of corporate income tax holiday (Section 31 plus EEC bonus) and 50% reductions for 10 further years under EEC-specific announcements. Other special-zone overlays exist for the Southern Border Provinces and 10 Special Economic Zones on the borders.

Common Mistakes

Avoid these traps:

• Applying under the wrong category. The activity codes are specific. Misclassification at application leads to fewer benefits or rejection. Use the BOI's pre-application consultation.
• Failing to maintain segregated accounting. The Section 31 holiday applies only to revenue from the promoted activity. Mixing promoted and non-promoted revenue in one account leads to disputes and clawback.
• Ignoring the implementation timeline. The 6-month start deadline is enforced. Delay without timely extension request results in promotion revocation.
• Treating BOI as a substitute for genuine business operation. A 'shell' BOI promotion without substantive activity will be revoked on inspection.
• Assuming Section 27 land ownership is unrestricted. Land owned under Section 27 must be used for the promoted activity. Sale of surplus land requires BOI approval; misuse triggers loss of land rights.
• Forgetting the cap. For A2-A4, the tax saved is capped at the value of investment (excluding land and working capital). Once the cap is reached, normal corporate income tax resumes even if the holiday years remain.

FAQs

1. Can I apply for BOI promotion for a tourism business (hotel, restaurant, dive shop)?

Generally no. Tourism retail, restaurants and bars are not on the BOI's promoted-activities list. Some related activities — meeting and convention venues, theme parks, cultural centres — are eligible under specific announcements, but standard hotel/restaurant operations are not. For tourism businesses, the routes to lawful foreign participation are the Foreign Business Licence and genuine Thai-majority structures.

2. Does BOI promotion exempt me from VAT?

No. BOI privileges relate to corporate income tax, import duties, foreign ownership and land. Value-added tax (VAT), specific business tax, and withholding tax on cross-border payments are governed by the Revenue Code and apply normally. BOI-promoted exporters can apply for VAT refunds under standard Revenue Department procedures.

3. What is the difference between BOI promotion and Treaty of Amity status?

BOI is an activity-based regime: the company is approved for a specific promoted activity and receives privileges tied to that activity. The Treaty of Amity is a nationality-based regime: US-majority companies receive national-treatment in most lines of business. BOI offers tax holidays; the Treaty does not. A US company can hold both — Treaty status for nationality-based FBA exemption, plus BOI promotion for the additional tax and operational benefits.

4. Can the BOI revoke my promotion if I miss reporting deadlines?

Yes, although the BOI typically issues warnings and offers compliance opportunities before revocation. Persistent non-reporting, material misrepresentation, or substantial deviation from the approved project triggers revocation. Revocation comes with retroactive clawback of taxes exempted plus 1.5% monthly surcharge under the Revenue Code.

5. How long does the BOI process take?

For straightforward projects with capital under THB 200 million, decisions are typically issued in 40 working days. For projects between THB 200 million and 2 billion, the timeline is around 60 working days. Above THB 2 billion, the application goes to the Board itself (chaired by the Prime Minister), which meets approximately monthly — total timeline 90+ working days. Pre-application consultation can shorten the active processing time by ensuring the application is complete on submission.

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