A free zone is a defined area for the benefit of customs duty in the operation of industry, commerce, or other activities that are beneficial to the country's economy. Those wishing to establish a duty-free zone must obtain a permit from the Director-General.
Thailand imposed the Free Trade zone programme to increase the country's international competitiveness, regarding industries and capital, and attract more foreign direct investment. The goal was to draw more manufacturing operations and get more foreign companies to make investments in Thailand.
A person who has been granted a license to operate in a duty-free zone is a person who has been granted permission from the Director-General to operate an industrial, commercial, or any other business that is beneficial to the economy of the country in the duty-free zone without restrictions.
Privileges in the Free Zone exempt from import duty for goods imported into the Kingdom to enter the duty-free zone in the following cases: machinery, manufacturing equipment, tools, appliances including components thereof that are necessary for the operation of the business including items used to create assemble or install a factory or building in a duty-free zone.
Goods imported for use in industrial, commercial, or any other business that is beneficial to the country's economy; or Goods released from other free zones exempt from export duty For goods released from the duty-free zone to be exported outside the Kingdom In the case where there is a law stipulating that any goods are exempted or duty refunded when they are exported out of the Kingdom if the goods are brought into the duty-free zone to exempt or return the duty It shall be deemed that such goods have been exported out of the Kingdom at the time such goods are brought into the duty-free zone. exempted from the enforcement of the law in relation to the control of importation into the Kingdom exporting outside the kingdom Possession or utilization of goods imported into the Kingdom or raw materials within the Kingdom imported into a duty-free zone for the purpose of producing, mixing, assembling, packing or otherwise processing the goods. with the objective of exporting outside the Kingdom For operators in duty-free zones in the following areas Free Zone at Don Mueang Airport Suvarnabhumi Airport and U-Tapao Airport Free Zone established in the area of the Special Economic Development Zone Free Zone established in the Eastern Economic Corridor. license fee and annual fees Obtaining Privileges in a Free Zone as the Establisher of a Free Zone or business operators in the duty free zone License fee must be paid. and annual fees as follows: The license fee for the establishment of a duty free zone is 10,000 baht. The annual fee for the establishment of the duty free zone is 300,000 baht. License fee for business operators in the duty free zone 5,000 baht. Annual fee for operators in the duty free zone 15,000 baht.
At Juslaws & Consult, we understand the complexity of establishing operations in a foreign country. We aid in setting up projects in a foreign country and guide clients through the administrative department to establish operations in a Thailand Free Trade zone. Our services act as the bridge between your business and the Industrial Estate Authority of Thailand, as well as the Board of Investment registration. With our knowledge on Free Trade zones in Thailand, we can make the process much more straight forward.
Companies registered in a Thailand free-zone benefit from the following tax advantages:
Most clients who want to register companies in free zones additionally request application submissions to secure BOI (Board of Investment) promotion status. Once the Board of Investments reviews their investment projects, they can benefit from tax incentives such as:
Once companies secure BOI promotion status, the companies can secure other tax incentives such as:
Without secure BOI promotion status, the authority of the special economic zone may grant some of these benefits regardless, given the companies are considered to be of economic interest and aligns with the target industries of the free zones.
Operations in a Free Trade Zone can offer businesses significant advantages:
A critical issue that is raised is whether production yields of free zone companies meet the 40% local content required to qualify for the favored rate on duties and taxes when sold domestically. The appropriate regulations essentially require 40% of the ex-factory price of the product to be local content for production to be eligible for duty exemptions.
However, regulations do not clarify how cost elements should be used to calculate this 40% local content. As a result of this ambiguity, the Customs Department may want to know whether the profit level included in 40% local content is calculated correctly. If Customs conclude that the profit level is unsuitable, they will deny duties privileges for locally sold products and pursue penalties and retroactive duties.
What are the duties of the Industrial Estate Authority Of Thailand?
The Industrial Estate Authority of Thailand is a state enterprise under the Ministry of Industry, responsible for establishing and developing industrial estates. The IEAT also acts as a mechanism of the government to decentralize industrial advancement to regional areas in the country.
What is an export processing zone?
An export processing zone is a designated area for industrial operations, trading, and services, with product export being the primary purpose. Any activities connected or beneficial to industrial production services or activities involved in the export of products are further appointed to the export processing zone in Thailand.
What does the IEAT do for investors?
Beyond tax incentives, the IEAT enables investors to own property for pursuing industrial activities. Furthermore, they grant foreign experts, technicians, and spouses to remain in Thailand. Investors are also allowed to remit or take the foreign currency to other countries.