Tax incentives for investment in Thai startups: key details
Thailand offers tax incentives for investments in local startups in 14 industries. We list eligibility criteria, targeted industries and available tax benefits.
In March 2022, the Thai cabinet approved income tax exemptions for investments in Thai startups, either directly or indirectly through individuals, businesses or venture capital firms (VCCs). ). The startup must operate in one of the 14 industries promoted by the government.
According to the Global Startup Ecosystem Index 2021, Thailand ranks 50and out of 100 countries worldwide for the best startup ecosystems. The country is ranked fourth in ASEAN after Singapore (10and), Malaysia (40and), and Indonesia (45and). Bangkok climbed 19 places from 90and at 71st in the world.
Thanks to tax exemptions, funding for Thai startups could reach 320 billion baht ($9.3 billion) by 2026 and create 400,000 direct or indirect jobs.
These benefits are available until June 30, 2032.
Who is eligible?
Tax incentives are granted to the following forms of investment:
- Direct investments: made by individuals, companies or partnerships registered in Thailand, and companies or partnerships registered abroad; and
- Investments via venture capital: made up of corporate venture capital (CVC), private equity (PE) trusts, CVC fund shareholders and private equity trust unitholders.
The CVC fund or the 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 ($581,000) or more .
If the CVC fund or PE trust does not meet this test, its tax exemption rights may be revoked.
Which industries are targeted?
Investors can only invest in startups engaged in “target industries/activities,” as prescribed by the National Competitiveness Enhancement Policy Committee for Target Industries. The government agencies responsible for issuing certification for targeted activities are 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:
- Aeronautics and logistics;
- Biofuels and biochemicals;
- Digital Economy ; and
- Medical pole.
- Smart electronics;
- Medical and wellness tourism;
- Affluent tourism;
- Agriculture and biotechnology; and
- Food for the future.
Additional lines of business:
- Defense and Education; and
- Human resource development.
What are the tax benefits?
A person or entity registered in Thailand or abroad will be eligible for exemption from personal income tax or corporation tax (CIT) for profits derived from the transfer of shares in Thai startups.
Prior to the transfer of the shares, the shareholder must have held the shares for at least 24 months. In addition, the startup must engage in one of the target industries and derive at least 80% of its revenue from the targeted activities over two consecutive accounting periods before the transfer of shares.
Investments via venture capital
The tax advantages granted to investments via venture capital vary according to the level of investment of the CVC fund or the PE trust, as well as the amount of the investments of the shareholders of the CVC fund and the unitholders of the 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 the CIT exemption for profits derived from the transfer of shares in Thai startups. The Thai startup must have derived at least 80% of its revenue from the targeted activities for two consecutive accounting periods before the transfer of shares.
Tax Benefits for CVC Fund Shareholders and PE Trust Unitholders
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 of CVC funds and PE trusts. Tax exemptions are proportional to the amount invested.
Prior to transferring shares from the CVC Fund or PE Trust, the shareholder must have held the share for at least 24 months. Additionally, the CVC fund or PE trust must have invested in a startup that has derived at least 80% of its revenue from 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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