Draft New EEC Notification on the Incentives for the Operators in Special Economic Promotional Zone (Thailand)

2. EEC Incentives Granted in Special Economic Promotional Zone

I: Incentives under Current Notifications

Under Section 48 of the Eastern Economic Corridor Act of 2018 (the “EEC Act”), an operator in the Special Economic Promotional Zone can obtain one or more incentives, for example, right to ownership of land for business operation or condominium unit for business operation or residence, right to bring in foreigners, right to tax and duties exemption or reduction. The EEC Policy Committee may grant incentives to each operator differently by considering the purpose of the establishment of each Special Economic Promotional Zone. As the EEC Act only stipulates the outline of each incentive, the incentives provided as well as the procedure to obtain such incentives under the EEC Act are neither clear nor certain.

In addition to the EEC Act, currently, there are only 2 EEC Notifications, i.e., (i) EEC Notification Re: Incentives for Operator in Special Economic Promotional Zone for Special Business of 2022 dated 15 August 2022 and (ii) EEC Notification Re: Incentives for Operator of E-Commerce for Smart Product Management Center in Special Economic Promotional Zone for Industrial Business related to E-Commerce Business of 2019 dated 3 July 2019, issued pursuant to the EEC Act, which stipulate certain requirements and incentives for the operators. However, both EEC Notifications only prescribe requirement and incentives for certain Special Economic Promotional Zone e.g., industry and digital innovation promotion zone, genomic medicine of Burapha University (Bang San), or for specific business i.e., e-commerce of smart product management center where the operator is required to fulfil requirements prior to obtaining any incentives.

In furtherance of the EEC Act, the Thailand Board of Investment (“BOI”) issued the BOI Notification No. 17/2565 Re: Investment Promotion Measure for EEC Area dated 8 December 2022 (“BOI Notification 17/2565”) which became effective earlier this year. Under the BOI Notification 17/2566, operators undertaking the targeted activity (in Group A1+, A1-A4 of the BOI) in 3 provinces in EEC i.e., Chacheongsao, Chonburi and Rayong Province were permitted to obtain additional incentives, e.g., additional corporate income tax (“CIT”) exemption for 2 years for activity in Group A1+, CIT reduction for net profit gained from investment at the rate of 50% of a normal rate for 3 years as from the date of expiration of CIT exemption for activity in Group A1-A4, subject to the activity project engaging in human resources development or research and development of technology and innovation and fulfilling other requirements specified therein. Compared to the above EEC Act and the EEC Notifications, the BOI Notification 17/2565 prescribes incentives more explicitly. The operator in the EEC may choose to apply for the incentives from either BOI or the EEC Policy Committee. Incentives granted by BOI and the EEC Policy Committee to the operator in the EEC will not be in addition to one another.

Except for those stated above, there are no notifications detailing incentives prescribed under the EEC Act for other operators and business sectors.

II: Incentives under New Draft Notification

This year, in response to the Government’s policy on attracting foreign investment though granting incentives, the EEC Policy Committee prepared the draft of the EEC Notification Re: Incentives for Operators in Special Economic Promotional Zone (the “Draft”) and planned to promulgate the Draft by end of December 2023. Based on the Draft, it is expected to become effective from 1 January 2024 onwards. Upon coming into effect, the Draft will repeal the 2 EEC Notifications, mentioned above.

Unlike the current EEC Notifications which prescribe requirement and incentives for certain Special Economic Promotional Zone, the Draft provides the incentives which cover all the Special Economic Promotional Zone within the EEC. According to the Draft, incentives will be granted to the operator of special targeted industries※1 provided that the operator possesses necessary qualifications and completes the procedure of application.

To apply for incentives under the Draft, as a first step, the operator is required to obtain permission to be an operator in Special Economic Promotional Zone by presenting its qualifications※2 and submitting documents and evidence※3 to the EEC office. The Secretary-General of EEC will consider the application and if approved, the EEC office shall issue the permission to be an operator in Special Economic Promotional Zone.

Regarding incentives under the Draft, the operator in Special Economic Promotional Zone or any person shall submit the investment proposal to the EEC Office with the relevant details in the prescribed form. The EEC Policy Committee will consider and negotiate incentives with the applicant. Once the resolution on incentives is concluded, the EEC Office shall send the letter informing the decision to the applicant within 7 days and the applicant shall submit the acceptance letter to the EEC Office within 2 months from the date of receiving such letter. After the submission of acceptance letter, the EEC Office shall prepare an agreement on incentives with the applicant (the “Incentives Agreement”). The incentives that can potentially be granted to an applicant are classified with the details in the table below:

Conclusion

As abovementioned, the Government intended to notify the Draft by December 2023. As of the date of this newsletter, the public hearing process for the Draft has been completed. Normally, after public hearing, public comments need to be taken into account for consideration, and this process may take some time. Thus, it is uncertain that the Draft will be enacted by December 2023 and become effective in January 2024 as planned. However, since the Draft will set clearer procedure and criteria for incentives, the operator must take note of the Draft provisions and make the requisite preparations in order to gain benefit therefrom.