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IBC (International Business Centre)
Thailand's International Business Centre tax regime under the Royal Decree on Tax Exemption (No. 674) B.E. 2561 (2018) — 3%/5%/8% corporate-income-tax brackets, substance requirements, and Revenue Department application process.
Overview
The International Business Centre (IBC / ศูนย์กลางธุรกิจระหว่างประเทศ) regime, introduced by the Royal Decree Issued Under the Revenue Code Governing Tax Exemption (No. 674) B.E. 2561 (2018) and related Revenue Department Notifications, replaced the older International Headquarters (IHQ) and International Trading Centre (ITC) regimes. An IBC is a Thai-incorporated company that provides management, technical, support, treasury, or trading services to its overseas affiliates. Qualifying IBCs pay reduced corporate income tax — 3%, 5% or 8% — on qualifying income, instead of the standard 20%, provided they meet specified substance requirements relating to qualifying expenditure and number of qualifying employees in Thailand.
Key Points:
- Legal basis: Royal Decree on Tax Exemption (No. 674) B.E. 2561 (2018) — พระราชกฤษฎีกาออกตามความในประมวลรัษฎากร ว่าด้วยการยกเว้นรัษฎากร (ฉบับที่ 674) พ.ศ. 2561
- Reduced CIT rates: 8% (annual qualifying expenditure ≥ THB 60 million in Thailand), 5% (≥ THB 300 million), 3% (≥ THB 600 million)
- Minimum 10 skilled employees in Thailand performing the IBC's functions (5 if the IBC provides only treasury services)
- Minimum paid-up capital: THB 10 million
- Qualifying services to affiliates: management; technical, support, financial-management (cash pooling, in-house lending in foreign currency under BOT licence); international trading
- Personal-income-tax flat rate of 15% for qualifying foreign expatriate employees
- Application to the Revenue Department (กรมสรรพากร) — typically 60-90 working days
Qualifying Services
An IBC must provide one or more of the specified services to its affiliated enterprises (foreign or Thai). Income from non-qualifying services is taxed at the standard 20% CIT rate.
- General management and business-planning services
- Procurement of raw materials and parts
- Research and development
- Technical-support services
- Marketing and sales-promotion services
- Human-resource management and training
- Financial-advisory services
- Economic and investment analysis
- Credit control and management
- Treasury-centre activities (cash pooling, foreign-currency in-house lending) subject to Bank of Thailand (BOT / ธนาคารแห่งประเทศไทย) licensing
- International trading of goods that pass through (or do not pass through) Thailand
Substance Requirements
To preserve the reduced CIT rate, the IBC must maintain real economic substance in Thailand, in line with the OECD BEPS Action 5 framework.
- At least 10 skilled employees physically working in Thailand performing IBC functions (5 for treasury-only IBCs)
- Annual qualifying expenditure in Thailand of at least THB 60 million (for the 8% bracket); THB 300m for 5%; THB 600m for 3%
- Local office and infrastructure proportionate to declared functions
- Documented service agreements and arm's-length transfer-pricing positions (cross-referenced with Transfer Pricing Act B.E. 2562 (2019) / 2019)
Application and Ongoing Compliance
IBC status is granted by the Revenue Department upon application and verified annually through tax filings.
- Submit application form, group structure chart, list of affiliates, draft service agreements, and forecast of qualifying expenditure
- Revenue Department review (typically 60-90 working days)
- On approval, IBC status applies from the first day of the accounting period in which it is granted (or a forward date)
- File annual CIT return (PND 50) flagging IBC income and supporting qualifying-expenditure schedule
- Maintain transfer-pricing documentation for intra-group services
- Notify Revenue Department of any material change in qualifying expenditure or employee headcount
Relevance for Foreign Nationals
Multinationals consolidating regional management, treasury, or trading functions in Bangkok regularly evaluate the IBC regime against Singapore's RHQ scheme and Malaysia's PSH regime. The IBC's 3% bracket is among the lowest tax rates available for genuine regional-headquarters substance in Southeast Asia, but it requires real headcount and qualifying spend in Thailand — paper headquarters will not survive a Revenue Department audit.
Related Topics
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