2019 08 January

Thailand Tax Alert: Thai Government Announces New International Business Center (“IBC”) Tax Incentive


On 28 December 2018, the Thai Revenue Department (“TRD”) announced a new program of tax incentives through the issuing of Royal Decree No.674 (“RD 674”).

Key points of RD 674

  • Section 3: Definition of IBCs
  • Section 4, 5 and 6: PIT at 15% for foreign nationals working for IBCs and their required qualifications
  • Section 7: Reduced CIT rate for IBCs
  • Section 8-9: Dividend and special business tax exemptions for IBCs
  • Section 10: Application process and business plan
  • Section 11: Qualifications to apply for IBCs
  • Section 12: Tax holidays
  • Section 13: IBC conditions and compliance requirements
  • Section 14: Tax privileges for dividends and interest
  • Section 15: Specific cautions
  • Section 16-18: ROHs, IHQs and IBCs already in existence

Section 3: Definition of IBCs

The concept of an IBC is a company established under Thai law engaging in the following activities with its associated enterprises located in either Thailand or overseas:

  1. Providing administrative and technical support services;
  2. Providing treasury management services; and/or
  3. International Trading Center activities

Associated Enterprises” definition:

“Companies are considered related if one company participates directly or indirectly in the management and control of another, or holds at least 25% of the capital/shareholding of the other company”

Section 4, 5 and 6: Tax privileges for foreign nationals and qualifying criteria

The PIT tax rate for foreign nationals is reduced to 15%.

To be eligible for this flat 15% PIT rate, foreign nationals must meet the following qualifications:

  1. Be permanent employees working full-time at an IBC
  2. Have their name included on the list of employees submitted with the IBC application to the TRD
  3. Reside in Thailand for at least 180 days in each calendar year
  4. Have a valid work permit issued by the Ministry of Labor
  5. Earn an annual salary of at least THB 2.4 million (USD 72,730) or THB 200,000 (USD 6,060) per month

Section 7-18:

Tax incentives under the New IBC scheme

Section 7: Corporate Income Tax (“CIT”) rates:

1)      8% if expenditure in Thailand is THB 60 million (USD 1.82 million)

2)      5% if expenditure in Thailand is THB 300 million (USD 9.09 million)

3)      3% if expenditure in Thailand is THB 600 million (USD 18.18 million)

Section 8: CIT exemption on dividends received from Thai and foreign associated enterprises
Section 9: SBT exemption on income derived from treasury management services
Section 4-5: PIT of 15% for foreign nationals working for an IBC

Section 14(1)(a-d): Exemption from withholding taxes on dividends paid by an IBC to foreign  companies

– Dividends must be paid within 1 year after approval from the TRD to be an IBC

Section 14 (2): Exemption from withholding taxes on interest paid by IBCs to foreign companies

Interest received from IBCs, only if derived from loans taken out by IBCs to re-lend to associated enterprises for treasury management services

Conditions Section 11(1): Minimum THB 10 million (USD 303,030) of paid-up capital
Section 13(2): Minimum THB 60 million (USD 1.82 million) of expenditure paid in Thailand
Section 11(2): Must have at least 10 employees, or at least 5 employees in the case of IBCs providing treasury management services
***Section 15: In the event that IBCs cannot comply with the conditions specified in Section 11(1)-(2) and Section 13(2) for more than one accounting period, the TRD will reverse IBC Company status back to the first accounting period when approval was granted
Section 16-18: Existing IHQs, ITCs and ROHs can be converted into IBCs


Section 10: A Company must submit its business plan together with the IBC application and the list of its associated enterprises to the TRD

Section 12: The Tax Holiday

IBCs can enjoy a tax holiday from CIT for 15 years from the date of approval from the TRD:

– The accounting period during which an IBC application is filed or approval to become an IBC is secured will be counted as the first accounting period.

DFDL Contacts

Jack Sheehan

Partner and Head of Regional Tax Practice


Jonathan Blaine

Tax Director

DFDL Thailand


The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.

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