Boi Application And It Market In Thailand

[Ericol]

Hello,

we are currently about to submit an application for the BOI as a smaller software company located in Europe. While we discussed things already to a certain degree with the overseas office, there are still a few open questions. Maybe someone who went through the process can provide some help here.

The investment amount is slightly above the minimum requirement of 1 mio baht for software companies (5.8. according to the BOI classifications). Aside from the founders, no foreign personnel will be brought along or is planned to be employed. Main reason for the application is the 100% foreign ownership and tax exemptions.

The BOI mentions an interview after the application, but we have precious few details regarding that.

- Who sits on this interview committee (administration, IT experts, ...) ?

- On what aspects does the interview focus (technology transfer, feasability...) ?

- How flexible are they in their schedule (right now it's not particularly easy to get/rebook affordable flights to Bangkok) ?

Are there any general "hooks" in regards to the application? For the most part it seems self-explaining, but maybe there is something between the lines that isn't being mentioned in the forefront?

How do you see IT personnel in Thailand (from an employers point of view)? Are the people skilled, but lack the jobs (comparable to India), or is there a shortage of sufficiently skilled people? This is especially in regards to MySQL, JSP, JavaBeans, XML, XSL, PHP, HTML).

Many thanks and regards,

Ericol

[cclub75]

You mean, you apply for BOI, even before considering the human ressources issues ?

I wish you good luck... I dont know about BOI for software, but BOI for industry can be.... pain in the xxxx.

Very difficult to find a thai staff who can manage all this matter (because of course as a foreigner, you will be lost if you try to manage it yourself).

BOI needs a lot of paper work, before and AFTER. Are you ready for it ?

And I should say that BOI for a small business like yours.... maybe is not worth it.

The main incentives are import taxes exemption for machinery, equipment, and income taxe for export sales. What I mean is : BOI is good for big investment.

One of the other BOI privileges is to own land. Why do you focus on the foreign ownership of the company ? You can have a 100 % farang company without BOI. I dont believe that software is on the list of probihited activities...

Hello,

we are currently about to submit an application for the BOI as a smaller software company located in Europe. While we discussed things already to a certain degree with the overseas office, there are still a few open questions. Maybe someone who went through the process can provide some help here.

The investment amount is slightly above the minimum requirement of 1 mio baht for software companies (5.8. according to the BOI classifications). Aside from the founders, no foreign personnel will be brought along or is planned to be employed. Main reason for the application is the 100% foreign ownership and tax exemptions.

The BOI mentions an interview after the application, but we have precious few details regarding that.

- Who sits on this interview committee (administration, IT experts, ...) ?

- On what aspects does the interview focus (technology transfer, feasability...) ?

- How flexible are they in their schedule (right now it's not particularly easy to get/rebook affordable flights to Bangkok) ?

Are there any general "hooks" in regards to the application? For the most part it seems self-explaining, but maybe there is something between the lines that isn't being mentioned in the forefront?

How do you see IT personnel in Thailand (from an employers point of view)? Are the people skilled, but lack the jobs (comparable to India), or is there a shortage of sufficiently skilled people? This is especially in regards to MySQL, JSP, JavaBeans, XML, XSL, PHP, HTML).

Many thanks and regards,

Ericol

<{POST_SNAPBACK}>

[Ericol]

You mean, you apply for BOI, even before considering the human ressources issues ?

I am not overly concerned with our personnel requirements. I would like to get a better picture though of how the BOI sees certain issues and what they expect from investing companies especially in regards to technology transfer. Thus I was wondering how one would describe the general situation on the IT market.

I wish you good luck... I dont know about BOI for software, but BOI for industry can be.... pain in the xxxx.

From what we saw so far, they are quite eager to get software companies and seemed quite supportive

Very difficult to find a thai staff who can manage all this matter (because of course as a foreigner, you will be lost if you try to manage it yourself).

BOI needs a lot of paper work, before and AFTER. Are you ready for it ?

And I should say that BOI for a small business like yours.... maybe is not worth it.

The main incentives are import taxes exemption for machinery, equipment, and income taxe for export sales. What I mean is : BOI is good for big investment.

One of the other BOI privileges is to own land. Why do you focus on the foreign ownership of the company ? You can have a 100 % farang company without BOI. I dont believe that software is on the list of probihited activities...

Since we would export 99.9% of our products, it still makes sense due to the income tax exemption.

According to your post you have some experience with BOI applications. What where the biggest obstacles you encountered? Can you share your impressions/experience in regards to the BOI interview (after the application has been submitted)?

Thanks and regards

Ericol

[Sunbelt Asia]

Just depends...

We just had BOI approval for a 498 million Baht factory and the interview was just one question "What is the knowledge that your key employees will learn versus other non BOI companies? " The interview lasted 90 seconds!

Other interviews can be a ppt and questions and answers and can be an hour.

How flexible are they in their schedule (right now it's not particularly easy to get/rebook affordable flights to Bangkok) ?

They are flexible.

www.lawyer.th.com

[Butterfly]

Since we would export 99.9% of our products, it still makes sense due to the income tax exemption.

Ericol

<{POST_SNAPBACK}>

Obviously you didn't do your homework. Exporting companies in Thailand are 100% tax exempt, even without BOI

[Ericol]

Obviously you didn't do your homework. Exporting companies in Thailand are 100% tax exempt, even without BOI

<{POST_SNAPBACK}>

That's indeed news to me - can you please provide me with a source / link ?

