Business in Thailand Free Trade Zones can give foreign direct investors in Thailand some extra advantage in their business and investments. Foreign business entries in these Trade Zones receive special attention from the Board of Investment with a prominent presence in the Eastern Economic Corridor (EEC) of Thailand. Before we move into the advantages of starting business in the Free Trade Zones of Thailand, let us brief you with the methods of entering thereto.
There are the few questions we receive from clients who enquire about starting their business in the Free Trade Zones of Thailand. The answers will help you to have a better business understanding of the concept!
Frequently Asked Questions on Thailand Free Trade Zones
What are the types of Free Trade Zones (FTZ) in Thailand?
- In Thailand, there are primarily two types of FTZ. Industrial Estates and Special Economic Zones are two of them. Industrial estates are typically facilitate activities by providing warehouses, storage facilities, and other support infrastructure. Companies who establish themselves in certain locations can also benefit from tax breaks on raw material imports.
- Special Economic Zones, on the other hand, are typically positioned near major transportation networks in order to simplify exporting and the transportation of goods and services. They give corporate tax holidays to businesses incorporated there, in addition to tax breaks on imported materials.
For what benefits should we set up our business in a FTZ?
- The main advantage of establishing a business in an FTZ is the tax advantages available to enterprises that incorporate in the area. Customs and merchandise delivered to the FTZ are exempt from import duties, VAT, and excise tax.
- Business owners also want to establish themselves in an FTZ since it gives them access to experienced workers. These workers holds certain skill sets as well as support infrastructure to help them conduct their operations.
Which Free Zone should I set up my company in?
- Based on your company’s business activities and long-term goals, Konrad Legal Company Limited will assist you with FTZ company formation. In general, we recommend forming a business in the Eastern Special Development Zone (ESDZ). It is because of the large amount of government and private investment in the region. Moreover, you will have the ease to obtain a business visa, and the numerous tax benefits. These benefits are available to companies that incorporate there under government policy. As a result, if your firm fits the qualifying criteria, it is advantageous to incorporate in ESDZ.
- Although the ESDZ is not one of Thailand’s ten special economic zones, it is a free trade zone in compliance with the Eastern Special Development Zone Act.
How can I set up a company in a Free Trade Zone?
- In Thailand, different FTZs have varying eligibility requirements. You must first register your Thailand firm with the Department of Business Development before establishing an FTZ. If you want to start up in an industrial estate, your firm must mostly focus on industrial activities. If you want to set up in a Special Economic Zone, your business must primarily focus on export and import. You can apply for a Free Zone License from the relevant regulating authority. It is possible only if your company meets the qualifying standards for the specific FTZ.
Can a company in a FTZ be wholly foreign owned?
- Yes, companies incorporated in Thailand’s FTZs can be fully owned by foreigners. In most cases, foreign ownership in a Thai corporation is restricted to a maximum of 49 percent of shareholders. Companies that have been certified by the BOI are eligible for 100% foreign ownership.
What is the purpose of a FTZ?
- A FTZ’s principal aim is to allow inflow & outflow of goods and commodities of the zone without being subject to tariffs or customs regulations. This will make the movement of products and services between the FTZ and other regions or nations easier and faster. The major goal of the FTZ is to make distribution, storage, and transportation of commodities easier. Therefore, it will usually contain the necessary distribution and storage facilities.
Advantages of Thailand Free Trade Zones
Tax benefits of Thailand FTZs
- For the first eight years, companies in a specific industry in a Thailand SEZ are exempt from corporate income tax. After that, they’ll get a 50% corporate income tax deduction for the next five years.
- Merchandise import for business activities in a Thailand Free Zone is exempt from import tariffs. Additionally, there are exemptions in VAT, excise tax, and, if applicable, alcohol tax. Machinery and equipment, foreign products, and items transferred from other FTZs are examples of qualified imported merchandise for exemption.
- Transportation of domestic goods to an FTZ are VAT-free.
Facilitation of Export Activities
- You can re-export finished products to other countries, import commodities or domestic raw materials to an FTZ for commercial activities. All of them are free from standard quality control requirements and any other similar regulations.
- In FTZs, there are usually no import or internal taxes. Moreover, there are no tariffs on scrap, waste, or yield loss from an imported component.
Access to skilled labour in Thailand FTZs
- Many MNCs are located in Thailand’s Free Zones. Therefore, when an MNC hire local personnel, they will transfer management or technical skills to local Thai employees.
- Many multinational corporations are also prepared to invest in job training programmes to help their local staff improve their abilities.
Provision of support infrastructure in Thailand FTZs
- To assist activity inside the territory, many Free Zones include a well-integrated transportation and communication network.
- To support export and import activity, they also provide warehouse, distribution, and other storage facilities.
Hopefully, this article educated you with the process and benefits of setting up your business in Thailand FTZz. Now you can comfortably make decision of incorporating your business in the FTZs of Thailand, it is great. Please fill up the form for further assistance in the process. Additionally, you can schedule a free consultation with Konrad Legal. We will help you understand the concept and incorporate your business in Thailand Free Trade Zones. Additionally, you can email us at officer@konradlegal.com.
