WORLD TRADE G/SCM/N/25/THA
19March 1998
ORGANIZATION(98-1110)
Original: English Committee onSubsidies
andCountervailing Measures
SUBSIDIES
Updating Notifications Pursuant toArticle XVI:1 oftheGATT 1994
andArticle 25oftheAgreement onSubsidies andCountervailing Measures
THAILAND
Thefollowing communication, dated 17March 1998, hasbeenreceived fromthePermanent
Mission ofThailand.
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INVESTMENT PROMOTION INCENTIVES
Period Covered bytheNotification
1January 1996 -31December 1996
I. BACKGROUND AND AUTHORITY
TheBoard ofInvestment provides bothlocalandforeign companies withfiscal incentives in
anattempt topromote theestablishment ofindustries inThailand toaccelerate thecountry 's
industrialization process andregional development. During recent years, investment incentives are
geared towards decentralization asoneoftheThaiGovernment 'spolicy themes isregional development.
Investment incentives areoffered toattract more investment toregional areas which facedisadvantages
invarious aspects andtoaddress theon-going imbalances between urban andruralareas. Thelegislation
thatgoverns theprovision ofincentives bytheBoard ofInvestment istheInvestment Promotion Act
(1997) amended in1991.
II. INCIDENCE
Major fiscal incentives granted include corporate income taxexemption andreduction; and
exemption andreduction ofimport duties onmachinery andrawmaterials. Awiderange ofactivities
covering manufacturing services areeligible forpromotion. Generally, themagnitude ofincentives
provided varies according toproject locations. Theentire country isdivided intothreezones. Zone 1
which covers Bangkok andsixneighbouring provinces isgranted theleastincentives whereas Zone 3,
themostremote area,isgranted themaximum incentives. Atpresent, locations arethemostimportant
criterion indetermining investment incentives thateachproject receives. TheBoard ofInvestment
mayrequire certain activities tobelocated inZone 2or3onlyinorder tobeeligible forpromotion.G/SCM/N/25/THA
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III. AMOUNT OFSUBSIDY
There isnospecific budget earmarked forinvestment incentives. Theextent ofincentives
depends onthenumber ofprojects promoted bytheBoard ofInvestment. Thusthegovernment revenue
foregone inthisregard fluctuates fromyeartoyear. Nostatistics oncorporate income taxexemption
andreduction areavailable. Onlyfigures onexemption ofimport duties onmachinery andrawmaterials
areavailable.
Import dutyexemption andreduction granted toBOI-promoted projects
Machinery
*Exemption
*Reduction
*TotalB7,080.1 million
B120.5 million
B7,200.6 million
Rawmaterials andessential materials
*Exemption
*Reduction
*TotalB41,559.8 million
B92.5million
B41,652.3 million
TOTAL B48,852.9 million
Sources: Customs Department, Ministry ofFinance, ThaiGovernment
IV. ESTIMATED AMOUNT PERUNIT
Theestimated amount ofsubsidy perunitcannot bedetermined.
Since thepolicy revision inApril 1993, theBoard ofInvestment alsooffers incentives forfactory
relocation andspecial incentives forresearch anddevelopment activities. Incentives offered under
these twoschemes arenotspecific tocertain industries orenterprises.
1. Factory relocation incentives
Incentives forfactory relocation aregranted toexisting projects which relocate from Zone 1
to2or3,orfrom Zone 2to3.
Eligibility
Factories facing environmental problems andrequired bytheMinistry ofIndustry torelocate
(1) Thefactory must berelocated toanindustrial estate orpromoted industrial zone.G/SCM/N/25/THA
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(2) Theformer factory mustbeclosed down andallmachinery mustbemoved tothenew
facility. Thenewfactory mustbeready foroperation within twoyears ofreceiving
thepromotion certificate.
Other types ofoperation
(1) Theexisting operation must employ nofewer than50people.
(2) Main production machinery mustbemoved tothenewlocation andthenewfactory
must startoperating within twoyears ofreceiving thepromotion certificate.
Incentives
Forprojects relocating toZone 2
- Corporate income taxexemption forthree years, extendible toseven years ifprojects
arerelocated toindustrial estates orpromoted industrial zones.
Forprojects relocating toZone 3
- Eight-year corporate income taxexemption.
- 50percentreduction ofcorporate income taxforaperiod offiveyears afterthe
exemption period.
- Double deduction from taxable income ofwater, electricity andtransportation costs
foraperiod oftenyears.
