Abstract
In June 2010, the Thai government proposed improved investment tax incentive schemes to attract more foreign companies to establish Regional Operating Headquarters (ROH) in Thailand. The major theme of incentive packages has historically been the waiving of income tax on ROHs locating in the Kingdom. In the wake of recent political crises, these tax benefits are considered as important measures in reinforcing the Kingdom’s position as an important manufacturing and service hub for the ASEAN region. While investor confidence was wavering because of the unstable political environment that has appertained since 2006, investors are weighing business continuity and safety concerns against the provided and proposed incentives. This paper briefly compares the original ROH tax incentives from 2002 with the new ones, examines the factors contributing to the establishment of Thailand as a hub for ROHs and analyzes the competitiveness of Thailand in comparison with Hong Kong, Singapore and Malaysia in the context of national competitiveness for establishing ROH. National competitiveness is measured by using the Double Diamond-based nine factor model (IPS Model) from the IPS national competitiveness research study.
Highlights
In 2002, the Royal Thai Government (RTG) introduced tax and non-tax incentives for establishing Regional Operating Headquarters (ROH) as an instrument to attract international investors from Hong Kong, Singapore and Malaysia to establish their regional headquarters in Thailand
Under the 2002 incentive schemes, the number of foreign investors conducting ROH business in Thailand providing support services to their offshore entities is less than one hundred (Visuttipat, 2010). These companies comprise 84 ROH companies, which are permitted on the basis of non-tax incentives under the Board of Investment (BOI) investment promotion guidelines, while 71 ROH companies applied for tax incentives under the Bureau of Large Business Tax Administration (LT) of the Revenue Department (RD), in addition to six already dissolved ROH companies (Panich, 2010)
Following the two antigovernment protests at the airport in 2008 and at the business district in the capital in 2010, business uncertainty has escalated and investor sentiment has been brought into question, the continued inflow of investment throughout 2010 and the concomitant rise in the value of the baht suggests that international investors remain bullish about Thailand’s long-term prospects
Summary
In 2002, the Royal Thai Government (RTG) introduced tax and non-tax incentives for establishing Regional Operating Headquarters (ROH) as an instrument to attract international investors from Hong Kong, Singapore and Malaysia to establish their regional headquarters in Thailand. The scope of permitted activities under services includes: Sourcing raw materials, parts, finished products Research and development Technical assistance Marketing and sales promotion Human resources training Business advisory services Investment feasibility studies Credit management Other services approved by the Revenue Department on a case-by-case basis. These new incentive packages are designed to target mainly foreign companies doing business in South East Asia while controlling their activities from outside Thailand and, for local companies who are planning to expand their business activities to other parts of the Asian region. Thailand entered the scene (Avenell, 1996)
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