Thailand Issues Tax Incentives for Investments in Local Startups
Thailand is offering tax incentives for investments into local startups in 12 industries. We list the eligibility criteria, targeted industries, and tax benefits available.
In March 2022, the Thai cabinet approved income tax exemptions for investments in Thai startups whether directly or indirectly through individuals, companies, or through corporate venture capital (CVC). The startup must operate in one of the 12 government-promoted industries.
According to the Global Startup Ecosystem Index 2021, Thailand ranked 50th out of 100 countries in the world for the best startup ecosystems. The country is ranked fourth in ASEAN after Singapore (10th), Malaysia (40th), and Indonesia (45th). Bangkok climbed 19 places from 90th to 71st in the world.
Through the tax exemptions, funding for Thai startups could reach 320 billion baht (US$9.3 billion) by 2026 and result in 400,000 direct or indirect employment.
These benefits are available until June 30, 2032.
Who is eligible?
The income tax incentives are given to the following forms of investments:
- Direct investments: Undertaken by individuals, companies or partnerships registered in Thailand, and companies or partnerships registered abroad; and
- Investments via venture capital: Consisting of corporate venture capital (CVC), private equity (PE) trusts, and shareholders of CVC funds and unitholders of PE trusts.
The CVC fund or PE trust can be registered in Thailand or abroad. If the CVC or PE is established under Thai law, it must be registered with the Securities and Exchange Commission and have paid-up capital on the last day of the accounting period of 20 million baht (US$581,000) or more.
If the CVC fund or PE trust fails to meet this criterion, they could have their rights to the tax exemption revoked.
What are the targeted industries?
Investors can only invest in startups engaging in ‘targeted industries/activities’ as prescribed by the Committee on Policy for National Competitive Enhancement for Targeted Industries. The government agencies responsible for the issuance of the certification of the target activities is the National Innovation Agency (NIA) and the National Science and Technology Development Agency (NSTDA).
The targeted industries are divided into three groups:
New S-Curve industries:
- Aviation and logistics;
- Biofuels and biochemicals;
- Digital economy; and
- Medical hub.
- Smart electronics;
- Medical and wellness tourism;
- Affluent tourism;
- Agriculture and biotechnology; and
- Food for the future.
- Defense and education; and
- Human resource development.
What are the tax benefits?
An individual or entity registered in Thailand or abroad will be eligible for individual income tax or corporate income tax (CIT) exemption for profits derived from the transfer of shares in Thai startups.
Prior to the transfer of shares, the shareholder must have held the shares for at least 24 months. Further, the startup must engage in one of the target industries and derive at least 80 percent of its revenue from the targeted activities in two consecutive accounting periods before the shares are transferred.
Investments via venture capital
The tax benefits provided to investments via venture capital varies according to the level of investment of the CVC fund or PE trust, as well as the amount of investments of shareholders of the CVC fund and unitholders of PE trusts.
Tax benefits for CVC funds and PE trusts
The private equity trust is not subject to CIT. As for CVC funds, they are eligible for CIT exemption for profits derived from the transfer of shares in Thai startups. The Thai startup must have earned at least 80 percent of their revenue from the targeted activities for two consecutive accounting periods before the transfer of the shares.
Tax benefits for shareholders of CVC funds and unitholders of PE trusts
Shareholders of CVC funds and unitholders of PE trusts are eligible for personal and CIT tax exemptions on capital gains derived from the disposal of shares from the CVC funds and PE trusts. The tax exemptions are in proportion to the amount they invested.
Prior to the transfer of shares of the CVC fund or PE trust, the shareholder must have held the share for at least 24 months. Further, the CVC fund or PE trust must have invested in a startup that derived at least 80 percent of their revenue from the targeted activities, also for two consecutive accounting periods.
In addition, shareholders and unitholders are eligible for personal and CIT tax exemptions for their gains from the dissolution of CVC funds and PE trusts.
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