I thought this was no longer the case (according to the article pasted below):

The WTO ruling was that corporate tax exemptions for export businesses violated WTO rules. Pursuant to the WTO's agreement on Subsidies and Counterfeiting measures, Thailand had been ordered to cease benefits by the end of 2002. Thailand had requested a ten year exemption, but this was turned down by the WTO which will now only allow a one year extension.

(source: http://www.sgalegal.com/Thailand%20Law%20News%20Jan03.html)

Edited November 15, 2005 by Ericol

[Butterfly]

Interesting article. I guess Thai government officials didn't get that memo

I am pretty confident that the local tax authority will not tax you if you are 100% export. They might ask for some silly minimum tax but nothing big or progressive.

However you will have to pay the regular social tax for your employees (it's about 4%)

after re-reading this article, this seems to affect only companies under BOI provisions (privileged companies). However, this is not the case here. Without BOI, export companies in Thailand are 100% tax exempt, this is not in violation of any WTO rules. Countries have the right to choose how they tax companies regardless of the WTO (which regulates international trades, not local tax issues, BOI is there to boost Thailand International trade which might explain the WTO ruling). Go see Thai government website for more details

Going through BOI is a waste of time unless you have annual sales of 1mil Euro and plan to invest something like 10 or 20 millions baht in the business

Also you will have to be setup in those special BOI zone in the middle of nowhere. Not fun when you want to take a drink after work.

Edited November 15, 2005 by Butterfly

[Ericol]

Thanks a lot for your help so far.

after re-reading this article, this seems to affect only companies under BOI provisions (privileged companies). However, this is not the case here. Without BOI, export companies in Thailand are 100% tax exempt, this is not in violation of any WTO rules. Countries have the right to choose how they tax companies regardless of the WTO (which regulates international trades, not local tax issues, BOI is there to boost Thailand International trade which might explain the WTO ruling). Go see Thai government website for more details

From the WTO's point of view that would be strange. They seem to consider nearly unrestricted tax exemptions based soley on export quotas to be harmful. It would be strange to make a difference only because of the government institution that grants them.

I researched the official government site as well as several other sources, but I was unable to verify the corporate tax exemption for export-only companies. Is this more of an informal arrangement or is it indeed regulated by law?

In case there is anyone who can provide legal advice regarding the tax exemption for exporting businesses I would be interested in scheduling a consultation (please contact me via PM).

Also you will have to be setup in those special BOI zone in the middle of nowhere. Not fun when you want to take a drink after work.

<{POST_SNAPBACK}>

The Thailand Software Park in Bangkok wouldn't be that bad in regards to its location. Unfortunately though, that one seems to be full. Right now we are waiting for a statement how they proceed in those cases. I somehow can't imagine that they are satisfied with 40 software companies - that doesn't really suffice for a new Silicon Valley / Chennai.

[cclub75]

From what we saw so far, they are quite eager to get software companies and seemed quite supportive

As other people said, indeed their are "flexible".

But you have to weight the advantages.

I still believe that BOI is more suited for medium to big investment.

For software, I have no idea of their requirements.

Since we would export 99.9% of our products, it still makes sense due to the income tax exemption.

According to your post you have some experience with BOI applications. What where the biggest obstacles you encountered? Can you share your impressions/experience in regards to the BOI interview (after the application has been submitted)?

Paper work, reporting, and for some issues (allocating BOI privilege when you make part for machines for instance, that you sell both on the local and to export... raw materials... tooling machines...) the feeling that... well.... sometimes they don't have the answer... or that it depends of the who you are talking to inside the BOI.

But once again, they are flexible about the process. The problem is : sometimes businesses need to reduce uncertainety, and thus the thai "flexibility" might be a danger (a director say to you one day "green light" about one question and another one will tell you "red light" later)...

Since your goal is taxe exemption and that you work with services, why don't you consider... a simple off shore scheme ?

Your thai entity makes business, developp the software, sell to an off shore company (that you own), and this entity resell. Thus, you keep the main shrunk of the profit offshore (0 % taxes). And you cover your charges for thai structure, you pay a little income taxe, and everybody is happy... And you save all the BOI circus.

Easy to do with software !

[Ericol]

From what we saw so far, they are quite eager to get software companies and seemed quite supportive

As other people said, indeed their are "flexible".

But you have to weight the advantages.

I still believe that BOI is more suited for medium to big investment.

For software, I have no idea of their requirements.

Since we would export 99.9% of our products, it still makes sense due to the income tax exemption.

According to your post you have some experience with BOI applications. What where the biggest obstacles you encountered? Can you share your impressions/experience in regards to the BOI interview (after the application has been submitted)?

Paper work, reporting, and for some issues (allocating BOI privilege when you make part for machines for instance, that you sell both on the local and to export... raw materials... tooling machines...) the feeling that... well.... sometimes they don't have the answer... or that it depends of the who you are talking to inside the BOI.

But once again, they are flexible about the process. The problem is : sometimes businesses need to reduce uncertainety, and thus the thai "flexibility" might be a danger (a director say to you one day "green light" about one question and another one will tell you "red light" later)...

Since your goal is taxe exemption and that you work with services, why don't you consider... a simple off shore scheme ?

Your thai entity makes business, developp the software, sell to an off shore company (that you own), and this entity resell. Thus, you keep the main shrunk of the profit offshore (0 % taxes). And you cover your charges for thai structure, you pay a little income taxe, and everybody is happy... And you save all the BOI circus.

Easy to do with software !

<{POST_SNAPBACK}>

I am a little skeptical with offshore setups - that just seems to ask for lots of trouble and legal expenses.

For now we'll try to go with the BOI route and see if that works out.