Thailand wooing IHQs to service Indo-China

THAILAND is offering a raft of tax and other incentives for companies setting up Interna- tional Headquarters to service their subsidiaries in the region and beyond . . . 

UNDER a new strategic plan developed by its military government, Thailand hopes to evolve from a manufacturing/assembling base for Southeast Asia to a “trading” nation.

In so doing, it is seeking to capitalise on its central location in so-called ‘continental’ ASEAN to service its less-developed neigh- bours — Vietnam, Burma, Laos and Cambodia.

Thailand is offering a rich array of tax and other incentives to entice foreign — and domestic — Thai companies to use Thailand as their international headquarters. Rules have also been changed to allow 100 per cent owner- ship in an expanded list of activities, such as treasury and trading. 

Duangjai Asawachintachit, Deputy Secretary General of the Thailand Board of Investment, told a business audience in Sydney in July that Thailand wants to attract companies to set up internationa 

headquarters which can service their subsidiaries in the region and beyond.

Duangjai says the Government has widened the role of International Headquarters (IHQs) based in Thailand. Previously, they were not permitted to engage in trading, but under changes brought in by the current Government, these restrictions have been lifted.

Another important change, she says, is that IHQs will be able to set up treasury centres to take advantage of Thailand’s well-developed financial services infrastructure.

“Our Ministry of Finance offers attractive special treatment for these companies, and they will be eligible for tax exemption for up to 15 years,” Duangjai says. These companies will also be able to bring in expatriate staff on a flat rate of 15 per cent personal income tax.

Thailand hopes that incoming IHQs will be involved in research and development — a function that will again be rewarded with fur- ther incentives. Wholly-owned corporate structures will be permitted for IHQs.

“These centres will enhance Thailand’s advantage as a trading hub. When a company, for example an Australian company, sets up an entity in Thailand to do trading — and is involved with sourcing goods from Australia for Vietnam, for example, or vice versa — such trading transactions will not attract tax.

Duangjai says Thailand has opened its economy to foreign investors, and they can now own up to 100 per cent of businesses, with a small number of exceptions — such as fisheries or dairy, where a majority Thai interest remains a requirement. The Thai Government is ramping up initiatives to take advantage of Thailand’s strategic location as the crossroads of ASEAN as it readies itself for implementation 

of the ASEAN Economic Community (AEC) by the end of this year.

Duangjai says that, with more than 600 million people, ASEAN as a regional grouping has a bigger market than the NAFTA countries, or the European Union.

More significantly, she points out that the purchasing power of ASEAN’s population is poised for growth because the region remains possibly the fastest-growing in the world.

Since staging a coup to seize power in 2013, Thailand’s military Government has drawn up a new strategy to further develop the Thai economy. Its plan includes establishment of 12 special economic zones along the Greater Mekong Sub-region and at the border with its neighbours to spread economic activities to these areas, selected for their potential synergic connection with adjoining towns.

Six of those special economic zones will be set up this year.

Over the next eight years, Thailand plans to spend US$76 billion on infrastructure, mainly on railways, because the region is not well served by rail, she says.

Thailand’s new transportation development strategies (2015-2022) consist of five key programmes, aiming to reduce the cost of logistics and transportation to improve the competitiveness of the economy.

Duangjai says Bangkok will get a new Skytrain, and the subway will be expanded. Allocations have also been made for port development, including a new port at the border with Burma, called Dawei.

She says that if this port is built, it will greatly reduce the cost of shipments from Asia to major markets in the west.

Despite perceived political uncertainty in the wake of the coup, Thailand saw an uptick in foreign direct investment to US$35 billion by mid-2014 — compared with US$24 billion in the previous year. The number of applications to BOI jumped 39 per cent, and, in terms of val- ue, the increase was more than 110 per cent.

The sharp increase in investment value was due to the launch of Thailand’s Eco Car 2 programmes, she says, for which 10 international carmakers have submitted applications.

The Government is committed to substitut- ing conventional energy with renewable energy, she says. And, although it may not get to its target, Thailand has, nevertheless, set a target of 25 per cent of all energy used in the country to be renewable energy. As a result, she says, BOI has received “hundreds” of applications from companies wanting to start up renewable energy operations.

She notes that many of these are from small to medium-sized companies, some with no more than five employees. In fact, she adds, for- eign investors in Thailand are increasingly SMEs.