Thailand: BOI extends its privileges to loan funds to related companies
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On September 16, 2021, the Board of Investment (BOI) of Thailand issued BOI Notification No. Sor. 3/2564, extending the scope of certain promoted activities to include lending money to related companies in Thailand and abroad.
The new notification places these activities within the scope of “Trade and Investment Support Offices” (TISO) and “International Business Centers” (IBC) – two of the categories of activities promoted most. most popular under the BOI. Majority foreign owned businesses can now apply for a TISO or IBC promotion to cover affiliate fund lending instead of applying for a foreign business license, which can be less predictable. BOI-promoted companies that already have a BOI certificate in the TISO or IBC categories can modify the BOI certificate to cover this type of lending activity.
The changed scope of activities promoted for the TISO and IBC categories now provides more flexibility for companies promoted by the BOI to provide financial services to their subsidiaries. Previously, this was restricted, especially when foreign-majority companies wanted to lend money abroad.
Terms & Conditions
Under the new notification, the business activities promoted in the TISO category now include loans to “affiliates and group companies”, while those in the IBC category now include loans to “associated companies”. These terms are defined separately in Thai laws and regulations, but in practice the definitions are very similar and generally refer to companies that share structural connections. Companies must ensure that the structure they propose corresponds to the appropriate legal definition before approaching the BOI for investment promotion.
Lending business activities now permitted in the IBC and TISO categories include foreign currency loans to associated companies and affiliates and group companies located abroad, and Thai baht loans to associated companies and affiliated group companies in Thailand. The new BOI notification also allows Thai baht loans to associated companies and affiliates and group companies in Cambodia, Laos, Malaysia, Myanmar and Vietnam for business or commercial investment purposes in or in those countries. Thailand.
A promoted company cannot exclusively engage in lending activities, but must carry out at least one other TISO business activity or IBC business activity (excluding treasury center and international trade business activities), depending on the category of the business being promoted. The scope of the lending activity should not fall under a cash center activity as defined by the BOI and the Bank of Thailand (BOT). In addition, offshore loans must always comply with BOT exchange requirements.
The two categories differ in terms of tax incentives – no tax incentives are available for TISO lending activities, while tax incentives for IBC projects mainly depend on the criteria of the special tax incentive scheme defined by the Department of Finance. revenue (RD), which has yet to recognize lending as an IBC business activity under its own IBC tax regime. While the full impact of this situation is still unclear, it could mean that income from a promoted lending business may not be eligible for tax incentives under the DR’s IBC tax regime.
Foreign majority-owned entities in Thailand may not engage in any financial services business activity except exempt money lending to affiliates and group companies in Thailand, as prescribed by the relevant ministerial regulations issued under the Foreign Affairs Act BE 2542 (1999), unless they are granted either a foreign business license or a foreign business certificate for this purpose. The chances of getting either one are low.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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