On March 15, 2024, Thailand’s Board of Investment (BOI) issued a regulation updating its investment incentives for software development and data centers, replacing the previous categories (8.1 for software and digital platforms, and 8.2.1 for data centers) with new classifications.
This update demonstrates the BOI’s focus on enhancing Thailand’s digital economy and technology sector.
New Digital Technology Business Category
Under the newly defined “8.1 Digital Technology Business” category, the BOI differentiates between businesses focused on the creation of new digital solutions and those aiming to enhance existing ones. This category is divided into:
- 8.1.1 Business of developing software or platforms for digital services or content.
- 8.1.2 Business of improving software or platforms for digital services or content.
Development Projects
- CIT Exemption: Projects qualify for an eight-year Corporate Income Tax (CIT) exemption.
- Salary Expenses Inclusion: Now includes the salary costs for Thai IT personnel hired temporarily after the application, with a minimum annual salary expense requirement of THB 1.5 million.
- Project Start Deadline: Operations must commence within 12 months of receiving the promotion certificate, with no extensions for beginning operations or importing machinery.
- Criteria Unchanged: The process for developing software or platforms for digital services/content in Thailand remains as previously specified, excluding retail and wholesale of goods from promotion eligibility.
Investment and Operational Criteria:
- Minimum Investment: Requires at least THB 1.5 million annually in salary expenses for Thai IT personnel, covering both permanent and temporary hires.
- Development Process: Must adhere to specified procedures for producing digital services or content within Thailand.
- Retail and Wholesale Exclusion: Investment promotion is not granted for retail and wholesale of all kinds of goods.
- CIT Exemption Cap: The annual exemption is based on actual expenditures, covering additional salary costs for new Thai IT hires, temporary staff expenses, training for development-related skills, and acquiring quality certifications like ISO 29110 or CMMI Level 2+.
- Machinery Use: Permits the use of existing or secondhand machinery.
- Operation Commencement: Projects must begin within 12 months from the certificate issue date, without the option to extend the machinery importation period.
Improvement Projects
Projects within this subcategory are eligible for specific incentives but do not qualify for CIT exemptions. They must meet the following criteria:
- Salary Requirement: Spend at least 1,500,000 THB annually on salaries for Thai IT personnel, including those hired temporarily after the investment promotion application.
- Improvement Plan Submission: Submit a plan for improving software, platforms, or digital content as required by the BOI.
- Category Stability: Cannot change the business category after selection.
- Machinery Usage: Use of existing or secondhand machinery is allowed.
- Operational Initiation: Must initiate operations within 12 months from receiving the promotion certificate, with no deadline extensions.
- Machinery Importation: Extensions for the machinery importation period are not permitted.
- Land Ownership: Land ownership for the promoted business is not allowed.
Data Centers
Criteria for Data Centers:
- Must provide services such as Server Colocation, Managed Service, Customer Server Backup, Disaster Recovery Services (DRS), and Data Hosting.
- Must install an electrical system capable of supporting an IT Load of no less than 2 MW.
- Must have a primary telecommunications system with high-speed communication lines, comprising at least 4 circuits, including a minimum of 3 domestic circuits with speeds of no less than 10 Gbps each, with a total speed of all circuits not less than 60 Gbps.
- Must be designed for Concurrent Maintainability, ensuring uninterrupted service provision during maintenance or changes to system components.
- Must have an Engine Generator system with Continuous Rating to meet the entire electricity demand, along with backup systems in case of generator failure.
- Must have backup systems for UPS, IT Cooling, and UPS Cooling to immediately take over operations if the main equipment fails, without impacting service provision.
- Must have independent distribution paths for the electrical supply system to ensure reliability and redundancy.
- Must have a comprehensive risk mitigation system to address damages caused by equipment failure or shutdown.
- Must have high-efficiency air conditioning systems with backup, along with comprehensive fire protection systems, to ensure operational safety and security.
- Must maintain a 24-hour security system to safeguard against unauthorized access and security breaches.
- Must obtain ISO/IEC 27001 certification for the Data Center before using tax exemption benefits.
Notable Amendments:
- The previous requirement for data centers to have a minimum area of 3,000 square meters has been removed.
- While ISO/IEC 27001 certification is still required for CIT exemption, there is no longer an explicit requirement to obtain certification before the full operation deadline, offering more flexibility in project timelines.
If you need help starting an IT business in Thailand and accessing BOI incentives, just email me or use the form below.
Photo by Radowan Nakif Rehan on Unsplash