- Deduction from netprofit of25percentofthecosts ofinstallation orconstruction
ofinfrastructure facilities.
2. Promotional privileges forresearch anddevelopment
Withaviewtoupgrading thecountry 'sproduction capabilities, theBoard ofInvestment grants
additionalincentivestopromotedprojectswhichinvestinresearchanddevelopmentactivities.Additional
three years ofcorporate income taxexemption willbegranted topromoted projects which invest in
research anddevelopment activities.
*****
Note: Zone 1comprised Bangkok, Samut Prakarn, Samut Sakorn, Nakorn Pathom, Nonta Buriand
Pathum Thani. Zone 2covered Samut Songkhram, Ratchburi, Suphan Buri, AngThong, Ayutthaya,
Saraburi, Nakhon Nayok, Chachoengsao andChon Buri. Zone 3included theother 57provinces,
MaptaPhutandLaem Chabang Industrial Estates.G/SCM/N/25/THA
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CREDIT REFINANCING SCHEMES OFTHE BANK OFTHAILAND (BOT)
Period Covered bytheNotification
1January 1996 -31December 1996
I. BACKGROUND AND AUTHORITY
UndertheRoyalDecreeRegulatingtheAffairsoftheBankofThailandB.E.2485,Section12(4),
theBankofThailand isauthorized toprovide financial assistance topriority sectors andprojects through
refinancing schemes.
II. INCIDENCE
Same asprevious notification, however, inSeptember 1996thedefinition ofsmall-scale industry
under theBank ofThailand Regulation Governing thePurchase ofPromissory Notes Arising from
Small-Scale Industrial Undertaking B.E.2531 (1988), waschanged from theindustry withnetfixed
assets ofnotmore thanB20million tonotmore thanB50million. Atthesame time, thecredit line
granted bytheBOT toeachsmall-scale industry wasalsoincreased from notexceeding B5million
tonotexceeding B12.5million. Therefore, thetotalcredit linewhen credit participation ofcommercial
banks andotherfinancial institutions isallowed, increases fromB10million toB25million. Inaddition
tocommercial banks participation, finance companies andfinance andsecurities companies participation
hasbeenincluded inthisscheme since September 1996.
III. AMOUNT OFSUBSIDY
In1996, thedaily average outstanding loans under theBOT financial assistance granted to
producers through thefinancial institutions totalled B2,199.04 million asshown inthetable.
Credit refinancing schemes oftheBOT in1996
SchemesTotal outstanding1
(million baht)Interest rate
Charged bytheBOT
(%)Charged bythe
financial institutions
(%)
Industrial credit
Small-scale industry
Livestock raising and
aqua-culture
Rural development
Zone 3investment484.78
245.40
750.58
311.10
407.185.0
3.0
5.0
3.0
3.010.00
10.00
10.00
10.00
11.25
TOTAL 2,199.04
1Daily-averageoutstandingloansincludingcommercialbanksandotherfinancialinstitutionsparticipation.G/SCM/N/25/THA
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INDUSTRIAL ESTATE AUTHORITY OFTHAILAND
Period Covered bytheNotification
1January -31December 1996
I. POLICY OBJECTIVE
Themain objectives ofIEAT are:
(1) Toprocure asuitable landfortheestablishment orexpansion ofindustrial estate which
includes thegeneral industrial zoneandexport processing zone.
(2) Toprovide facilities forindustrial operators intheindustrial estate.
(3) Topromoteandcontroltheindustrialestateownedbyprivatesectororothergovernment
agencies.
II. BACKGROUND AND AUTHORITY
TheBoard ofDirectors oftheIndustrial Estate Authority ofThailand shallhavethepower
tolayoutthepolicies andcontrol andsupervise inthegeneral theactivities ofIEAT.
III. INCIDENCE
IEAT willgivetheincentives totheindustrial operator whoispermitted toengage inindustrial
activity inanindustrial estate.
IV. FORM OFSUBSIDY
Theschemes ofsubsidy cover theexemptions ofpayment ofsurcharge under thelawon
promotion ofinvestment, import duty, value added taxandexcise taxonmachinery, equipment, tools
andsupplies including thecomponents thereof which areessential fortheproduction ofgoods ortrading
forexport, asthecasemaybe,andonmaterials tobeusedfortheconstruction, assembly orinstallation
offactory orbuilding andgoods imported andtaken intoanexport processing zonebyindustrial operator
andtrader forexport foruseintheproduction ofgoods ortrading forexport.
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