Thailand Free Zone & Customs

Thailand Free Zone & Customs

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 feature exemption from import duty for the following goods imported into the Kingdom's duty-free zone: 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. This includes the following:

Goods imported for use in industrial, commercial, or any other business that is beneficial to the country's economy; 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; goods 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. These incentives benefit 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: to obtaining privileges in a Free Zone as an establisher of a Free Zone or as a business operator in the duty free zone, license fee and annual fees shall be paid as follows: the license fee for establishment of a duty free zone is THB 10,000; annual fee for  establishment of the duty free zone is THB 300,000; license fee for business operators in the duty free zone is THB 5,000; annual fee for operators in the duty free zone is THB 15,000.

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 proceedings 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. With our knowledge on Free Trade zones in Thailand, we can make the process much more straightforward.

Advantages Of Registering Free-Zone Companies

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:

  • Tax holidays of up to 8 years
  • Relinquished or reduced custom duties on equipment and raw material import.

Once the company has secured BOI promotion status, the company can secure other tax incentives such as:

  • Up to 8 years of a reduced corporate income tax rate of 10%
  • Corporate tax exemption of up to 3 three years

Without secured BOI promotion status, the authority of the special economic zone may grant some of these benefits regardless, given that the company is considered to be of economic interest and aligns with the target industries of the free zone.

Operations in a Free Trade Zone can offer businesses significant advantages:

  • Businesses can import raw materials and manufacturing merchandise with tax and duty exemptions, if the customs department deems them eligible.
  • Merchandise moving in or out of the free trade zone is free from value-added tax (VAT).
  • Other operations within a free trade area benefit from tax exemption of scrap, yield loss, or waste if they result from those operations.

Issues With Free Trade Zones

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.